-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AWwCgWyRBnp5HvVubWu8KcDlt2Fk1Qu1FL9+m4oLGYe5lDkWqs8y2IVt/+KUtOA9 djq/Hvhr8eWZs+ba6nH0jQ== 0000944209-00-000671.txt : 20000424 0000944209-00-000671.hdr.sgml : 20000424 ACCESSION NUMBER: 0000944209-00-000671 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20000421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTRAVISION COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001109116 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954783236 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-35336 FILM NUMBER: 606239 BUSINESS ADDRESS: STREET 1: 2425 OLYMPIC BLVD STREET 2: STE 6000 WEST CITY: SANTA MONICA STATE: CA ZIP: 90404 BUSINESS PHONE: 3104473870 MAIL ADDRESS: STREET 1: 2425 OLYMPIC BLVD STREET 2: STE 6000 WEST CITY: SANTA MONICA STATE: CA ZIP: 90404 S-1 1 FORM S-1 As filed with the Securities and Exchange Commission on April 20, 2000 Registration No. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- Form S-1 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 --------------- Entravision Communications Corporation (Exact name of registrant as specified in charter)
Delaware 4833 95-4783236 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification No.)
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------- Walter F. Ulloa Entravision Communications Corporation 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 (310) 447-3870 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to:
Kenneth D. Polin, Esq. Richard M. Jones, Esq. Zevnik Horton Guibord McGovern O'Melveny & Myers LLP Palmer & Fognani, L.L.P. 1999 Avenue of the Stars, 7th Floor 101 West Broadway, 17th Floor Los Angeles, California 90067 San Diego, California 92101 (310) 553-6700 (619) 515-9600
--------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
Proposed maximum Amount of Title of each class of securities to be registered aggregate offering price (1)(2) registration fee - ------------------------------------------------------------------------------------------------------- Class A common stock, $0.0001 par value......... $615,000,000 $162,360 - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
(1) Includes shares issuable upon exercise of an over-allotment option granted to the underwriters. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. --------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +We will amend and complete the information in this prospectus. Although we + +are permitted by U.S. federal securities laws to offer these securities using + +this prospectus, we may not sell them or accept your offer to buy them until + +the documentation filed with the Securities and Exchange Commission relating + +to these securities has been declared effective by the Securities and + +Exchange Commission. This prospectus is not an offer to sell these securities + +or our solicitation of your offer to buy these securities in any jurisdiction + +where that would not be permitted or legal. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION--APRIL 20, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Prospectus , 2000 Entravision Communications Corporation [JFAX LOGO APPEARS HERE] Shares of Class A Common Stock - -------------------------------------------------------------------------------- Entravision: The Offering: . We are a leading . We are offering diversified shares of our Spanish-language Class A common media company in stock. the United States with television, . The underwriters radio, outdoor have an option to and publishing purchase an operations. additional shares from us and one of our stockholders to cover over- allotments. Proposed Market and Symbol: . We have applied . This is our for listing on initial public the New York offering, and no Stock Exchange public market under the symbol currently exists EVC. for our shares. We anticipate that the initial public offering price for our Class A common stock will be between $ and $ per share. . This offering is contingent upon and will close concurrently with our acquisition of Z-Spanish Media Corporation. . Closing: , 2000.
------------------------------------------------------------------------ Per Share Total ------------------------------------------------------------------------ Public offering price................................... $ $ Underwriting fees....................................... Proceeds to Entravision................................. ------------------------------------------------------------------------
This investment involves risk. See "Risk Factors." - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has determined whether this prospectus is truthful or complete. Nor have they made, nor will they make, any determination as to whether anyone should buy these securities. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- Donaldson, Lufkin & Jenrette Credit Suisse First Boston Merrill Lynch & Co. Book Running Manager Co-Lead Manager Co-Lead Manager ----------- Salomon Smith Barney Bear, Stearns & Co. Inc. DLJdirect Inc.
[INSIDE FRONT COVER] [ARTWORK] [FRONT GATEFOLD] [A MAP OF THE UNITED STATES IDENTIFYING THE LOCATION OF EACH OF OUR MEDIA PROPERTIES AND THE CALL LETTERS AND CHANNEL OF EACH OF OUR STATIONS] You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus. TABLE OF CONTENTS
Page ---- Prospectus Summary....................................................... 4 Risk Factors............................................................. 10 Forward-Looking Statements............................................... 19 Use of Proceeds.......................................................... 20 Dividend Policy.......................................................... 20 Capitalization........................................................... 21 Dilution................................................................. 22 Selected Historical Financial Data....................................... 23 Selected Unaudited Pro Forma Financial Data.............................. 25 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 27 Business................................................................. 47 Management............................................................... 68 Principal Stockholders................................................... 74 Certain Relationships and Related Transactions........................... 75 Description of Capital Stock............................................. 78 Shares Eligible for Future Sale.......................................... 83 Underwriting............................................................. 85 Legal Matters............................................................ 87 Experts.................................................................. 87 Where You Can Find More Information...................................... 88 Index to Financial Statements............................................ F-1
---------------- NOTE TO READER We completed several acquisitions between January 1, 1999 and the date of this prospectus. We have also agreed to acquire Z-Spanish Media Corporation concurrently with the closing of this offering and broadcasting licenses relating to two television stations and two radio stations before or after the closing of this offering. We believe that you will have a better picture of us if we present the information in this prospectus on a "what if" basis to show how we would look as if we had completed all of our pending acquisitions as of the date of this prospectus. Unless we indicate otherwise, all of the text of this prospectus describes us on this "what if" basis. In addition, our unaudited pro forma financial information shows how we would look as if we had owned all of the businesses, licenses or assets that we have recently acquired or agreed to acquire for all of 1999. Our audited financial statements and summary and selected historical financial data, however, show us as we actually were, without any "what if" changes, except for our reorganization described elsewhere in this prospectus. 3 PROSPECTUS SUMMARY This summary contains general discussions of our business and this offering. We encourage you to read the entire prospectus, including "Risk Factors" and the financial statements, for a more complete understanding of Entravision and this offering. ENTRAVISION Entravision is a leading diversified media company utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States. We operate in 32 of the top 50 U.S. Hispanic markets. Through our operations we have the ability to reach approximately 72% of Hispanics living in the United States, or approximately 23 million people. For the fiscal year ended December 31, 1999, we had pro forma net revenue of $150 million, broadcast cash flow of $46 million and EBITDA of $33 million. The table below briefly summarizes our operations, including our recent acquisition of Latin Communications Group Inc. and our pending acquisition of Z-Spanish Media Corporation:
- --------------------------------------------------------------------------------------------------- Television Radio Outdoor Publishing - --------------------------------------------------------------------------------------------------- .Own and operate .Own and operate .Own approximately .Own two Spanish- television 60 radio stations 10,000 billboards language stations in 18 in 24 U.S. markets concentrated in publications, El U.S. markets high-density Diario/La Prensa Hispanic and VEA New York .Largest .Operate the communities in Los Univision- largest centrally Angeles and New .El Diario/La affiliated programmed York, the two Prensa is the television group Spanish-language largest markets in oldest Spanish- in the United radio network in the United States language daily States the United States newspaper in the United States .Stations are .Stations are .1999 pro forma .1999 pro forma located in 17 of located in 22 of gross revenue gross revenue of the top 50 the top 50 of $16 million, or $19 million, or Hispanic markets Hispanic markets 10% of total 12% of total in the United in the United States States .1999 pro forma .1999 pro forma gross revenue gross revenue of $69 million, or of $61 million, or 41% of total 37% of total - ---------------------------------------------------------------------------------------------------
Television. We own and operate Univision-affiliated stations in 17 of the top 50 Hispanic markets in the United States. Through our 25-year network affiliation agreements, Univision Communications Inc. makes available to these stations 24 hours a day of Spanish-language programming. Univision's prime time schedule is all first-run programming (i.e., no reruns) throughout the year. We combine this premier programming with our local news programming to brand each of our stations with a strong local identity. As a result, each of our Univision-affiliated stations ranks first in Spanish-language television viewership in its market. Univision has invested an aggregate of $120 million in Entravision and will own an approximately % equity interest in us after this offering. We believe this investment reflects Univision's endorsement of our business model and its commitment to us as a long-term strategic partner. Radio. Our radio operations combine national programming with a strong local presence. Through our radio programming, which is delivered via satellite to our stations, we provide national programming with local time slots available for advertising, news, traffic, weather, promotions and community events. This strategy allows us to provide higher-quality programming with significantly lower costs of operations than we could otherwise deliver solely with independent programming. We produce seven primary formats, the most of any Spanish-language radio company in the United States, in order to appeal to the diverse musical tastes of the listeners in the markets we serve. 4 Outdoor. Our billboards are concentrated in high-density Hispanic communities in Los Angeles and New York. Because of its repetitive impact and relatively low cost per thousand impressions, outdoor advertising attracts national, regional and local advertisers. We believe national advertisers value our ability to efficiently target specific demographic groups on a cost- effective basis compared to other advertising media. In addition, we believe local advertisers place significant value on our ability to provide marketing solutions in close proximity to their stores or outlets. Publishing. Our publishing operations, through El Diario/La Prensa, the leading Spanish-language daily newspaper in New York, and VEA New York, a tourist publication, offer advertisers another medium targeting consumers in the second largest Hispanic market in the United States. The Hispanic Market Opportunity While Hispanics represent approximately 11% of the U.S. population and the Hispanic population is growing approximately six times faster than the non- Hispanic population, they are currently targeted by less than 1% of total advertising dollars. Advertisers have recently begun to direct a greater percentage of their advertising spending toward Hispanics and, consequently, Spanish-language advertising is currently growing at more than four times the rate of total advertising. We believe that we have benefited and will continue to benefit from the following industry trends and attributes in the United States: . high Spanish-language use among Hispanic consumers; . strong projected growth and high geographic concentration of the Hispanic population; . increasing Hispanic buying power; . increasing advertising spending on Spanish-language media; and . the attractive demographic profile of the Hispanic consumer. Business Strategy We seek to be the leading diversified Spanish-language media company in the United States and to increase our advertising revenue through the following strategies: . use our Univision network affiliation and our leading radio network and station brands to maximize our market share; . invest in media research to provide advertisers with accurate measures of our audience; . continue to build and retain strong management teams; . emphasize and invest in our local news and radio formats and support community events to enhance our audience recognition, loyalty and ratings; . capitalize on cross-promotional opportunities created by our diverse portfolio of media properties to maximize audience share and increase advertising revenue; and . continue to seek acquisitions and investment opportunities in high-growth Hispanic markets. Recent and Pending Acquisitions Latin Communications Group. On April 20, 2000, we acquired Latin Communications Group Inc., or LCG, for approximately $252 million. LCG owns and operates 17 radio stations in nine high-growth markets, including Los Angeles, Riverside-San Bernardino, San Francisco-San Jose, Las Vegas, Albuquerque-Santa Fe, Sacramento, Denver-Boulder and Monterey-Salinas-Santa Cruz, and publishes El Diario/La Prensa and VEA New York. 5 Z-Spanish Media Corporation. On April 20, 2000, we agreed to acquire Z- Spanish Media Corporation for $475 million. Z-Spanish Media owns and operates 33 radio stations in 13 markets, including Dallas-Ft. Worth, Phoenix and Sacramento. In addition, Z-Spanish Media is one of the largest outdoor advertising companies in the United States focusing on the Hispanic market, with approximately 10,000 billboards. Other Acquisitions. We have agreed to acquire two television stations in the Hartford and Orlando markets and we have agreed to acquire two radio stations in the Los Angeles market for an aggregate of approximately $126 million. ---------------- Our principal executive offices are located at 2425 Olympic Boulevard, Suite 6000 West, Santa Monica, California 90404, and our telephone number is (310) 447-3870. We operate a number of websites, including www.entravision.com, www.zspanish.com, www.zmegahits.com, www.labonita.com, www.labuena.com, www.casademusica.com and www.vistamediagroup.com. The information on our websites is not a part of this prospectus. 6 The Offering Class A common stock offered......... shares Common stock to be outstanding after this offering....................... shares of Class A common stock shares of Class B common stock shares of Class C common stock shares of common stock Voting rights........................ Holders of our Class A common stock are entitled to one vote per share. Holders of our Class B common stock are entitled to ten votes per share. Holders of our Class C common stock are entitled to one vote per share, are entitled to vote as a separate class to elect two directors and have the right to vote as a separate class on material decisions involving Entravision. Use of proceeds...................... We intend to use the net proceeds of this offering: . to acquire Z-Spanish Media; . to pay the balance of the purchase price to acquire two radio stations from Citicasters Co.; . to reduce our debt; and . for working capital and general corporate purposes. Proposed New York Stock Exchange symbol.............................. EVC
Unless indicated otherwise, the information in this prospectus: . reflects the completion of our reorganization in which direct and indirect ownership interests in our predecessor and Univision's subordinated note and option will be exchanged for shares of our common stock; . includes the issuance of shares of Class A common stock to acquire Z-Spanish Media concurrently with the closing of this offering; . excludes shares of Class A common stock issuable upon the exercise of the underwriters' over-allotment option; . excludes shares of Class A common stock reserved for issuance upon conversion of our Series A preferred stock; and . excludes shares of Class A common stock reserved for issuance under our omnibus equity incentive plan. 7 Summary Historical and Unaudited Pro Forma Financial Data (In thousands, except per share data) The following table presents: . our summary historical financial data as of December 31, 1999 and for the years ended December 31, 1997, 1998 and 1999; . our summary unaudited pro forma financial data as of and for the year ended December 31, 1999, giving effect to our completed 1999 and 2000 acquisitions and our pending acquisition of Z-Spanish Media as if we had owned these businesses for all of 1999, the conversion of TSG Capital Fund III, L.P.'s convertible subordinated note into preferred stock and the exchange of Univision's subordinated note and option for common stock; and . our summary unaudited pro forma as adjusted financial data giving further effect to the sale of the shares of Class A common stock that we are offering, assuming an initial public offering price of $ per share, and the application of the net proceeds of this offering, as described in "Use of Proceeds." The summary unaudited pro forma and pro forma as adjusted financial data are not necessarily indicative of the operating results or the financial condition that would have been achieved if we had completed these transactions as of the date indicated and should not be construed as representative of future operating results or financial condition. The summary historical and unaudited pro forma financial data should be read in conjunction with the audited consolidated financial statements and related notes, with "Selected Unaudited Pro Forma Financial Data" and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Historical -------------------------- Year Ended Year Ended December 31, December 31, 1999 -------------------------- ---------------------- Unaudited Unaudited Pro Forma 1997 1998 1999 Pro Forma As Adjusted ------- ------- -------- --------- ----------- Statement of Operations Data: Gross revenue: Television............... $32,701 $48,689 $ 63,842 $ 68,938 Radio.................... 718 1,183 2,362 60,861 Outdoor and publishing... -- -- -- 35,134 ------- ------- -------- --------- ------- Total gross revenue...... 33,419 49,872 66,204 164,933 Less agency commissions.... 2,963 5,052 7,205 14,867 ------- ------- -------- --------- ------- Net revenue................ 30,456 44,820 58,999 150,066 ------- ------- -------- --------- ------- Expenses: Direct operating......... 9,184 15,794 24,441 58,915 Selling, general and administrative.......... 5,845 8,877 11,611 45,486 Corporate................ 3,899 3,963 5,809 12,377 Depreciation and amortization............ 8,847 9,565 14,613 83,168 Non-cash stock-based compensation (1)........ 900 500 29,143 29,143 Gain on sale of assets... -- -- -- (4,442) ------- ------- -------- --------- ------- Total expenses............. 28,675 38,699 85,617 224,647 ------- ------- -------- --------- ------- Operating income (loss).... 1,781 6,121 (26,618) (74,581) Interest expense, net and other..................... (5,107) (8,244) (12,091) (33,900) Income tax (expense) benefit (2)............... 7,531 (210) 121 27,998 ------- ------- -------- --------- ------- Income (loss) from continuing operations .. 4,205 (2,333) (38,588) (80,483) Preferred stock dividends (3)....................... -- -- -- 42,209 ------- ------- -------- --------- ------- Income (loss) from continuing operations applicable to common stock..................... $ 4,205 $(2,333) $(38,588) $(122,692) ======= ======= ======== ========= ======= Pro forma net loss from continuing operations applicable to common stock (4)....................... $(2,672) $(1,796) $(35,210) $(122,692) ======= ======= ======== ========= ======= Pro forma basic and diluted earnings per share: Net loss from continuing operations applicable to common stock (4)........ $ (0.04) $ (0.03) $ (0.54) ======= ======= ======== ========= =======
8
Historical ----------------------- Year Ended Year Ended December 31, December 31, 1999 ----------------------- --------------------- Unaudited Unaudited Pro Forma 1997 1998 1999 Pro Forma As Adjusted ------- ------- ------- --------- ----------- Other Financial Data: Broadcast cash flow (5).......... $15,427 $20,149 $22,947 $45,665 EBITDA (6)....................... 11,528 16,186 17,138 33,288
As of December 31, 1999 --------------------------------- Unaudited Unaudited Pro Forma Historical Pro Forma As Adjusted ---------- ---------- ----------- Balance Sheet Data: Cash and cash equivalents.................... $ 2,357 $ 13,545 $ Total assets................................. 188,819 1,180,039 Long-term debt, including current portion.... 167,537 360,837 Redeemable preferred stock................... -- 345,990 Total stockholders' equity (7)............... 11,813 241,523
- ------- (1) For 1999, non-cash stock-based compensation represents management's estimate of the fair value of our employee stock award and our employee stock option grant based on the estimated price of this offering. (2) Included in the 1997 income tax expense is a $7.8 million tax benefit that resulted from the reversal of previously recorded deferred tax liabilities that were established in our 1997 acquisition of KNVO, McAllen, Texas. This entity was converted from a C-corporation to an S-corporation in 1997. As a result, deferred taxes were reduced. (3) Includes dividends on the 13.5% preferred stock that we could be required to issue to finance our acquisition of Z-Spanish Media if this offering has not closed by September 30, 2000 and dividends on the 8.5% redeemable preferred stock issuable to TSG Capital Fund III, L.P. upon conversion of its $90 million convertible subordinated note. (4) Pro forma net loss from continuing operations applicable to common stock and pro forma basic and diluted loss applicable to common stock per share give effect to our conversion from a limited liability company to a corporation for federal and state income tax purposes and assume that we were subject to corporate income taxes at an effective combined federal and state income tax rate of 40% before the effect of non-tax deductible goodwill and non-cash stock-based compensation for each period presented. (5) Broadcast cash flow means operating income (loss) before corporate expenses, depreciation and amortization, non-cash stock-based compensation and gain on sale of assets. We have presented broadcast cash flow which we believe is comparable to the data provided by other companies in the broadcast industry, because such data is commonly used as a measure of performance for companies in our industry. However, broadcast cash flow should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (6) EBITDA means broadcast cash flow less corporate expenses and is commonly used in the broadcast industry to analyze and compare broadcast companies on the basis of operating performance, leverage and liquidity. EBITDA, as presented above, may not be comparable to similarly titled measures of other companies unless such measures are calculated in substantially the same fashion. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (7) The stockholders' equity data gives effect to our reorganization in which direct and indirect ownership interests in our predecessor and Univision's subordinated note and option will be exchanged for shares of our common stock before the closing of this offering. 9 RISK FACTORS You should carefully consider the risks described below, together with all of the other information included in this prospectus, before buying shares in this offering. Risks Related to Our Business If we cannot integrate the operations of companies we acquire, our business and financial condition will be adversely affected. To implement our strategy of growing through acquisitions, we need to: . retain key management and personnel of acquired companies; . successfully merge corporate cultures and business processes; . realize sales efficiencies and cost reduction benefits; and . operate successfully in markets in which we may have little or no prior experience. In addition, after we have completed an acquisition, our management must be able to assume significantly greater responsibilities, and this in turn may cause them to divert their attention from our existing operations. If we are unable to completely integrate into our business the operations of the companies that we have recently acquired or that we may acquire in the future, our business and financial condition will be adversely affected. Because we have no operating history as a combined company, we face risks generally associated with combining business enterprises. We acquired LCG on April 20, 2000, and we will acquire Z-Spanish Media concurrently with the closing of this offering. Because we have never operated as a combined company, we face risks generally associated with combining business enterprises. When considering our prospects, investors must consider the risks, expenses and difficulties encountered by companies in their early stages of combined operations, including possible disruptions and inefficiencies associated with rapid growth and workplace expansion. In addition, our lack of operating history as a combined company makes it difficult to evaluate our current business and prospects or to accurately predict our future revenue or results of operations. If we fail to manage our growth effectively, our business and financial condition will be adversely affected. We have significantly increased our business within a short period of time through our acquisition of LCG and our pending acquisition of Z-Spanish Media. As a result of these acquisitions, our number of full-time employees grew from 544 as of December 31, 1999 to approximately 1,100 as of March 31, 2000. If we are to grow successfully, we must: . attract and retain qualified personnel; . effectively implement new operational systems, procedures and controls; . improve our administrative and financial systems; and . manage relationships with various advertisers. In particular, we believe that our future success will depend on our ability to hire, train and retain highly-skilled personnel. Competition for quality personnel is intense in our business. We may not be able to accomplish any of these requirements, and our failure to do so could have a material adverse effect on our business and financial condition. In addition, our rapid growth currently and in the future could significantly strain our management and other resources. 10 We have a history of losses that if continued into the future could adversely affect the market price of our Class A common stock and our ability to raise capital. We had net losses of approximately $2.3 million and $38.6 million for the years ended December 31, 1998 and 1999. In addition, we had a pro forma net loss of $122.7 million for the year ended December 31, 1999, after giving effect to our acquisition of LCG and our pending acquisition of Z-Spanish Media. We believe losses may continue while we pursue our acquisition strategy and expand our radio network. Our inability to generate profits could adversely affect the market price of our Class A common stock, which in turn could adversely affect our ability to raise additional equity capital or to incur additional debt. If our strategy to grow through acquisition is limited by competition for suitable media properties, or by other factors we cannot control, it could adversely affect our future rate of growth. We intend to pursue acquisitions of additional media properties as our management believes appropriate. In order for us to succeed with this strategy, we must be effective at quickly evaluating markets, accessing the capital markets and obtaining the necessary regulatory approvals, including approvals of the Federal Communications Commission, or the FCC, and the Department of Justice, or the DOJ. We compete with many other buyers for target properties. Some of those competitors have more money and resources than we do. We may not succeed in making additional acquisitions. Also, our strategy includes buying underperforming media properties and using our experience to improve their performance. Thus, any likely benefit from any property we buy will be over time, rather than immediately, and we may need to pay large initial costs for these improvements. If we cannot raise required capital, it may have a material adverse effect on our business and our ability to grow through acquisitions. We may require significant additional capital for future acquisitions and general working capital needs. If our cash flow and existing working capital are not sufficient to fund our general working capital requirements and debt service, we will have to raise additional funds by selling equity, refinancing some or all of our existing debt or selling assets or subsidiaries. Capital markets are volatile and uncertain, and we may not be able to gain access to these markets to raise additional capital. Consequently, none of these alternatives for raising additional funds may be available on acceptable terms to us or in amounts sufficient for us to meet our requirements. Our failure to obtain any required new financing may have a material adverse effect on our business and our ability to grow through acquisitions. Our substantial level of debt and the terms of our Series A preferred stock could limit our ability to grow and compete. After repaying some of our outstanding indebtedness with a portion of the proceeds from this offering, we will have approximately $200 million of debt outstanding under our bank credit facilities, and $90 million of Series A mandatorily redeemable convertible preferred stock. We expect to obtain a portion of our required capital through debt financing that bears or is likely to bear interest at a variable rate, subjecting us to interest rate risk. Our substantial level of debt could have several important consequences, including the following: . a significant portion of our cash flow from operations will be dedicated to servicing our debt obligations and will not be available for operations, future business opportunities or other purposes; . our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes may be limited; and 11 . our substantial debt could make us more vulnerable to economic downturns, limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions. Our ability to satisfy all of our debt obligations depends upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. We may not have sufficient future cash flow to meet our debt payments, or we may not be able to refinance any of our debt at maturity. We have pledged substantially all of our assets to our lenders as collateral. Our lenders could proceed against the collateral granted to them to repay outstanding indebtedness if we are unable to meet our debt service obligations. If the amounts outstanding under the bank credit facility are accelerated, our assets may not be sufficient to repay in full the money owed to such lenders. The terms of our credit agreements restrict the decisions we can make about our business. Our bank credit facilities contains covenants that restrict, among other things, our ability to: . incur additional indebtedness; . pay dividends; . make acquisitions or investments; and . merge, consolidate or sell assets. Our bank credit facilities also require us to maintain specific financial ratios. A breach of any of the covenants contained in our bank credit facilities could allow our lenders to declare all amounts outstanding under the bank credit facilities to be immediately due and payable. Following this offering, our executive officers will have control over our business, which may discourage a merger or sale of our company. Following this offering, Walter F. Ulloa, our Chairman and Chief Executive Officer, Philip C. Wilkinson, our President and Chief Operating Officer, and Paul A. Zevnik, our Secretary, will own all of the shares of our Class B common stock, and will have approximately 80% of the combined voting power of our outstanding shares of common stock. The holders of our Class B common stock are entitled to ten votes per share on any matter subject to a vote of the stockholders. Accordingly, Messrs. Ulloa, Wilkinson and Zevnik will have the ability to elect each of the remaining members of our board of directors, other than the two members of our board of directors to be appointed by Univision, and will have control of our policies and affairs. Messrs. Ulloa, Wilkinson and Zevnik have agreed contractually to elect themselves, Amador S. Bustos and a representative of TSG Capital Fund III, L.P. as directors of our company. This control may discourage certain types of transactions involving an actual or potential change of control of our company, such as a merger or sale of our company. Univision will have significant influence over our business and could make certain transactions more difficult or impossible to complete. Univision, as the holder of all of our Class C common stock upon consummation of this offering, will have significant influence over material decisions relating to our business, including the right to elect two of our directors, and the right to approve material decisions involving our company, including any merger, consolidation or other business combination, any dissolution of our company and any transfer of the FCC licenses for any of our Univision-affiliated television stations. Univision's ownership interest may have the effect of delaying, deterring or preventing a change in control of our company and may make some transactions more difficult or impossible to complete without its support. 12 Our television ratings and revenue could decline significantly if our relationship with Univision or if Univision's success changes in an adverse manner. If our relationship with Univision changes in an adverse manner, or if Univision's success diminishes, it could have a material adverse effect on our ability to generate television advertising revenue on which our television business depends. The ratings of Univision's network programming might decline or Univision might not continue to provide programming, marketing, available advertising time and other support to its affiliates on the same basis as currently provided. Additionally, by aligning ourselves closely with Univision, we might forego other opportunities that could diversify our television programming and avoid dependence on any one television network. Univision's relationships with Grupo Televisa, S.A. de C.V. and Corporacion Venezolana de Television, C.A., or Venevision, are important to Univision's, and consequently our, continued success. For example, we could be adversely affected by a current dispute between Univision and Televisa. Under its program license agreements with Televisa, Univision has the first right to air Televisa's Spanish-language programming in the United States through 2017. Televisa now asserts that it can directly broadcast that same programming into the United States through a direct satellite venture in Mexico. Loss of key personnel could harm our business. Our business depends upon the efforts, abilities and expertise of our executive officers and key employees, including Walter F. Ulloa, our Chairman and Chief Executive Officer, Philip C. Wilkinson, our President and Chief Operating Officer, Jeanette Tully, our Chief Financial Officer, Amador S. Bustos, the President of our Radio Division, and Glenn Emanuel, the President of our Outdoor Division. The loss of any of these officers or other key personnel could harm our business. Cancellations or reductions of advertising could cause our quarterly results to fluctuate, which could adversely affect the market price of our Class A common stock. We do not obtain long-term commitments from our advertisers, and advertisers may cancel, reduce or postpone orders without penalty. Cancellations, reductions or delays in purchases of advertising could adversely affect our revenue, especially if we are unable to replace such purchases. Our expense levels are based, in part, on expected future revenue and are relatively fixed once set. Therefore, unforeseen fluctuations in advertising sales could adversely impact our operating results. These factors could cause our quarterly results to fluctuate, which could adversely effect the market price of our Class A common stock. In addition, our advertising revenue could be adversely affected by a recession or downturn in the U.S. economy, since advertising expenditures generally decrease as the economy slows down, or by the loss of a major industry segment of our advertisers. Our results in individual geographic markets could be adversely affected by local or regional economic downturns. Risks Related to the Television, Radio, Outdoor Advertising and Publishing Industries If we are unable to maintain our FCC licenses, our television and radio operations could be harmed. The domestic broadcasting industry is subject to extensive federal regulation which, among other things, requires approval by the FCC for the issuance, renewal, transfer and assignment of broadcasting station operating licenses and limits the number of broadcasting properties we may acquire. In addition, the Communications Act of 1934 and FCC rules impose limits on ownership of our capital stock by foreign persons and entities. The success of our television and radio operations depends, in part, on acquiring and maintaining broadcast licenses issued by the FCC, which are typically issued for a maximum term of eight years and are subject to renewal. Pending or future renewal applications submitted by us may not be approved, and renewals may include conditions or qualifications that could restrict our television and radio operations. In addition, third parties may challenge our renewal applications. If the FCC were to issue an order denying a license renewal application or revoking a license, we could be required to cease operating the broadcast station covered by the license. 13 In addition, our bank credit facilities require us to maintain our FCC licenses. If the FCC were to revoke any of our material licenses, our lenders could declare all amounts outstanding under the bank credit facilities to be immediately due and payable. If our indebtedness is accelerated, we may not have sufficient funds to pay the amounts owed. Our low-power television stations in Washington, D.C. and San Diego are subject to frequency and power changes in full-power television authorizations of the FCC. If we are unable to find suitable replacements without a loss in coverage, our ratings and advertising revenue in these markets may decrease. We must be able to respond to rapidly changing technology, services and standards which characterize the television and radio industries in order to remain competitive. The FCC is considering ways to introduce new technologies to the television and radio broadcast industries, including delivery of digital audio and video broadcasting, and the standardization of available technologies that significantly enhance the quality of broadcasts. Several new media technologies are being developed for the delivery of radio programming, including the following: . cable television operators have introduced a service commonly referred to as "cable radio" which provides cable television subscribers with several high-quality channels of music, news and other information; . the Internet offers new forms of audio programming distribution; . the introduction of satellite digital audio technology could result in new satellite radio services with sound quality equivalent to that of compact discs and whose subscription programming (without commercial advertising) is directed to specific program niches, including ours; . the introduction of low-power, non-commercial FM radio stations into our markets could increase competition for our radio stations; and . the introduction of in-band, on-channel digital radio could provide multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services. We could face increased competition from these technologies if they become broadly adopted. Our inability to respond to changes in technology on a timely basis or at an acceptable cost could have a material adverse effect on our business and financial condition. The required conversion to digital television could impose significant costs on us which may not be balanced by consumer demand. The FCC requires us to provide a digitally transmitted signal by May 1, 2002 for all of our U.S. television stations and, generally, to stop broadcasting analog signals by 2006. Our costs to convert our television stations to digital television, or DTV, could be significant, and there may not be any consumer demand for DTV services. The imposition of DTV and the removal of Channels 60- 69 from use for television broadcasting have reduced available channels, which may affect our continued ability to operate certain of our low-power television stations. Changes in federal laws could result in increased competition for our broadcast stations. Recent and prospective actions by Congress, the FCC and the courts could cause us to face significant competition in the future. The changes include: . relaxation of restrictions on television and radio station ownership; . relaxation of restrictions on the participation by regional telephone operating companies in cable television and other direct-to-home audio and video technologies; . increased restrictions on the use of local marketing agreements; 14 . the establishment of a Class A television service for low-power stations that makes such stations primary stations and gives them protection against full-service stations; . plans to license low-power FM radio stations that will be designed to serve small localized areas and niche audiences; and . permission for direct broadcast satellite television to provide the programming of traditional over-the-air stations, including local and out-of-market network stations. In addition, new laws or regulations may eliminate, or at least limit the scope of, our cable carriage rights. Because our full-power television stations rely on "must carry" rights to obtain cable carriage, either of those changes could have a material adverse impact on our television operations. Pursuant to the "must carry" provisions of the Cable Television Consumer Protection and Competition Act of 1992, a broadcaster may demand carriage on a specific channel on cable systems within its market. However, the future of those "must carry" rights is uncertain, especially as they relate to the carriage of DTV stations. The current FCC rules relate only to the carriage of analog television signals. It is not clear what, if any, "must carry" rights television stations will have after they make the transition to DTV. Our low-power television stations do not have "must carry" rights. In eight markets where we currently hold only a low-power license we may face future uncertainty with respect to the availability of cable carriage. With the exception of the San Angelo and Amarillo markets, all of our low-power stations reach a substantial portion of the Hispanic cable households in their respective markets. We may face review by the Department of Justice for additional television and radio station acquisitions in our existing markets. Since the passage of the Telecommunications Act of 1996, the DOJ has become more aggressive in reviewing proposed acquisitions of television and radio stations and television and radio station networks. The DOJ is particularly concerned when the proposed buyer already owns one or more television or radio stations in the market of the station it is seeking to buy. In general, the DOJ has more closely scrutinized television and radio broadcasting acquisitions that result in market shares in excess of 40% of local television or radio advertising revenue. If the DOJ fails to approve our proposed acquisitions in the future, our ability to expand our operations will be limited. If we are unable to compete effectively for advertising revenue against other stations and other media companies, some of which have greater resources than we do, we could suffer a decrease in advertising revenue. The broadcasting industry is highly competitive. The financial success of each of our stations depends upon its audience ratings and share of the overall advertising revenue within its geographic market and the economic health of the market. In addition, our advertising revenue depends upon the desire of advertisers to reach our audience demographic. Our television and radio stations compete for audience share and advertising revenue directly with other television and radio stations and with other media within their respective markets, such as the following: . newspapers; . cable television; . the Internet; . magazines; . billboard advertising; . transit advertising; and . direct mail advertising. 15 Some of these television and radio stations also broadcast Spanish-language radio and television programming. Some of our competitors are larger and have significantly greater resources than we do. In addition, the Telecommunications Act facilitates the entry of other broadcasting companies into the markets in which we operate stations or may operate stations in the future. If we are unable to compete successfully in the markets we serve, we may suffer a decrease in advertising revenue, which could adversely affect our business and financial condition. Increased regulation of outdoor advertising could harm our outdoor operations. Our outdoor operations are significantly impacted by federal, state and local government regulation of the outdoor advertising business. These regulations impose restrictions on, among other things, the location, size and spacing of billboards. If we are required to remove our existing billboards, or are unable to construct new billboards or reconstruct damaged billboards, our outdoor business could be harmed. In addition, we may not receive compensation for billboards that we may be required to remove in the future. Additional regulations may be imposed on outdoor advertising in the future. Legislation regulating the content of billboard advertisements has been introduced and passed in Congress from time to time in the past. Additional regulations or changes in the current laws regulating and affecting outdoor advertising at the federal, state or local level may harm the results of our outdoor operations. Strikes, work stoppages and slowdowns by our employees could negatively affect our results of operations. Our publishing business depends to a significant degree on our ability to avoid strikes and other work stoppages by our employees. The Newspaper and Mail Deliverers' Union of New York and Vicinity, or the NMDU, and the Newspaper Guild of New York represent our publishing employees. Our collective bargaining agreement with the NMDU expires on March 30, 2004. Our collective bargaining agreement with the Newspaper Guild of New York expires on June 30, 2002. Future collective bargaining agreements may not be negotiated without service interruptions, and the results of these negotiations may adversely affect our financial condition and results of operations. In addition, strikes may occur in the future in connection with labor negotiations or otherwise. Any prolonged strike or work stoppage could have a material adverse effect on our results of operations and financial condition. Risks Related to this Offering Future sales by existing stockholders could depress the market price of our Class A common stock. Immediately after this offering, the public market for our common stock will include only the shares of our Class A common stock that we are selling in this offering. At that time, there will be outstanding an additional shares of Class A common stock, shares of Class B common stock and shares of Class C common stock. Shares of our Class B common stock and Class C common stock are immediately convertible on a share-for-share basis into Class A common stock at the option of the holder. The shares held by our officers, directors and existing stockholders are subject to "lock-up" agreements with Donaldson, Lufkin & Jenrette that prohibit such stockholders from selling their common stock in the public market for 180 days after the date of this prospectus. When the "lock-up" period expires, or if Donaldson, Lufkin & Jenrette consents, in its sole discretion, to an earlier sale, such stockholders will be able to sell their shares in the public market, subject to certain legal restrictions. Upon completion of this offering, we will have outstanding shares of Class A common stock. Of these shares, the shares sold in this offering are freely tradeable. This leaves shares of Class A common stock, of which will be eligible for sale in the public market after the "lock-up" period expires, or 180 days after the date of this prospectus, including shares of Class A common stock issuable upon conversion of outstanding shares of Class B common stock and Class C common stock. If our existing stockholders sell a large number of shares, the market price of our Class A common stock could decline dramatically. Moreover, the perception in the public market that these stockholders might sell shares of Class A common stock could depress the market price of our Class A common stock. 16 Our investors will pay a price for our Class A common stock that was not determined in a competitive market. Before this offering, there has not been any market for our Class A common stock. We do not know the extent to which investor interest in our business will lead to the development of a trading market or how liquid that market might be. If you purchase shares of Class A common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay a price that was negotiated between us and our underwriters. The price of our Class A common stock that will prevail in the market after this offering may be higher or lower than the price you pay. For a description of the factors we considered in negotiating the public offering price, see "Underwriting." As a new investor, you will experience immediate and substantial dilution. We expect the initial public offering price to be substantially higher than the pro forma net tangible book value per share of the Class A common stock outstanding immediately after this offering. Accordingly, if you purchase shares of our Class A common stock in this offering, you will incur immediate and substantial dilution in pro forma net tangible book value. The pro forma net tangible book value upon completion of this offering will be $ per share, representing an immediate dilution to you of $ per share, based on an assumed initial public offering price of $ per share. In addition, if the holders of outstanding options exercise those options, you will experience further dilution. Our common stockholders will not receive a current return on their investment since we do not intend to pay cash dividends. We intend to retain any earnings to support the growth and development of our business, and we do not intend to pay cash dividends for the foreseeable future. Under our bank credit facilities and the terms of our preferred stock, we are restricted in our ability to pay dividends on all classes of our common stock. Stockholders who desire to change control of our company may be prevented from doing so by provisions of our charter, applicable law and our credit agreement. Our charter could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. Our charter provisions could diminish the opportunities for a stockholder to participate in tender offers. In addition, under our charter, our board of directors may issue preferred stock that could have the effect of delaying or preventing a change in control of our company. The issuance of preferred stock could also negatively affect the voting power of holders of our common stock. The provisions of our charter may have the effect of discouraging or preventing an acquisition or sale of our business. In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. The transfer restrictions imposed on the broadcast licenses we own also restrict the ability of third parties to acquire us. Our licenses may only be transferred with prior approval by the FCC. Accordingly, the number of potential transferees of our licenses is limited, and any acquisition, merger or other business combination involving Entravision would be subject to regulatory approval. In addition, the documents governing our indebtedness contain limitations on our ability to enter into a change of control transaction. Under these documents, the occurrence of a change of control transaction, in some cases after notice and grace periods, would constitute an event of default permitting acceleration of our outstanding indebtedness. 17 Our stock price could be volatile. The stock market in general, and the stock prices of new public companies in particular, have experienced significant volatility that often has been unrelated to the operating performance of any specific public company. Factors that may have a significant impact on the market price of our Class A common stock include: . future announcements concerning us or Univision; . changes in the prospects of our business partners; . results of technological innovations; . government regulation, including the FCC's review of our acquisition of broadcast licenses; and . changes in recommendations of securities analysts and rumors that may be circulated about us or our competitors. Our future earnings and stock price may be subject to significant volatility, particularly on a quarterly basis. Shortfalls in our revenue or earnings in any given period relative to the levels expected by securities analysts could immediately, significantly and adversely affect the trading price of our Class A common stock. In the past, following periods of volatility in the market price of a company's securities, class action litigation has often been instituted against such company. Litigation of this type could result in substantial costs and a diversion of our management's attention and resources, which could, in turn, have a material adverse effect on our business and financial condition. 18 FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements, including statements under the captions "Prospectus Summary," "Risk Factors," "Selected Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus, concerning our expectations of future revenue, expenses, the outcome of our growth and acquisition strategy and the projected growth of the U.S. Hispanic population. Forward-looking statements often include words or phrases such as "will likely result," "expect," "will continue," "anticipate," "estimate," "intend," "plan," "project," "outlook," "seek" or similar expressions. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed in the forward-looking statements. Factors which could cause actual results to differ from expectations include those in the "Risk Factors" section of this prospectus. Our results of operations may be adversely affected by one or more of these factors. We caution you not to place undue reliance on these forward-looking statements, which reflect our management's view only as of the date of this prospectus. We are not obligated to update these statements or publicly release the results of any revisions to them to reflect events or circumstances occurring after the date of this prospectus or to reflect the occurrence of unanticipated events. 19 USE OF PROCEEDS We estimate that the net proceeds to us from the sale of shares of Class A common stock in this offering will be approximately $ million, based on an assumed initial public offering price of $ per share and after deducting the estimated underwriting fees and offering expenses. If the underwriters exercise their over-allotment in full, we estimate that the net proceeds will be $ million. We intend to use the net proceeds from this offering as follows: . to acquire Z-Spanish Media................................. $ 256 million . to repay a portion of existing indebtedness under our bank credit facilities.......................................... 154 million . to pay the balance of the purchase price for two radio stations from Citicasters.................................. 68 million . for working capital and general corporate purposes......... million ------------- $ million =============
For a description of our acquisitions of Z-Spanish Media and two radio stations from Citicasters, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview." On April 19, 2000, we entered into a $115 million term loan to partially finance our acquisition of LCG. We expect to repay this debt in full with proceeds from this offering. The interest rate on this debt was 10.5% as of the date of this prospectus. This debt must be repaid in full by April 18, 2001 and can be prepaid without penalty. In addition, we assumed $39 million of the debt that we are repaying from Z- Spanish Media under two separate credit facilities. As of the date of this prospectus, the interest rate on $35 million of this debt was 9.6%, and the interest rate on $4 million of this debt was 8.7%. Debt outstanding under both of these facilities must be repaid in full by September 30, 2006, unless the maturity of the loans is accelerated pursuant to the provisions of the credit facilities. Until we use the net proceeds of this offering as described above, we will invest them in short-term, interest-bearing, investment grade securities. DIVIDEND POLICY We have never declared or paid cash dividends on our capital stock. Our predecessor, Entravision Communications Company, L.L.C., made cash distributions to its members to pay income taxes. We intend to retain future earnings for use in our business and do not anticipate declaring or paying any cash or stock dividends on shares of our common stock for the foreseeable future. In addition, our bank credit facilities and the terms of our outstanding preferred stock restrict our ability to pay dividends. 20 CAPITALIZATION (In thousands, except per share data) The following table shows our cash and cash equivalents and capitalization on: . an actual basis as of December 31, 1999; . a pro forma basis to reflect acquisitions we made or have agreed to make after December 31, 1999, and investments made by Univision and TSG Capital Fund III, L.P. in 2000 totaling $200 million; and . a pro forma as adjusted basis to further reflect the sale of the shares of Class A common stock we are offering at an estimated initial public offering price of $ per share, after deducting the underwriting fees and estimated offering expenses and the application of the net proceeds of this offering. This table should be read together with our audited consolidated financial statements and unaudited pro forma consolidated financial statements and the related notes included elsewhere in this prospectus.
As of December 31, 1999 -------------------------------- Unaudited Unaudited Pro Forma Actual Pro Forma As Adjusted -------- --------- ----------- Cash and cash equivalents...................... $ 2,357 $ 13,545 ======== ======== ====== Current maturities of long-term debt .......... $ 1,620 $ 24,468 Notes payable, less current maturities......... 155,917 336,369 Subordinated note--Univision (1)............... 10,000 -- Convertible subordinated note--TSG Capital Fund III, L.P. (1)................................. -- -- -------- -------- ------ Total long-term debt.......................... 167,537 360,837 -------- -------- ------ Series A mandatorily redeemable convertible preferred stock, $0.0001 par value, 11,000,000 shares authorized; 1999 actual no shares issued or outstanding; pro forma and pro forma as adjusted shares issued and outstanding (1)............................... -- 90,000 Series B redeemable pay-in-kind preferred stock (2)........................................... -- 255,990 -------- -------- ------ Total preferred stock......................... -- 345,990 -------- -------- ------ Stockholders' equity Class A common stock, $0.0001 par value, 305,000,000 shares authorized; 1999 actual 9,875,708 shares issued and outstanding; pro forma shares issued and outstanding; pro forma as adjusted shares issued and outstanding.................................. 1 12 Class B common stock, $0.0001 par value, 60,000,000 shares authorized; 1999 actual and pro forma 54,858,626 shares issued and outstanding; pro forma as adjusted shares issued and outstanding................ 5 5 Class C common stock, $0.0001 par value, 50,000,000 shares authorized; 1999 actual no shares issued and outstanding; pro forma and pro forma as adjusted 45,124,619 shares issued and outstanding (1)................... -- 5 Additional paid-in capital.................... 76,292 305,986 Accumulated deficit........................... (63,901) (63,901) Stock subscription notes receivable (3)....... (584) (584) -------- -------- ------ Total stockholders' equity.................... 11,813 241,523 -------- -------- ------ Total capitalization........................... $179,350 $948,350 ======== ======== ======
- ------- (1) The unaudited pro forma data reflects the exchange of the $120 million subordinated note and option from Univision for shares of Class C common stock in connection with our reorganization and the conversion of the $90 million subordinated note from TSG Capital Fund III, L.P. to Series A mandatorily redeemable convertible preferred stock. (2) Represents preferred stock that we could be required to issue to finance our acquisition of Z-Spanish Media if this offering has not closed by September 30, 2000. (3) Represents unsecured loans made to two of our officers to purchase equity. These loans are further described in "Certain Relationships and Related Transactions." 21 DILUTION Purchasers of our Class A common stock offered by this prospectus will suffer an immediate and substantial dilution in pro forma net tangible book value per share. Dilution is the amount by which the initial public offering price paid by the purchasers of the shares of Class A common stock will exceed the pro forma net tangible book value per share of our common stock after this offering. The pro forma net tangible book value per share of common stock is determined by subtracting total liabilities from the total tangible assets and dividing the difference by the pro forma number of shares of our common stock deemed to be outstanding on the date the tangible book value is determined. As of , 2000, we had a tangible book value of $ million or $ per share, excluding this offering. Assuming the sale of shares at an initial public offering price of $ per share and deducting the underwriters' discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of , 2000 would have been $ million or $ per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $ per share and an immediate dilution to new investors of $ per share. The following table illustrates this per share dilution:
Per Share --------- Assumed initial public offering price............................ $ ------ Pro forma net tangible book value before this offering........... ------ Increase in net tangible book value per share attributable to this offering................................................... ------ Pro forma net tangible book value after this offering............ ------ Dilution per share to new investors.............................. $ ======
The following table summarizes, on a pro forma as adjusted basis as of , 2000, the number of shares of Class A common stock purchased from us, the estimated value of the total consideration paid for or attributed to the Class A common stock and the average price per share paid by or attributable to existing stockholders and the new investors purchasing shares in this offering at an assumed initial offering price of $ per share before deducting estimated underwriters' fees and offering expenses:
Shares Purchased Total Consideration Average -------------- --------------------- Price Per Number Percent Amount Percent Share ------ ------- --------- ---------- --------- Existing stockholders....... ---- ---- --------- --------- ---- New investors .............. ---- ---- --------- --------- ---- Total....................... ==== ==== ========= ========= ====
22 SELECTED HISTORICAL FINANCIAL DATA (In thousands, except per share data) Presented below are our summary historical financial data. The data as of December 31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999 were derived from our audited financial statements and related notes included elsewhere in this prospectus, and should be read in conjunction with this information as well as "Entravision Management's Discussion and Analysis of Financial Condition and Results of Operations." The data as of December 31, 1995, 1996 and 1997 and for the years ended December 31, 1995 and 1996 were derived from our audited financial statements and related notes, which are not included in this prospectus.
Year Ended December 31, ---------------------------------------------- 1995(1) 1996 1997 1998 1999 ------- ------- ------- -------- -------- Statement of Operations Data: Gross revenue................. $ 7,797 $13,555 $33,419 $ 49,872 $ 66,204 Less agency commissions....... 688 1,481 2,963 5,052 7,205 ------- ------- ------- -------- -------- Net revenue................... 7,109 12,074 30,456 44,820 58,999 ------- ------- ------- -------- -------- Expenses: Direct operating............ 1,846 3,819 9,184 15,794 24,441 Selling, general and administrative............. 2,295 4,667 5,845 8,877 11,611 Corporate................... -- 564 3,899 3,963 5,809 Depreciation and amortization............... 673 1,479 8,847 9,565 14,613 Non-cash stock-based compensation (2)........... -- -- 900 500 29,143 ------- ------- ------- -------- -------- Total expenses................ 4,814 10,529 28,675 38,699 85,617 ------- ------- ------- -------- -------- Operating income (loss)....... 2,295 1,545 1,781 6,121 (26,618) Interest expense, net......... (265) (1,035) (5,107) (8,244) (12,091) ------- ------- ------- -------- -------- Income (loss) before income taxes...................... 2,030 510 (3,326) (2,123) (38,709) Income tax (expense) benefit (3).......................... (369) (145) 7,531 (210) 121 ------- ------- ------- -------- -------- Net income (loss)........... 1,661 365 4,205 (2,333) (38,588) ======= ======= ======= ======== ======== Pro forma income tax (expense) benefit (4).................. (812) (204) 654 327 3,499 ======= ======= ======= ======== ======== Pro forma net income (loss) (4).......................... $ 1,218 $ 306 $(2,672) $ (1,796) $(35,210) ======= ======= ======= ======== ======== Pro forma basic and diluted earnings per share: Pro forma net income (loss) (4)........................ $ 0.02 $ 0.00 $ (0.04) $ (0.03) $ (0.54) Weighted average common shares outstanding......... 67,039 64,092 65,945 65,790 64,805 Other Financial Data: Broadcast cash flow (5)....... $ 2,968 $ 3,588 $15,427 $ 20,149 $ 22,947 EBITDA (6).................... 2,968 3,024 11,528 16,186 17,138 Capital expenditures.......... 902 935 2,366 3,094 12,825 As of December 31, ---------------------------------------------- 1995(1) 1996 1997 1998 1999 ------- ------- ------- -------- -------- Balance Sheet Data: Cash and cash equivalents..... $ 726 $ 2,886 $ 2,250 $ 3,661 $ 2,357 Total assets.................. 8,630 28,767 93,017 113,724 188,819 Long-term debt, including current portion.............. 5,265 17,449 74,781 99,938 167,537 Total stockholders' equity (7).......................... 2,322 9,743 13,122 7,304 11,813
- -------- (1) The 1995 financial data presents the combined financial statements of our broadcast properties prior to the 1996 formation of our holding company structure. (2) For 1999, non-cash stock-based compensation represents management's estimate of the fair value of our employee stock award and our employee stock option grant based on the estimated price of this offering. 23 (3) Included in the 1997 income tax expense is a $7.8 million tax benefit that resulted from the reversal of previously recorded deferred tax liabilities that were established in our 1997 acquisition of KNVO, McAllen, Texas. This entity was converted from a C-corporation to an S-corporation in 1997. As a result, deferred tax liabilities were reduced. (4) Pro forma net income (loss) and pro forma basic and diluted net income (loss) per share give effect to our conversion from a limited liability company to a corporation for federal and state income tax purposes and assume that we were subject to corporate income taxes at an effective combined federal and state income tax rate of 40% before the effect of non- tax deductible goodwill and non-cash stock-based compensation for each period presented. (5) Broadcast cash flow means operating income (loss) before corporate expenses, depreciation and amortization and non-cash stock-based compensation. We have presented broadcast cash flow, which we believe is comparable to the data provided by other companies in the broadcast industry, because such data is commonly used as a measure of performance in our industry. However, broadcast cash flow should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (6) EBITDA means broadcast cash flow less corporate expenses and is commonly used in the broadcast industry to analyze and compare broadcast companies on the basis of operating performance, leverage and liquidity. EBITDA, as presented above, may not be comparable to similarly titled measures of other companies unless such measures are calculated in substantially the same fashion. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (7) The stockholders' equity data gives effect to our reorganization in which direct and indirect ownership interests in our predecessor and Univision's subordinated note and option will be exchanged for shares of our common stock before the closing of this offering. 24 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (In thousands) Our selected unaudited pro forma financial data as of and for the year ended December 31, 1999 presents: . our summary historical financial data for the year ended December 31, 1999; . the historical financial data of our completed and pending acquisitions for the year ended December 31, 1999 including the period from January 1, 1999 through the acquisition dates for our 1999 acquisitions; . our summary unaudited pro forma financial data as of and for the year ended December 31, 1999, giving effect to acquisitions completed in 1999 and 2000 and our pending acquisition of Z-Spanish Media as if we had owned these businesses for all of 1999, the effect of conversion of TSG Capital Fund III, L.P.'s $90 million convertible subordinated note into preferred stock and the exchange of Univision's $120 million subordinated note and option for common stock; and . our unaudited pro forma as adjusted financial data, giving further effect to the sale of the shares of common stock that we are offering, assuming an initial public offering price of $ per share and the application of the net proceeds of this offering. The summary unaudited pro forma and pro forma as adjusted financial data are not necessarily indicative of the operating results or the financial condition that would have been achieved if we had owned these businesses for all of 1999 and should not be construed as representative of future operating results or financial condition. The summary historical and unaudited pro forma financial data should be read in conjunction with the audited consolidated financial statements and related notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Year Ended December 31, 1999 ----------------------------------------------- Completed Unaudited Entravision and Pending Unaudited Pro Forma Historical Acquisitions Pro Forma As Adjusted ----------- ------------ --------- ----------- Statement of Operations Data: Gross revenue: Television................... $ 63,842 $ 5,096 $ 68,938 Radio........................ 2,362 58,499 60,861 Outdoor and publishing....... -- 35,134 35,134 -------- -------- --------- ---- Total gross revenue.......... 66,204 98,729 164,933 Less agency commissions........ 7,205 7,662 14,867 -------- -------- --------- ---- Net revenue.................... 58,999 91,067 150,066 Expenses: Direct operating............. 24,441 34,474 58,915 Selling, general and administrative.............. 11,611 33,875 45,486 Corporate.................... 5,809 6,568 12,377 Depreciation and amortization................ 14,613 13,954 83,168 Non-cash stock-based compensation................ 29,143 -- 29,143 Gain on sale of assets....... -- (4,442) (4,442) -------- -------- --------- ---- Total expenses................. 85,617 84,429 224,647 -------- -------- --------- ---- Operating income (loss)........ (26,618) 6,638 (74,581) Interest expense, net and other......................... (12,091) (13,244) (33,900) Income tax benefit ............ 121 1,872 27,998 -------- -------- --------- ---- Loss from continuing operations.................. (38,588) (4,734) (80,483) Preferred stock dividends (1)......................... -- -- 42,209 -------- -------- --------- ---- Net loss from continuing operations applicable to common stock................ $(38,588) $ (4,734) $(122,692) $ ======== ======== ========= ====
Year Ended December 31, 1999 --------------------- Unaudited Unaudited Pro Forma Pro Forma As Adjusted --------- ----------- Other Financial Data: Broadcast cash flow (2)................................... $45,665 EBITDA (3)................................................ 33,288
25
As of December 31, 1999 Unaudited Pro Forma As Adjusted ----------------- Balance Sheet Data: Cash and cash equivalents............ $ Total assets............ Long-term debt, including current portion................ Series A mandatorily redeemable convertible preferred stock........ Total stockholders' equity (4).............
- -------- (1) Includes dividends on the 13.5% preferred stock that we could be required to issue to finance our acquisition of Z-Spanish Media if this offering has not closed by September 30, 2000 and dividends on the 8.5% redeemable preferred stock issuable to TSG Capital Fund III, L.P. upon conversion of its $90 million convertible subordinated note. (2) Broadcast cash flow means operating income (loss) from continuing operations before corporate expenses, depreciation and amortization, non- cash stock-based compensation and gain on sale of assets. We have presented broadcast cash flow which we believe is comparable to the data provided by other companies in the broadcast industry, because such data is commonly used as a measure of performance in our industry. However, broadcast cash flow should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (3) EBITDA means broadcast cash flow less corporate expenses and is commonly used in the broadcast industry to analyze and compare broadcast companies on the basis of operating performance, leverage and liquidity. EBITDA, as presented above, may not be comparable to similarly titled measures of other companies unless such measures are calculated in substantially the same fashion. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of operating performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (4) The stockholders' equity data gives effect to our reorganization in which direct and indirect ownership interests in our predecessor and Univision's subordinated note and option will be exchanged for shares of our common stock before the closing of this offering. 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We have included Management's Discussion and Analysis for each of Entravision, LCG, which we have acquired, and Z-Spanish Media, which we have agreed to acquire. The words "we" and "our" as used in each of these sections refer to Entravision, LCG or Z-Spanish Media individually and not as a combined entity. You should read these sections together with the historical audited financial statements of Entravision, LCG and Z-Spanish Media and the related notes contained elsewhere in this prospectus. We agreed to acquire all of the outstanding capital stock of Z-Spanish Media on April 20, 2000 for $475 million including the assumption of approximately $109 million in debt. The consideration to be paid consists of approximately $256 million in cash and shares of Class A common stock, valued at a price of $ per share. The acquisition will be accounted for as a purchase business combination and the excess purchase price will be allocated to intangible assets and goodwill, which will be amortized over 15 years. The closing of the acquisition is subject to conditions, including the receipt of required regulatory approvals. The closing of this offering is conditioned upon the closing of the acquisition. We acquired all of the outstanding capital stock of LCG on April 20, 2000 for approximately $252 million. The acquisition was accounted for as a purchase business combination and the excess purchase price was allocated to intangible assets and goodwill, which will be amortized over 15 years. We have agreed to acquire substantially all of the assets related to two radio stations in the Los Angeles market from Citicasters Co. for $85 million, of which $17 million was previously placed in escrow as a deposit. In addition, we have agreed to acquire two television stations in Hartford, Connecticut, and Orlando, Florida for a total of approximately $41 million. We are acquiring FCC licenses and the entire purchase price for these acquisitions will be allocated to intangible assets and will be amortized over 15 years. The closing of these acquisitions is subject to conditions, including the receipt of required regulatory approvals. We expect to close the Citicasters acquisition in the second quarter of 2000 and the television station acquisitions in the third quarter of 2000. We have no operating history as a combined company on which to base an evaluation of our business and prospects. Our business is evolving rapidly, and, therefore, we believe that period-to-period comparisons of operating results of Entravision, LCG and Z-Spanish Media are not meaningful, and you should not rely on them as an indicator of our future performance as a combined company. 27 ENTRAVISION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We operate 31 television stations (and own the construction permits to build two additional television stations) and ten radio stations primarily in the Southwestern United States where the majority of U.S. Hispanics live, including the U.S./Mexican border markets. Our television stations consist primarily of Univision affiliates serving 17 of the top 50 U.S. Hispanic markets. Our radio stations consist of six FM and four AM stations serving portions of the California and Texas markets. We were organized as a Delaware limited liability company in January 1996 to combine the operations of our predecessor entities. We currently conduct operations through a group of affiliated limited liability companies and S- corporations. Before the closing of this offering we will complete a reorganization in which all of the outstanding membership interests of our predecessor and Univision's subordinated note and option will be exchanged for shares of our common stock. This reorganization is described in "Certain Relationships and Related Transactions--Reorganization." We generate revenue from sales of national and local advertising time on television and radio stations. Advertising rates are, in large part, based on each station's ability to attract audiences in demographic groups targeted by advertisers. We recognize advertising revenue when the commercials are broadcast. We incur commissions from agencies on local, regional and national advertising. Our revenue reflects deductions from gross revenue for commissions to these agencies. Our primary expenses are employee compensation, including commissions paid to our sales staffs, marketing, promotion and selling costs, technical, local programming, engineering costs and general and administrative expenses. Our local programming costs consist of costs related to producing a local newscast in each of our markets. During 1999, we recorded an operating expense of $29.1 million for non-cash stock-based compensation incurred in connection with an employee stock award and option grant. We expect to continue to make stock-based awards in the future. We have historically not had material income tax expense or benefit reflected in our statement of operations as the majority of our subsidiaries have been non-taxpaying entities. Federal and state income taxes attributable to income during such periods were incurred and paid directly by the members. Accordingly, no discussion of income taxes is included in this section. Before the closing of this offering we will become a taxpaying organization. We have included in our historical financial statements a pro forma provision for income taxes and a pro forma net loss to show what our net income or loss would have been if we were a taxpaying entity. We anticipate that our future effective income tax rate will vary from 40% due to a portion of our preliminary purchase price for the LCG and Z-Spanish Media acquisitions being allocated to non-tax deductible goodwill. 28 Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998 The following table sets forth selected data from our operating results for the years ended December 31, 1998 and 1999 (dollars in thousands):
Historical ----------------- 1998 1999 % Change ------- -------- ---------- Statement of Operations Data: Gross revenue........... $49,872 $ 66,204 32.7% Less agency commissions............ 5,052 7,205 42.6 ------- -------- Net revenue............. 44,820 58,999 31.6 Direct operating expenses............... 15,794 24,441 54.7 Selling, general and administrative expenses............... 8,877 11,611 30.8 Corporate expenses...... 3,963 5,809 46.6 Depreciation and amortization........... 9,565 14,613 52.8 Non-cash stock-based compensation........... 500 29,143 n/m ------- -------- Operating income (loss)................. 6,121 (26,618) Interest expense, net... (8,244) (12,091) ------- -------- Loss before income tax.. (2,123) (38,709) Income tax benefit (expense).............. (210) 121 ------- -------- Net loss................ $(2,333) $(38,588) ======= ======== Other Data: Broadcast cash flow..... $20,149 $ 22,947 13.9% EBITDA.................. 16,186 17,138 5.9
Net Revenue. Net revenue increased to $59.0 million in 1999 from $44.8 million in 1998, an increase of $14.2 million. This increase was primarily attributable to the acquisition of television stations in 1999 and the benefit of 12 months of our 1998 acquisitions. On a same station basis, for stations we owned or operated for all of 1998, net revenue increased $3.6 million, or 8%. This increase is attributable to an increase in advertising rates of approximately 20% in certain of our markets, offset by a $2.5 million decrease in network compensation from Univision. Direct Operating Expenses. Direct operating expenses increased to $24.4 million in 1999 from $15.8 million in 1998, an increase of $8.6 million. The increase was primarily attributable to the additional operations of five television stations in 1999. On a same station basis, for stations owned or operated for all of 1998, direct operating expenses increased $3.2 million, or 20.3%. This increase was due to approximately $1.5 million in technical and news costs to implement local news programming in our McAllen, Texas and Las Vegas, Nevada markets and an additional newscast at our station in San Diego, California. The addition of local newscasts to our television stations is consistent with our strategy of increasing advertising revenue and viewership by producing news programming specifically designed for each of our markets. As a percentage of net revenue, direct operating expenses increased to 41.4% in 1999 from 35.2% in 1998. Although direct operating expenses as a percentage of net revenue increased by 6.2%, we anticipate that these expenses as a percentage of net revenue will return to historical levels as we integrate our acquisitions. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $11.6 million in 1999 from $8.9 million in 1998, an increase of $2.7 million. The increase was primarily attributable to the acquisition of television stations in 1999. On a same station basis, for stations owned or operated for all of 1998, selling, general and administrative expenses decreased $0.7 million, or 7.9%. The decrease was due to the elimination of duplicative costs in integrating our 1998 acquisitions as well as volume discounts obtained due to the increase in the number of stations and employees. This decrease was partially offset by the increase in selling costs associated with increased sales, management and staff levels and 29 increased market research costs, all of which are consistent with our strategy of investing in sales, management and market research. As a percentage of net revenue, selling, general and administrative expenses decreased to 19.7% in 1999 from 19.8% in 1998. Corporate Expenses. Corporate expenses increased to $5.8 million in 1999 from $4.0 million in 1998, an increase of $1.8 million. The increase was primarily due to additional staffing as a result of our growth and additional costs associated with our acquisitions. As a percentage of net revenue, corporate expenses increased by 1% to 9.8% in 1999. We expect corporate expenses as a percentage of net revenue to continue to increase as we hire additional corporate personnel due to our growth and the costs associated with being a public company. Depreciation and Amortization. Depreciation and amortization increased to $14.6 million in 1999 from $9.6 million in 1998, an increase of $5.0 million. The increase was primarily attributable to the acquisition of television stations in 1999. On a same station basis, for stations we owned or operated for all of 1998, depreciation and amortization increased $0.3 million. This increase was due to additional depreciation from a new facility we built in McAllen, Texas and the capital expenditures to replace broadcast equipment for this station. Non-Cash Stock-Based Compensation. We have an employment agreement with an executive vice president in which the employee was awarded 1,845,656 shares of Class A common stock, which vested through January 2000. At December 31, 1999, the estimated fair value of this award was $27.7 million, of which $0.9 million, $0.5 million and $26.3 million were recorded as non-cash stock-based compensation for the years ended December 31, 1997, 1998 and 1999 respectively. In January 1999, we entered into an employment agreement with a senior vice president. As amended, the agreement allowed the employee to purchase 164,390 restricted shares of Class A common stock at $0.01 per share. The shares vest ratably over three years. Non-cash stock-based compensation associated with both of the awards was determined using an estimate by management and based primarily on the estimated offering price of this offering. With respect to the restricted shares, we recorded $2.8 million in non-cash stock-based compensation during 1999. Total non-cash stock-based compensation was $29.1 million for 1999. Operating Income (Loss). As a result of the above factors, we recognized an operating loss of $26.6 million in 1999 compared to operating income of $6.1 million in 1998. Excluding non-cash stock-based compensation, operating income decreased to $2.5 million in 1999 from $6.6 million in 1998, a decrease of $4.1 million. As a percentage of net revenue, operating income, excluding non-cash stock-based compensation, decreased to 4.3% in 1999 from 14.8% in 1998. Interest Expense, Net. Interest expense increased to $12.1 million in 1999 from $8.2 million in 1998, an increase of $3.8 million. The increase is due to additional borrowings to fund our acquisitions, higher interest rates due to our increased debt to cash flow ratio and $2.5 million related to the estimated intrinsic value of the option feature of our original $10 million subordinated note payable to Univision. Net Loss. We recognized a net loss of $38.6 million in 1999, compared to a net loss of $2.3 million in 1998. Excluding non-cash stock-based compensation, our net loss increased to $9.4 million in 1999 from $1.8 million in 1998, an increase of $7.6 million. As a percentage of net revenue, our net loss, excluding non-cash stock-based compensation, increased to 16% in 1999 from 4.1% in 1998. Broadcast Cash Flow. Broadcast cash flow increased to $22.9 million in 1999 from $20.1 million in 1998, an increase of $2.8 million. The increase was primarily attributable to the additional operations of five television stations in 1999. On a same station basis, for stations we owned or operated for all of 1998, broadcast cash flow increased $1.1 million. The increase was attributable to an increase in advertising rates of approximately 20% in some of our markets, offset by a $2.5 million decrease in network compensation from Univision and our investment in local news programming in our McAllen, Texas and Las Vegas, Nevada markets, and additional costs to implement an additional newscast at our station in San Diego, California. As a percentage of net revenue, broadcast cash flow decreased to 38.9% in 1999 from 45% in 1998. 30 EBITDA. EBITDA increased to $17.1 million in 1999 from $16.2 million in 1998, an increase of $0.9 million. As a percentage of net revenue, EBITDA decreased to 29% in 1999 from 36.1% in 1998. Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997 The following table sets forth selected data from our operating results for the years ended December 31, 1997 and 1998 (dollars in thousands):
Historical ---------------- 1997 1998 % Change ------- ------- -------- Statement of Operations Data: Gross revenue................................... $33,419 $49,872 49.2% Less agency commissions......................... 2,963 5,052 70.5 ------- ------- Net revenue..................................... 30,456 44,820 47.2 Direct operating expenses....................... 9,184 15,794 72.0 Selling, general and administrative expenses.... 5,845 8,877 51.9 Corporate expenses.............................. 3,899 3,963 1.6 Depreciation and amortization................... 8,847 9,565 8.1 Non-cash stock-based compensation............... 900 500 (44.4) ------- ------- Operating income................................ 1,781 6,121 Interest expense, net........................... (5,107) (8,244) ------- ------- Loss before income tax.......................... (3,326) (2,123) Income tax benefit (expense).................... 7,531 (210) ------- ------- Net income (loss)............................... $ 4,205 $(2,333) ======= ======= Other Data: Broadcast cash flow............................. $15,427 $20,149 30.6% EBITDA.......................................... 11,528 16,186 40.4
Net Revenue. Net revenue increased to $44.8 million in 1998 from $30.5 million in 1997, an increase of $14.4 million. The increase was primarily attributable to the benefit of a full year of our 1997 acquisitions of KINT and KNVO. These acquisitions accounted for $5.5 million of the increase in 1998. In addition, the increase was due to a rate shift from local to national advertising and an increase in the average rate charged for national advertising. The acquisition of television stations in 1998 accounted for $2.6 million of the increase. On a same station basis, for stations owned or operated for all of 1997, net revenue increased $11.7 million, or 38.4%. Direct Operating Expenses. Direct operating expenses increased to $15.8 million in 1998 from $9.2 million in 1997, an increase of $6.6 million. The increase was partially attributable to a full year of operations from our 1997 acquisitions of KINT and KNVO. These acquisitions accounted for $2.2 million of the increase in 1998. The acquisition of television stations in 1998 accounted for $1.2 million of the increase. On a same station basis, for stations owned or operated for all of 1997, direct operating expenses increased $5.4 million, or 58.8%. As a percentage of net revenue, direct operating expenses increased to 35.3% in 1998 from 30.2% in 1997. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $8.9 million in 1998 from $5.8 million in 1997, an increase of $3.0 million. The increase is partially attributable to a full year of operations from our 1997 acquisitions of KINT and KNVO. These acquisitions accounted for $0.6 million of the increase in 1998. Additional costs of sales and research tools associated with our strategy to improve our sales efforts accounted for an additional $0.5 million of this increase. The acquisition of two television stations in 1998 accounted for $1.0 million of the increase. On a same station basis, for stations owned or operated for all of 1997, selling, general and administrative expenses increased 31 $2.1 million, or 35.9%. As a percentage of net revenue, selling, general and administrative expenses increased to 19.8% in 1998 from 19.2% in 1997. Corporate Expenses. Corporate expenses increased to $4.0 million in 1998 from $3.9 million in 1997, an increase of $0.1 million. The increase was primarily associated with our acquisitions. As a percentage of net revenue, corporate expenses decreased to 8.8% in 1998 from 12.8% in 1997. Depreciation and Amortization. Depreciation and amortization increased to $9.6 million in 1998 from $8.8 million in 1997, an increase of $0.8 million. The increase was primarily attributable to a full year of operations from our 1997 acquisitions of KINT and KNVO and a partial year of depreciation and amortization from our 1998 acquisitions. Operating Income. As a result of the above factors, our operating income was $6.1 million in 1998 compared to operating income of $1.8 million in 1997, an increase of $4.3 million. Excluding non-cash stock-based compensation, operating income increased to $6.6 million in 1998 from $2.7 million in 1997, an increase of $3.9 million. As a percentage of net revenue, operating income, excluding non-cash stock-based compensation, increased to 14.8% in 1998 from 8.8% in 1997. Interest Expense, Net. Interest expense increased to $8.2 million in 1998 from $5.1 million in 1997, an increase of $3.1 million. The increase is due to additional borrowings to fund our acquisitions. Net Income (Loss). As a result of the above factors, we had a net loss of $2.3 million in 1998 compared to net income of $4.2 million in 1997. Excluding the tax benefit of $7.8 million related to KNVO's change in tax status in 1997, the net loss decreased to $2.3 million in 1998 from $3.6 million in 1997, a decrease of $1.3 million. Broadcast Cash Flow. Broadcast cash flow increased to $20.1 million in 1998 from $15.4 million in 1997, an increase of $4.7 million. The increase was partially attributable to a full year of operations from our 1997 acquisitions of KINT and KNVO. These acquisitions accounted for $2.8 million of the increase in 1998. In addition, the increase was due to a rate shift from local to national advertising and an increase in the average rate charged for national advertising of approximately 20% in some of our markets. The acquisition of television stations in 1998 accounted for $0.4 million of the increase. On a same station basis, for stations owned or operated for all of 1997, broadcast cash flow increased $4.3 million, or 27.9%. As a percentage of net revenue, broadcast cash flow decreased to 45% in 1998 from 50.7% in 1997. EBITDA. EBITDA increased to $16.2 million in 1998 from $11.5 million in 1997, an increase of $4.7 million. The increase was partially attributable to a full year of operations from our 1997 acquisitions of KINT and KNVO. These acquisitions accounted for $2.8 million of the increase in 1998. The acquisition of television stations in 1998 accounted for $0.4 million of the increase. On a same station basis, for stations owned or operated for all of 1997, EBITDA increased $4.3 million, or 37.3%. The increase was offset by additional technical, programming and local news costs. As a percentage of net revenue, EBITDA decreased to 36.1% in 1998 from 37.8% in 1997. Liquidity and Capital Resources Our primary source of liquidity is cash provided by operations, available borrowings under our bank credit facilities and investments made by Univision and TSG Capital Fund III, L.P. in 2000. We have a $158 million revolving line of credit with a group of lenders, which expires November 10, 2006 and contains scheduled quarterly reductions in the available borrowings through such date. Our obligations under this facility are secured by all of our stock and substantially all of our assets, as well as a pledge of the stock of several of our subsidiaries, including our special purpose subsidiary formed to hold our FCC licenses. Five of these subsidiaries have also pledged their assets as collateral for this facility and guaranteed repayment of outstanding borrowings. The facility contains financial covenants, including a requirement not to exceed a maximum debt to cash flow ratio 32 and interest and fixed charge coverage ratios. The facility requires us to maintain our FCC licenses for our broadcast properties and contains other operating covenants, including restrictions on our ability to incur additional indebtedness and pay dividends. The balance outstanding on our revolving credit facility as of the date of this prospectus was $150 million bearing interest at the rate of 9%. On March 2, 2000, Univision invested $110 million in the form of a subordinated note. From these proceeds, we used $33 million for our investment in a San Diego television station, $17 million to make a deposit toward our acquisition of two FM radio stations in the Los Angeles market and $60 million to reduce outstanding borrowings on our revolving bank credit facility. On April 19, 2000, we entered into a $115 million term loan to partially finance our acquisition of LCG. Amounts outstanding under this facility are due April 18, 2001 and bear interest at LIBOR plus 4%. The facility is secured by a pledge of all of the stock of LCG, a pledge of all of the stock of LCG's special purpose entity formed to hold its FCC licenses, a lien on all of LCG's assets and a secondary lien on all of our assets. This credit facility contains a covenant that requires us to maintain a minimum level of EBITDA measured on a quarterly basis. As of the date of this prospectus, borrowings outstanding under this facility were $115 million, which we expect to repay in full using proceeds from this offering. On April 20, 2000, we acquired LCG for $252 million. We financed the balance of the purchase price remaining after our previous deposit of $7 million using advances of $50 million on our revolving line of credit and $105 million on our term loan and $90 million from the issuance to TSG Capital Fund III, L.P. of a convertible subordinated note. On April 20, 2000, we agreed to acquire Z-Spanish Media for $475 million, including the assumption of approximately $109 million of debt, of which approximately $39 million will be repaid using proceeds from this offering. For a description of the terms of this debt see "Z-Spanish Media Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." In addition, we have agreed to acquire two television stations in the Hartford and Orlando markets and two radio stations in the Los Angeles market for an aggregate of $126 million. We expect to use $68 million of the proceeds from this offering to pay the balance of the purchase price for the two Los Angeles radio stations and borrowings under our revolving credit facility and the credit facilities that we are assuming from Z-Spanish Media to finance the television station acquisitions. Net cash flow from operating activities decreased to approximately $6.1 million for 1999, from approximately $7.7 million for 1998. Net cash flow used in investing activities increased to approximately $59.1 million for 1999, compared to approximately $25.6 million for 1998. During 1999, we acquired broadcast properties for a total of approximately $46 million (including deposits of $8.7 million for acquisitions closed in 2000) and made capital expenditures totaling approximately $13 million, which included the purchases of three parcels of land for $1.5 million, the building of a new facility in McAllen, Texas for $3.5 million and the upgrade of broadcasting equipment at all of our stations totalling $8 million. During 1998, we acquired broadcast properties for a total of approximately $23 million and made purchases of capital equipment totaling approximately $3 million. During 2000, we anticipate our capital expenditures will be approximately $18 million, including the building of three studio facilities and the transition to DTV. During 2000, we anticipate that Z-Spanish Media's and LCG's capital expenditures will be $5 million, including upgrades and maintenance on broadcasting equipment and facility improvements to radio stations in some of our markets, including Denver and Phoenix. We anticipate paying for these capital expenditures out of net cash flow from operating activities. The amount of these capital expenditures may change based on future changes in business plans, our financial conditions and general economic conditions. Net cash flow from financing activities was approximately $52 million for 1999. During 1999, we drew on our bank credit facility to acquire television stations from LCG and a television station in Venice (Sarasota), 33 Florida. In 1998, we completed acquisitions totaling $24 million, which were financed with borrowings under our revolving credit facility. These acquisitions included KORO and KLDO. We currently anticipate that funds generated from operations and available borrowings under our credit facilities, together with the net proceeds from this offering, will be sufficient to meet our anticipated cash requirements for the foreseeable future. We are currently in discussions with our lenders to refinance our existing indebtedness and increase available borrowings, which we expect to complete before the closing of this offering. We continuously review, and are currently reviewing, opportunities to acquire additional television and radio stations as well as billboards and other opportunities targeting the U.S. Hispanic market. We expect to finance any future acquisitions through funds generated from operations and borrowings under our credit facilities and through additional debt and equity financings. Any additional financings, if needed, might not be available to us on reasonable terms or at all. Failure to raise capital when needed could seriously harm our business and our acquisition strategy. If additional funds were raised through the issuance of equity securities, the percentage of ownership of our stockholders would be reduced. Furthermore, these equity securities might have rights, preferences or privileges senior to our Class A common stock. Seasonality Seasonal net broadcast revenue fluctuations are common in the broadcasting industry and are due primarily to fluctuations in advertising expenditures by local and national advertisers. Our first fiscal quarter generally produces the lowest net broadcast revenue for the year. Segments In accordance with FASB Statement No. 131, Disclosures About Segments of an Enterprise and Related Information, we have determined that we have one reportable segment. Furthermore, we have determined that all of our broadcast properties are subject to the same regulatory environment because they target similar classes of viewers and listeners through similar distribution methods. New Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, or the Statement, which is required to be adopted in all fiscal quarters of all fiscal years beginning after June 15, 2000. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance. We will be required to adopt the Statement effective January 1, 2001. The Statement will require that we recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitment through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Because of our minimal use of derivatives, we do not anticipate that the adoption of the Statement will have a significant effect on our or our acquired companies' earnings or financial position. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, or SAB 101. SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the Securities and Exchange Commission. This accounting bulletin, as amended in March 2000, is effective for us beginning in the second quarter of our fiscal year beginning January 1, 2000. We do not believe that the adoption of SAB 101 will have a material impact on our or our acquired companies' financial statements. 34 Quantitative and Qualitative Disclosures About Market Risk General Market risk represents the potential loss that may impact our financial position, results of operations or cash flows due to adverse changes in the financial markets. We are exposed to market risk from changes in the base rates on our variable rate debt. We periodically enter into derivative financial instrument transactions such as swaps or interest rate caps, in order to manage or reduce our exposure to risk from changes in interest rates. Under no circumstances do we enter into derivatives or other financial instrument transactions for speculative purposes. Our credit facilities require us to maintain an interest rate protection agreement. Interest Rates Our bank revolving line of credit bears interest at a variable rate of LIBOR (6.5% at December 31, 1999) plus 1.625%, and our term loan used to finance the LCG acquisition bears interest at LIBOR plus 4% at April 19, 2000. At December 31, 1999 we had $143 million of variable rate bank debt. We currently hedge a portion of our outstanding variable rate debt by using an interest rate cap. This interest rate cap effectively converts $50 million of our variable rate debt to a LIBOR fixed rate of 7% for a two-year period. Based on the current level of borrowings under our credit facilities at our interest rate cap agreements, an increase in LIBOR from the rates at December 31, 1999 to the cap rates would not materially change our interest expense. The estimated fair value of this interest rate cap agreement was not material and we expect to continue to use similar types of interest rate protection agreements in the future. 35 LCG MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General LCG has 17 radio stations which are programmed with one of our three nationally recognized formats delivered via satellite to all of our stations, except for KSSE-FM, Los Angeles, California, which is programmed locally using our "Super Estrella" format, and one station which is programmed pursuant to a time brokerage agreement. Stations using our satellite-delivered formats offer a local sound by using time slots or inserts for news, advertising and community affairs. The principal source of our revenue is the sale of broadcasting time on our radio stations to local and national advertisers. Our advertisers pay rates that are primarily affected by our ability to attract audiences in the demographic groups targeted by those advertisers. Ratings are measured principally by Arbitron Radio Market Reports. Our revenue is recognized when commercials are run. Operating expenses primarily consist of programming expenses, salaries and commissions and advertising and promotion expenses. In February 1999, we sold our television broadcasting business to Entravision. As a result, related net assets at December 27, 1998 and the results of television broadcasting operations for the three years ended December 26, 1999 were classified as discontinued operations. The following discussion focuses on the continuing radio broadcasting and newspaper publishing operations. On April 20, 2000, Entravision acquired all of our outstanding capital stock for $252 million. Year Ended December 26, 1999 Compared to the Year Ended December 27, 1998 The following table sets forth selected data from our operating results for the years ended December 27, 1998 and December 26, 1999 (dollars in thousands):
Historical ---------------- 1998 1999 % Change ------- ------- -------- Statement of Operations Data: Gross revenue................................. $41,588 $48,868 17.5% Less agency commissions....................... 3,692 4,623 25.2 ------- ------- Net revenue................................... 37,896 44,245 16.8 Direct operating expenses..................... 15,196 15,560 2.4 Selling, general and administrative expenses.. 17,677 18,910 7.0 Corporate expenses............................ 2,901 1,795 (38.1) Depreciation and amortization................. 4,593 4,907 6.8 ------- ------- Operating income (loss)....................... (2,471) 3,073 Interest expense and other, net............... (6,449) (5,527) ------- ------- Loss from continuing operations before income tax benefit.................................. (8,920) (2,454) Income tax benefit............................ 2,570 736 ------- ------- Loss from continuing operations............... $(6,350) $(1,718) ======= ======= Other Data: Broadcast cash flow........................... $ 5,023 $ 9,775 94.6% EBITDA........................................ 2,122 7,980 n/m
Net Revenue. Net revenue increased to $44.2 million in 1999 from $37.9 million in 1998, an increase of $6.3 million. Radio advertising accounted for about $5.8 million of the increase. The increase can be primarily attributed to favorable ratings and a strong demand for advertising, which allowed for rate increases ranging from 10% to 70% in our top markets. 36 Direct Operating Expenses. Direct operating expenses increased to $15.6 million in 1999 from $15.2 million in 1998, an increase of $0.4 million. The increase was primarily due to increases in radio engineering and programming costs. As a percentage of net revenue, direct operating expenses decreased to 35.2% in 1999 from 40.1% in 1998. For newspaper publishing, direct operating costs remained relatively flat. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $18.9 million in 1999 from $17.7 million in 1998, an increase of $1.2 million. The increase was primarily the result of increased general and administrative costs related to newspaper publishing and increased radio sales commissions. As a percentage of net revenue, selling, general and administrative expenses decreased to 42.6% in 1999 from 46.6% in 1998. Corporate Expenses. Corporate expenses decreased to $1.8 million in 1999 from $2.9 million in 1998, a decrease of $1.1 million. The decrease related primarily to a one-time 1998 charge for executive severance and increased professional fees. As a percentage of net revenue, corporate expenses decreased to 4.1% in 1999 from 7.7% in 1998. Depreciation and Amortization. Depreciation and amortization increased to $4.9 million in 1999 from $4.6 million in 1998, an increase of $0.3 million. Depreciation accounted for 77% of the increase due to the purchase of a new fully-automated publishing system. Operating Income (Loss). As a result of the above factors, operating income increased to $3.1 million in 1999 from an operating loss of $2.5 million in 1998, an increase of $5.5 million. Radio operations accounted for $4.7 million of the increase. Interest Expense and Other, Net. Interest expense and other decreased to $5.5 million in 1999 from $6.4 million in 1998, a decrease of $0.9 million. The decrease in interest expense was due primarily to a decrease in outstanding debt resulting from the sale of our television business in February 1999. Loss from Continuing Operations. As a result of the above factors, the loss from continuing operations decreased to $1.7 million in 1999 from $6.4 million in 1998, an decrease of $4.7 million. Broadcast Cash Flow. Broadcast cash flow increased to $9.8 million in 1999 from $5.0 million in 1998, an increase of $4.8 million. Radio operations accounted for $4.7 million of the increase. As a percentage of net revenue, broadcast cash flow increased to 22.1% in 1999 from 13.3% in 1998. EBITDA. EBITDA increased to $8.0 million in 1999 from $2.1 million in 1998, an increase of $5.9 million. The radio operations accounted for $4.7 million of the increase. As a percentage of net revenue, EBITDA increased to 18% in 1999 from 5.6% in 1998. 37 Year Ended December 27, 1998 Compared to the Year Ended December 28, 1997 The following table sets forth selected data from our operating results for the years ended December 28, 1997 and December 27, 1998 (dollars in thousands):
Historical ---------------- 1997 1998 % Change ------- ------- -------- Statement of Operations Data: Gross revenue................................. $40,467 $41,588 2.8% Less agency commissions....................... 3,472 3,692 6.3 ------- ------- Net revenue................................... 36,995 37,896 2.4 Direct operating expenses..................... 15,131 15,196 0.4 Selling, general and administrative expenses.. 17,535 17,677 0.8 Corporate expenses............................ 1,713 2,901 69.4 Depreciation and amortization................. 3,762 4,593 22.1 ------- ------- Operating loss................................ (1,146) (2,471) Interest expense and other, net............... (4,511) (6,449) ------- ------- Loss from continuing operations before income tax benefit.................................. (5,657) (8,920) Income tax benefit............................ 2,213 2,570 ------- ------- Loss from continuing operations............... $(3,444) $(6,350) ======= ======= Other Data: Broadcast cash flow........................... $ 4,329 $ 5,023 16.0% EBITDA........................................ 2,616 2,122 (18.9)
Net Revenue. Net revenue increased to $37.9 million in 1998 from $37.0 million in 1997, an increase of $0.9 million. Newspaper publishing accounted for $0.8 million of the increase. Direct Operating Expenses. Direct operating expenses were relatively flat compared to 1997 with an increase of $0.1 million. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $17.7 million in 1998 from $17.5 million in 1997, an increase of $0.2 million. Radio operations accounted for the majority of the increase. The increase primarily resulted from increased sales, marketing and promotion expenses. As a percentage of net revenue, selling, general and administrative expenses decreased to 46.6% in 1998 from 47.4% in 1997. Corporate Expenses. Corporate expenses increased to $2.9 million in 1998 from $1.7 million in 1997, an increase of $1.2 million. The increase was related primarily to one-time charges for executive severance and increased professional fees. As a percentage of net revenue, corporate expenses increased to 7.7% in 1998 from 4.6% in 1997. Depreciation and Amortization. Depreciation and amortization increased to $4.6 million in 1998 from $3.8 million in 1997, an increase of $0.8 million. Radio operations accounted for $0.7 million of the increase. The increase represented increased amortization associated with the 1997 acquisition of eight radio stations. Operating Loss. As a result of the above factors, the operating loss increased to $2.5 million in 1998 from $1.1 million in 1997, an increase of $1.4 million. Interest Expense and Other, Net. Interest expense increased to $6.4 million in 1998 from $4.5 million in 1997, an increase of $1.9 million. The increase was due primarily to higher interest rates in 1998 compared to 1997 and increases in outstanding debt incurred in connection with our acquisitions. Loss from Continuing Operations. As a result of the above factors, the loss from continuing operations increased to $6.4 million in 1998 from $3.4 million in 1997, an increase of $3.0 million. 38 Broadcast Cash Flow. Broadcast cash flow increased to $5.0 million in 1998 from $4.3 million in 1997, an increase of $0.7 million. As a percentage of net revenue, broadcast cash flow increased to 13.3% in 1998 from 11.7% in 1997. EBITDA. EBITDA decreased to $2.1 million in 1998 from $2.6 million in 1997, a decrease of $0.5 million. The decline is due to the increase in corporate expense. As a percentage of net revenue, EBITDA decreased to 5.6% in 1998 from 7.1% in 1997. Segment Operations We operate in two reportable segments, radio broadcasting and newspaper publishing. The radio broadcasting segment has operations in the San Francisco, San Jose, Monterey-Salinas-Santa Cruz, Riverside-San Bernardino, Sacramento, Albuquerque-Santa Fe, Denver-Boulder and Washington D.C. The publishing segment consists of two Spanish-language publications in New York City. Each segment is managed separately. We evaluate performance based on several factors, of which the primary financial measure is segment operating profit. Total revenue of each segment represents sales to unaffiliated customers. There are no inter- segment sales. No single customer provides more than 10% of our revenue. The accounting policies of the segments are the same as those described in Note 2 to our audited financial statements. Corporate expenses include general and administrative costs that are not directly related to the reportable segments. Financial information for these business segments includes (in thousands):
Historical ---------------------------- 1997 1998 1999 -------- -------- -------- Net Revenue: Radio Broadcasting............................... $ 19,200 $ 19,345 $ 25,136 Newspaper Publishing............................. 17,795 18,551 19,109 -------- -------- -------- $ 36,995 $ 37,896 $ 44,245 ======== ======== ======== Operating Profit (loss): Radio Broadcasting............................... $ (98) $ (974) $ 3,718 Newspaper Publishing............................. 672 1,411 1,150 -------- -------- -------- Total Reportable Segments....................... 574 437 4,868 Corporate expenses............................... (1,720) (2,908) (1,795) -------- -------- -------- $ (1,146) $ (2,471) $ 3,073 ======== ======== ======== Identifiable Assets: Radio Broadcasting............................... $130,863 $131,887 $130,909 Newspaper Publishing............................. 23,308 23,827 24,563 -------- -------- -------- Total Reportable Segments....................... 154,171 155,714 155,472 Corporate........................................ 4,335 5,476 2,014 Discontinued operations.......................... 4,500 4,832 -- -------- -------- -------- $163,006 $166,022 $157,486 ======== ======== ======== Depreciation and Amortization: Radio Broadcasting............................... $ 3,023 $ 3,777 $ 3,862 Newspaper Publishing............................. 739 816 1,044 -------- -------- -------- $ 3,762 $ 4,593 $ 4,906 ======== ======== ======== Capital Expenditures: Radio Broadcasting............................... $ 672 $ 187 $ 1,061 Newspaper Publishing............................. 263 868 1,230 -------- -------- -------- Total Reportable Segments....................... 935 1,055 2,291 Discontinued Operations........................... 75 216 -- -------- -------- -------- $ 1,010 $ 1,271 $ 2,291 ======== ======== ========
39 Liquidity and Capital Resources LCG's primary source of liquidity is from its net cash flow provided by its radio and newspaper operations and borrowings under our $35 million revolving bank credit facility. Funds for debt service, capital expenditures and operations historically have been provided by income from continuing operations. The bank credit facility is secured by a first priority lien on the capital stock of our subsidiaries and bears interest at various interest rates depending on our total leverage ratio. At March 31, 2000, $22.5 million of debt was outstanding on our facility, bearing interest at the rate of 10.25%. In connection with our sale to Entravision, all indebtedness outstanding under the facility was paid, and the facility was terminated. As of March 31, 2000, we had $21.5 million of senior subordinated debt outstanding held by some of our stockholders and officers bearing interest at the rate of 5%. The unamortized original issue discount was approximately $4.5 million at December 31, 1999. For 1999, net cash flow provided by operating activities was $1.1 million compared to $0.6 million for 1998 and $2.3 million for 1997. The change from 1998 to 1999 can be attributed primarily to an increase in operating income. The change from 1997 to 1998 related primarily to a decline in operating income. Net cash flow provided by investing activities was $16.7 million during 1999 as compared to $2.5 million used in 1998 and $66.6 million used in 1997. During 1999, we sold our television stations to Entravision for approximately $12.9 million and sold other assets including a tower site in Portland, Oregon for approximately $6.6 million. We had capital expenditures of $2.3 million for 1999, including the purchase of a new fully-integrated publishing system for our newspaper business. During 1997, we acquired eight radio stations for approximately $70 million. Net cash flow used in financing activities was $14.1 million during 1999 compared to cash provided by financing activities of $2.0 million in 1998 and $37.7 million in 1997. The change in net cash flow provided by financing activities in 1999 relates to a net reduction in our debt using the proceeds from the sale of our television stations. The increase in net cash flow provided by financing activities in 1997 can be attributed to the borrowings associated with our acquisition of eight radio stations during 1997. 40 Z-SPANISH MEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Z-Spanish Media was formed to combine national radio programming with a local presence. Through our four formats, which are delivered via satellite to our stations and our affiliates, we provide a national quality radio sound with local time slots available for news, traffic, weather, promotions and community events. On December 31, 1999, Z-Spanish Media merged with Vista Media Group, Inc., or Vista, whereby Vista became a wholly owned subsidiary of Z-Spanish Media. Z-Spanish Media and Vista have shared a common controlling stockholder group since August 29, 1997. As such, the business combination has been accounted for as a common control business combination, and the accounts of Vista are included in the accompanying combined financial statements from August 29, 1997. The principal source of our revenue is the sale of broadcasting time on our radio stations and network and the sale of outdoor display contracts for our billboard operations. As a result, our revenue is affected primarily by the advertising rates our radio stations and network charge, and the rates charged for billboard contracts. For our radio operations, the rates are based upon a station's and the network's ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by Arbitron Radio Market Reports. We recognize revenue when advertising or network programming is broadcast. For our billboard operations, the rates are based on the particular display's exposure in relation to the demographic of a particular market and the location of the particular display. We recognize billboard advertising revenue over the life of the advertising contract. Our operating expenses primarily consist of salaries and commissions and advertising and promotional expenses. On April 20, 2000, we agreed to sell all of our outstanding capital stock to Entravision for $475 million. Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998 The following table sets forth selected data from our operating results for the years ended December 31, 1998 and 1999 (dollars in thousands):
Historical ---------------- 1998 1999 % Change ------- ------- -------- Statement of Operations Data: Gross revenue.................................... $27,598 $38,561 39.7% Less agency and broker commissions............... 1,740 2,523 45.0 ------- ------- Net revenue...................................... 25,858 36,038 39.4 Direct operating expenses........................ 10,108 14,183 40.3 Selling, general and administrative expenses..... 6,459 8,382 29.8 Corporate expenses............................... 3,669 4,773 30.1 Depreciation and amortization.................... 6,736 8,670 28.7 Gain on sale of assets, net...................... (5,685) (4,442) (21.9) ------- ------- Operating income................................. 4,571 4,472 Interest expense, net............................ (5,324) (6,471) ------- ------- Loss before income tax and extraordinary loss.... (753) (1,999) Minority interest................................ (86) 182 Income tax benefit (expense)..................... (394) 102 Extraordinary loss on debt extinguishment........ -- (1,047) ------- ------- Net loss......................................... $(1,233) $(2,762) ======= ======= Other Data: Broadcast/billboard cash flow.................... $ 9,291 $13,619 46.6% EBITDA........................................... 5,622 8,846 57.3
41 Net Revenue. Net revenue increased to $36.0 million in 1999 from $25.9 million in 1998, an increase of $10.1 million. Approximately $6.3 million of this increase was due to the inclusion of the full year of results of the operations of Z-Spanish Radio which we acquired on May 29, 1998. The increase in net revenue also resulted from an increase of $5.4 million from radio station acquisitions. Additionally, billboard sales increased $1.8 million, a portion of which was due to the inclusion of Seaboard Outdoor Advertising Co. Inc., or Seaboard, which we purchased on September 30, 1999. The increase in net revenue was partially offset by a decrease of $3.4 million due to the sale of stations in 1999 and 1998. Direct Operating Expenses and Selling, General and Administrative Expenses. Direct operating expenses increased to $14.2 million in 1999 from $10.1 million in 1998, an increase of $4.1 million. Selling, general and administrative expenses increased to $8.4 million in 1999 from $6.5 million in 1998, an increase of $1.9 million. Approximately $4.8 million of the increase in direct operating expenses and selling, general and administrative expenses was caused by the inclusion of the full year of Z-Spanish Radio's operations. Additional radio stations acquired in 1999 resulted in an increase in direct operating expenses and selling, general and administrative expenses of $2.1 million. Also, $1.7 million of the direct operating expense increase was caused by a loss on the disposal of assets from our billboard operations. These increases in direct operating expenses and selling, general and administrative expenses were partially offset by a decrease of $2.6 million due to the sale of stations in 1998 and 1999. As a percentage of net revenue, direct operating expenses increased from 39.1% in 1998 to 39.4% in 1999. As a percentage of net revenue, selling, general and administrative expenses decreased to 23.3% in 1999 from 25% in 1998. Corporate Expenses. Corporate expenses increased to $4.8 million in 1999 from $3.7 million in 1998, an increase of $1.1 million. The increase in corporate expenses resulted primarily from increases in the number of employees, higher salary expense and higher professional fees associated with potential acquisitions and related financings. As a percentage of net revenue, corporate expenses decreased to 13.2% in 1999 from 14.2% in 1998. Depreciation and Amortization. Depreciation and amortization increased to $8.7 million in 1999 from $6.7 million in 1998, an increase of $2.0 million. The increase in depreciation and amortization was due to the acquisitions of radio stations and billboards. Net Gain on Sale of Assets. Net gain on sale of assets decreased to $4.4 million in 1999 from $5.7 million in 1998, a decrease of $1.3 million. Net gain recorded in 1999 included gain on sale of radio stations WBPS in Cambridge, Massachusetts and WYPA in Chicago, Illinois of $2.2 million and $2.3 million, partially offset by a loss on sale of KZNO in Nogales, Arizona of $0.1 million. The aggregate net gain recorded in 1998 of $5.7 million resulted from the disposition of radio stations WNJR in Newark, New Jersey, KYPA in Los Angeles, California, KWPA in Pomona, California, KXPA in Bellevue, Washington, KOBO in Yuba City, California, KEST in San Francisco, California, KSJX in San Jose, California and KKMO in Seattle, Washington, as well as the disposition of certain assets and liabilities of PAR Holdings, Inc. As a percentage of net revenue, net gain on sale of assets decreased to 12.3% in 1999 from 22% in 1998. Operating Income. Operating income decreased to $4.5 million in 1999 from $4.6 million in 1998, a decrease of $0.1 million. The decrease was primarily the result of gains on the sale of assets of $4.4 million in 1999 as compared to $5.7 million in 1998. Excluding our 1999 and 1998 gains from sales of radio stations, operating income for 1999 would have been $30,000 and our operating loss for 1998 would have been $1.1 million. Interest Expense, Net. Net interest expense increased to $6.5 million in 1999 from $5.3 million in 1998, an increase of $1.2 million. The increase was due primarily to higher borrowings to fund acquisitions in 1999. Net Loss. As a result of the above factors, we had a net loss of $2.8 million in 1999 compared to a net loss of $1.2 million in 1998, an increase in net loss of $1.6 million. As a percentage of net revenue, net loss increased to 7.7% in 1999 from 4.8% in 1998. Excluding our 1999 extraordinary loss of $1.0 million related to early extinguishment of debt, net loss for 1999 would have been $1.8 million. As a percentage of net revenue, our net loss, excluding extraordinary loss, was 4.8% in 1999 and 4.8% in 1998. 42 Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to $13.6 million in 1999 from $9.3 in 1998, an increase of $4.3 million. The inclusion of the full year of results of Z-Spanish Radio and the effect of station purchases accounted for an increase of $5.4 million of broadcast/billboard cash flow, which was partially offset by a loss of $1.7 million due to the disposal of some of our billboard assets. The increase in broadcast/billboard cash flow was also attributable to our billboard operations, a portion of which was due to the inclusion of Seaboard. As a percentage of net revenue, broadcast/billboard cash flow increased to 37.8% in 1999 from 35.9% in 1998. EBITDA. EBITDA increased to $8.8 million in 1999 from $5.6 million in 1998, an increase of $3.2 million. The inclusion of the full year of results of Z- Spanish Radio, three months of operations of Seaboard plus the effect of purchases of stations during the year accounted for an increase of $5.0 million, offset by a decrease of $1.7 million due to the loss on the disposal of assets from our billboard operations. As a percentage of net revenue, EBITDA increased to 24.5% in 1999 from 21.7% in 1998. Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997 The following table sets forth selected data from our operating results for the years ended December 31, 1997 and 1998 (dollars in thousands):
Historical ---------------- 1997 1998 % Change ------- ------- -------- Statement of Operations Data: Gross revenue....................................... $13,339 $27,598 106.9% Less agency and broker commissions.................. 297 1,740 n/m ------- ------- Net revenue......................................... 13,042 25,858 98.3 Direct operating expenses........................... 4,391 10,108 130.2 Selling, general and administrative expenses........ 5,105 6,459 26.5 Corporate expenses.................................. 2,975 3,669 23.3 Depreciation and amortization....................... 2,747 6,736 145.2 Gain on sale of assets, net......................... (2,671) (5,685) 112.8 ------- ------- Operating income.................................... 495 4,571 Interest expense, net............................... (2,069) (5,324) ------- ------- Loss before income tax and extraordinary items...... (1,574) (753) Minority interest................................... (31) (86) Income tax benefit (expense)........................ 538 (394) Extraordinary loss on debt extinguishment........... (568) -- ------- ------- Net loss............................................ $(1,635) $(1,233) ======= ======= Other Data: Broadcast/billboard cash flow....................... $ 3,546 $ 9,291 162.0% EBITDA.............................................. 571 5,622 n/m
Net Revenue. Net revenue increased to $25.9 million in 1998 from $13.0 million in 1997, an increase of $12.9 million. Approximately $7.3 million of the increase was due to the inclusion of a full year of results of Vista, and approximately $9.2 million of the increase was due to the inclusion of seven months of results of Z-Spanish Radio. The increase in net revenue was partially offset by a decrease of $3.7 million due to the sale of nine radio stations in 1998 and the sale of two radio stations in 1997. Direct Operating Expenses and Selling, General and Administrative Expenses. Direct operating expenses increased to $10.1 million in 1998 from $4.4 million in 1997, an increase of $5.7 million. Selling, general and administrative expenses increased to $6.5 million in 1998 from $5.1 million in 1997, an increase of $1.4 million. Approximately $4.1 million of the increase in direct operating expenses and selling, general and administrative expenses was caused by the inclusion of the full year of results of Vista, and approximately $4.8 million of the increase was due to the inclusion of seven months of results of Z-Spanish Radio. The 43 increase in direct operating expenses and selling, general and administrative expenses was partially offset by a decrease of $1.8 million due to the sale of nine stations in 1998 and two stations in 1997. As a percentage of net revenue, direct operating expenses increased to 39.1% in 1998 from 33.7% in 1997. As a percentage of net revenue, selling, general and administrative expenses decreased to 25.0% in 1998 from 39.1% in 1997. Corporate Expenses. Corporate expenses increased to $3.7 million in 1998 from $3.0 million in 1997, an increase of $0.7 million. The increase in corporate expenses was caused by higher salary expense and professional fees associated with acquisitions and related financings. As a percentage of net revenue, corporate expenses decreased to 14.2% in 1998 from 22.8% in 1997. Depreciation and Amortization. Depreciation and amortization increased to $6.7 million in 1998 from $2.7 million in 1997, an increase of $4.0 million. The increase in depreciation and amortization was due primarily to the additional fixed and intangible assets from the acquisition of radio stations and billboards. Net Gain on Sale of Assets. Net gain on sale of assets increased to $5.7 million in 1998 from $2.7 million in 1997, an increase of $3.0 million. The aggregate net gain recorded in 1998 of $5.7 million consisted of the disposition of radio stations WNJR in Newark, New Jersey, KYPA in Los Angeles, California, KWPA in Pomona, California, KXPA in Bellevue, Washington, KOBO in Yuba City, California, KEST in San Francisco, California, KSJX in San Jose, California and KKMO in Seattle, Washington, as well as the disposition of certain assets and liabilities of PAR Holdings, Inc. Net gain recorded in 1997 included gain on sale of radio stations WEJM in Chicago, Illinois and WVVX in Chicago, Illinois of $1.9 million and $0.8 million, respectively. As a percentage of net revenue, net gain on sale of assets increased to 22% in 1998 from 20.5% in 1997. Operating Income. Operating income increased to $4.6 million in 1998 from $0.5 million in 1997, an increase of $4.1 million. The increase was primarily the result of gains on the sale of assets of $5.7 million in 1998, as compared to $2.7 million in 1997. The inclusion of the full year results of Vista accounted for $1.6 million of the increase, which was partially offset by higher expenses from the acquisition of radio stations. As a percentage of net revenue, operating income increased to 17.7% in 1998 from 3.8% in 1997. Excluding our 1998 and 1997 gains from sales of radio stations, operating losses for 1998 would have been $1.1 million and for 1997 would have been $2.2 million. Interest Expense. Net interest expense increased to $5.3 million in 1998 from $2.1 million in 1997, an increase of $3.2 million. The increase was due primarily to higher borrowings to fund acquisitions in 1998. Net Loss. As a result of the above factors, we had a net loss of $1.2 million in 1998 compared to a net loss of $1.6 million in 1997, a decrease in net loss of $0.4 million. As a percentage of net revenue, net loss decreased to 4.8% in 1998 from 12.5% in 1997. Excluding our 1997 extraordinary loss of $0.5 million related to early extinguishment of debt, net loss for 1997 would have been $1.1 million. As a percentage of net revenue, our net loss, excluding extraordinary loss, decreased to 4.8% in 1998 from 8.2% in 1997. Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to $9.3 million in 1998 from $3.5 million in 1997, an increase of $5.8 million. The inclusion of the full year results of Vista accounted for $3.2 million of the increase. The remainder of the increase was due to the inclusion of Z- Spanish Radio operations, offset by the station sales during 1998 and 1997. As a percentage of net revenue, broadcast/billboard cash flow increased to 35.9% in 1998 from 27.2% in 1997. EBITDA. EBITDA increased to $5.6 million in 1998 from $0.6 million in 1997, an increase of $5.0 million. The inclusion of the full year results of Vista accounted for $2.9 million of the increase. The remainder of the increase was due to the inclusion of Z-Spanish Radio operations, offset by the station sales during 1998 and 1997. As a percentage of net revenue, EBITDA increased to 21.7% in 1998 from 4.4% in 1997. 44 Segment Operations Z-Spanish Media provides services through the following two reportable segments: . Radio Group--the Radio Group's portfolio consisted of 32 radio stations (19 FM and 13 AM) at December 31, 1999, including one station operated under a local marketing agreement. . Outdoor Advertising--the Outdoor Advertising Group owned and operated approximately 10,000 outdoor billboards at December 31, 1999. The factors for determining reportable segments were based on services provided. Each segment is responsible for executing a segment-specific business strategy. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance based on profit or loss of operations before income taxes. The following table summarizes the net revenue, operating income, total assets, depreciation and amortization, and capital expenditures by segment for the years ended December 31, 1997, 1998 and 1999 (in thousands):
Historical --------------------------- 1997 1998 1999 ------- -------- -------- Net Revenue: Radio Broadcasting................................ $ 9,812 $ 15,391 $ 23,811 Outdoor Advertising............................... 3,230 10,467 12,227 ------- -------- -------- $13,042 $ 25,858 $ 36,038 ======= ======== ======== Operating Income: Radio Broadcasting................................ $ 2,448 $ 5,394 $ 8,376 Outdoor Advertising............................... 1,022 2,846 869 ------- -------- -------- Total Reportable Segments........................ 3,470 8,240 9,245 Corporate......................................... (2,975) (3,669) (4,773) ------- -------- -------- $ 495 $ 4,571 $ 4,472 ======= ======== ======== Total Assets: Radio Broadcasting................................ $68,076 $169,664 $218,231 Outdoor Advertising............................... 28,279 27,610 70,812 ------- -------- -------- $96,355 $197,274 $289,043 ======= ======== ======== Depreciation and Amortization: Radio Broadcasting................................ $ 2,130 $ 4,785 $ 5,983 Outdoor Advertising............................... 617 1,951 2,687 ------- -------- -------- $ 2,747 $ 6,736 $ 8,670 ======= ======== ======== Capital Expenditures: Radio Broadcasting................................ $ -- $ 695 $ 4,926 Outdoor Advertising............................... 855 1,346 535 ------- -------- -------- $ 855 $ 2,041 $ 5,461 ======= ======== ========
Segment income from operations excludes interest income, interest expense and provision for income tax. Liquidity and Capital Resources Our primary source of liquidity is cash provided by broadcasting and billboard operations, and to the extent necessary, undrawn commitments available under our bank credit facilities. We have both term and revolving lines of credit totaling $145 million, of which $109 million was outstanding as of December 31, 1999. 45 We have a $30 million revolving line of credit and a $45 million term facility with a group of lenders. The facilities expire on January 20, 2006 and are secured by substantially all of the assets and stock of Z-Spanish Media, except for radio stations KLNZ-FM, Phoenix, and KZMP-FM, Dallas. The term facility contains scheduled quarterly repayments beginning March 31, 2000. The revolving facility contains scheduled quarterly reductions in availability beginning March 31, 2001. Both facilities contain financial covenants including a requirement not to exceed a maximum debt to EBITDA ratio and interest and fixed charge coverage ratios. The facilities contain other operating covenants, including limits or our capital expenditures and restrictions on our ability to incur additional indebtedness and pay dividends. The facilities require us to maintain our FCC licenses for our broadcast properties. As of the date of this prospectus, the balance outstanding on the revolving credit facility was $8.2 million and the balance outstanding on the term facility was $43.9 million. The interest rate on these facilities was 9.1% at December 31, 1999. Our acquisitions of KLNZ-FM and KZMP-FM were financed by a separate $20 million term facility with a group of lenders. This facility expires in full on December 31, 2000, and is secured by the assets KLNZ-FM and KZMP-FM. Outstanding borrowings under this facility were $18.1 million at December 31, 1999 bearing interest at 9.5%. The facility contains covenants, including restrictions on our ability to incur additional indebtedness and pay dividends and limits on capital expenditures. The terms of the facility also require us to maintain the FCC licenses on the two stations. Vista has a separate $15 million revolving credit facility and a $35 million term facility with a single lender. Both of these facilities expire September 30, 2006 and are secured by substantially all of the assets and stock of Vista. Vista's revolving facility contains scheduled quarterly reductions in availability beginning March 31, 2001, and the term facility requires quarterly repayments of principal beginning June 30, 2001. These facilities contain financial covenants including a requirement not to exceed a maximum debt to cash flow ratio, interest and fixed charge coverage ratios, and also limit Vista's corporate overhead expenditures. The facilities also contain operating covenants, including restrictions on Vista's ability to incur additional indebtedness and pay dividends. As of the date of this prospectus, the balance outstanding on the revolving facility was $4 million, and the balance outstanding on the term facility was $35 million. The interest rate on these facilities was 9.6% at December 31, 1999. Net cash flow used in operating activities during 1999 decreased to $0.3 million compared to $4.4 million in 1998. The decrease was primarily due to acquisitions made in 1999 along with the inclusion of a full year of operations from acquisitions made in 1998. Net cash flow used in investing activities was $79 million in 1999 compared to net cash flow provided by investing activities of $32.3 million in 1998. During 1999, we made radio acquisitions totaling approximately $56.7 million, and Vista made acquisitions of billboard and outdoor advertising properties totaling approximately $36.9 million. We funded these acquisitions through a combination of proceeds from the issuance of common and preferred stock. The funding of these acquisitions was partially offset by proceeds of approximately $23.7 million from radio station sales during 1999. Additionally, capital expenditures, which included broadcast equipment for our radio stations, advertising displays, building, land, leasehold improvements and computer and telecommunications equipment, totaled $5.5 million in 1999 and $2.0 million in 1998. The capital expenditures in 1999 included approximately $3.0 million in purchases of land for transmitter sites and studio/office buildings. Net cash flow from financing activities was approximately $80.2 million during the year ended December 31, 1999. During 1999, we entered into new credit facilities totaling $130 million, of which approximately $70.6 million was used to repay the existing debt facilities. 46 BUSINESS Overview We are a leading diversified media company utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States. We operate in 32 of the top 50 U.S. Hispanic markets. We currently own and operate television stations serving 18 U.S. markets. We are the largest Univision-affiliated station group in the United States. Univision is a key source of programming for our television broadcasting business and is a valuable strategic partner of ours. We also operate 60 radio stations in 24 markets, including leading Spanish-language stations in Los Angeles, San Francisco, Phoenix and Dallas-Ft. Worth. Our outdoor operations consist of approximately 10,000 billboards concentrated in high-density Hispanic communities in Los Angeles and New York. We also own two publications, El Diario/La Prensa, the oldest Spanish-language newspaper in the United States, and VEA New York, a tourist publication. The LCG Acquisition. Through our acquisition of LCG on April 20, 2000 for $252 million, we added 17 radio stations to our ten existing radio stations and LCG's publishing operations. LCG's radio stations are located in nine radio markets, including Los Angeles and San Francisco, which are two of the top ten U.S. Hispanic markets. The Z-Spanish Media Acquisition. Through our pending acquisition of Z- Spanish Media, we are acquiring the second largest group of Spanish-language radio stations and the largest centrally programmed radio network in the United States targeting primarily Hispanic listeners. Z-Spanish Media also operates one of the largest outdoor advertising companies in the United States focusing on the Hispanic market. We have agreed to purchase Z-Spanish Media for $475 million, which includes the assumption of approximately $109 million of debt. Other Acquisitions. We have agreed to acquire two television stations in the Hartford and Orlando markets and we have agreed to acquire two radio stations in the Los Angeles market for an aggregate of approximately $126 million. The Hispanic Market Opportunity While Hispanics represent approximately 11% of the U.S. population and the U.S. Hispanic population is growing six times faster than the non-Hispanic population, they are currently targeted by less than 1% of total advertising dollars. Advertisers have recently begun to direct a greater percentage of their advertising spending toward U.S. Hispanics and, consequently, Spanish- language advertising is currently growing at more than four times the rate of total advertising. We believe that we have benefited and will continue to benefit from the following industry trends and attributes in the United States: Spanish-Language Use. Approximately 68% of all Hispanics, regardless of income or educational level, speak Spanish at home. This percentage is expected to remain relatively constant through 2010. The number of Hispanics who speak Spanish in the home is expected to grow from 22.1 million in 2000 to 27.8 million in 2010. We believe that the strong Spanish-language use among Hispanics indicates that Spanish-language media will continue to be an important source of news, sports and entertainment for Hispanics and an important vehicle for our marketing and advertising. 47 Hispanic Population Growth and Concentration. Our audience consists primarily of Hispanics, one of the fastest growing segments of the U.S. population. In 2000, the Hispanic population is estimated to grow to 32.4 million in the United States (11.8% of the total population), an increase of 36.4% from 23.7 million (9.5% of the total population) in 1990. The overall Hispanic population is growing at approximately six times the rate of the non- Hispanic U.S. population and is expected to grow to 42.4 million (14.2% of the total U.S. population) by 2010. Source: Standard & Poor's DRI. HISPANIC POPULATION CHART Greater Hispanic Buying Power. The Hispanic population accounted for total consumer expenditures of $380 billion in 1999, an increase of 57% since 1990. Hispanics are expected to account for $460 billion in consumer expenditures in 2000, and $965 billion by 2010. We believe these factors make Hispanics an attractive target audience for many major U.S. advertisers. Source: Standard & Poor's DRI. Increased Spanish-Language Advertising. According to published sources, $1.9 billion of total advertising expenditures in the United States were placed in Spanish-language media in 1999. Approximately 48 57% of that $1.9 billion was placed in Spanish-language television advertising. We believe that major advertisers have found that Spanish-language media is a more cost-effective means to target the growing Hispanic audience than English- language broadcast media. Attractive Profile of Hispanic Consumers. We believe the demographic profile of the Hispanic audience makes it attractive to advertisers. The larger size and younger age of Hispanic households (averaging 3.4 persons and 27.5 years of age as compared to the general public's average of 2.5 persons and 36.5 years of age) leads Hispanics to spend more per household on many categories of goods and services. The average U.S. Hispanic household spends 28% more per year than the average U.S. household on food at home, 100% more on children's clothing, 35% more on footwear, 11.4% more on phone services and 23.2% more on laundry and household cleaning products than the average non-Hispanic household. We expect Hispanics to continue to account for a disproportionate share of growth in spending nationwide in many important consumer categories as the Hispanic population and its disposable income continue to grow. Business Strategy We seek to be the leading diversified Spanish-language media company in the United States and to increase our advertising revenue through the following strategies: Effectively Use Our Leading Network and Media Brands. We are the largest Univision television affiliate group, the largest operator of Spanish-language radio stations and the largest centrally programmed radio network in the United States. Univision reaches 92% of all Hispanic households and has an approximately 84% share of the U.S. Spanish-language network television prime- time audience. Univision makes available to our television stations 24 hours a day of Spanish-language programming including a prime time schedule of substantially all first-run programming (i.e., no reruns) throughout the year. We operate our radio networks using seven primary formats designed to appeal to different listener tastes. We format the programming of our network and radio stations to capture a substantial share of the U.S. Hispanic audience. Invest in Media Research and Sales. We believe that continued use of reliable ratings and surveys will allow us to further increase our advertising rates and narrow the gap which has historically existed between our audience share and our share of advertising revenue. We use industry ratings and surveys, including Nielsen, Arbitron, the Traffic Audit Bureau and the Audit Bureau of Circulation, to provide a more accurate measure of consumers that we reach with our operations. We believe that our focused research and sales efforts will enable us to continue to achieve significant revenue growth. Continue to Build and Retain Strong Management Teams. We believe we have one of the most experienced management teams in the industry. Walter F. Ulloa, our Chairman and Chief Executive Officer, Philip C. Wilkinson, our President and Chief Operating Officer, Jeanette Tully, our Chief Financial Officer, Amador S. Bustos, the President of our Radio Division, and Glenn Emanuel, the President of our Outdoor Division, have an average of 20 years of media experience. We intend to continue to build and retain our key management personnel and to capitalize on their knowledge and experience in the Spanish-language markets. Emphasize Local Content, Programming and Community Involvement. We believe that local content in each market we serve is an important part of building our brand identity within the community. By combining our local news and high quality network programming, we believe we have a significant competitive advantage. We also believe that our active community involvement, including station remote broadcasting appearances at client and customer events, concerts and tie-ins to major events, helps to build station awareness and identity as well as viewer and listener loyalty. Increase In-Market Cross Promotion. Our strategy is to cross-promote our television and radio stations, outdoor and publishing properties. In addition, we believe we will add significant value to our advertisers by providing attractive media packages to target the Hispanic consumer. Target Other Attractive Hispanic Markets and Fill-In Acquisitions. We believe our knowledge of, and experience with, the Hispanic marketplace will enable us to continue to identify acquisitions in the television, radio, outdoor and publishing markets. Since our inception, we have used our management expertise, programming and brand identity to improve our acquired media properties. 49 Television Overview We own and operate Univision-affiliated stations in 17 of the top 50 Hispanic markets in the United States. Our television operations are the largest affiliated group of Univision stations. Univision is the leading Spanish-language broadcaster in the United States, reaching more than 92% of all Hispanic households, which represents an approximately 84% market share of the U.S. Spanish-language network television audience as of December 1999. Univision is the most watched television network (English- or Spanish-language) among Hispanic households and makes available to our Univision-affiliated stations 24 hours a day of Spanish-language programming. Univision's prime time schedule is all first-run programming (i.e., no reruns) through the year. In each of our markets, our stations produce local news. We believe that the breadth and diversity of Univision's programming, combined with our local news and community-oriented segments, provide us with a competitive advantage over other Spanish-language and English-language broadcasters in reaching Hispanic viewers. Our local content is designed to brand each of our stations as the best source for relevant community information that accurately reflects local interests and needs. As a result, each of our Univision-affiliated stations ranks first in Spanish-language television viewership in its market. Television Programming Univision Network Programming. Univision directs its programming primarily toward its young, family-oriented audience. It begins daily with Despierta America and talk and information shows, Monday through Friday, followed by novelas. In the late afternoon and early evening, Univision offers a talk show, a news-magazine and national news, in addition to local news produced by our television stations. During prime time, Univision airs novelas, variety shows, a talk show, comedies, news magazines and lifestyle shows, as well as specials and movies. Prime time is followed by late news and a late night talk show. Overnight programming consists primarily of repeats of programming aired earlier in the day. Weekend daytime programming begins with children's programming, followed by sports, variety, teen lifestyle shows and movies. Approximately eight to ten hours of programming per weekday, including a substantial portion of weekday prime time, are currently programmed with novelas supplied primarily by Grupo Televisa and Venevision. Although novelas have been compared to daytime soap operas on ABC, NBC or CBS, the differences are significant. Novelas, originally developed as serialized books, have a beginning, middle and end, generally run five days per week and conclude four to eight months after they begin. Novelas also have a much broader audience appeal than soap operas, delivering audiences that contain large numbers of men, children and teens in addition to women. Entravision Local Programming. We produce and broadcast local news in all of our markets. We believe that our local news brands each of our stations and creates a strong identity with our viewers. We shape our local news to relate to our target audiences. In eight of our television markets, our local news is ranked first among viewers 18-34 in any language. We have made substantial investments in people and equipment in order to provide each of our local communities with a top quality local newscast. Our local newscasts have won numerous awards, and we strive to be the most important community voice in each of our local markets. Network Affiliation Agreements. All but four of our television stations have entered into network affiliation agreements with Univision that provide each station with the exclusive right to broadcast the Univision network programming in its respective market. These affiliation agreements have initial terms of 25 years expiring in 2021. Under the affiliation agreements, Univision retains the right to sell approximately six minutes per hour of the advertising time available during the Univision schedule, with the remaining six minutes per hour available for sale by our stations. Our network affiliation agreement with the United Paramount Network, or UPN, gives us the right to provide UPN network programming for a ten-year period on XUPN-TV serving the Tecate/San Diego market. A related participation agreement grants UPN a 20% interest in the appreciation of XUPN-TV above $35 million. XHAS-TV broadcasts Telemundo network programming serving the Tijuana/San Diego market pursuant to a network affiliation agreement which expires on December 31, 2000. We intend to renegotiate this contract when it expires. 50 Our Television Station Portfolio The following table lists information concerning each of our television stations and its respective market:
Market Rank (by Hispanic Total Hispanic % Hispanic Market Households)(1) Households(1) Households(1) Households(1) Call Letters, Channel - ----------------------------------------------------------------------------------------------------------------- Harlingen-Weslaco- 9 254,460 206,720 81.2% KNVO-TV, Channel 48 Brownsville-McAllen, Texas - ------------------------------------------------------------------------------------------------------------------ San Diego, California 11 980,620 189,110 19.3% KBNT-LP, Channel 19 KTCD-LP, Channel 46 (2) KHAX-LP, Channel 49 (2) - ------------------------------------------------------------------------------------------------------------------ Albuquerque-Santa Fe, 12 568,650 189,050 33.2% KLUZ-TV, Channel 41 New Mexico K48AM, Channel 48 - ------------------------------------------------------------------------------------------------------------------ El Paso, Texas 13 276,980 177,980 64.3% KINT-TV, Channel 26 - ------------------------------------------------------------------------------------------------------------------ Denver-Boulder, Colorado 16 1,268,230 137,780 10.9% KCEC-TV, Channel 50 K43DK, Channel 43 K03EM, Channel 3 - ------------------------------------------------------------------------------------------------------------------ Washington, D.C. 18 1,999,870 103,340 5.2% WMDO-LP, Channel 30 - ------------------------------------------------------------------------------------------------------------------ Corpus Christi, Texas 19 184,900 98,970 53.5% KORO-TV, Channel 28 - ------------------------------------------------------------------------------------------------------------------ Tampa-St. Petersburg 19 1,485,980 98,970 6.7% WBSV-TV, Channel 62 (Sarasota), Florida WVEA-LP, Channel 61 - ------------------------------------------------------------------------------------------------------------------ Orlando-Daytona Beach- 24 1,101,920 79,000 7.2% WNTO-TV, Channel 26 (3) Melbourne, Florida WVEN-LP, Channel 63 - ------------------------------------------------------------------------------------------------------------------ Las Vegas, Nevada 25 521,200 72,460 13.9% KINC-TV, Channel 15 K27AF, Channel 27 K47EG, Channel 47 - ------------------------------------------------------------------------------------------------------------------ Monterey-Salinas-Santa Cruz, 26 228,630 60,820 26.6% KSMS-TV, Channel 67 California - ------------------------------------------------------------------------------------------------------------------ Hartford-New Haven, 28 915,940 53,740 5.9% WHCT-TV, Channel 18 (3) Connecticut - ------------------------------------------------------------------------------------------------------------------ Laredo, Texas 31 54,540 50,350 92.3% KLDO-TV, Channel 27 - ------------------------------------------------------------------------------------------------------------------ Colorado Springs-Pueblo, 33 290,830 45,400 15.6% KGHB-LP, Channel 27 Colorado - ------------------------------------------------------------------------------------------------------------------ Santa Barbara-Santa 34 228,350 44,590 19.5% KPMR-TV, Channel 36 (3)(4) Maria-San Luis Obispo, California - ------------------------------------------------------------------------------------------------------------------ Yuma, Arizona-El Centro, 36 86,960 43,000 49.5% KVYE-TV, Channel 7 California - ------------------------------------------------------------------------------------------------------------------ Odessa-Midland, Texas 37 138,510 41,890 30.2% KUPB-TV, Channel 18 (4) - ------------------------------------------------------------------------------------------------------------------ Lubbock, Texas 39 147,570 39,700 26.9% KBZO-LP, Channel 51 - ------------------------------------------------------------------------------------------------------------------ Palm Springs, California 42 115,070 34,260 29.8% KVER-LP, Channel 4 K05JY, Channel 5 K28ET, Channel 28 - ------------------------------------------------------------------------------------------------------------------ Amarillo, Texas 43 191,450 31,460 16.4% K48FR, Channel 48 (4) - ------------------------------------------------------------------------------------------------------------------ San Angelo, Texas 66 51,460 13,920 27.1% K31DM, Channel 31 - ------------------------------------------------------------------------------------------------------------------ Tecate, Baja California, -- -- -- -- XUPN-TV, Channel 49 (5) Mexico - ------------------------------------------------------------------------------------------------------------------ Tijuana, Mexico -- -- -- -- XHAS-TV, Channel 33 (5)
(1) Source: Nielsen Media Research year 2000 population estimates. (2) We own a 47.5% equity interest in the entity that holds the FCC license to this station, with an option to acquire an additional 47.5%. We provide substantially all of the programming and related services available on this station pursuant to a time brokerage agreement. (3) Pending acquisition. (4) Regular broadcast operations not yet commenced. (5) We hold a minority, non-voting interest in the entity that holds the broadcast license for this station. We provide substantially all of the programming and related services available on this station under a time brokerage agreement. 51 Television Advertising Since 1997, no single advertiser has accounted for more than 2% of our annual gross television revenue. In 1998, 47% of our television revenue consisted of national television advertising sales and 52% of our television revenue consisted of local television advertising sales. National television advertising revenue accounted for 42% of our total television advertising revenue for 1999, with 57% being local television advertising revenue. National Advertising. National advertising revenue represents commercial time sold to a national advertiser within a specific market by Univision, our national representative firm. For these sales, Univision is paid a 15% commission on the net revenue from each sale (gross revenue less agency commission). We target the largest national Spanish-language advertisers that collectively purchase the greatest share of national advertisements through Univision. The Univision representative works closely with each station's national sales manager. This has enabled us to secure premier national advertisers, including Ford Motor Company, General Motors, Southwestern Bell, McDonald's, Burger King and Anheuser-Busch. Local Advertising. Local advertising revenue is generated from commercial air time and is sold directly by the station to an in-market advertiser or its agency. Television Audience Research We derive our revenue primarily from selling advertising time. The relative advertising rates charged by competing stations within a market depend primarily on four factors: . the station's ratings (households or people viewing its programs as a percentage of total television households or people in the viewing area); . audience share (households or people viewing its programs as a percentage of households or people actually watching television at a specific time); . the time of day the advertising will run; and . the demographic qualities of a program's viewers (primarily age and gender). Nielsen ratings provide advertisers with the industry-accepted measure of Hispanic audience television viewership and have been important in allowing us to demonstrate to advertisers our ability to reach the Hispanic audience. We believe that continued use of accurate, reliable ratings will allow us to further increase our advertising rates and narrow the gap which has historically existed between our audience share and our share of advertising revenue. We have made significant investments in experienced sales managers and account executives and have provided our sales professionals with state-of-the- art research tools to continue to attract major advertisers. The various Nielsen rating services that we use are described below: Nielsen Hispanic Station Index (NHSI). The NHSI service measures Hispanic household viewing at the local market level. Each NHSI sample also reflects the varying levels of language usage by Hispanics in each market in order to more accurately reflect the Hispanic household population in the relevant market. NHSI only measures the audience viewing of Hispanic households, that is, households where the head of the household is of Hispanic descent or origin. Although NHSI offers improvements over previous measurement indices, we believe it still underreports the number of viewers watching Entravision programming because we have viewers who do not live in Hispanic households. Nielsen Station Index (NSI). The NSI service measures local station viewing of all households in a specific market. We buy NSI in all of our markets in order to effectively position our viewing against both English- and Spanish- language competitors. While Hispanic households are present in proportion to their percentage of total households within a market in NSI, this rating service is not language-stratified and generally underrepresents Spanish- speaking households. As a result, we believe that NSI typically underreports 52 viewing of Spanish-language television. Despite this limitation, NSI demonstrates that many of our full-power broadcast affiliates achieve total market ratings that are fully comparable with their English-language counterparts, with two of our full-power television stations ranking as the top station in their respective markets. Television Competition We compete for viewers and revenue with English-language television stations and networks, including the four principal English-language television networks, ABC, CBS, NBC and Fox, and in most markets, UPN and WB, and with other Spanish-language networks. We also compete for viewers and revenue with independent television stations, other video media, suppliers of cable television programs, direct broadcast satellite systems, newspapers, magazines, radio, the Internet and other forms of entertainment and advertising. Radio Overview We currently own and operate 60 radio stations in 24 markets. Our radio stations cover in aggregate approximately 57% of the Hispanic audience and are located in 22 of the top 50 Hispanic markets. We also provide programming to 42 affiliate stations in 38 markets. Our radio operations combine national programming with a strong local presence. Through our radio programming, which is delivered via satellite to our stations, we provide national programming with local time slots available for advertising, news, traffic, weather, promotions and community events. This strategy allows us to provide higher- quality programming with significantly lower costs of operations than we could otherwise deliver solely with independent programming. Radio Programming Radio Networks. Our national radio networks have developed a loyal listener base, which looks to us for information and entertainment across the country. Through our radio network, we have created the single largest U.S. Hispanic radio market, currently with over 19 million potential listeners. Our networks allow listeners to call a toll-free number and communicate with family and friends across our markets. Our networks also allow clients with national product distribution, or Internet-based companies, to deliver a uniform advertising message to the fast growing Hispanic market around the country in an efficient and cost-effective manner. Although our networks have a broad reach across the United States, our formats allow for local content. Technology allows our stations to offer the necessary local feel and to be responsive to local clients and community needs. Designated time slots are used for local advertising, news, traffic, weather, promotions and community events. The audience gets the benefit of a national quality radio sound along with important local content. Furthermore, all of our stations can disconnect from the networks and operate independently in the case of a local emergency or a problem with the central satellite transmission. To further strengthen our national/local combination market presence, our on-air personalities frequently travel to participate in local promotional events. For example, in selected key markets we have the talent appear at special shows on location for network-wide broadcast. We promote these events as "broadcasting live from" to bond the national personalities to local listeners. Our network formats are currently used by 42 affiliates located in 38 markets across the United States. Our affiliates receive our programming in exchange for two minutes per hour for network commercials. Affiliates are allowed up to 16 minutes per hour for local advertisements and content. Our affiliates receive high-quality programming at a significantly lower cost than they could produce themselves. We benefit by having extended national coverage without the capital expenditures necessary to buy and manage stations in those markets. The extended coverage also allows the network to charge higher rates as its delivery of the U.S. Hispanic market grows. 53 Radio Formats. We produce high-quality radio programming in a variety of music formats that are simultaneously distributed via satellite with a digital CD-quality sound to our owned and affiliate stations. We offer seven primary formats which appeal to different listener preferences: . Radio Romantica is an adult-contemporary, romantic ballads/current hits format, targeting Hispanics 18-49 (primarily females). . Radio Tricolor is a personality-driven, Mexican country-style format, targeting Hispanics 18-49 (primarily males). . Super Estrella is a music-driven, pop and alternative Spanish rock format, targeting Hispanics 18-34 (males and females). . La Zeta is a top hits Spanish format with recognizable radio personalities. The music is primarily from the northern and central regions of Mexico, targeting Hispanics 18-49 (primarily males). . La Bonita is an international Spanish classic hits/nostalgia format, targeting Hispanics 25-54 (primarily females). . La Buena is a Spanish version of an English format called "young country." This music-intensive format features music primarily from central and northern Mexico, targeting Hispanics 18-34 (males and females). . Z MegaHits is an English-language rhythmic oldies format consisting of 70's and early 80's top 40 hits geared to second and third generation Hispanics, targeting Hispanics 25-54 (primarily females). 54 Our Radio Station Portfolio The following table lists information concerning each of our owned and operated radio stations and its respective market:
Market Rank (by Hispanic Market Households)(1) Station Frequency Format - -------------------------------------------------------------------------------- Los Angeles, California 1 KACD-FM 103.1 MHz Super Estrella (2) KBCD-FM 103.1 MHz Super Estrella (2) KSSE-FM 97.5 MHz Super Estrella Riverside-San Bernardino, KCAL-AM 1410 kHz Radio Tricolor California KSZZ-AM 590 kHz Radio Tricolor - ---------------------------------------------------------------------------------------- Miami-Ft. Lauderdale- 3 WLQY-AM 1320 kHz Time Brokered (3) Hollywood, Florida - ---------------------------------------------------------------------------------------- San Jose, California 4 KBRG-FM 100.3 MHz Radio Romantica KLOK-AM 1170 kHz Radio Tricolor KZSF-AM 1370 kHz La Zeta - ---------------------------------------------------------------------------------------- Chicago, Illinois 5 WRZA-FM 99.9 MHz La Zeta WZCH-FM 103.9 MHz La Zeta WNDZ-AM 750 kHz Time Brokered (3) - ---------------------------------------------------------------------------------------- Houston-Galveston, Texas 6 KGOL-AM 1180 kHz Time Brokered (3) - ---------------------------------------------------------------------------------------- Dallas-Ft. Worth, Texas 8 KRVA-FM (4) 106.9 MHz La Buena KRVF-FM (4) 107.1 MHz La Buena KZMP-FM 101.7 MHz La Zeta KRVA-AM 1600 kHz La Buena KZMP-AM 1540 kHz La Bonita - ---------------------------------------------------------------------------------------- Phoenix, Arizona 10 KLNZ-FM 103.5 MHz La Zeta KVVA-FM 107.1 MHz Spanish Contemporary KUET-AM (5) 710 kHz -- - ---------------------------------------------------------------------------------------- Albuquerque-Santa Fe, New Mexico 12 KRZY-FM 105.9 MHz Radio Romantica KRZY-AM 1450 kHz Radio Tricolor - ---------------------------------------------------------------------------------------- El Paso, Texas 13 KINT-FM 93.9 MHz La Caliente (top 40) KATH-FM 94.7 MHz Country (English) KOFX-FM 92.3 MHz Oldies (English) KSVE-AM 1150 kHz Radio Unica KBIV-AM (6) 1650 kHz -- - ---------------------------------------------------------------------------------------- Fresno, California 14 KZFO-FM 92.1 MHz La Zeta KHOT-AM 1250 kHz La Bonita - ---------------------------------------------------------------------------------------- Sacramento, California 15 KHZZ-FM 104.3 MHz Z MegaHits KRCX-FM 99.9 MHz Radio Tricolor KRRE-FM 101.9 MHz Radio Romantica KZSA-FM 92.1 MHz La Zeta KSQR-AM 1240 kHz La Bonita Stockton, California KMIX-FM 100.9 MHz La Buena KCVR-AM 1570 kHz La Bonita Modesto, California KTDO-FM 98.9 MHz Z MegaHits KZMS-FM 97.1 MHz La Zeta KLOC-AM 920 kHz La Bonita - ---------------------------------------------------------------------------------------- Denver-Boulder, Colorado 16 KJMN-FM 92.1 MHz Radio Romantica KMXA-AM 1090 kHz Radio Tricolor - ---------------------------------------------------------------------------------------- Washington, D.C. 18 WACA-AM (7) 1540 kHz Time Brokered (3) - ---------------------------------------------------------------------------------------- Tucson, Arizona 21 KZLZ-FM 105.3 MHz La Zeta - ---------------------------------------------------------------------------------------- Las Vegas, Nevada 25 KVBC-FM 105.1 MHz Radio Romantica - ---------------------------------------------------------------------------------------- Monterey-Salinas-Santa 26 KLOK-FM 99.5 MHz Radio Tricolor Cruz, California KLXM-FM (4) 97.9 MHz Z MegaHits KLUE-FM (4) 106.3 MHz Z MegaHits KRAY-FM 103.5 MHz La Buena KSES-FM 107.1 MHz Super Estrella KZSL-FM 93.9 MHz La Zeta KCTY-AM 980 kHz La Bonita KSES-AM 700 kHz Super Estrella KTGE-AM 1570 kHz Regional Mexican - ---------------------------------------------------------------------------------------- Brawley, California 36 KWST-FM 94.5 MHz Country (English) El Centro, California KAMP-AM 1430 kHz News/Talk Imperial, California KMXX-FM 99.3 MHz Radio Tricolor - ---------------------------------------------------------------------------------------- Lubbock, Texas 39 KBZO-AM 1460 kHz La Zeta - ---------------------------------------------------------------------------------------- Palm Springs, California 42 KLOB-FM 94.7 MHz Radio Tricolor - ---------------------------------------------------------------------------------------- Reno, Nevada 51 KRNV-FM 101.7 MHz Radio Tricolor - ---------------------------------------------------------------------------------------- Chico, California 69 KZCO-FM 97.7 MHz Z MegaHits KEWE-AM 1340 kHz Time Brokered (3)
55 (1) Source: Nielsen Media Research year 2000 population estimates. (2) Pending acquisition--intended format. (3) Operated pursuant to a local marketing agreement under which we grant to the operator the right to program the station. (4) Simulcast station. (5) Under an FCC construction permit. (6) Not yet operating--expanded band for Station KSVE-AM. (7) We have agreed to sell this station, the closing of which we expect will take place after the closing of this offering. Radio Advertising Substantially all of the revenue from our radio operations is derived from local, national and network advertising. Local. This form of revenue refers to advertising usually purchased by a local client or agency directly from the station's sales force. In 1999, local radio revenue comprised 64% of our total radio revenue. National. This form of revenue refers to advertising purchased by a national client targeting a specific market. Usually this business is placed by a national advertising agency or media buyer and ordered through one of the offices of our national sales representative, Caballero Spanish Media. The national accounts are handled locally by the station's general sales manager. In 1999, 26% of our total radio revenue was from national radio advertising. Network. This form of revenue refers to advertising that is placed on our entire network of stations. This business is placed as a single order and is broadcast from the network's central location. The network advertising can be placed by a local account executive that has a client in its market that wants national exposure. Network inventory can also be sold by corporate executives, by our national representative or by two other entities with whom we have network sales agreements, the Jones Radio Network and the Hispanic Broadcasting Company Radio Network. In 1999, network radio revenue accounted for 10% of our total radio revenue. Radio Marketing/Audience Research We believe that radio is a highly efficient and cost-effective means for advertisers to reach targeted demographic groups. Advertising rates charged by our radio stations are based primarily on the following factors: . the station's ability to attract listeners in a given market; . the demand for available air time; . the attractiveness of the demographic qualities of the listeners (primarily age and purchasing power); . the time of day that the advertising runs; . the program's popularity with listeners; and . the availability of alternative media in the market. In the smaller and mid-sized markets, Spanish-language radio continues to be more of a concept sale. In the larger markets, Arbitron provides advertisers with the industry-accepted measure of listening audience classified by demographic segment and time of day that the listeners spend on particular radio stations. Radio advertising rates generally are highest during the morning and afternoon drive-time hours which are the peak times for radio audience listening. We believe that having multiple stations in a market is desirable to enable the broadcaster to provide alternatives and to command higher advertising rates and budget share. Historically, advertising rates for Spanish-language radio stations have been lower than those of English-language stations with similar audience 56 levels. We believe we will be able to increase our rates as new and existing advertisers recognize the growing desirability of targeting the Hispanic population in the United States. Each station broadcasts an optimal number of advertisements each hour, depending upon its format, in order to maximize the station's revenue without jeopardizing its audience listenership. Our owned stations have up to 15 minutes per hour for commercial inventory and local content. Our network has up to four additional minutes of commercial inventory per hour. The pricing is based on a rate card and negotiations subject to the supply and demand for the inventory in each particular market and the network. Radio Competition Radio broadcasting is a highly competitive business. The financial success of each of our radio stations and markets depends on the power of each of our stations, advertising trends and demand, audience ratings, our ability to increase our market share of the overall radio advertising revenue and the economic health of the market. In addition, our advertising revenue depends upon the desire of advertisers to reach our audience demographic. Our radio stations compete for audience share and advertising revenue directly with other radio stations and with other media within their respective markets, such as newspapers, the Internet, broadcast and cable television, magazines, billboard advertising, transit advertising and direct mail advertising. Some of these radio stations and networks also broadcast music programming aimed at a particular Hispanic audience. In many of our markets, our primary competitors in Hispanic radio are Hispanic Broadcasting Corporation, Radio Unica and Spanish Broadcasting Systems. Some of our competitors are larger and may have greater resources than we do. If a competing station within a market converts to a format similar to that of one of our stations, or if one of our competitors upgrades the power and reach of one of its stations, we could suffer a reduction in ratings and advertising revenue in that market. The audience ratings and advertising revenue of our individual stations are subject to change and any adverse change in a particular market could have a material adverse effect on our operations. Outdoor Advertising/Publishing Overview Our outdoor and publishing operations complement our television and radio businesses and will allow for cross-promotional opportunities. Because of its repetitive impact and relatively low cost per thousand impressions, outdoor advertising attracts national, regional and local advertisers. We believe national advertisers value our ability to efficiently target specific demographic groups on a cost-effective basis compared to other advertising media. In addition, we believe local advertisers place significant value on our ability to provide advertising solutions in close proximity to their stores or outlets. Our outdoor portfolio adds to our television and radio reach by providing local advertisers with significant coverage of the Hispanic communities in Los Angeles and New York. Our outdoor advertising strategy is designed to complement our existing television and radio businesses by allowing us to capitalize on our Hispanic market expertise. The primary components of our strategy are to leverage the strengths of our inventory, continue to focus on ethnic communities and increase market penetration. Outdoor Advertising Markets We own approximately 10,000 billboards concentrated in high-density Hispanic communities in Los Angeles and New York, the two largest markets in the United States. According to the Outdoor Advertising Association of America, Inc., an industry trade association, outdoor advertising in the United States generated total revenue of approximately $4.8 billion in 1999, compared to $4.4 billion in 1998. We believe our outdoor advertising appeals to both large and small businesses. Los Angeles. The greater Los Angeles market has a population of approximately 15.3 million, of which approximately six million or 39% are Hispanic. As such, Los Angeles ranks as the largest Hispanic advertising market in the United States. Approximately 87% of our billboard inventory in Los Angeles is located in 57 neighborhoods where Hispanics represent at least 30% of the local population, based on the 1990 Census Report. We believe that this coverage of the Hispanic population has increased significantly since 1990 as the Hispanic community continues to grow into communities previously populated by other demographic groups. The Los Angeles metropolitan area has miles of freeways and surface streets where the average commuter spends in excess of 90 minutes per day in the car. New York. The greater New York City area has a population of approximately 18.3 million, of which approximately 3.2 million or 17.6% are Hispanic. As such, New York ranks as the second largest Hispanic advertising market in the United States. Billboard Inventory as of December 31, 1999
Inventory Type Los Angeles New York - -------------- ----------- -------- 8-sheet posters............................................ 6,000 3,500 City-Lights................................................ 250 0 30-sheet posters........................................... 0 165 Wall-Scapes................................................ 5 96 Bulletins.................................................. 20 24 ----- ----- Total.................................................... 6,275 3,785 ===== =====
Our inventory consists of the following types of billboards that are typically located on sites that we have leased or have a permanent easement: 8-sheet posters are generally 6 feet high by 12 feet wide. Due to the smaller size of this type of billboard, 8-sheet posters are often located in densely populated or fast growing areas where larger signs do not fit or are not permitted, such as parking lots and other tight areas. Accordingly, most of our 8-sheet posters are concentrated on city streets, targeting both pedestrian and vehicular traffic and are sold to advertisers for periods of four weeks. City-Lights is a product we created in 1998 to serve national advertisers with a "high-impact" advertising format both during the day and nighttime. The format is typically used by national fashion, entertainment and consumer products companies desiring to target consumers within proximity of local malls or retail outlets. A City-Lights structure is approximately 7 feet by 10 feet set vertically on a single pole structure. The advertisement is usually housed in an illuminated glass casing for greater visibility at night and is sold to advertisers for a period of four weeks. 30-sheet posters are generally 12 feet high by 25 feet wide and are the most common type of billboard. Lithographed or silk-screened paper sheets that are supplied by the advertiser are pre-pasted and packaged in airtight bags by the outdoor advertising company and applied, like wallpaper, to the face of the display. The 30-sheet posters are concentrated on major traffic arteries and space is usually sold to advertisers for periods of four weeks. Wall-Scapes generally consist of advertisements ranging in a variety of sizes (from 120 to 800 square feet) which are displayed on the sides of buildings in densely populated locations. Advertising formats can include either vinyl prints or painted artwork. Because of a Wall-Scape's greater impact and higher cost relative to other types of billboards, space is usually sold to advertisers for periods of six to 12 months. Bulletins are generally 14 feet high and 48 feet wide and consist of panels or a single sheet of vinyl that are hand painted at the facilities of the outdoor advertising company or computer painted in accordance with design specifications supplied by the advertiser and mounted to the face of the display. Because of painted bulletins' greater impact and higher cost relative to other types of billboards, they are usually located near major highways and are sold for periods of six to 12 months. 58 Outdoor Advertising Revenue Advertisers usually contract for outdoor displays through advertising agencies, which are responsible for the artistic design and written content of the advertising. Advertising contracts are negotiated on the basis of monthly rates published in our "rate card." These rates are based on a particular display's exposure (or number of "impressions" delivered) in relation to the demographics of the particular market and its location within that market. The number of "impressions" delivered by a display (measured by the number of vehicles passing the site during a defined period and weighted to give effect to such factors as its proximity to other displays and the speed and viewing angle of approaching traffic) is determined by surveys that are verified by the Traffic Audit Bureau, an independent agency which is the outdoor advertising industry's equivalent of television's Nielsen ratings and radio's Arbitron ratings. In each of our markets, we employ salespeople who sell both local and national advertising. Our 1999 outdoor advertising revenue mix consisted of approximately 60% national advertisers and 40% local advertisers. National advertisers value our product due to our ability to efficiently target specific demographic groups on a cost-effective basis. Local advertisers, in addition to these factors, place significant value on our ability to provide advertising solutions in the form of billboards in close proximity to the advertisers' stores or outlets. We believe that our local sales force is crucial to maintaining relationships with key advertisers and agencies and identifying new advertisers. Outdoor Advertising Competition We compete in each of our outdoor markets with other outdoor advertisers as well as other media. In addition, we also compete with a wide variety of out- of-home media, including advertising in shopping centers, airports, stadiums, movie theaters and supermarkets, as well as on taxis, trains and buses. In competing with other media, outdoor advertising relies on its relative cost efficiency and its ability to reach a broad segment of the population in a specific market or to target a particular geographic area or population with a particular set of demographic characteristics within that market. Publishing The primary publication in our publishing segment is El Diario/La Prensa, the oldest Spanish-language daily newspaper in the United States and the premier Spanish-language publishing franchise in the Northeast. El Diario/La Prensa's daily paid circulation of approximately 50,000 reaches a total daily readership of 321,000. This figure, as reported in Simmons Hispanic Market Study, reflects the highest pass-along rates recorded by any newspaper in the United States. El Diario/La Prensa won the award for "Outstanding Spanish-language Daily" from the National Association of Hispanic Publications in 1994 and 1996 and is one of only two newspapers in New York City with growing circulation. We also own VEA New York, a Spanish-language tourist publication serving visitors to New York from Latin America, Spain and other Spanish-language countries. We believe our combined media provide an effective vehicle for national and local advertisers to reach the fast growing Hispanic population. Material Trademarks, Trade Names and Service Marks In the course of our business, we use various trademarks, trade names and service marks, including our logos, in our advertising and promotions. We believe the strength of our trademarks, trade names and service marks are important to our business and intend to protect and promote them as appropriate. We do not hold or depend upon any material patent, government license, franchise or concession, except our broadcast licenses granted by the FCC. Employees As of March 31, 2000, giving effect to our acquisitions of LCG and Z-Spanish Media, we had approximately 1,100 full-time employees. As of March 31, 2000, 146 of our publishing employees were 59 represented by labor unions that have entered into collective bargaining agreements with us. As of March 31, 2000, five of our outdoor employees were represented by labor unions that have entered into or are currently in negotiations for collective bargaining agreements with us. We believe our relations with our employees are good. Regulation of Television and Radio Broadcasting General. The FCC regulates television and radio broadcast stations pursuant to the Communications Act. Among other things, the FCC: . determines the particular frequencies, locations and operating power of stations; . issues, renews, revokes and modifies station licenses; . regulates equipment used by stations; and . adopts and implements regulations and policies that directly or indirectly affect the ownership, changes in ownership, control, operation and employment practices of stations. A licensee's failure to observe the requirements of the Communications Act or FCC rules and policies may result in the imposition of various sanctions, including admonishment, fines, the grant of renewal terms of less than eight years, the grant of a license with conditions or, in the case of particularly egregious violations, the denial of a license renewal application, the revocation of an FCC license or the denial of FCC consent to acquire additional broadcast properties. Congress and the FCC have had under consideration or reconsideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our television and radio stations, result in the loss of audience share and advertising revenue for our television and radio broadcast stations or affect our ability to acquire additional television and radio broadcast stations or finance such acquisitions. Such matters may include: . changes to the license authorization and renewal process; . proposals to impose spectrum use or other fees on FCC licensees; . changes to the FCC's equal employment opportunity regulations and other matters relating to involvement of minorities and women in the broadcasting industry; . proposals to change rules relating to political broadcasting including proposals to grant free air time to candidates, and other changes regarding program content; . proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages; . technical and frequency allocation matters, including creation of a new Class A television service for existing low-power television stations and a new low-power FM radio broadcast service; . the implementation of digital audio broadcasting on both satellite and terrestrial bases; . the implementation of rules governing the transmission of local television signals by direct broadcast satellite services in their local areas; . changes in broadcast multiple ownership, foreign ownership, cross- ownership and ownership attribution policies; and . proposals to alter provisions of the tax laws affecting broadcast operations and acquisitions. We cannot predict what changes, if any, might be adopted, nor can we predict what other matters might be considered in the future, nor can we judge in advance what impact, if any, the implementation of any particular proposal or change might have on our business. 60 FCC Licenses. Television and radio stations operate pursuant to licenses that are granted by the FCC for a term of eight years, subject to renewal upon application to the FCC. During the periods when renewal applications are pending, petitions to deny license renewal applications may be filed by interested parties, including members of the public. The FCC is required to hold hearings on renewal applications if it is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a "substantial and material question of fact" as to whether the grant of the renewal applications would be inconsistent with the public interest, convenience and necessity. However, the FCC is prohibited from considering competing applications for a renewal applicant's frequency, and is required to grant the renewal application if it finds: . that the station has served the public interest, convenience and necessity; . that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC; and . that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC that, when taken together, would constitute a pattern of abuse. If as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet the requirements for renewal and that no mitigating factors justify the imposition of a lesser sanction, the FCC may deny a license renewal application. Historically, FCC licenses have generally been renewed. We have no reason to believe that our licenses will not be renewed in the ordinary course, although there can be no assurance to that effect. The non-renewal of one or more of our stations' licenses could have a material effect on our business. Ownership Matters. The Communications Act requires prior approval of the FCC for the assignment of a broadcast license or the transfer of control of a corporation or other entity holding a license. In determining whether to approve an assignment of a television or radio broadcast license or a transfer of control of a broadcast licensee, the FCC considers a number of factors pertaining to the licensee including compliance with various rules limiting common ownership of media properties, the "character" of the licensee and those persons holding "attributable" interests therein, and the Communications Act's limitations on foreign ownership and compliance with the FCC rules and regulations. To obtain the FCC's prior consent to assign or transfer a broadcast license, appropriate applications must be filed with the FCC. If the application to assign or transfer the license involves a substantial change in ownership or control of the licensee, for example, the transfer or acquisition of more than 50% of the voting stock, the application must be placed on public notice for a period of 30 days during which petitions to deny the application may be filed by interested parties, including members of the public. If an assignment application does not involve new parties, or if a transfer of control application does not involve a "substantial change" in ownership or control, it is a pro forma application, which is not subject to the public notice and 30 day petition to deny procedure. The regular and pro forma applications are nevertheless subject to informal objections that may be filed any time until the FCC acts on the application. If the FCC grants an assignment or transfer application, interested parties have 30 days from public notice of the grant to seek reconsideration of that grant. The FCC has an additional ten days to set aside such grant on its own motion. When ruling on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer to any party other than the assignee or transferee specified in the application. Under the Communications Act, a broadcast license may not be granted to or held by persons who are not U.S. citizens, by any corporation that has more than 20% of its capital stock owned or voted by non-U.S. citizens or entities or their representatives, by foreign governments or their representatives or by non-U.S. corporations. Furthermore, the Communications Act provides that no FCC broadcast license may be granted to or held by any corporation directly or indirectly controlled by any other corporation of which more than 25% of its capital stock is owned of record or voted by non-U.S. citizens or entities or their representatives, or foreign governments or their representatives or by non-U.S. corporations, if the FCC finds the public interest will be served by the refusal or revocation of such license. Thus, the licenses for our stations could be revoked 61 if more than 25% of our outstanding capital stock is issued to or for the benefit of non-U.S. citizens in excess of these limitations. Our first restated certificate of incorporation restricts the ownership and voting of our capital stock to comply with these requirements. The FCC generally applies its other broadcast ownership limits to "attributable" interests held by an individual, corporation or other association or entity. In the case of a corporation holding broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the stock of a licensee corporation are generally deemed attributable interests, as are positions as an officer or director of a corporate parent of a broadcast licensee. Stock interests held by insurance companies, mutual funds, bank trust departments and certain other passive investors that hold stock for investment purposes only become attributable with the ownership of 20% or more of the voting stock of the corporation holding broadcast licenses. A time brokerage agreement with another television or radio station in the same market creates an attributable interest in the brokered television or radio station as well for purposes of the FCC's local television or radio station ownership rules, if the agreement affects more than 15% of the brokered television or radio station's weekly broadcast hours. Debt instruments, non-voting stock, options and warrants for voting stock that have not yet been exercised, insulated limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership and minority voting stock interests in corporations where there is a single holder of more than 50% of the outstanding voting stock whose vote is sufficient to affirmatively direct the affairs of the corporation generally do not subject their holders to attribution. However, the FCC recently adopted a new rule, known as the equity-debt-plus or EDP rule that causes certain creditors or investors to be attributable owners of a station, regardless of whether there is a single majority stockholder or other applicable exception to the FCC's attribution rules. Under this new rule, a major programming supplier (any programming supplier that provides more than 15% of the station's weekly programming hours) or a same- market media entity will be an attributable owner of a station if the supplier or same-market media entity holds debt or equity, or both, in the station that is greater than 33% of the value of the station's total debt plus equity. For purposes of the EDP rule, equity includes all stock, whether voting or nonvoting, and equity held by insulated limited partners in limited partnerships. Debt includes all liabilities, whether long-term or short-term. Generally, the FCC only permits an owner to have one television station per market. A single owner is permitted to have two stations with overlapping signals so long as they are assigned to different markets. Recent changes to the FCC's rules regarding ownership now permit an owner to operate two television stations assigned to the same market so long as either: . the television stations do not have overlapping broadcast signals; or . there will remain after the transaction eight independently owned, full power noncommercial or commercial operating television stations in the market and one of the two commonly-owned stations is not ranked in the top four based upon audience share. The FCC will consider waiving these ownership restrictions in certain cases involving failing or failed stations or stations which are not yet built. The FCC permits a television station owner to own one radio station in the same market as its television station. In addition, a television station owner is permitted to own additional radio stations, not to exceed the local ownership limits for the market, as follows: . in markets where 20 media voices will remain, an owner may own an additional five radio stations, or, if the owner only has one television station, an additional six radio stations; and . in markets where ten media voices will remain, an owner may own an additional three radio stations. 62 A "media voice" includes each independently-owned and operated full-power television and radio station and each daily newspaper that has a circulation exceeding 5% of the households in the market, plus one voice for all cable television systems operating in the market. The FCC has eliminated the limitation on the number of radio stations a single individual or entity may own nationwide and increased the limits on the number of stations an entity or individual may own in a market as follows: . In a radio market with 45 or more commercial radio stations, a party may own, operate or control up to eight commercial radio stations, not more than five of which are in the same service (AM or FM). . In a radio market with between 30 and 44 (inclusive) commercial radio stations, a party may own, operate or control up to seven commercial radio stations, not more than four of which are in the same service (AM or FM). . In a radio market with between 15 and 29 (inclusive) commercial radio stations, a party may own, operate or control up to six commercial radio stations, not more than four of which are in the same service (AM or FM). . In a radio market with 14 or fewer commercial radio stations, a party may own, operate or control up to five commercial radio stations, not more than three of which are in the same service (AM or FM), except that a party may not own, operate, or control more than 50% of the radio stations in such market. The FCC staff has notified the public of its intention to review transactions that comply with these numerical ownership limits but that might involve undue concentration of market share. Because of these multiple and cross-ownership rules, if a stockholder, officer or director of Entravision holds an "attributable" interest in Entravision, such stockholder, officer or director may violate the FCC's rules if such person or entity also holds or acquires an attributable interest in other television or radio stations or daily newspapers, depending on their number and location. If an attributable stockholder, officer or director of Entravision violates any of these ownership rules, we may be unable to obtain from the FCC one or more authorizations needed to conduct our broadcast business and may be unable to obtain FCC consents for certain future acquisitions. In connection with our acquisitions of LCG and Z-Spanish Media, we are required to comply with the FCC rules governing multiple ownership of radio and television stations. The addition of the Z-Spanish Media radio stations to the LCG radio stations being acquired in the Monterey-Salinas-Santa Cruz, California radio market, together with our existing ownership of a television station in that market, will result in our owning up to three more radio stations than are permitted by the FCC's radio multiple ownership rules. In order to comply with these rules, we intend to divest of up to three stations in the Monterey-Salinas-Santa Cruz market. In addition, the Z-Spanish Media radio stations, when combined with the LCG radio stations in the Modesto, California market, may result in our owning one more radio station than is permitted by the FCC's rules. In order to comply with these rules, we may be required to divest of one station in this market. The Communications Act requires broadcasters to serve the "public interest." The FCC has relaxed or eliminated many of the more formalized procedures it developed to promote the broadcast of certain types of programming responsive to the needs of a broadcast station's community of license. Nevertheless, a broadcast licensee continues to be required to present programming in response to community problems, needs and interests and to maintain certain records demonstrating its responsiveness. The FCC will consider complaints from the public about a broadcast station's programming when it evaluates the licensee's renewal application, but complaints also may be filed and considered at any time. Stations also must pay regulatory and application fees, and follow various FCC rules that regulate, among other things, political broadcasting, the broadcast of obscene or indecent programming, sponsorship identification, the broadcast of contests and lotteries and technical operation. 63 The FCC requires that licensees not discriminate in hiring practices, develop and implement programs designed to promote equal employment opportunities and submit reports to the FCC on these matters periodically and in connection with each license renewal application. The FCC rules also prohibit a broadcast licensee from simulcasting more than 25% of its programming on another radio station in the same broadcast service (that is, AM/AM or FM/FM). The simulcasting restriction applies if the licensee owns both radio broadcast stations or owns one and programs the other through a local marketing agreement, provided that the contours of the radio stations overlap in a certain manner. "Must Carry" Rules. FCC regulations implementing the Cable Television Consumer Protection and Competition Act of 1992 require each television broadcaster to elect, at three year intervals beginning October 1, 1993, to either: . require carriage of its signal by cable systems in the station's market, which is referred to as "must carry" rules; or . negotiate the terms on which such broadcast station would permit transmission of its signal by the cable systems within its market which is referred to as "retransmission consent." We have elected "must carry" with respect to each of our full-power stations. Time Brokerage Agreements. We have, from time to time, entered into local marketing agreements, generally in connection with pending station acquisitions. By using local marketing agreements, we can provide programming and other services to a station proposed to be acquired before we receive all applicable FCC and other governmental approvals. FCC rules and policies generally permit time brokerage agreements if the station licensee retains ultimate responsibility for and control of the applicable station. We cannot be sure that we will be able to air all of our scheduled programming on a station with which we have local marketing agreements or that we will receive the anticipated revenue from the sale of advertising for such programming. Stations may enter into cooperative arrangements known as joint sales agreements or JSAs. Under the typical JSA, a station licensee obtains, for a fee, the right to sell substantially all of the commercial advertising on a separately-owned and licensed station in the same market. The typical JSA also involves the provision by the selling party of certain sales, accounting and services to the station whose advertising is being sold. Unlike a local marketing agreement, the typical JSA does not involve programming. As part of its increased scrutiny of radio and television station acquisitions, the DOJ has stated publicly that it believes that local marketing agreements and JSAs could violate the Hart-Scott-Rodino Antitrust Improvements Act of 1976 if such agreements take effect prior to the expiration of the waiting period under such Act. Furthermore, the DOJ has noted that JSAs may raise antitrust concerns under Section 1 of the Sherman Antitrust Act and has challenged JSAs in certain locations. The DOJ also has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to television and radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. Digital Television Services. The FCC has adopted rules for implementing DTV service in the United States. Implementation of DTV will improve the technical quality of television signals and provide broadcasters the flexibility to offer new services, including high-definition television and data broadcasting. The FCC has established service rules and adopted a table of allotments for DTV. Under the table, certain eligible broadcasters with a full-power television station are allocated a separate channel for DTV operation. Stations will be permitted to phase in their DTV operations over a period of years after which they will be required to surrender their license to broadcast the analog, or non-digital television signal. Our stations must be on the air with a digital signal by May 1, 2002. We must return one of our channels to the government by 2006. 64 Equipment and other costs associated with DTV transition, including the necessity of temporary dual-mode operations and the relocation of stations from one channel to another, will impose some near-term financial costs on television stations providing the services. The potential also exists for new sources of revenue to be derived from DTV. We cannot predict the overall effect the transition to DTV might have on our business. Digital Radio Services. The FCC currently is considering standards for evaluating, authorizing and implementing terrestrial digital audio broadcasting technology, including In-Band On-Channel(TM) technology for FM radio stations. Digital audio broadcasting's advantages over traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary services. In-Band On-Channel(TM) technology would permit an FM station to transmit radio programming in both analog and digital formats, or in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what regulations the FCC will adopt regarding digital audio broadcasting or In-Band On-Channel(TM) technology and what effect such regulations would have on our business or the operations of our radio stations. RF Radiation. The FCC has adopted rules limiting human exposure to levels of radio frequency (RF) radiation. These rules require applicants for renewal of broadcast licenses or modification of existing licenses to inform the FCC whether the applicant's broadcast facility would expose people or employees to excessive RF radiation. We believe that all of our stations are in compliance with the FCC's current rules regarding RF radiation. Satellite Digital Audio Radio Service. The FCC has allocated spectrum to a new technology, SDARS, to deliver satellite-based audio programming to a national or regional audience. The nationwide reach of SDARS could allow niche programming aimed at diverse communities that we are targeting. Two companies that hold licenses for authority to offer multiple channels of digital, satellite-delivered radio could compete with conventional terrestrial radio broadcasting. These potential competitors are expected to begin operations no later than 2001. Low-Power Radio Broadcast Service. On January 20, 2000, the FCC adopted rules creating a new low-power FM, or LPFM, radio service. The rules have been published in the Federal Register and became effective on April 17, 2000. The new LPFM service will consist of two classes of radio stations, with maximum power levels of either 10 Watts or 100 Watts. The 10 Watt stations will reach an area with a radius of between one and two miles and the 100 Watt stations will reach an area with a radius of approximately three and one-half miles. The new LPFM stations will not be required to protect other existing FM stations on frequencies three channels away, as currently required of full-powered FM stations. The new LPFM service will be exclusively non-commercial. Current broadcast licensees or parties with interests in cable television or newspapers will not be eligible to hold LPFM licenses. It is difficult to predict what impact, if any, the new LPFM service will have on technical interference with our stations' signals or competition for our stations' audiences. The new FCC rules for LPFM services are the subject of court challenges and Congress is considering legislation which would substantially modify the rules adopted by the FCC. Other Pending FCC and Legislative Proceedings. The Satellite Home Viewer Act allows satellite carriers to deliver broadcast programming to subscribers who are unable to obtain television network programming over the air from local television stations. Congress in 1999 enacted legislation to amend the Satellite Home Viewer Improvement Act to facilitate the ability of satellite carriers to provide subscribers with programming from local television stations. These policies do not achieve "must-carry" status until January 1, 2002, when any satellite company that has chosen to provide local-into-local service must provide subscribers with all of the local broadcast television signals that are assigned to the market and where television licensees ask to be carried on the satellite system. On November 29, 1999, Congress enacted the Community Broadcasters Protection Act of 1999, which provides for a new Class A television service, consisting of certain low-power television stations. Low-power 65 television stations that qualify for Class A status will no longer be secondary in nature and will be protected against certain full-power stations. In turn, the existence of Class A stations may impact the ability of full-power stations to modify their facilities. The FCC has recently completed a rulemaking proceeding to implement these rules. As the owner of both full-power and low- power stations, we are not certain as to whether the creation of the Class A service will, on balance, be beneficial or detrimental to us. Regulation of Outdoor Advertising Outdoor advertising is subject to governmental regulation at the federal, state and local levels. Federal law, principally the Highway Beautification Act of 1965, or the HBA, regulates outdoor advertising on federally aided primary and interstate highways. As a condition to federal highway assistance, the HBA requires states to restrict billboards on such highways to commercial and industrial areas and imposes certain additional size, spacing and other limitations. All states have passed state billboard control statutes and regulations at least as restrictive as the federal requirements, including removal of any illegal signs on such highways at the owner's expense and without compensation. We believe that the number of our billboards that may be subject to removal as illegal is immaterial. No state in which we operate has banned billboards, but some have adopted standards more restrictive than the federal requirements. Municipal and county governments generally also have sign controls as part of their zoning laws. Some local governments prohibit construction of new billboards and some allow new construction only to replace existing structures, although most allow construction of billboards subject to restrictions on zones, size, spacing and height. Federal law does not require the removal of existing lawful billboards, but does require payment of compensation if a state or political subdivision compels the removal of a lawful billboard along a federally aided primary or interstate highway. State governments have purchased and removed legal billboards for beautification in the past, using federal funding for transportation enhancement programs, and may do so in the future. Governmental authorities from time to time use the power of eminent domain to remove billboards. Thus far, we have been able to obtain satisfactory compensation for any of our billboards purchased or removed as a result of governmental action, although there is no assurance that this will continue to be the case in the future. Local governments do not generally purchase billboards for beautification, but some have attempted to force the removal of legal but nonconforming billboards (billboards which conformed with applicable zoning regulations when built but which do not conform to current zoning regulations) after a period of years under a concept called "amortization," by which the governmental body asserts that just compensation is earned by continued operation over time. Although there is some question as to the legality of amortization under federal and many state laws, amortization has been upheld in some instances. We generally have been successful in negotiating settlements with municipalities for billboards required to be removed. Restrictive regulations also limit our ability to rebuild or replace nonconforming billboards. Under the terms of a settlement agreement among U.S. tobacco companies and 46 states, tobacco companies discontinued all advertising on billboards and buses in the 46 participating states as of April 23, 1999. The remaining four states had already reached separate settlements with the tobacco industry. We removed all tobacco billboards and advertising in these states in compliance with the settlement deadlines. In addition to the above settlement agreements, state and local governments are also considering regulating the outdoor advertising of alcohol products. Alcohol related advertising represented approximately 8.4% of the total revenue of our outdoor billboard business in 1999. As a matter of both company policy and industry practice (on a voluntary basis), we do not post any alcohol advertisements within a 500 square foot radius of any school, church or hospital. Legal Proceedings We currently and from time to time are involved in litigation incidental to the conduct of our business, but we are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us. 66 Properties and Facilities Our corporate headquarters are located in Santa Monica, California. We lease approximately 9,307 square feet of space in the building housing our corporate headquarters under a lease expiring in 2006. The types of properties required to support each of our television and radio stations typically include offices, broadcasting studios and antenna towers where broadcasting transmitters and antenna equipment are located. The majority of our office, studio and tower facilities are leased pursuant to long-term leases. We also own the buildings and/or land used for office, studio and tower facilities at two of our television stations. We own substantially all of the equipment used in our television and radio broadcasting business. We believe that all of our facilities and equipment are adequate to conduct our present operations. 67 MANAGEMENT Executive Officers and Directors The following table sets forth information about our executive officers and directors upon completion of this offering. Each of our directors serves until his or her successor is elected and is qualified.
Name Age Position ---- --- -------- Walter F. Ulloa...... 51 Chairman and Chief Executive Officer Philip C. Wilkinson.. 44 President, Chief Operating Officer and Director Executive Vice President, Treasurer and Chief Jeanette Tully....... 53 Financial Officer Paul A. Zevnik....... 49 Secretary and Director Amador S. Bustos..... 49 President of Radio Division and Director Glenn Emanuel........ 47 President of Outdoor Division Darryl B. Thompson... 38 Director Andrew W. Hobson..... 38 Director Michael D. Wortsman.. 52 Director
Walter F. Ulloa. Mr. Ulloa, the Chairman and Chief Executive Officer of Entravision since its inception in 1996, has over 24 years of experience in Spanish-language television and radio in the United States. Mr. Ulloa will be elected as a member of our board of directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From 1989 to 1996, Mr. Ulloa was involved in the development, management or ownership of the predecessor entities to Entravision. From 1976 to 1989, he worked at KMEX, Los Angeles, California, as operations manager, production manager, news director, local sales manager and an account executive. Philip C. Wilkinson. Mr. Wilkinson, the President and Chief Operating Officer of Entravision since its inception in 1996, has over 19 years of experience in Spanish-language television and radio in the United States. Mr. Wilkinson will be elected as a member of our board of directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From 1990 to 1996, Mr. Wilkinson was involved in the development, management or ownership of the predecessor entities to Entravision. From 1982 to 1990, he worked at the Univision television network and served in the positions of account executive, Los Angeles national sales manager and West Coast sales manager. Jeanette Tully. Ms. Tully, an Executive Vice President and the Chief Financial Officer and Treasurer of Entravision since September 1996, has over 22 years of experience in the media industry. From 1994 until early 1996 when the company was sold to Infinity Broadcasting, Ms. Tully was the Executive Vice President and Chief Financial Officer of Alliance Broadcasting. From May 1986 until she joined Alliance Broadcasting, Ms. Tully was a Vice President of Communications Equity Associates, where she advised a variety of broadcast companies on financial matters. Paul A. Zevnik. Mr. Zevnik has been the Secretary of Entravision since its inception in 1996. Mr. Zevnik will be elected as a member of our board of directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From 1989 to 1996, Mr. Zevnik was involved in the development, management or ownership of the predecessor entities to Entravision. Mr. Zevnik is a partner in the Washington, D.C. office of the law firm of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. Amador S. Bustos. Mr. Bustos will be the President of our Radio Division upon completion of this offering and our acquisition of Z-Spanish Media. Mr. Bustos will also be elected as a member of our board of directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. From November 1992 until our acquisition of Z-Spanish Media, Mr. Bustos served as Chairman, Chief Executive Officer and 68 President of Z-Spanish Media or one of its predecessors. From December 1979 until September 1992, Mr. Bustos held various positions, including general sales manager, senior account executive and community affairs coordinator, at several radio stations and a television station in the San Francisco Bay area. Glenn Emanuel. Mr. Emanuel will be the President of our Outdoor Division upon completion of this offering and our acquisition of Z-Spanish Media. Mr. Emanuel has over 20 years of experience in the outdoor advertising industry. From 1997 until our acquisition of Z-Spanish Media, Mr. Emanuel served as the President of Vista, Z-Spanish Media's outdoor advertising group. Before joining Vista, he served as general manager of Regency Outdoor Advertising's operations in Los Angeles for ten years. Darryl B. Thompson. Mr. Thompson will serve on our board of directors as a representative of TSG Capital Fund III, L.P. upon completion of this offering and our acquisition of Z-Spanish Media, and will be elected pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. Mr. Thompson has been a partner of TSG Capital Group, L.L.C. since 1993. Mr. Thompson serves on the boards of directors of several public and private companies, including LatinForce.Net, Inc., Pointe Communications Corporation and Millennium Digital Media Holdings, L.L.C. Andrew W. Hobson. Mr. Hobson, who will be a member of our board of directors as a representative of Univision upon completion of this offering, has been an Executive Vice President of the Univision Network since 1993. From 1990 through 1993 he was a principal at Chartwell Partners, Univision's majority owner. Before joining Chartwell, Mr. Hobson was a Vice President in the investment banking group of Bankers Trust Corp., where he was employed from 1984 to 1990. Michael D. Wortsman. Mr. Wortsman, who will be a member of our board of directors as a representative of Univision upon completion of this offering, is the Co-President of Univision Television Group Inc. Before holding this position, Mr. Wortsman served as the Executive Vice President of corporate development for the Univision Television Group from 1993 to 1996. Board Committees The board of directors intends to establish an audit committee and a compensation committee. Univision, as the holder of our Class C common stock, will have the right to appoint one member to each of these committees, as well as any other committee established by our board of directors. The audit committee will recommend to the board of directors the selection of independent auditors, review the results and scope of audit and other services provided by our independent auditors and review and evaluate our audit and control functions. The compensation committee will review and recommend to the board of directors the compensation and benefits of all of our officers and will establish and review general policies relating to compensation and benefits of our employees. Compensation Committee Interlocks and Insider Participation At the completion of this offering, the members of our compensation committee will consist of , and , none of whom has ever been an officer or employee of Entravision. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board or compensation committee. Director Compensation We intend to establish fees for all non-employee directors within six months after the date of this prospectus, which will include grants of stock options to our directors. We also expect to reimburse our non-employee directors for reasonable expenses they may incur in attending board of directors or committee meetings. 69 Executive Compensation The following table sets forth all compensation earned in the fiscal year ended December 31, 1999 by our Chief Executive Officer and the four other most highly compensated officers whose annual salary and bonus exceeded $100,000. Summary Compensation Table
Annual Compensation(1) ------------------------------ Other Annual All Other Name and Principal Position Year Salary Bonus Compensation Compensation - --------------------------- ---- -------- -------- ------------ ------------ Walter F. Ulloa................ 1999 $360,000 $429,938 -- -- Chairman and Chief Executive Officer Philip C. Wilkinson............ 1999 360,000 429,938 -- -- President and Chief Operating Officer Jeanette Tully................. 1999 230,000 -- -- -- Chief Financial Officer Amador S. Bustos............... 1999 168,000 7,560 -- -- President of Radio Division Glenn Emanuel.................. 1999 225,000 75,000 -- -- President of Outdoor Division
- -------- (1) Excludes perquisites and other personal benefits, securities or property which aggregate the lesser of $50,000 or 10% of the total of annual salary and bonus. Employee Benefit Plans 2000 Omnibus Equity Incentive Plan On , 2000 we adopted our 2000 Omnibus Equity Incentive Plan to provide an additional means to attract, motivate, reward and retain key personnel. The plan gives the administrator the authority to grant different types of stock incentive awards and to select participants. Our employees, officers, directors and consultants may be selected to receive awards under the plan. The following summary is qualified by reference to the complete plan, which is on file with the Securities and Exchange Commission. Share Limits. A maximum of shares of our Class A common stock may be issued under the plan, or approximately % of our outstanding shares after giving effect to this offering. The aggregate number of shares subject to stock options and stock appreciation rights granted under the plan to any one person in a calendar year cannot exceed one million shares. Each share limit and award under the plan is subject to adjustment for certain changes in our capital structure, reorganizations and other extraordinary events. Shares subject to awards that are not paid or exercised before they expire or are terminated are available for future grants under the plan. Awards. Awards under the plan may be in the form of: . incentive stock options; . nonqualified stock options; . stock appreciation rights; . restricted stock; or . stock units. Awards may be granted individually or in combination with other awards. Certain types of stock-based performance awards under the plan will depend upon the extent to which performance goals set by the administrator are met during the performance period. 70 Awards under the plan generally will be nontransferable, subject to exceptions such as a transfer to a family member or to a trust, as authorized by the administrator. Nonqualified stock options and other awards may be granted at prices below the fair market value of the common stock on the date of grant. Restricted stock awards can be issued for nominal or the minimum lawful consideration. Incentive stock options must have an exercise price that is at least equal to the fair market value of the common stock, or 110% of fair market value of the common stock for any owner of more than 10% of our common stock, on the date of grant. These and other awards may also be issued solely or in part for services. Administration. The plan will be administered by a committee of directors appointed by our board of directors. The administrator of the plan has broad authority to: . designate recipients of awards; . determine or modify, subject to any required consent, the terms and provisions of awards, including the price, vesting provisions, terms of exercise and expiration dates; . approve the form of award agreements; . determine specific objectives and performance criteria with respect to performance awards; . construe and interpret the plan; and . reprice, accelerate and extend the exercisability or term, and establish the events of termination or reversion of outstanding awards. Change of Control. Upon a change of control event, any award may become immediately vested and/or exercisable, unless the administrator determines to the contrary. Generally speaking, a change of control event will be triggered under the plan: . in connection with certain mergers or consolidations of Entravision with or into another entity where our stockholders before the transaction own less than 50% of the surviving entity; . if a majority of our board of directors changes over a period of two years or less; or . upon a sale of all or substantially all of our assets if a change in ownership of more than 50% of our outstanding voting securities occurs. The administrator of the plan may also provide for alternative settlements of awards, the assumption or substitution of awards or other adjustments of awards in connection with a change of control or other reorganization of Entravision. Plan Amendment, Termination and Term. Our board of directors may amend, suspend or discontinue the plan at any time, but no such action will affect any outstanding award in any manner materially adverse to a participant without the consent of the participant. Plan amendments will generally not be submitted to stockholders for their approval unless such approval is required by applicable law. The plan will remain in existence as to all outstanding awards until such awards are exercised or terminated. The maximum term of options, stock appreciation rights and other rights to acquire common stock under the plan is ten years after the initial date of award, subject to provisions for further deferred payment in certain circumstances. No award can be granted ten years after adoption of the plan by our board of directors. Payment for Shares. The exercise price of options or other awards may generally be paid in cash or, subject to certain restrictions, shares of common stock. Subject to any applicable limits, we may finance or offset shares to cover any minimum withholding taxes due in connection with an award. 71 Federal Tax Consequences. The current federal income tax consequences of awards authorized under the plan follow certain basic patterns. Generally, awards under the plan that are includable in the income of the recipient at the time of exercise, vesting or payment, such as nonqualified stock options, stock appreciation rights and restricted stock awards, are deductible by us, and awards that are not required to be included in the income of the recipient, such as incentive stock options, are not deductible by us. Generally speaking, Section 162(m) of the Internal Revenue Code provides that a public company may not deduct compensation, except for compensation that is commission or performance-based paid to its chief executive officer or to any of its four other highest compensated officers to the extent that the compensation paid to such person exceeds $1 million in a tax year. The regulations exclude from these limits compensation that is paid pursuant to a plan in effect before the time that a company is publicly held. We expect that compensation paid under the plan will not be subject to Section 162(m) in reliance on this transition rule, as long as such compensation is paid or stock options, stock appreciation rights and/or restricted stock awards are granted before the earlier of a material amendment to the plan or our annual stockholders meeting in the year 2004. In addition, we may not be able to deduct certain compensation attributable to the acceleration of payment and/or vesting of awards in connection with a change of control event should that compensation exceed certain threshold limits under Section 280G of the Internal Revenue Code. Non-Exclusive Plan. The plan is not exclusive. Our board of directors (or its delegate), under Delaware law, may grant stock and performance incentives or other compensation, in stock or cash, under other plans or authority. 401(k) Plan We offer a 401(k) savings and retirement plan to all of our employees. Participants in the 401(k) plan may elect to contribute up to 15% of their annual salary but may not exceed the annual maximum contribution limits established by the Internal Revenue Service. We currently match 25% of the amounts contributed up to a maximum of $1,000 per year by each participant. The 401(k) plan is intended to qualify under the Internal Revenue Code, so that contributions by employees or by us to the plan and income earned on plan contributions are not taxable to employees until distributed to them, and contributions by us will be deductible by us when made. The trustees under the 401(k) plan, at the direction of each participant, invest such participant's assets in the 401(k) plan in selected investment options. As a result of our acquisition of LCG and our pending acquisition of Z- Spanish Media, we are (or will be) the successor-in-interest to the 401(k) plans of LCG and Z-Spanish Media. To the extent permissible, we intend to terminate all such plans, and each of the employees covered by such plans will have the opportunity to roll-over their investment accounts into our 401(k) plan. 72 Indemnification of Directors and Executive Officers and Limitation of Liability Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit indemnification for liabilities, including reimbursement for expenses incurred, arising under the Securities Act. This indemnification may, however, be unenforceable as against public policy. As permitted by Delaware law, our first restated certificate of incorporation, which will become effective upon the closing of this offering, includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability: . for any breach of the director's duty of loyalty to us or our stockholders; . for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; . under Section 174 of the Delaware law regarding unlawful dividends and stock purchases; or . for any transaction from which the director derived an improper personal benefit. As permitted by Delaware law, our first restated certificate of incorporation provides that: . we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law, so long as the person being indemnified acted in good faith and in a manner the person reasonably believed to be in or not opposed to our best interests, and with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful; . we are permitted to indemnify our other employees and agents to the extent that we indemnify our officers and directors, unless otherwise required by law; . we are required to advance expenses to our directors and officers incurred in connection with a legal proceeding to the fullest extent permitted by Delaware law, subject to very limited exceptions; and . the rights conferred in our first restated certificate of incorporation are not exclusive. Before the closing of this offering, we intend to enter into indemnity agreements with each of our current directors and officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our first restated certificate of incorporation and to provide additional procedural protections. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. We have obtained directors' and officers' liability insurance. 73 PRINCIPAL STOCKHOLDERS The following table summarizes information regarding the beneficial ownership of our outstanding common stock as of , 2000 based on an estimated initial public offering price of $ for: . each person or entity known by us to beneficially own 5% or more of our outstanding common stock; . our executive officers noted in the Summary Compensation Table; . each of our directors; and . all executive officers and directors as a group.
Percentage of Shares Beneficially Owned (2) ----------------------- Name and Address of Class of Number of Shares Before After Beneficial Owner (1) Shares Beneficially Owned Offering Offering - -------------------- -------- ------------------ ---------- ---------- Walter F. Ulloa (3)..... B Philip C. Wilkinson (4).................... B Paul A. Zevnik (5)...... B Univision Communications Inc. (6)............... C TSG Capital Group (7)... A Jeanette Tully.......... A * * Amador S. Bustos........ A * * Glenn Emanuel........... A * * Darryl B. Thompson (8).. A Andrew W. Hobson (9).... Michael D. Wortsman (10)................... All executive officers and directors as a group (nine persons)... A B
- -------- * Represents beneficial ownership of less than 1%. (1) Unless otherwise noted, the address for each person or entity named below is c/o Entravision Communications Corporation, 2425 Olympic Boulevard, Suite 6000 West, Santa Monica, California 90404. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. (2) Because this table assumes no exercise of the underwriters' over-allotment option and because the selling stockholder will only sell to the extent the option is exercised, the table does not reflect any shares he may sell. (3) Includes shares held by The Walter F. Ulloa Irrevocable Trust of 1996. (4) Includes shares held by The Wilkinson Family Trust and shares held by The 1994 Wilkinson Children's Gift Trust. (5) Includes shares held by The Paul A. Zevnik Irrevocable Trust of 1996, shares held by The Zevnik Family L.L.C. and shares held by The Zevnik Charitable Foundation. Mr. Zevnik has shared voting power in The Zevnik Charitable Foundation. (6) The address for Univision Communications Inc. is 1999 Avenue of the Stars, Suite 3050, Los Angeles, California 90067. (7) TSG Capital Group includes TSG Capital Fund II, L.P., TSG Capital Fund III, L.P., TSG Associates II Inc. and TSG Associates III, LLC. The address for each of these entities is 177 Broad Street, 12th Floor, Stamford, Connecticut 06901. (8) Includes shares held by TSG Capital Group. Mr. Thompson is a principal in each of the TSG Capital Group entities. Mr. Thompson may be deemed to exercise voting and investment power over such shares. Mr. Thompson disclaims beneficial ownership of such shares, except to the extent of his proportionate interest therein. (9) Mr. Hobson is an executive officer of an affiliate of Univision Communications Inc. (10) Mr. Wortsman is an executive officer of an affiliate of Univision Communications Inc. 74 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Reorganization. Before the closing of this offering, we will complete a reorganization. As a result of this reorganization, the beneficial ownership of Entravision will be virtually identical to the beneficial ownership of Entravision Communications Company, L.L.C., our predecessor, immediately before the reorganization. This reorganization will occur as follows: . Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik and each of their trusts and other controlled entities will exchange their direct and indirect ownership interests in our predecessor for newly-issued shares of our Class B common stock; . each of the stockholders in the seven corporate member entities of our predecessor (other than Messrs. Ulloa, Wilkinson and Zevnik and their trusts and related entities) will exchange their shares in such corporate members for newly-issued shares of our Class A common stock; . each of the remaining individuals, trusts and other entities holding direct membership interests in our predecessor will exchange such interests for newly-issued shares of our Class A common stock; and . Univision will exchange its subordinated note and option in our predecessor for shares of our Class C common stock. Relationship with Univision. In December 1996, Univision invested $10 million in our predecessor in exchange for a subordinated note and an option to acquire an approximately 25% ownership interest in our predecessor. The note is due December 30, 2021 and bears interest at 7.01% per year, for which Univision has agreed to provide us with network compensation equal to the amount of annual interest due. In April 1999, we acquired television stations KLUZ and K48AM in Albuquerque, New Mexico from Univision in exchange for $1 million in cash and a 2% increase in Univision's option to acquire an ownership interest in our predecessor. In March 2000, Univision invested an additional $110 million in our predecessor, which increased the subordinated note to an aggregate of $120 million, and increased its option to the right to acquire a 40% ownership interest in our predecessor. In connection with our reorganization, Univision will exchange its subordinated note and option for shares of our Class C common stock, or an approximately % ownership interest in us. As long as Univision owns at least 30% of its initial Class C shares, it will have the right to vote as a separate class to elect two directors, to appoint a member to any board committee and to approve material decisions involving our company, including any merger consolidation or any other business combination, any dissolution and any transfer of the FCC licenses for any of our Univision-affiliated television stations. Also, pursuant to our Univision network affiliation agreements, Univision acts as our national advertising sales representative for our Univision-affiliated television stations. Our director-nominee, Andrew W. Hobson, is an Executive Vice President of the Univision Network and our director-nominee, Michael D. Wortsman, is the Co-President of Univision Television Group Inc. Voting Agreement. On the closing of this offering, we will enter into a voting agreement with Walter F. Ulloa, our Chairman and Chief Executive Officer, Philip C. Wilkinson, our President and Chief Operating Officer, and Paul A. Zevnik, our Secretary, under which they will agree to vote all of their shares of Class B common stock in favor of such director-nominees as Messrs. Ulloa and Wilkinson may nominate. Mr. Zevnik will further agree to vote his shares on all other matters in the same manner as both Mr. Ulloa and Mr. Wilkinson, unless they vote differently, in which case Mr. Zevnik will be free to vote his shares however he may choose. Messrs. Ulloa and Wilkinson will irrevocably designate themselves and Mr. Zevnik as director-nominees. In addition, Messrs. Ulloa and Wilkinson will agree to nominate as directors Amador S. Bustos, the President of our Radio Division, and a representative of TSG Capital Fund III, L.P. as long as Mr. Bustos and the TSG representative continue to have a contractual right to be elected to our board of directors. This agreement will remain in effect with respect to each of Messrs. Ulloa, Wilkinson and Zevnik as long as he owns 30% of his initial Class B shares. 75 Registration Rights. We will enter into investor rights agreements with all of our existing stockholders and with all of the stockholders receiving Class A common stock in connection with our acquisition of Z-Spanish Media. The investor rights agreements provide these stockholders with rights to require us to register their stock with the Securities and Exchange Commission. These rights do not apply to this offering. Transactions with Walter F. Ulloa and Philip C. Wilkinson Employment agreements between our predecessor and Messrs. Ulloa and Wilkinson entitle each of them to receive an annual bonus in an amount equal to 1% of our predecessor's annual net revenue. For the period from January 1, 2000 through June 30, 2000, we will pay bonuses under these agreements of approximately $300,000 to each of Mr. Ulloa and Mr. Wilkinson. These employment agreements will be terminated before the closing of this offering. Mr. Ulloa is the sole shareholder of Las Tres Campanas Television, Inc., the FCC licensee of low-power television stations K27AF and K47EG in Las Vegas, Nevada. In 1997, Las Tres Campanas issued a note to a former shareholder in the principal amount of $262,500. We have assumed the payment obligations of Las Tres Campanas under the note in exchange for Las Tres Campanas's agreement to contribute to us all of its assets, including the licenses to stations K27AF and K47EG. As of December 31, 1999, the unpaid balance of principal and interest under the note was approximately $231,000. In 1996, Cabrillo Broadcasting Corporation, one of the member entities of our predecessor, made a loan in the principal amount of $159,000 to Mr. Wilkinson, which was used by Mr. Wilkinson to purchase equity in KSMS, Inc., another of our predecessor entities. When the roll-up of our predecessor was consummated in 1997, all of the assets and liabilities of Cabrillo were contributed to our predecessor. As payment for this obligation, Mr. Wilkinson has agreed to transfer to us his ownership interest in the FCC license for radio station KPVW, Aspen, Colorado. Transactions with Paul A. Zevnik Mr. Zevnik is a partner of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., which has regularly represented us as our legal counsel and will continue to do so. In October 1996, we made a loan to Mr. Zevnik evidenced by a promissory note in the principal amount of $360,366, which bears interest at a rate of 5.625% per year and is due and payable in full in October 2001. Mr. Zevnik used the loan to purchase 10,313 Class A units of our predecessor. As of December 31, 1999, the aggregate outstanding principal and interest amount on this loan was $425,366. Transactions with TSG Entities and Darryl B. Thompson Our director-nominee, Darryl B. Thompson, is an equityholder, officer and director of TSG Capital Fund II, L.P., TSG Capital Fund III, L.P., TSG Ventures, L.P. and TSG Associates III, L.P. On April 20, 2000, TSG Capital Fund III, L.P. and its affiliates invested $90 million in our predecessor in the form of a convertible subordinated note, which was used to fund a portion of the purchase price to acquire LCG. The note will automatically convert upon the closing of this offering into shares of our Series A preferred stock. In connection with our acquisition of Z-Spanish Media, TSG Capital Fund II, L.P. and its affiliates will receive $ in cash and shares of our Class A common stock, and TSG Associates III, L.P. and its affiliates will receive $ in cash and shares of our Class A common stock. On March 31, 1998, TSG Ventures, L.P. issued a promissory note to KZSF Broadcasting, Inc., a wholly owned subsidiary of Z-Spanish Media, in the principal amount of approximately $1.1 million with an interest 76 rate of 12% per year, which was paid in full in January 1999. On March 31, 1998, TSG Ventures, L.P. issued a promissory note to Z-Spanish Radio Network, Inc., a wholly owned subsidiary of Z-Spanish Media, in the principal amount of $1.8 million with an interest rate of 15% per year, which was paid in full in January 1999. In December 1999, Z-Spanish Media and Vista agreed to provide an aggregate of $5 million in advertising to LatinForce.Net Inc., an incubator for websites targeting Hispanics in the United States and Latin America, in exchange for shares of Series A preferred stock. Mr. Thompson is a director, and TSG Capital Fund III, L.P. is a stockholder, of LatinForce.Net. Transactions with Amador S. Bustos In connection with our acquisition of Z-Spanish Media, Amador S. Bustos, the President of our Radio Division, and his affiliates will receive $ in cash and shares of our Class A common stock. In October 1999, Z-Spanish Media acquired all of the outstanding capital stock of JB Broadcasting, Inc., an entity owned by Mr. Bustos and his brother John Bustos, for $3.4 million, of which $0.4 million was paid in cash and the remainder was paid in shares of Z-Spanish Media's Class B common stock. From 1996 until October 1999, Z-Spanish Media operated radio station KZMS in Modesto, California, which was owned by JB Broadcasting, under a local marketing agreement. Total fees of $0.7 million due under this agreement were included in the consideration paid to acquire JB Broadcasting. During 1998, Z-Spanish Media operated radio station KZSJ in San Jose under a local marketing agreement with KZSJ Radio LLC, an entity owned by Mr. Bustos, pursuant to which KZSJ Radio LLC received a monthly fee of $10,000. The local marketing agreement was terminated by mutual agreement between the parties in December 1998, and $0.1 million remains due and payable to KZSJ Radio LLC. Pursuant to a lease that expires in 2009, Z-Spanish Media rents a studio building from Mr. Bustos for $42,000 per year. Pursuant to a lease that expires in 2019, Z-Spanish Media leases a corporate office building from Mr. Bustos for $63,000 a year. Rent increases annually by 5% per year for the term of both leases. Transactions with Glenn Emanuel In connection with our acquisition of Z-Spanish Media, Glenn Emanuel, the President of our Outdoor Division, will receive $ in cash and shares of our Class A common stock. In August 1997, Mr. Emanuel executed a promissory note in favor of Vista in the principal amount of $198,315 with an interest rate of 9.75% per year, which is due and payable in full on August 9, 2002. Mr. Emanuel used the loan to purchase shares of Vista's common and preferred stock. The loan will be secured by the shares of Class A common stock to be received by Mr. Emanuel in connection with our acquisition of Z-Spanish Media. As of December 31, 1999, the outstanding balance of principal and interest under the loan was $243,548. 77 DESCRIPTION OF CAPITAL STOCK Set forth below is a summary of the material provisions of our capital stock as set forth in our first restated certificate of incorporation. This summary does not purport to be complete. For a more detailed description, see our first restated certificate of incorporation, a copy of which we have filed as an exhibit to the registration statement, and the applicable provisions of Delaware law. Our first restated certificate of incorporation provides for authorized capital stock of: . 415 million authorized shares of common stock, $0.0001 par value per share, which consists of 305 million shares of Class A common stock, 60 million shares of Class B common stock and 50 million of Class C common stock; and . 50 million authorized shares of preferred stock, $0.0001 par value per share, which consists of 11 million shares of Series A preferred stock to be authorized pursuant to a certificate of designations, preferences and rights and 39 million undesignated shares. As of , 2000, assuming our reorganization described elsewhere in this prospectus, there will be outstanding shares of Class A common stock held of record by stockholders, shares of Class B common stock held of record by stockholders, shares of Class C common stock held of record by one stockholder and shares of Series A preferred stock held of record by one stockholder. All of the shares of Class A common stock being issued pursuant to this offering will be fully-paid and non-assessable. Common Stock General. The holders of our Class A common stock, Class B common stock and Class C common stock have the same rights except with respect to voting, conversion and transfer. Dividends. Subject to the right of the holders of any class of our preferred stock, holders of shares of our common stock are entitled to receive dividends that may be declared by our board of directors out of legally available funds. No dividend may be declared or paid in cash or property on any share of any class of our common stock unless simultaneously the same dividend is declared or paid on each share of that and every other class of our common stock; except with respect to the payment of stock dividends, in which case holders of a specific class of our common stock are entitled to receive only additional shares of that class. We may not reclassify, subdivide or combine shares of any class of our common stock without, at the same time, proportionally reclassifying, subdividing or combining shares of the other classes. Voting Rights. Holders of our Class A common stock and Class C common stock are entitled to one vote per share on all matters to be voted on by stockholders, while holders of our Class B common stock are entitled to ten votes per share. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by all holders of our common stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any class of our preferred stock. Univision, as the holder of all of our Class C common stock upon completion of this offering, is entitled to vote as a separate class to elect two of our directors, and will have the right to vote as a class on certain material decisions involving Entravision, including any merger, consolidation or other business combination, any dissolution of Entravision and any transfer of the FCC licenses for any of our Univision-affiliated stations. These special voting rights will terminate upon Univision selling below 30% of its initial ownership level of our Class C common stock. Messrs. Ulloa, Wilkinson and Zevnik, as the holders of all of the Class B common stock upon completion of this offering, will enter into a voting agreement in which each of such individuals will agree, in any election of our directors, to vote the shares of our Class B common stock held by such individual in favor of the 78 director-nominees designated by Messrs. Ulloa and Wilkinson. Under the voting agreement, Messrs. Ulloa, Wilkinson and Zevnik will contractually agree to elect themselves, Amador S. Bustos and a representative of TSG Capital Fund III, L.P. as directors of Entravision. Liquidation Rights. The holders of each class of our common stock will share equally on a per share basis upon liquidation or dissolution of all of our assets available for distribution to common stockholders. Conversion. Shares of our Class B common stock will be convertible into shares of our Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically: . upon the transfer to a person or entity which is not a permitted transferee; . upon the death of such holder; . when such holder is no longer actively involved in the business of Entravision; or . if such holder owns less than 30% of his, her or its initial ownership level. In general, permitted transferees will include Messrs. Ulloa, Wilkinson and Zevnik, and any of their respective spouses, legal descendants, adopted children, minor children supported by such holder and controlled entities. In addition, each share of our Class B common stock shall automatically convert into Class A common stock on a share-for-share basis upon the death of the second of Mr. Ulloa and Mr. Wilkinson or when the second of Mr. Ulloa and Mr. Wilkinson ceases to be actively involved in the business of Entravision. Shares of our Class C common stock will be convertible into shares of our Class A common stock on a share-for-share basis at the option of the holder at any time or automatically upon the transfer to a person or entity which is not a permitted transferree or if such holder owns less than 30% of its initial ownership level. Other Rights. The holders of our common stock have no preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to these shares. Preferred Stock Series A Mandatorily Redeemable Convertible Preferred Stock Dividends. The holders of the Series A preferred stock shall have dividends declared at the rate of 8.5% per annum compounded annually. Such dividends accrue and are only payable upon liquidation of Entravision or redemption of the Series A preferred stock, payable in cash. Accrued but unpaid dividends are waived and forgiven upon conversion of the Series A preferred stock into Class A common stock. Liquidation Preference. The Series A preferred stock is senior to the rights of each class of our common stock upon liquidation or distribution of our assets in dissolution. Voting Rights. The affirmative vote of a majority of the holders of the Series A preferred stock is required to: . issue any equity security that is senior to the Series A preferred stock; . amend our first restated certificate of incorporation or first amended and restated bylaws in a manner that adversely affects the rights of the Series A preferred stock; or . enter into or engage in any transaction with an affiliate of Entravision or its stockholders not at arms length. Redemption. The Series A preferred stock is subject to mandatory redemption at par value plus accrued dividends at the option of the holder of the Series A preferred stock for a period of 90 days beginning five years after its issuance and must be redeemed in full ten years after its issuance. The Series A preferred stock which does not elect to convert into our common stock is also fully redeemable at par value plus accrued dividends upon a change in control of Entravision. We have the right to redeem the Series A preferred stock at our option at any time one year after its issuance, provided that the trading price of our Class A common stock is at least $ per share for 15 consecutive trading days immediately before such redemption. 79 Conversion. The Series A preferred stock is convertible into our Class A common stock at a conversion price of the lower of: . $8.4746 per share; or . the greater of 93% of the price per share of the Class A common stock sold in this offering or $7.3692 per share. Blank-Check Preferred Stock Our board of directors is empowered, without approval of the stockholders, to cause additional shares of preferred stock to be issued from time to time in one or more series, and the board of directors may fix the number of shares of each series and the designation, powers, privileges, preferences and rights and the qualifications, limitations and restrictions of the shares of each series. The specific matters that our board of directors may determine with respect to additional series of preferred stock include the following: . the number of shares of each series; . the designation of each series; . the rate of any dividends; . whether any dividends shall be cumulative or non-cumulative; . any voting rights; . rights and terms of any conversion or exchange; . the terms of any redemption, or any sinking fund with respect to any redemption of each series; . the amount payable in the event of any voluntary liquidation, dissolution or winding up of the affairs of Entravision; and . any other relative rights, privileges and limitations of each series. Alien Ownership Our first restated certificate of incorporation restricts the ownership of our capital stock in accordance with the Communications Act and the rules of the FCC that prohibit direct ownership of more than 20% of our outstanding capital stock (or beneficial ownership of more than 25% of our capital stock through others) by or for the account of aliens, foreign governments or non- U.S. corporations or corporations otherwise subject to control by those persons or entities. Our first restated certificate of incorporation also prohibits any transfer of our capital stock which would cause us to violate this prohibition. In addition, our first restated certificate of incorporation authorizes our board of directors to adopt other provisions that it deems necessary to enforce these prohibitions. Delaware Anti-Takeover Law and Charter Provisions Provisions of our first restated certificate of incorporation are intended to enhance continuity and stability in our board of directors and in our policies, but might have the effect of delaying or preventing a change in control of Entravision and may make the removal of incumbent management more difficult even if the transactions could be beneficial to the interests of stockholders. A summary description of these provisions follows: Change in Control. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, the statute prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business 80 combination is approved in a prescribed manner. For purposes of Section 203, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years prior, did own) 15% or more of a corporation's voting stock. The provisions of Section 203, together with the ability of our board of directors to issue preferred stock without further stockholder action, could delay or frustrate the removal of incumbent directors or a change in control of Entravision. The provisions also could discourage, impede or prevent a merger, tender offer or proxy contest, even if this event would be favorable to the interests of stockholders. Our stockholders, by adopting an amendment to our first restated certificate of incorporation or our first amended and restated bylaws, may elect not to be governed by Section 203 effective 12 months after adoption. Neither our first restated certificate of incorporation nor our first amended and restated bylaws currently exclude us from the restrictions imposed by Section 203. Authority to Issue Additional Preferred Stock. Our first restated certificate of incorporation authorizes our board of directors, without stockholder approval, to issue additional shares of one or more series of preferred stock, each series having the voting rights, dividend rates, liquidation, redemption, conversion and other rights as may be fixed by our board of directors. The issuance of additional shares of preferred stock, or the issuance of rights to purchase additional shares of preferred stock, could be used to discourage an unsolicited acquisition proposal. For example, a business combination could be impeded by issuing a series of preferred stock containing class voting rights that would enable the holder or holders of this series to block the transaction. Alternatively, a business combination could be facilitated by issuing a series of preferred stock having sufficient voting rights to provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of additional shares of preferred stock could adversely affect the voting power and other rights of the holders of our common stock. Although our board of directors is required to make any determination to issue any additional shares of preferred stock based on its judgment as to the best interests of our stockholders, it could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over prevailing market prices of the stock. Our board of directors does not, at present, intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange requirements. Limitation of Director Liability. Section 102(b)(7) of the Delaware General Corporation Law authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breach of directors' fiduciary duty of care. Although Section 102(b) does not change directors' duty of care, it enables corporations to limit available relief to equitable remedies such as injunction or rescission. Our first restated certificate of incorporation limits the liability of directors to Entravision or its stockholders to the fullest extent permitted by Section 102(b). Specifically, our directors will not be personally liable for monetary damages for breach of a director's fiduciary duty as a director, except for liability: . for any breach of the director's duty of loyalty to us or our stockholders; . for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; . for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or . for any transaction from which the director derived an improper personal benefit. Indemnification. To the maximum extent permitted by law, our first restated certificate of incorporation provides for mandatory indemnification of directors and officers and discretionary indemnification of our employees and agents against all expense, liability and loss to which they may become subject or which they may incur as a result of being or having been our director, officer, employee or agent, as the case may be. 81 Registration Rights All of our stockholders before the closing of this offering and all of the stockholders receiving our Class A common stock in connection with the acquisition of Z-Spanish Media are entitled to certain rights with respect to registration of their shares under the Securities Act, which do not apply to this offering. Transfer Agent and Registrar The transfer agent and registrar for our common stock is ChaseMellon Shareholder Services, L.L.C. Listing We have applied for listing of our Class A common stock on the New York Stock Exchange under the trading symbol "EVC." 82 SHARES ELIGIBLE FOR FUTURE SALE Before this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices. As described below, no shares currently outstanding will be available for sale immediately after this offering because of contractual restrictions on resale. Sales of substantial amounts of our common stock in the public market after the restrictions lapse or are released could adversely affect the prevailing market price and impair our ability to raise equity capital in the future. Upon completion of the offering, we will have outstanding shares of Class A common stock, outstanding shares of Class B common stock and outstanding shares of Class C common stock. Of the shares of Class A common stock, the shares sold in this offering, plus any shares issued upon exercise of the underwriters' over-allotment option, will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates" as that term is defined in Rule 144 under the Securities Act. In general, affiliates include officers, directors or 10% stockholders. The remaining shares of common stock outstanding will be "restricted securities" within the meaning of Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 promulgated under the Securities Act, which are summarized below. Sales of the restricted securities in the public market, or the availability of such shares for sale, could adversely affect the market price of our common stock. Each of our officers, directors and existing stockholders has entered into a "lock-up" agreement with Donaldson, Lufkin & Jenrette Securities Corporation in connection with this offering generally providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of our common stock or any securities exercisable for or convertible into our common stock without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation. The "lock-up" restrictions will expire on the date which is 180 days after the date of this prospectus. Notwithstanding possible earlier eligibility for sale under the provisions of Rules 144 and 701, shares subject to "lock-up" agreements will not be salable until such agreements expire or are waived by Donaldson, Lufkin & Jenrette Securities Corporation. Taking into account the "lock-up" agreements, and assuming Donaldson, Lufkin & Jenrette Securities Corporation does not release stockholders from these agreements, the following shares will be eligible for sale in the public market at the following times: . beginning on the date of this prospectus, only the shares of Class A common stock sold in the offering will be immediately available for sale in the public market; and . beginning 180 days after the date of this prospectus, an additional shares of common stock will be freely tradeable pursuant to Rule 144(k), and an additional shares will be eligible for sale subject to volume limitations, as explained below, pursuant to Rules 144 and 701, including, in both cases, shares of Class A common stock issuable upon conversion of Class B common stock or Class C common stock. In general, under Rule 144 as currently in effect, after the expiration of the "lock-up" agreements with Donald, Lufkin & Jenrette Securities Corporation, a person who has beneficially owned restricted securities for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: . 1% of the number of shares of common stock then outstanding which will equal approximately shares immediately after the offering; or . the average weekly trading volume of the common stock during the four calendar weeks preceding the sale. 83 Sales under Rule 144 are also subject to requirements with respect to manner of sale, notice and the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Rule 701, as currently in effect, permits our employees, officers, directors or consultants who purchased shares pursuant to a written compensatory plan or contract to resell such shares in reliance upon Rule 144 but without compliance with specific restrictions. Rule 701 provides that affiliates may sell their Rule 701 shares under Rule 144 without complying with the holding period requirement and that non-affiliates may sell such shares in reliance on Rule 144 without complying with the holding period, public information, volume limitation or notice provisions of Rule 144. In addition, we intend to file a registration statement on Form S-8 under the Securities Act within 180 days following the date of this prospectus to register shares to be issued pursuant to our omnibus equity incentive plan. As a result, any options or rights exercised under our omnibus equity incentive plan or any other benefit plan after the effectiveness of the registration statement will also be freely tradable in the public market. However, such shares held by affiliates will still be subject to the volume limitation, manner of sale, notice and public information requirements of Rule 144 unless otherwise resaleable under Rule 701. All of our stockholders before the closing of this offering and all of the stockholders receiving our Class A common stock in connection with the acquisition of Z-Spanish Media are entitled to certain rights with respect to registration of their shares under the Securities Act, which do not apply to this offering. We cannot predict as to the effect, if any, that sales of shares of our Class A common stock, or the availability of shares for future sale, will have on the market price of our Class A common stock prevailing from time to time. 84 UNDERWRITING Subject to terms and conditions of an underwriting agreement, dated as of , 2000, the underwriters named below, who are represented by Donaldson, Lufkin & Jenrette Securities Corporation, Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Bear, Stearns & Co. Inc. and DLJdirect Inc., have severally agreed to purchase from us the respective number of shares of Class A common stock shown opposite their names below.
Number of Underwriters: Shares Donaldson, Lufkin & Jenrette Securities Corporation................... Credit Suisse First Boston Corporation................................ Merrill Lynch, Pierce, Fenner & Smith Incorporated ................... Salomon Smith Barney Inc.............................................. Bear, Stearns & Co. Inc............................................... DLJdirect Inc......................................................... Total............................................................... ====
The underwriting agreement provides that the obligations of the several underwriters to purchase and accept delivery of the shares of Class A common stock included in this offering are subject to approval of legal matters by their counsel and to customary conditions, including the effectiveness of the registration statement, the continuing correctness of our representations and those of the selling stockholder, the listing of the Class A common stock on the New York Stock Exchange and no occurrence of an event that would have a material adverse effect on us. The underwriters are obligated to purchase and accept delivery of all the shares of Class A common stock, other than those covered by the over-allotment option described below, if they purchase any of the shares of Class A common stock. The underwriters initially propose to offer some of the shares of Class A common stock directly to the public at the initial public offering price on the cover page of this prospectus and some of the shares of Class A common stock to dealers, including the underwriters, at the initial public offering price less a concession not in excess of $ per share. The underwriters may allow, and these dealers may re-allow, a concession not in excess of $ per share to other dealers. After the initial offering of the Class A common stock to the public, the representatives of the underwriters may change the public offering price and these concessions. The underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. The following table shows the underwriting fees to be paid to the underwriters by us and by the selling stockholder in this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of Class A common stock.
No Exercise Full Exercise Entravision: Per share........................................ $ $ Total............................................ $ $ Selling Stockholder: Per share........................................ $ $ Total............................................ $ $
We estimate expenses related to this offering will be $ . We and the selling stockholder have granted to the underwriters an option, exercisable within 30 days after the date of the underwriting agreement, to purchase up to additional shares of Class A common stock at the initial public offering price less underwriting fees. The underwriters may exercise this option solely to cover over-allotments, if any, made in connection with the offering. To the extent that the underwriters exercise this option, each underwriter will become obligated, subject to conditions, to purchase a number of additional shares approximately proportionate to that underwriter's initial purchase commitment. 85 We and the selling stockholder have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriters may be required to make in respect of any of those liabilities. Entravision, our executive officers and directors and all of our stockholders before the closing of the offering (including the selling stockholder) have agreed, for a period of 180 days from the date of this prospectus, they will not, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation, do either of the following: . offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for common stock; or . enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any Class A common stock. Either of the foregoing transfer restrictions will apply regardless of whether a covered transaction is to be settled by the delivery of Class A common stock or such other securities, in cash or otherwise. In addition, during this 180 day period and subject to specified exceptions, we have agreed not to file any registration statement with respect to, and each of our executive officers and directors and all of our stockholders have agreed not to exercise any right with respect to, the registration of any shares of Class A common stock or any securities convertible into or exercisable for Class A common stock without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation. At our request, the underwriters have reserved for sale up to shares of Class A common stock offered by this prospectus for sale at the initial public offering price to our employees, officers and directors and other persons designated by us. The number of shares of Class A common stock available for sale to the general public in this offering will be reduced to the extent these persons purchase or confirm for purchase, orally or in writing, these reserved shares. Any reserved shares not purchased or confirmed for purchase will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. We have applied for listing of our Class A common stock on the New York Stock Exchange under the symbol "EVC." Other than in the United States, no action has been taken by Entravision, the selling stockholder or the underwriters that would permit a public offering of the shares of Class A common stock offered by this prospectus offering in any jurisdiction where action for that purpose is required. The shares of Class A common stock offered through this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements associated with the offer and sale of any of the shares of Class A common stock offered through this prospectus be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. You should inform yourself and observe any restrictions relating to the offering of the Class A common stock and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of Class A common stock included in this offering in any jurisdiction where that would not be permitted or legal. DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation, is facilitating the distribution of the shares sold in this offering over the Internet. Stabilization In connection with the offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A common stock. Specifically, the underwriters may over-allot the offering, creating a syndicate short position. The underwriters may bid for and purchase shares of Class A 86 common stock in the open market to cover a syndicate short position or to stabilize the price of the Class A common stock. In addition, the underwriting syndicate may reclaim selling concessions from syndicate members and selected dealers if Donaldson, Lufkin & Jenrette Securities Corporation repurchases previously distributed Class A common stock in syndicate covering transactions, in stabilization transactions or otherwise or if Donaldson, Lufkin & Jenrette Securities Corporation receives a report that indicates that the clients of such syndicate members have purchased the Class A common stock and immediately resold the shares for a profit. These activities may stabilize or maintain the market price of the Class A common stock above independent market levels. The underwriters are not required to engage in these activities, may end any of these activities at any time, and in any event will discontinue these activities no later than 30 days after the closing of this offering. Pricing of the Class A common stock Prior to this offering, there has been no established trading market for our Class A common stock. The initial public offering price of our Class A common stock will be determined by negotiation among Entravision, the selling stockholder and the representatives of the underwriters. The factors to be considered in determining the initial public offering price include: . the history of and the prospects for the industry in which we compete; . our past and present operations; . our historical results of operations; . our prospects for future earnings; . the recent market prices of securities of generally comparable companies; and . the general condition of the securities markets at the time of this offering. LEGAL MATTERS The validity of the Class A common stock being offered by this prospectus will be passed upon for us by Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., San Diego, California. Paul A. Zevnik, a partner of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., owns shares of our Class B common stock. Other legal matters will be passed upon for the underwriters by O'Melveny & Myers LLP, Los Angeles, California. EXPERTS The financial statements of Entravision Communications Corporation as of December 31, 1998 and 1999, and for each of the years ended December 31, 1997, 1998, 1999, and DeSoto-Channel 62 Associates, Ltd. for the period from January 1, 1999 through September 24, 1999, included in this prospectus and registration statement have been audited by McGladrey & Pullen, LLP, independent accountants, to the extent and for the periods indicated in their reports included elsewhere herein, and are included in reliance upon such reports and upon the authority of such firm as experts in accounting and auditing. The financial statements of Latin Communications Group Inc. as of December 27, 1998 and December 26, 1999, and for each of the three years in the period ended December 26, 1999, included in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as indicated in their report with respect thereto, and are included herein in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of Z-Spanish Media Corporation and its predecessor as of December 31, 1998 and 1999, and for each of the years ended December 31, 1997, 1998 and 1999 included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as indicated in their report with respect thereto, and are included herein in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 87 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 (including exhibits, schedules and amendments thereto) under the Securities Act with respect to the shares of our Class A common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. Certain parts of the registration statement are omitted as allowed by the rules and regulations of the Securities and Exchange Commission. We refer you to the registration statement and the exhibits to such registration statement for further information with respect to us and the shares of our Class A common stock to be sold in this offering. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete and in each instance we refer you to the copy of that contract, agreement or other document filed as an exhibit to the registration statement, and each such statement is deemed qualified in all respects by such reference. You may read and copy all or any portion of the registration statement or any other information we file at the public reference room at the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the regional offices of the Securities and Exchange Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings with the Securities and Exchange Commission, including the registration statement, are also available to you on the Securities and Exchange Commission's website (http://www.sec.gov). As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act, and, in accordance with those requirements, we will file periodic reports, proxy statements and other information with the Securities and Exchange Commission. We intend to furnish our stockholders with annual reports containing audited financial statements and with quarterly reports for the first three quarters of each year containing unaudited interim financial information. 88 INDEX TO FINANCIAL STATEMENTS
Page ---- ENTRAVISION COMMUNICATIONS CORPORATION (PRO FORMA) Unaudited Pro Forma Financial Information, Basis of Presentation......... F-2 Unaudited Pro Forma Condensed Consolidated Statement of Operations....... F-4 Unaudited Pro Forma Condensed Consolidated Balance Sheet................. F-5 Notes to Unaudited Pro Forma Financial Statements........................ F-6 ENTRAVISION COMMUNICATIONS CORPORATION (HISTORICAL) INDEPENDENT AUDITOR'S REPORT............................................... F-8 FINANCIAL STATEMENTS Consolidated Balance Sheets.............................................. F-9 Consolidated Statements of Operations.................................... F-10 Consolidated Statements of Stockholders' Equity.......................... F-11 Consolidated Statements of Cash Flows.................................... F-12 Notes to Consolidated Financial Statements............................... F-13 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES REPORT OF INDEPENDENT AUDITORS............................................. F-30 FINANCIAL STATEMENTS Consolidated Balance Sheets.............................................. F-31 Consolidated Statements of Operations.................................... F-32 Consolidated Statements of Stockholders' Equity.......................... F-33 Consolidated Statements of Cash Flows.................................... F-34 Notes to Consolidated Financial Statements............................... F-35 Z-SPANISH MEDIA CORPORATION INDEPENDENT AUDITOR'S REPORT............................................... F-46 FINANCIAL STATEMENTS Combined Balance Sheets.................................................. F-47 Combined Statements of Operations........................................ F-48 Combined Statements of Stockholders' Equity.............................. F-49 Combined Statements of Cash Flows........................................ F-50 Notes to Combined Financial Statements................................... F-51 DESOTO-CHANNEL 62 ASSOCIATES, LTD. INDEPENDENT AUDITOR'S REPORT............................................... F-69 FINANCIAL STATEMENTS Statement of Operations and Partners' Deficit............................ F-70 Statement of Cash Flows.................................................. F-71 Notes to Financial Statements............................................ F-72
F-1 UNAUDITED PRO FORMA FINANCIAL INFORMATION BASIS OF PRESENTATION The following unaudited pro forma financial information is based on our historical financial statements and those of LCG, Z-Spanish Media and other acquired or to be acquired companies and has been prepared to illustrate the effects of the acquisitions described below and the related financing transactions. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 1999 gives effect to acquisitions completed between January 1, 1999 and the date of this prospectus, including our acquisition of LCG, and our pending acquisition of Z-Spanish Media, as if such transactions had been completed January 1, 1999. The unaudited pro forma condensed consolidated balance sheet as of December 31, 1999 has been prepared as if such acquisitions had occurred as of December 31, 1999. The unaudited pro forma condensed consolidated balance sheet as of December 31, 1999 column "Univision and TSG Capital Investments" reflects an additional $110 million investment from Univision and $90 million from TSG Capital Fund III, L.P. For purposes of this presentation, these investments are presented as a reduction of our existing bank debt. These acquisitions will be accounted for using the purchase method of accounting. The total purchase costs of these acquisitions will be allocated to the tangible and intangible assets and liabilities acquired based upon their respective fair values. The allocation of the aggregate purchase price reflected in the unaudited pro forma financial information is preliminary. The final allocation of the purchase price will be contingent upon the receipt of final appraisals of the acquired assets. The unaudited pro forma financial information is not necessarily indicative of either future results of operations or the results that might have occurred if the foregoing transactions had been consummated on the indicated dates. The unaudited pro forma financial information should be read in conjunction with our audited consolidated financial statements and notes thereto and those of LCG, Z-Spanish Media and Desoto-Channel 62 Associates, Ltd. included elsewhere in this prospectus. Recently Completed and Pending Acquisitions Recently Completed Acquisitions 1999 Acquisitions El Centro/Brawley/Imperial, California Acquisition. On January 6, 1999, we acquired certain assets of Brawley Broadcasting Company and KAMP Radio, Inc., which includes the radio stations KAMP (AM) El Centro, California; KWST (FM) Brawley, California; KMXX (FM) Imperial, California for approximately $2.5 million. This was financed with an advance under our existing bank line of credit. Orlando/Tampa, Florida and Washington, D.C. Acquisition. On February 4, 1999, we purchased all of the assets of Latin Communications Group Television, Inc. relating to television stations WVEN-LP, in Orlando, Florida and WVEA-LP in Tampa, Florida. In addition, we purchased all of the outstanding capital stock of Los Cerezos Television Company, which operates television station WMDO-LP in Washington, D.C. The aggregate purchase price was approximately $14.3 million including the assumption of certain liabilities totaling $1.1 million. This was financed with an advance under our existing bank line of credit. Albuquerque, New Mexico Acquisition. On April 1, 1999, we acquired certain assets of Univision affiliate television stations KLUZ and K48AM from Univision for a purchase price of approximately $14.9 million. We provided a 2% increase in Univision's option under its note agreement and $1 million cash. Venice (Sarasota), Florida Acquisition. On September 20, 1999, we acquired certain assets of DeSoto Broadcasting, Inc., DeSoto Channel 62 Associates, and Omni Investments, Inc. for a purchase price of $17.0 million. These companies collectively own the assets and licenses to operate television station WBSV in Venice, Florida. This was financed with an advance under our existing bank line of credit. F-2 Lubbock/San Angelo/Amarillo, Texas Acquisition. On December 20, 1999, we acquired certain assets of Paisano Communications, which includes low-power television stations KBZO-LP, Lubbock, Texas; K31DM, San Angelo, Texas; K48FR, Amarillo, Texas and radio station KBZO (AM), Lubbock, Texas for $2.3 million. This was financed with an advance under our existing bank line of credit. 2000 Acquisitions El Paso, Texas Acquisition. On January 14, 2000, we acquired substantially all of assets relating to the operations of radio stations KATH (FM) and KOFX (FM) from Magic Media, Inc. for approximately $14 million. This was financed with an advance under our existing bank line of credit. Tijuana, Mexico Acquisition. In March 2000, our 40% owned affiliate acquired the outstanding capital stock of a Mexican corporation which holds the necessary authorizations from the Mexican government to own and operate television station XHAS, Channel 33. Additionally, we acquired a 47.5% interest in Vista Television, Inc., and Channel 57, Inc. for approximately $35.2 million. Additionally, we will enter into a time brokerage agreement in connection with this acquisition. This was financed with proceeds from the $110 million Univision investment. California, Colorado, New Mexico and Washington D.C. Acquisition. On April 20, 2000, we acquired all of the outstanding capital stock of LCG for approximately $252 million. LCG operates 17 radio stations in California, Colorado, New Mexico and Washington D.C. and also owns two Spanish-language publications. This acquisition was financed using our bank credit facilities and TSG Capital Fund III, L.P.'s investment of $90 million. Pending Acquisition California, Texas, Illinois, Arizona, New York and Florida Acquisition. On April 20, 2000, we agreed to acquire all of the outstanding capital stock of Z- Spanish Media for a purchase price of approximately $475 million including the assumption of approximately $109 million of debt. Z-Spanish Media owns 33 radio stations and an outdoor billboard business. These pro forma financial statements also give effect to Z-Spanish Media's September 30, 1999 acquisition of Seaboard Outdoor Advertising, as if Z-Spanish Media had owned these operations for all of 1999. The acquisition of Z-Spanish Media will be financed with the issuance of shares of Class A common stock valued at $110 million and $256 million cash from offering proceeds. If this offering is not completed, the agreement provides for the issuance of $256 million of redeemable preferred stock with a dividend at LIBOR plus 7%. Other Pending Transactions The following transactions represent our purchases of FCC licenses. For purposes of these pro forma financial statements, these transactions do not represent business acquisitions and therefore historical financial information is not meaningful. As a result, these transactions are not included in our pro forma financial information. Hartford, Connecticut Acquisition. In February 2000, we agreed to acquire the FCC license of television station WHCT in Hartford, Connecticut for $18 million. Santa Monica/Newport Beach, California Acquisition. In March 2000, we agreed to acquire from Citicasters Co., a subsidiary of Clear Channel Communications, Inc., the FCC licenses relating to the operations of radio stations KACD (FM) Santa Monica, California and KBCD (FM) Newport Beach, California for $85 million of which $17 million was placed into escrow as a deposit. Orlando/Daytona Beach/Melbourne, Florida Acquisition. On April 14, 2000, we agreed to acquire certain assets of television station WNTO-TV for $23 million. F-3 ENTRAVISION COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 1999 (In thousands, except per share data)
Unaudited Historical Other Pro Forma Unaudited Unaudited Historical Historical Z-Spanish Completed Adjust- Unaudited Offering Pro Forma Entravision LCG Media Acquisitions ments Pro Forma Adjustments As Adjusted ----------- ---------- ---------- ------------ --------- --------- ----------- ----------- Gross revenue: Television............ $ 63,842 $ -- $ -- $ 5,096 $ -- $ 68,938 Radio................. 2,362 29,759 26,334 2,406 -- 60,861 Outdoor and publishing........... -- 19,109 12,227 3,798 -- 35,134 -------- ------- ------- ------- -------- --------- ---- ---- Total gross revenue.... 66,204 48,868 38,561 11,300 -- 164,933 Less agency commissions........... 7,205 4,623 2,523 516 -- 14,867 -------- ------- ------- ------- -------- --------- ---- ---- Net revenue............ 58,999 44,245 36,038 10,784 -- 150,066 -------- ------- ------- ------- -------- --------- ---- ---- Expenses: Direct operating...... 24,441 15,560 14,183 4,731 -- 58,915 Selling, general and administrative....... 11,611 18,910 8,382 6,583 -- 45,486 Corporate............. 5,809 1,795 4,773 -- -- 12,377 Depreciation and amortization......... 14,613 4,907 8,670 377 54,601 (1) 83,168 Non-cash stock-based compensation......... 29,143 -- -- -- -- 29,143 Gain on sale of assets............... -- -- (4,442) -- -- (4,442) -------- ------- ------- ------- -------- --------- ---- ---- Total expenses......... 85,617 41,172 31,566 11,691 54,601 224,647 -------- ------- ------- ------- -------- --------- ---- ---- Operating income (loss)................ (26,618) 3,073 4,472 (907) (54,601) (74,581) Interest expense, net and other............. (12,091) (5,527) (6,471) (1,246) (24,280)(2) (335)(3) 16,050 (4) (33,900) Income tax benefit..... 121 736 284 852 22,506 (5) 3,499 (6) 27,998 -------- ------- ------- ------- -------- --------- Loss from continuing operations............ (38,588) (1,718) (1,715) (1,301) (37,161) (80,483) Preferred stock dividends............. -- -- -- -- 42,209 (7) 42,209 -------- ------- ------- ------- -------- --------- ---- ---- Loss from continuing operations applicable to common stock....... $(38,588) $(1,718) $(1,715) $(1,301) $(79,370) $(122,692) ======== ======= ======= ======= ======== ========= Basic and diluted earnings per share: Net loss from continuing operations applicable to common stock................ ========= ==== Weighted average common shares outstanding.......... ========= ====
F-4 ENTRAVISION COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of December 31, 1999 (In thousands)
Univision Historical and TSG Unaudited Unaudited Unaudited Historical Historical Z-Spanish Capital Group Pro Forma Unaudited Offering Pro Forma As Entravision LCG Media Investments Adjustments Pro Forma Adjustments Adjusted ----------- ---------- ---------- ------------- ----------- ---------- ----------- ------------ Current assets: Cash and cash equivalents......... $ 2,357 $ 6,695 $ 4,493 $ -- -- $ 13,545 Receivables......... 12,665 8,184 15,971 -- -- 36,820 Prepaid expenses and taxes........... 355 1,632 1,983 -- -- 3,970 -------- -------- -------- --------- --------- ---------- ---- ---- Total current assets............ 15,377 16,511 22,447 -- -- 54,335 Property and equipment............ 27,230 7,259 34,267 -- 600 (8) 69,356 Intangible assets.... 136,189 131,162 225,408 -- 554,136 (8) 1,046,895 Other assets......... 10,023 2,554 6,921 -- (10,045)(11) 9,453 -------- -------- -------- --------- --------- ---------- ---- ---- Total assets...... $188,819 $157,486 $289,043 $ -- $ 544,691 $1,180,039 ======== ======== ======== ========= ========= ========== ==== ==== Current liabilities: Accounts payable, accrued liabilities and other........... $ 7,479 $ 6,081 $ 12,254 $ -- $ -- $ 25,814 Long-term debt, current portion..... 1,620 69 22,779 -- -- 24,468 -------- -------- -------- --------- --------- ---------- ---- ---- Total current liabilities....... 9,099 6,150 35,033 -- -- 50,282 Long-term debt....... 155,917 42,037 89,066 (200,000) 251,894 (9) (2,545)(11) 336,369 Subordinated notes... 10,000 -- -- 200,000 (210,000)(10) -- Deferred taxes and other................ 1,990 20,331 28,554 -- 155,000 (9) 205,875 -------- -------- -------- --------- --------- ---------- ---- ---- Total liabilities....... 177,006 68,518 152,653 -- 194,349 592,526 -------- -------- -------- --------- --------- ---------- ---- ---- Series A mandatorily redeemable convertible preferred stock................ -- -- -- -- 90,000 (10) 90,000 -- -- Series B redeemable pay-in-kind preferred stock................ -- -- -- -- 255,990 (9) 255,990 -- -- Common stock put options.............. -- -- 37,591 -- (37,591)(11) -- -------- -------- -------- --------- --------- ---------- ---- ---- -- -- -- -- 308,399 345,990 -- -- -------- -------- -------- --------- --------- ---------- ---- ---- Stockholders' equity: Class A common stock............... 1 92 251 -- 11 (9) -- (343)(11) 12 Class B common stock............... 5 -- -- -- -- 5 Class C common stock............... -- -- -- -- 5 (10) 5 Additional paid-in capital............. 76,292 94,485 115,751 -- (210,236)(11) 109,699 (9) 119,995 (10) 305,986 Deferred compensation and other............... -- -- (5,197) -- 5,197 (11) -- Accumulated deficit............. (63,901) (5,609) (12,006) -- 17,615 (11) (63,901) Stock subscriptions notes receivable.... (584) -- -- -- (584) -- -------- -------- -------- --------- --------- ---------- ---- ---- Total stockholders' equity............ 11,813 88,968 98,799 -- 41,943 241,523 -------- -------- -------- --------- --------- ---------- ---- ---- Total liabilities and stockholders' equity............ $188,819 $157,486 $289,043 $ -- $ 544,691 $1,180,039 ======== ======== ======== ========= ========= ========== ==== ====
F-5 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTMENTS (1) These adjustments reflect additional depreciation and amortization expense resulting from the allocation of our purchase price of the assets acquired, including increases in property and equipment and identifiable intangible assets, to their estimated fair market values and the goodwill associated with the acquisitions.
Amortization Depreciation Less Pro Forma Expense Expense Historical Adjustment ------------ ------------ ---------- ---------- LCG......................... $ 22,306 $1,037 $ (4,907) $18,436 Z-Spanish Media............. 35,181 4,895 (8,670) 31,406 Other....................... 5,136 -- (377) 4,759 --------- ------ -------- ------- $ 62,623 $5,932 $(13,954) $54,601 ========= ====== ======== =======
Goodwill and other specifically identified intangibles are amortized over 15 years and fixed assets over 7 years. (2) These adjustments conform historical interest expense to pro forma interest expense associated with our borrowings under our existing credit facility prior to our adjustments for our subordinated notes and LCG credit facility which were used to finance the completed and pending acquisitions. The pro forma interest expense adjustment is as follows:
Debt After Interest Less Pro Forma Acquisitions Expense Historical Adjustment ------------ -------- ---------- ---------- LCG............................. $245,000 $21,070 $ (5,527) $15,543 Z-Spanish Media................. 109,300 9,400 (6,289) 3,111 Other........................... 82,500 7,095 (1,469) 5,626 ------- -------- ------- $37,565 $(13,285) $24,280 ======= ======== =======
The assumed interest rate under our existing revolving credit facility was 8.6%, which represents our current rate. (3) This adjustment represents the reduction or increase in interest expense on the borrowings under our existing credit facility due to the reduced rate associated with our 8.5% $90 million convertible subordinated note from TSG Capital Fund III, L.P., Univision's 7% $110 million subordinated note and option and the increase in interest rate to 10.5% associated with our $115 million term loan for our acquisition of LCG.
Interest Expense -------- TSG Capital Fund III, L.P......................................... $ 90 Univision......................................................... 1,760 Term loan for acquisition of LCG.................................. (2,185) ------ $ (335) ======
(4) This adjustment represents the interest savings on the exchange of Univision's 7% subordinated note and option of $120 million to Class C common stock and the conversion of TSG Capital Fund III, L.P.'s 8.5% convertible subordinated note of $90 million to preferred stock. (5) To provide for the tax effect of pro forma adjustments using an estimated effective rate of 40%. Our acquisitions of LCG and Z-Spanish Media and our acquisitions of stations KORO and KNVO will include non-tax deductible goodwill which is estimated to be $6.9 million for the year ended December 31, 1999. (6) This represents the provision for income taxes on pro forma net loss to give effect to our conversion from a limited liability company to a C- corporation for federal and state income tax purposes as if it had F-6 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued) occurred on December 31, 1999. An effective combined tax rate of 40% was used after giving effect to non-tax deductible goodwill of $0.8 million and non-cash stock-based compensation of $29.1 million. (7) This adjustment represents the 8.5% dividend on TSG Capital Fund III, L.P.'s mandatorily redeemable convertible preferred stock and the 13.5% dividend on our redeemable preferred stock issued in conjunction with our acquisition of Z-Spanish Media, if this offering is not completed.
Preferred Stock Dividends --------------- --------- Series A mandatorily redeemable convertible preferred stock..... $ 7,650 Series B redeemable pay-in-kind preferred stock................. 34,559 ------- $42,209 =======
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS (8) These adjustments represent the allocation of purchase price of our 2000 acquisitions to the estimated fair market value of the assets acquired and liabilities assumed, and the recording of goodwill and FCC license intangibles associated with the acquisitions.
FCC Licenses and Other Less Total Intangibles Goodwill Historical Intangibles Equipment ------------ -------- ---------- ----------- --------- LCG................. $300,588 $34,000 $(131,162) $203,426 $ -- Z-Spanish Media..... 474,718 53,000 (225,408) 302,310 -- Other............... 43,400 5,000 -- 48,400 600 -------- ------- --------- -------- ------- $818,706 $92,000 $(356,570) $554,136 $ 600 ======== ======= ========= ======== =======
(9) The adjustment represents the issuance of stock and borrowings under credit facilities to finance acquisitions and to record related deferred tax liabilities. (10) This adjustment represents the exchange of Univision's 7% subordinated note and option of $120 million to Class C common stock and the conversion of TSG Capital Fund III, L.P.'s 8.5% convertible subordinated note of $90 million into shares of Series A mandatorily redeemable convertible preferred stock.
Borrowings Under Common Credit Stock Preferred Deferred Facilities Issued Stock Taxes ---------- -------- --------- -------- LCG.................................. $202,894 $ -- $ -- $ 82,000 Z-Spanish Media...................... -- 109,710 255,990 73,000 Other................................ 49,000 -- -- -- -------- -------- -------- -------- $251,894 $109,710 $255,990 $155,000 ======== ======== ======== ========
(11) This adjustment represents the elimination of our deposit related to our acquisition of LCG and the historical stockholders' equity of LCG and Z- Spanish Media as these acquisitions were accounted for as purchase business combinations. UNAUDITED PROFORMA OFFERING ADJUSTMENTS (12) This adjustment represents the interest savings from using the estimated net proceeds we receive from this offering for the repayment of $ of the pro forma borrowings. (13) This adjustment represents the tax effect of offering adjustments using an estimated statutory tax rate of 40%. (14) This adjustment represents our issuance of shares of our Class A common stock at a public offering price of $ per share, net of in estimated offering expenses. The application of the estimated proceeds we receive from this offering will be used to repay our credit facilities. F-7 The accompanying consolidated financial statements of Entravision Communications Corporation and its subsidiaries have been prepared to give effect to an exchange transaction of the Company from a limited liability company (LLC) to a corporation and contemporaneously with the closing of the public offering contemplated by this prospectus the conversion of all LLC membership units to Class A, B and C common stock as described in Note 1. On the effective date of the registration statement covering the shares of Class A common stock to be sold in the public offering, we will issue the following report: INDEPENDENT AUDITOR'S REPORT To the Board of Directors Entravision Communications Corporation Santa Monica, California We have audited the accompanying consolidated balance sheets of Entravision Communications Corporation and its subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Entravision Communications Corporation and its subsidiaries as of December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. As described in Note 1, the accompanying consolidated financial statements of Entravision Communications Corporation and its subsidiaries have been prepared to give effect to the exchange transaction as discussed in Note 1, before the closing of the public offering contemplated by this prospectus. /s/ McGladrey & Pullen, LLP Pasadena, California March 18, 2000, except for the seventh and eighth paragraphs of Note 11, as to which the date is April 20, 2000 F-8 ENTRAVISION COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1999 (In thousands, except share and per share data)
1998 1999 -------- -------- ASSETS Current assets Cash and cash equivalents................................. $ 3,661 $ 2,357 Receivables: Trade, net of allowance for doubtful accounts of 1998 $790; 1999 $979......................................... 9,143 12,392 Related parties.......................................... 284 273 Prepaid expenses and taxes................................ 268 355 -------- -------- Total current assets.................................... 13,356 15,377 Property and equipment, net................................ 16,788 27,230 Intangible assets, net..................................... 77,891 136,189 Other assets, including deposits on acquisitions of 1998 $5,533; 1999 $8,742....................................... 5,689 10,023 -------- -------- $113,724 $188,819 ======== ======== LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of notes and advances payable, related parties.................................................. $ 201 $ 231 Current maturities of long-term debt...................... 943 1,389 Accounts payable and accrued expenses (including related parties of 1998 $71; 1999 $280).......................... 6,199 7,479 -------- -------- Total current liabilities............................... 7,343 9,099 -------- -------- Long-term debt Subordinated note payable to Univision.................... 10,000 10,000 Notes payable, less current maturities.................... 88,794 155,917 -------- -------- 98,794 165,917 Deferred taxes............................................. 283 1,990 -------- -------- Total liabilities....................................... 106,420 177,006 -------- -------- Commitments and Contingencies Series A mandatorily redeemable convertible preferred stock, $0.0001 par value, 11,000,000 shares authorized; no shares issued or outstanding in 1998 or 1999.............. -- -- Stockholders' equity Class A common stock, $0.0001 par value, 305,000,000 shares authorized; shares issued and outstanding 1998 10,004,228 and 1999 9,875,708............................ 1 1 Class B common stock, $0.0001 par value, 60,000,000 shares authorized; shares issued and outstanding 1998, 1999 54,858,626............................................... 5 5 Class C common stock, $0.0001 par value, 50,000,000 shares authorized; no shares issued or outstanding.............. -- -- Additional paid-in capital................................ 30,711 76,292 Accumulated deficit....................................... (22,852) (63,901) -------- -------- 7,865 12,397 Less: stock subscription notes receivable................. (561) (584) -------- -------- 7,304 11,813 -------- -------- $113,724 $188,819 ======== ========
See Notes to Consolidated Financial Statements. F-9 ENTRAVISION COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 1997, 1998 and 1999 (In thousands, except share and per share data)
1997 1998 1999 ----------- ----------- ----------- Gross revenue (including network compensation from Univision of 1997 $2,947, 1998 $4,922 and 1999 $2,748)... $ 33,419 $ 49,872 $ 66,204 Less agency commissions................. 2,963 5,052 7,205 ----------- ----------- ----------- Net revenue........................... 30,456 44,820 58,999 ----------- ----------- ----------- Expenses: Direct operating (including Univision national representation fees of 1997 $1,220, 1998 $2,379 and 1999 $3,149) ..................................... 9,184 15,794 24,441 Selling, general and administrative... 5,845 8,877 11,611 Corporate expenses (including related parties of 1997 $321, 1998 $453 and 1999 $522)........................... 3,899 3,963 5,809 Non-cash stock-based compensation..... 900 500 29,143 Depreciation and amortization......... 8,847 9,565 14,613 ----------- ----------- ----------- 28,675 38,699 85,617 ----------- ----------- ----------- Operating income (loss)............. 1,781 6,121 (26,618) Interest expense (including amounts to Univision of $701 in 1997, 1998 and 1999; ............................... (5,222) (8,386) (12,190) Interest income....................... 115 142 99 ----------- ----------- ----------- Loss before income taxes............ (3,326) (2,123) (38,709) Income tax (expense) benefit............ (254) (210) 121 Effect of change in tax status.......... 7,785 -- -- ----------- ----------- ----------- Net income (loss)................... $ 4,205 $ (2,333) $ (38,588) =========== =========== =========== Pro forma provision for income taxes benefit................................ 654 327 3,499 ----------- ----------- ----------- Pro forma net loss...................... $ (2,672) $ (1,796) $ (35,210) =========== =========== =========== Pro forma per-share data: Net loss per share: Basic and diluted.................... $ (0.04) $ (0.03) $ (0.54) =========== =========== =========== Weighted average common shares outstanding: Basic and diluted.................... 65,944,843 65,789,604 64,804,756 =========== =========== ===========
See Notes to Consolidated Financial Statements. F-10 ENTRAVISION COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 1997, 1998 and 1999 (In thousands, except share and per share data)
Stock Number of Common Shares Common Stock Additional Subscription Preferred ------------------------------ ----------------------- Paid-in Accumulated Notes Stock Class A Class B Class C Class A Class B Class C Capital (Deficit) Receivable Total --------- ---------- ---------- ------- ------- ------- ------- ---------- ----------- ------------ -------- Balance, December 31, 1996............ $ -- 5,848,237 30,670,160 -- $ 1 $ 3 $ -- $14,312 $ (4,054) $(519) $ 9,743 Issuance of Class A common stock in connection with employee stock award........... -- 1,845,656 -- -- -- -- -- 900 -- -- 900 Issuance of Class A and Class B common stock upon merger with entity under common control.. -- 2,930,046 19,713,274 -- -- 2 -- 117 -- -- 119 Issuance of Class A common stock upon conversion of stockholder note payable......... -- 469,778 -- -- -- -- -- 240 -- -- 240 Interest earned on subscription receivables..... -- -- -- -- -- -- -- 21 -- (21) -- Repurchase and retirement of Class A common stock........... -- (387,209) -- -- -- -- -- -- (587) -- (587) Net income...... -- -- -- -- -- -- -- -- 4,205 -- 4,205 Dividends ($0.02 per share) paid to members for income taxes.... -- -- -- -- -- -- -- -- (1,498) -- (1,498) ----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- -------- Balance, December 31, 1997............ -- 10,706,508 50,383,434 -- 1 5 -- 15,590 (1,934) (540) 13,122 Issuance of Class A and Class B common stock upon merger with entity under common control.. -- 536,782 4,475,192 -- -- -- -- 14,600 (14,600) -- -- Interest earned on subscription receivables..... -- -- -- -- -- -- -- 21 -- (21) -- Repurchase and retirement of Class A common stock........... -- (1,239,062) -- -- -- -- -- -- (1,000) -- (1,000) Compensation expense attributable to employee stock award........... -- -- -- -- -- -- -- 500 -- -- 500 Net loss........ -- -- -- -- -- -- -- -- (2,333) -- (2,333) Dividends ($0.04 per share) paid to members for income taxes.... -- -- -- -- -- -- -- -- (2,985) -- (2,985) ----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- -------- Balance, December 31, 1998............ -- 10,004,228 54,858,626 -- 1 5 -- 30,711 (22,852) (561) 7,304 Increase in conversion option on subordinated note agreement relating to acquisition of business........ -- -- -- -- -- -- -- 13,915 -- -- 13,915 Intrinsic value of subordinated note conversion option.......... -- -- -- -- -- -- -- 2,500 -- -- 2,500 Interest earned on subscription receivables..... -- -- -- -- -- -- -- 23 -- (23) -- Repurchase and retirement of Class A common stock........... -- (128,520) -- -- -- -- -- -- (61) -- (61) Compensation expense attributable to employee stock award and stock options......... -- -- -- -- -- -- -- 29,143 -- -- 29,143 Net loss........ -- -- -- -- -- -- -- -- (38,588) -- (38,588) Dividends ($0.04 per share) paid to members for income taxes.... -- -- -- -- -- -- -- -- (2,400) -- (2,400) ----- ---------- ---------- ----- ----- ----- ----- ------- -------- ----- -------- Balance, December 31, 1999............ $ -- 9,875,708 54,858,626 -- $ 1 $ 5 $ -- $76,292 $(63,901) $(584) $ 11,813 ===== ========== ========== ===== ===== ===== ===== ======= ======== ===== ========
See Notes to Consolidated Financial Statements. F-11 ENTRAVISION COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1997, 1998 and 1999 (In thousands)
1997 1998 1999 -------- -------- -------- Cash Flows from Operating Activities Net income (loss)............................... $ 4,205 $ (2,333) $(38,588) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization................... 8,847 9,565 14,354 Deferred tax expense (benefit).................. 149 (83) 406 Effect of change in tax status.................. (7,785) -- -- Amortization of debt issue costs................ 373 1,295 258 Intrinsic value of subordinated note exchange option......................................... -- -- 2,500 Non-cash stock-based compensation............... 900 500 29,143 Loss on disposal of property and equipment...... 35 15 100 Changes in assets and liabilities, net of effect of business combinations: (Increase) in accounts receivable.............. (3,525) (2,446) (3,249) (Increase) in prepaid expenses and other assets........................................ (64) (119) (87) Increase in accounts payable, accrued expenses and other..................................... 3,374 1,264 1,291 -------- -------- -------- Net cash provided by operating activities..... 6,509 7,658 6,128 -------- -------- -------- Cash Flows from Investing Activities Proceeds from sale of equipment................. 7 19 116 Purchases of property and equipment............. (2,366) (3,094) (12,825) Cash deposits and purchase price on acquisitions................................... (59,549) (22,511) (46,354) -------- -------- -------- Net cash (used in) investing activities....... (61,908) (25,586) (59,063) -------- -------- -------- Cash Flows from Financing Activities Proceeds from issuance of common stock.......... 119 -- -- Principal payments on notes payable............. (1,227) (288) (352) Proceeds from borrowings on notes payable....... 58,079 24,407 54,913 Dividends paid to members for income taxes...... (1,498) (2,985) (2,400) Purchase and retirement of common stock......... (587) (500) (530) Payments of deferred debt costs................. (123) (1,295) -- -------- -------- -------- Net cash provided by financing activities..... 54,763 19,339 51,631 -------- -------- -------- Net increase (decrease) in cash and cash equivalents.................................. (636) 1,411 (1,304) Cash and Cash Equivalents Beginning....................................... 2,886 2,250 3,661 -------- -------- -------- Ending.......................................... $ 2,250 $ 3,661 $ 2,357 ======== ======== ======== Supplemental Disclosures of Cash Flow Information Cash payments for: Interest........................................ $ 3,672 $ 6,744 $ 10,542 ======== ======== ======== Income taxes (refunds), 1997 $88; 1998 $274; 1999 $308...................................... $ (36) $ 51 $ 96 ======== ======== ======== Supplemental Disclosures of Non-cash Investing and Financing Activities Conversion of note payable for Class A common stock.......................................... $ 240 $ -- $ -- ======== ======== ======== Issuance of note payable in connection with redemption of common stock..................... $ -- $ 500 $ 30 ======== ======== ======== Assets Acquired and Debt Issued in Business Combinations Current assets.................................. $ 636 $ 99 $ 86 Broadcast equipment and furniture and fixtures....................................... 12,001 1,343 4,477 Intangible assets............................... 55,991 16,733 67,533 Current liabilities............................. -- (164) -- Deferred taxes.................................. (7,974) -- (2,112) Notes payable................................... (84) (350) (12,000) Increase in subordinated debt exchange option... -- -- (13,915) Less cash deposits from prior year.............. (1,521) (500) (5,533) -------- -------- -------- Net cash paid................................. $ 59,049 $ 17,161 $ 38,536 ======== ======== ========
See Notes to Consolidated Financial Statements. F-12 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS, REORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of business Entravision Communications Corporation (the Company or ECC), a Delaware corporation, primarily owns and operates Spanish-language television stations serving predominantly the Southwestern United States. Each of the Spanish- language stations is a Univision Communications Inc. (Univision) affiliate. Univision is the leading Spanish-language television broadcaster in the United States and makes available to its affiliates 24-hour Spanish-language programming. Additionally, the Company owns and operates an English-language United Paramount Network (UPN) affiliate television station in San Diego. The Company also operates a television station in Las Vegas under a local marketing agreement (LMA). The Company also owns and operates Spanish-language radio stations in the Southwest United States. The television and radio stations are collectively referred to as the "broadcast properties." The revenue associated with the radio stations was $2.4 million, or approximately 4%, for the year ended December 31, 1999. See Note 11 for a discussion of acquisitions of additional broadcast properties subsequent to December 31, 1999. Pursuant to Univision network affiliation agreements, Univision acts as the Company's exclusive sales representative for the sale of all national advertising aired on Univision television stations. National sales represent time sold on behalf of the Company's stations by sales representatives employed by Univision. Proceeds of national sales are remitted to the Company by Univision, net of an agency commission and a network representative fee. The affiliation agreements expire at various dates through December 2021. Reorganization On February 11, 2000, ECC was formed. The First Restated Certificate of Incorporation authorizes both preferred and common stock. The common stock has three classes identified as A, B and C which have similar rights and privileges except the Class B common stock provides ten votes per share as compared to one vote per share for all other classes of common stock. Additionally, Univision, as the holder of all Class C common stock, is entitled to vote as a separate class to elect two directors, and will have the right to vote as a separate class on certain material transactions. Class B and C common stock is convertible at the holder's option into one fully paid and nonassessable share of Class A common stock and is required to be converted into one share of Class A common stock upon certain events as defined in the First Restated Certificate of Incorporation. The Series A mandatorily redeemable convertible preferred stock has limited voting rights, and accrues an 8% dividend. The purpose of the formation of ECC is to effect an exchange transaction whereby direct and indirect ownership interests in Entravision Communications Company, L.L.C. (ECC LLC) will be exchanged for Class A or Class B common stock of ECC. The Class B common stock will be issued to Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik (and their controlled entities). In addition, the stockholders of Cabrillo Broadcasting Corporation (KBNT), Golden Hills Broadcasting Corporation (KCEC), Las Tres Palmas Corporation (KVER), Tierra Alta Broadcasting, Inc. (KINC), KSMS-TV, Inc. (KSMS), Valley Channel 48, Inc. (KNVO) and Telecorpus, Inc. (KORO) (collectively, the Affiliates) will exchange their common shares of the respective corporations for Class A common shares in ECC. Additionally, Univision will exchange its subordinated note for Class C common stock. The number of common shares of ECC to be issued to the members of ECC LLC and the stockholders of the Affiliates will be determined in such a manner that the ownership interest in ECC will equal the direct and indirect ownership interest in ECC LLC immediately prior to the exchange. F-13 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) This exchange transaction will become effective immediately prior to the effective date of the Initial Public Offering of ECC expected to be consummated during 2000. ECC LLC and Affiliates are considered to be under common control and as such, the exchange will be accounted for in a manner similar to a pooling of interests. Accordingly, these consolidated financial statements, including share data and the stock option exercise price, have been presented as if ECC LLC was incorporated and the exchange transaction took place in the earliest period presented. Formation of Entravision Communications Company, L.L.C. Entravision Communications Company, L.L.C., a Delaware limited liability company, was formed on January 11, 1996. ECC LLC was established to own and operate broadcast properties. ECC LLC assumed the operations of television stations KVER, KINC, KBNT, KCEC and KSMS on November 1, 1996 under local marketing agreements (LMAs) whereby the operating revenue and expenses of these companies accrued to the benefit of ECC LLC. Each of these companies received membership interests in ECC LLC in exchange for the LMAs and asset contribution agreements. These LMAs were in effect through May 31, 1997, at which time, upon Federal Communications Commission (FCC) approval, each of these companies and KNVO transferred all of their operating assets, liabilities and operations to ECC LLC in accordance with the asset contribution agreements. The operating assets, liabilities and operations of KORO were transferred to ECC LLC in exchange for membership interests in ECC LLC on April 21, 1998. KBNT, KCEC, KVER and KINC operated under common control prior to the formation of ECC LLC. Accordingly, effective upon the execution of the LMAs and asset contribution agreements, the assets and liabilities of these companies were recorded at their fair value to the extent of the ownership interest of each respective company owned by minority stockholders and at historical cost for the ownership interest under common control. KSMS, KNVO and KORO were each acquired subsequent to January 1996 through newly formed acquisition companies owned directly by the member corporation's stockholders in proportion to their direct and indirect membership interest in ECC LLC prior to each acquisition. Each of these acquisitions was with unrelated parties at fair value with nominal equity consideration. Subsequent to the signing of the original ECC LLC Formation Agreement in January 1996, each of the members of ECC LLC and all of the individual stockholders of the corporations have been considered members of a control group. Accordingly, effective upon the execution of the LMAs and asset contribution agreements, the assets and liabilities of these companies were recorded at their historical cost which approximated fair value at the time. The actual exchange of ECC common stock for the common stock of KSMS, KNVO and KORO will result in a distribution of shares to the individual stockholders and has been presented in the statement of stockholders' equity as a stock dividend, stock split, and stock dividend, respectively. In determining weighted average common shares outstanding for earnings per share purposes, the stock dividends and stock split have been accounted for as if they had occurred as of the beginning of the earliest period presented. Significant accounting policies Basis of consolidation The consolidated financial statements include the accounts of ECC and its subsidiaries, substantially all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation. F-14 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company's operations are affected by numerous factors including changes in audience acceptance (i.e., ratings), priorities of advertisers, new laws and governmental regulations and policies, and technological advances. The Company cannot predict if any of these factors might have a significant impact on the television and radio industries in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on the Company's operations. Significant estimates and assumptions made by management are used for, but not limited to, the allowance for doubtful accounts, the carrying value of long-lived and intangible assets and the fair value of the Company's common stock used to determine interest and compensation expense. Cash and cash equivalents For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Interest rate cap agreements Interest rate cap agreements are principally used by the Company in the management of interest rate exposure. The differential to be paid or received is accrued as interest rates change and is recorded in the statement of operations. Property and equipment Property and equipment are recorded at cost. Depreciation and amortization are provided using accelerated and straight-line methods over the following estimated useful lives:
Years ----------------- Buildings and land improvements............................ 39 Transmission, studio and broadcast equipment............... 5-10 Office and computer equipment.............................. 5-7 Transportation equipment................................... 5 Leasehold improvements..................................... Lesser of the life of the lease or economic life of the asset
Intangible assets Intangible assets consisting of the following items are amortized on a straight-line method over the following estimated useful lives:
Years ----- FCC licenses........................................................... 15 Univision affiliation agreements....................................... 15 Goodwill............................................................... 15 Time brokerage agreements.............................................. 15 Noncompete agreements.................................................. 2-5 Construction rights and permits........................................ 15 Other.................................................................. 1-10
F-15 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Deferred debt costs related to the Company's credit facility are amortized on a method that approximates the interest method over the respective life of the credit facility. Impairment of long-lived assets The Company reviews its long-lived assets and intangibles related to those assets periodically to determine potential impairment by comparing the carrying value of the long-lived assets and identified goodwill with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows) of the long-lived assets and identified goodwill. Goodwill not identified with impaired assets is evaluated to determine whether events or circumstances warrant a write-down or revised estimates of useful lives. The Company determines impairment by comparing the carrying value of goodwill with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. Impairment losses are measured by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows) of the goodwill. To date, management has determined that no impairment of long-lived assets and goodwill exists. Concentrations of credit risk The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company from time to time may have bank deposits in excess of the FDIC insurance limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that their trade receivable credit risk exposure is limited. Credit losses for bad debts are provided for in the financial statements through a charge to the allowance, and aggregated $0.7 million, $0.6 million and $0.8 million for the years ended December 31, 1997, 1998 and 1999, respectively. A valuation allowance is provided for known and anticipated credit losses. Disclosures about fair value of financial instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and cash equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Long-term debt The carrying amount approximates the fair value of the Company's long-term debt based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities with similar collateral requirements. F-16 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Income taxes Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when it is determined to be more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Prior to the reorganization of the Company, as discussed above, the organization included various taxpaying and non-taxpaying entities as discussed below. Each of the entities files separate federal and state tax returns. Deferred taxes have not been provided for the difference between the book and tax basis of intangible assets, broadcast equipment, and furniture and fixtures for the non-taxpaying entities. As a result of the reorganization, the Company will record a deferred tax liability with a corresponding charge to tax expense of approximately $7.5 million. At December 31, 1999, the difference between book and tax bases of assets is approximately $18.7 million. Entravision Communications Company, L.L.C., Entravision Holdings, LLC, Entravision, L.L.C.,Entravision-El Paso, L.L.C. and Entravision Communications of Midland, LLC are limited liability companies and, as such, are taxed as partnerships. Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Tierra Alta Broadcasting, Inc., KSMS-TV, Inc., Valley Channel 48, Inc. and Telecorpus, Inc. have elected to be taxed under sections of federal and state income tax law which provide that, in lieu of corporation income taxes, the stockholders separately account for their pro rata share of the companies' items of income, deductions, losses and credits, and the companies will pay state taxes at a reduced rate. Los Cerezos Television Company is taxed as a C-corporation. Prior to January 23, 1997 Valley Channel 48, Inc. was taxed as a C- corporation and prior to January 1, 1996, Golden Hills Broadcasting Corporation was a C-corporation. As a result of the Tax Reform Act of 1986, these companies and Telecorpus, Inc. are subject to a tax on any unrecognized "built-in gains" realized during the ten-year period after their respective conversion to S- corporation status. The built-in gains tax is a corporate tax computed by applying the corporate tax rate to any appreciation related to assets owned at the date of conversion to S status. Upon the 1997 filing of the election by Valley Channel 48, Inc. to be taxed as an S- corporation, the previously recorded net deferred tax liability was reduced to an amount that represents taxes that might be payable due to the built-in gains tax. As a result, approximately $7.8 million was recorded as a tax benefit representing the reversal of previously recorded deferred taxes. Each of these companies has provided a deferred tax liability for built-in gains that represent the estimated liability for built-in gains tax. Pro forma income tax adjustments and pro forma earnings per share The pro forma income tax information included in these financial statements is to show what the significant effects might have been on the historical statements of operations had the Company and its affiliates not been treated as flow-through entities not subject to income taxes. The pro forma information reflects a provision for income taxes at the assumed effective rate in the years ended December 31, 1997, 1998 and 1999. The pro forma net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the period. F-17 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Advertising costs Advertising costs are expensed as incurred. Advertising expense totaled approximately $0.2 million, $0.6 million and $0.9 million for the years ended December 31, 1997, 1998 and 1999, respectively. Revenue recognition Revenue related to the sale of advertising is recognized at the time of broadcast. Network compensation is recognized ratably over the period of the agreement. Segment information In accordance with Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, management has determined that the Company has one reportable segment. Furthermore, management has determined that all of its broadcast properties are subject to the same regulatory environment with their respective programs directed toward similar classes of viewers and listeners through similar distribution methods. Local marketing and time brokerage agreements The Company operates certain stations under LMAs and time brokerage agreements whereby the Company sells and retains all advertising revenue. The broadcast station licensee retains responsibility for ultimate control of the station in accordance with all FCC rules and regulations. The Company pays a fixed fee to the station owner, as well as all expenses of the station, and performs other functions. The financial results of the LMA-operated stations are included in the Company's statement of operations from the date of commencement of the respective LMAs, and were not significant in any of the years presented. Trade transactions The Company exchanges broadcast time for certain merchandise and services. Trade revenue and the related receivables are recorded when spots air at the fair value of the goods or services received or time aired, whichever is more readily determinable. Trade expense and the related liability are recorded when the goods or services are used or received. Trade revenue and costs were approximately $0.4 million, $0.9 million and $1.3 million for the years ended December 31, 1997, 1998 and 1999, respectively. Stock-based compensation The Company accounts for stock-based employee compensation under the requirements of Accounting Principles Board (APB) Opinion No. 25, which does not require compensation to be recorded if the consideration to be received is at least equal to fair value of the shares to be received at the measurement date. Nonemployee stock-based transactions are accounted for under the requirements of SFAS No. 123, Accounting for Stock-Based Compensation, which requires compensation to be recorded based on the fair value of the securities issued or the services received, whichever is more reliably measurable. Earnings per share Basic earnings per share (EPS) is computed as net income (loss) divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common stock issuable through stock options and convertible securities. F-18 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999, all dilutive securities have been excluded as their inclusion would have had an antidilutive effect on EPS. If stock options and convertible debt securities had not been excluded, 23,001,533, 22,947,386 and 24,517,777 shares respectively of additional common shares would have been included in the denominator, and the loss would have been reduced by $0.7 million in the numerator for each of the three years. Comprehensive income As of January 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 established the requirements for the reporting and presentation of comprehensive income and its components. For the years ended December 31, 1997, 1998 and 1999, the Company had no components of comprehensive income and, therefore, net income is equal to comprehensive income. New pronouncement In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted in all fiscal quarters of all fiscal years beginning after June 15, 2000. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance. The Company will adopt the new Statement effective January 1, 2001. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitment through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a significant effect on the Company's earnings or financial position. NOTE 2. BUSINESS COMBINATIONS During the years ended December 31, 1997, 1998 and 1999, the Company acquired the following companies, all of which were accounted for as purchase business combinations with the operations of the businesses included subsequent to their respective acquisition dates. The allocation of the respective purchase prices are generally based upon independent appraisals of the broadcast properties and as it relates to the 1999 acquisitions reflects management's preliminary allocation of purchase price. 1997 acquisitions Valley Channel 48, Inc. (KNVO) On January 23, 1997, the Company acquired all of the issued and outstanding common stock of Valley Channel 48, Inc. for approximately $24.6 million in cash plus the assumption of certain liabilities. Valley Channel 48, Inc. operates a Univision affiliate in the McAllen, Harlingen/Brownsville, Texas market. The excess purchase price over tangible net assets acquired of $28.8 million was allocated to specifically identifiable intangibles consisting of $1.1 million to presold commercial advertising contracts, $1.7 million to the FCC license, $13.9 million to the Univision affiliation agreement, $0.3 million to a noncompete agreement. The remaining excess purchase price of $11.8 million was recorded as goodwill. F-19 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) KINT-TV On June 4, 1997, the Company purchased substantially all of the assets relating to television station KINT-TV which operates the El Paso, Texas Univision affiliate and all of the stock of 26 de Mexico S.A. de C.V. (a Mexican corporation) for approximately $25.2 million. The excess of the purchase price over the tangible net assets of $19.0 million was allocated to specifically identifiable intangibles consisting of $14.6 million to the Univision affiliation agreement, $3.0 million to the FCC license, $1.1 million to presold commercial advertising contracts, $0.2 million to the stock of the Mexican corporation and $0.1 million to other identifiable intangibles. KINT-FM and KSVE-AM On September 24, 1997, the Company acquired substantially all of the assets of KINT-FM and KSVE-AM, both Spanish-programmed radio stations operating in El Paso, Texas, for $4.0 million. From June 4, 1997 through September 24, 1997, ECC operated these stations under an LMA. The excess purchase price over the tangible assets acquired of $3.4 million was allocated to specifically identified intangibles consisting of $2.9 million to the FCC license, $0.2 million to presold commercial advertising contracts and $0.2 million to other identifiable intangibles. The remaining excess purchase price of $0.1 million was recorded as goodwill. KLDO On August 14, 1997, the Company acquired substantially all of the assets of Panorama Broadcasting Co., which owned and operated the Laredo, Texas, Univision affiliate, for $6.3 million. The excess purchase price over tangible assets of $4.5 million was allocated to specifically identified intangibles consisting of $3.5 million to the Univision affiliation agreement, $0.3 million to the FCC license and $0.2 million to presold commercial advertising contracts. The remaining excess purchase price of $0.5 million was recorded as goodwill. 1998 acquisitions Entravision Communications of Midland, LLC On January 22, 1998, the Company entered into an agreement with an unrelated third party and formed Entravision Communications of Midland, LLC (Midland). The purpose of this new entity is to construct a new UHF television station in Midland, Texas. The Company acquired an 80% interest in Midland for $0.3 million and advanced Midland $2.6 million to obtain the rights to a construction permit under an auction and settlement agreement pursuant to an FCC application. As of December 31, 1999, construction of the station had not commenced. The agreement also contains options whereby, commencing one year from the date that the station begins program test operations, ECC may acquire the remaining interest in Midland for a predetermined exercise price, as defined in the agreement. La Paz Wireless Corporation (KVYE) On March 15, 1998, the Company acquired substantially all of the assets of La Paz Wireless Corporation, which owned television station KVYE in El Centro, California. The purchase price was $0.7 million, consisting of $0.1 million in cash, seller financing of $0.4 million and the assumption of certain liabilities in the amount of $0.2 million. Prior to the acquisition, the Company operated this station as a Univision affiliate under an LMA. F-20 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The purchase price of $0.7 million was allocated to specifically identifiable intangibles consisting of $0.5 million to the FCC license and $0.2 million to goodwill. Telecorpus, Inc. (KORO) On April 21, 1998, the Company, acquired all of the outstanding capital stock of Telecorpus, Inc. for approximately $14.6 million. Telecorpus, Inc. operates a Univision affiliate in Corpus Christi, Texas. The excess purchase price over tangible net assets acquired of $13.2 million was allocated to specifically identifiable intangibles consisting of $0.4 million to presold advertising contracts, $1.9 million to the FCC license, $4.5 million to the Univision affiliation agreement, $5.8 million to noncompete agreements. The remaining purchase price of $0.6 million was recorded as goodwill. 1999 acquisitions Brawley Broadcasting Company and KAMP Radio, Inc. On January 6, 1999, the Company acquired substantially all of the assets of Brawley Broadcasting Company and KAMP Radio, Inc., which include the radio stations KAMP (AM) El Centro, California; KWST (FM) Brawley, California; and KMXX (FM) Imperial, California. The purchase price was $2.5 million of which $0.4 million was previously deposited in escrow with the remainder being paid in cash at closing. The excess purchase price over tangible net assets acquired of $2.0 million was allocated to specifically identifiable intangibles consisting of $1.4 million to the FCC license, and $0.2 million to other identifiable intangibles. The remaining excess purchase price of $0.4 million was recorded as goodwill. Latin Communications Group Television, Inc. On February 4, 1999 the Company purchased all of the assets of Latin Communications Group Television, Inc. relating to television station WVEN- LP, in Orlando, Florida and WVEA-LP in Tampa Florida. Additionally, the Company, through a newly formed acquisition corporation, Los Cerezos Acquisition Co. with no other activities other than to complete this purchase, purchased all of the outstanding capital stock of Los Cerezos Television Company. Los Cerezos Television Company operates television station WMDO-LP in Washington, D.C. The aggregate purchase price paid in connection with these acquisitions was approximately $14.3 million including the assumption of certain liabilities totaling $1.1 million. The excess purchase price over tangible net assets acquired of $14.2 million was allocated to specifically identifiable intangible assets consisting of $0.9 million to presold commercial advertising contracts, $2.2 million to FCC licenses, $7.4 million to Univision affiliation agreements, and $0.2 million to noncompete agreements. The remaining excess purchase price of $3.5 million was recorded as goodwill. The Company previously operated these stations under an LMA beginning in November 1998. KLUZ-TV On April 1, 1999, the Company acquired substantially all of the assets of Univision affiliate television stations KLUZ and K48AM in Albuquerque, New Mexico from Univision. The purchase price was $14.9 million of which $1.0 million was cash. As part of the acquisition consideration, the Company provided F-21 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Univision a 2% increase in its conversion exchange option under the subordinated note agreement (see Note 5). The incremental exchange option has been assigned a value of $13.9 million and has been recorded as additional paid-in capital as a result of this acquisition. The excess purchase price over tangible net assets acquired of $13.5 million was allocated to specifically identifiable intangibles consisting of $7.3 million to the FCC license, $0.6 million to presold commercial advertising contracts, and $5.6 million to the Univision affiliation agreement. Televisora ALCO, S.A. de C.V. (XUPN) On June 9, 1999, the Company acquired a 40% interest in Televisora ALCO S.A. de C.V. (ALCO), a Mexican corporation which operates XHTEB-TV in Tecate, Baja California, Mexico. The purchase price for the 40% interest was $0.5 million in cash. The Company is accounting for this investment under the equity method of accounting. This station began broadcasting in November 1999 which resulted in insignificant revenue and expenses. ALCO's assets and liabilities were not significant at December 31, 1999. The Company also acquired all of the outstanding capital stock of Comercializadora Frontera Norte S.A. de C.V. (CFN), a Mexican corporation, which has a time brokerage agreement with ALCO in connection with substantially all of the station's broadcast and advertising rights. The aggregate consideration paid for this acquisition was approximately $19.5 million, of which $7.5 million was in cash with the remaining $12.0 million due under a time brokerage contract payable. The entire purchase price was allocated to the intangible asset, time brokerage agreements. On August 10, 1999, CFN assigned all of its rights and obligations under the time brokerage agreement to ECC. As a result, all of the operations of this broadcast property are accounted for as a division of the Company. The time brokerage agreement provides for a ten-year term with successive automatic 30-year renewals. DeSoto Broadcasting (WBSV) On September 20, 1999, the Company acquired substantially all of assets of DeSoto Broadcasting, Inc., DeSoto Channel 62 Associates, and Omni Investments, Inc. These companies collectively owned the assets and licenses to operate WBSV in Venice (Sarasota), Florida. The purchase price was $17.0 million of which $0.9 million was previously deposited in escrow with the reminder paid in cash at closing. The excess purchase price over tangible net assets acquired of $15.8 million was allocated to the FCC license. Paisano Communications (KBZO) On December 20, 1999, the Company acquired substantially all of the assets of Paisano Communications which includes low power television stations KBZO-LP, Lubbock, Texas; K31DM, San Angelo, Texas: K48FR, Amarillo, Texas and radio station KBZO (AM), Lubbock, Texas. The purchase price, was $2.3 million in cash. The excess purchase price over tangible net assets acquired of $2.1 million was allocated to specifically identifiable intangible assets consisting of $0.3 million to the FCC license, $1.3 million to Univision affiliation agreement and $0.3 million to noncompete agreements. The remaining excess purchase price of $0.2 million was recorded as goodwill. See Note 11 for acquisitions subsequent to year end. F-22 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Pro Forma results (unaudited) The following pro forma results of continuing operations assume the 1998 and 1999 acquisitions discussed above occurred on January 1, 1998. The unaudited pro forma results have been prepared using the historical financial statements of the Company and each acquired entity. The unaudited pro forma results give effect to certain adjustments including amortization of goodwill, depreciation of property and equipment, interest expense and the related tax effects.
1998 1999 (Unaudited) (Unaudited) (In millions of dollars except per share) ----------- ---------- Net revenue.......................................... $ 61.2 $ 63.3 Net (loss)........................................... (4.4) (37.0) Basic and diluted net (loss) per share............... $(0.07) $(0.57)
The above pro forma financial information does not purport to be indicative of the results of operations had the 1998 and 1999 acquisitions actually taken place on January 1, 1998, nor is it intended to be a projection of future results or trends. NOTE 3. PROPERTY AND EQUIPMENT Property and equipment at December 31 consists of:
1998 1999 (In millions of dollars) ----- ----- Buildings....................................................... $ 3.6 $ 5.3 Construction in progress........................................ 0.2 -- Land improvements............................................... 0.3 0.3 Leasehold improvements.......................................... 0.7 1.6 Transmission studio and other broadcast equipment............... 15.9 25.4 Office and computer equipment................................... 1.8 3.1 Transportation equipment........................................ 0.9 1.0 ----- ----- 23.4 36.7 Less accumulated depreciation and amortization.................. 7.6 11.6 ----- ----- 15.8 25.1 Land............................................................ 1.0 2.1 ----- ----- $16.8 $27.2 ===== =====
NOTE 4. INTANGIBLE ASSETS At December 31, intangible assets consist of:
1998 1999 (In millions of dollars) ----- ------ FCC licenses................................................... $17.0 $ 44.0 Univision affiliation agreements............................... 38.1 52.5 Goodwill....................................................... 22.4 27.1 Noncompete agreements.......................................... 6.3 6.8 Construction rights and permits................................ 3.7 4.0 Time brokerage agreement....................................... -- 19.5 Deferred debt costs............................................ 1.3 1.3 Other.......................................................... 1.2 3.3 ----- ------ 90.0 158.5 Less accumulated amortization.................................. 12.1 22.3 ----- ------ $77.9 $136.2 ===== ======
F-23 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 5. LONG-TERM DEBT, NOTES PAYABLE AND SUBSEQUENT EVENT Notes payable at December 31 are summarized as follows:
1998 1999 (In millions of dollars) ----- ------ Subordinated note with interest at 7.01%....................... $10.0 $ 10.0 Credit facility with bank...................................... 88.0 142.9 Financing agreement with bank, due in monthly installments of $20,000, bearing interest at the prime rate (8.5% at December 31, 1999) plus 0.25% through July 31, 2009, secured by building with a depreciated cost of $1,620.................... 0.1 1.6 Time brokerage contract payable, due in annual installments of $1,000, bearing interest at LIBOR (6.5% at December 31, 1999) through June 2011............................................. -- 12.0 Other.......................................................... 1.6 0.8 ----- ------ 99.7 167.3 Less current maturities........................................ 0.9 1.4 ----- ------ $98.8 $165.9 ===== ======
Subordinated note On December 30, 1996, the Company issued a $10.0 million subordinated note to Univision. This note is subordinated to all senior debt. The note is due December 30, 2021 and bears interest at 7.01% per annum, for which Univision has agreed to provide the Company with network compensation equal to the amount of annual interest due. Under a separate option agreement, Univision may exchange the note into Class C common stock, representing a 27.9% interest in the Company, at the holder's option at any time prior to maturity. During 1999 certain conditions restricting the exchange of the note were eliminated and, as such, the Company recorded interest expense of $2.5 million based on the estimated intrinsic value of the option feature at the date the note was entered into. The note contains certain restrictions including the restriction on dividends, acquisition of assets over a certain limit, the incurrence of debt over certain leverage ratios, the merger or consolidation of the Company with a third party or a sale of the Company's assets, the transfer or sale of any FCC license for our Univision affiliate television stations, the issuance of additional common stock and changes to the capital structure of the Company without the consent of Univision. Credit facility with bank The Company has a revolving credit facility with a bank in the amount of $158.0 million, of which $142.9 million was outstanding at December 31, 1999. On January 14, 2000, the Company entered into an amendment to increase the credit facility to $158 million. Additionally, the Company has a letter of credit outstanding at December 31, 1999 in the amount of $0.4 million. The credit facility bears interest at LIBOR (6.5% at December 31, 1999) plus 1.625% and expires on November 10, 2006. The facility is collateralized by substantially all the Company's assets, as well as a nonrecourse guarantee of certain stockholders and a pledge of ECC LLC membership units and corporate ownership interest. The credit facility contains quarterly scheduled reductions in the amount that is available under the revolving loan commitment commencing December 31, 2000 through November 10, 2006. These quarterly reductions range from $1.5 million to $10.5 million. In addition, the Company pays loan commitment fees of from 0.275% to 0.5% (per annum). The credit facility also contains a mandatory prepayment clause in the event the Company should liquidate any assets in excess of $5.0 million if the proceeds are not utilized to acquire assets of the same type and use within one year, receive insurance or condemnation proceeds which are not fully utilized toward the replacement of such assets, or have excess cash flows (as defined in the credit facility) in any fiscal year subsequent to December 31, 1999. However, no prepayment due to excess cash flow is required provided that the Company's maximum total debt ratio is less than 4.5 to 1. F-24 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The credit facility contains certain financial covenants relating to maximum total debt ratio, total interest coverage ratio, a fixed charge coverage ratio and a ceiling on annual capital expenditures. The covenants become increasingly restrictive in the later years of the facility. The credit facility also contains restrictions on the incurrence of additional debt, the payment of dividends, acquisitions over a certain limit and management fees or bonuses to certain executives. The credit facility also states that the Company may not make any equity offering without giving the bank 30 days written notice. The Company has entered into interest rate cap agreements to reduce the impact of changes in interest rates on its revolving credit facility. At December 31, 1999, the Company had outstanding an interest rate cap agreement with a bank, having a total notional principal amount of $50.0 million. The agreement effectively changes the Company's interest rate exposure on $50.0 million of its revolving credit facility to a fixed 7%. The interest rate cap agreements mature July 16, 2000. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the interest rate cap agreement. However, the Company does not anticipate nonperformance by the counterparty. Aggregate maturities of long-term debt and notes payable as of December 31, 1999 are as follows:
Years Ending December 31, Amount ------------------------- ------ (In millions of dollars) 2000................................................................. $ 1.4 2001................................................................. 9.2 2002................................................................. 16.2 2003................................................................. 22.2 2004................................................................. 28.2 Thereafter........................................................... 90.1 ------ $167.3 ======
NOTE 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31 consist of:
1998 1999 (In millions of dollars) ---- ---- Accounts payable.................................................. $1.4 $2.4 Accrued payroll and payroll taxes................................. 1.0 1.1 Accrued interest.................................................. 0.9 0.1 Income taxes payable.............................................. 0.3 0.3 Executive employment agreement bonus.............................. 0.9 1.1 Professional fees................................................. 0.4 0.5 Syndication fees.................................................. -- 0.9 Other............................................................. 1.3 1.1 ---- ---- $6.2 $7.5 ==== ====
F-25 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 7. INCOME TAXES The provision for income taxes for the years ended December 31 is as follows:
1997 1998 1999 (In millions of dollars) ---- ---- ----- Current: Federal.................................................. $ -- $0.1 $ 0.2 State.................................................... 0.1 0.2 0.1 Deferred................................................... 0.2 (0.1) (0.4) ---- ---- ----- $0.3 $0.2 $(0.1) ==== ==== =====
The income tax provision differs from the amount of income tax determined by applying the federal statutory income tax rate because substantially all of the Company's operations are generated by non-taxpaying entities. The components of the deferred tax assets and liabilities at December 31 consist of the following:
1998 1999 (In millions of dollars) ----- ----- Deferred tax assets: Intangible assets........................................... $ 0.2 $ -- ----- ----- Deferred tax liabilities: Change in accounting method................................. (0.1) -- Intangible assets........................................... -- (1.8) Property and equipment...................................... (0.4) (0.2) ----- ----- (0.5) (2.0) ----- ----- Net long-term deferred tax liability.......................... $(0.3) $(2.0) ===== =====
NOTE 8. COMMITMENTS The Company has agreements with Nielsen Media Research (Nielsen), expiring at various dates through December 2004, to provide television audience measurement services. Pursuant to these agreements, the Company is obligated to pay Nielsen a total of $7.9 million in increasing annual amounts. The annual commitments range from $1.4 million to $1.9 million. Operating leases The Company leases facilities and broadcast equipment under various operating lease agreements with various terms and conditions, which expire at various dates through May 2009. The approximate future minimum lease payments under these operating leases at December 31, 1999 are as follows:
Years Ending December 31, Amount ------------------------- ------ (In millions of dollars) 2000................................................................. $2.4 2001................................................................. 1.8 2002................................................................. 1.5 2003................................................................. 1.2 2004................................................................. 0.9 Thereafter........................................................... 2.1 ---- $9.9 ====
F-26 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Total rent expense under operating leases, including rent under month-to- month arrangements, was approximately $1.0 million, $1.2 million and $2.0 million for the years ended December 31, 1997, 1998 and 1999, respectively. Employment agreements ECC LLC has entered into employment agreements (the Agreements) with two executive officers and stockholders through October 2003. The Agreements provide that a minimum annual base salary and a bonus of 1% of ECC LLC's annual net revenue be paid to each of the executives, effective for years beginning after January 1, 1997. ECC LLC accrued approximately $0.6 million, $0.9 million and $1.1 million of bonuses payable to these executives for the years ended December 31, 1997, 1998 and 1999, respectively. Additionally, the Agreements provide for a continuation of each executive's annual base salary and annual bonus through the end of the employment period if the executive is terminated due to a permanent disability or without cause, as defined in the Agreements. Management intends to modify these Agreements subsequent to year end. ECC LLC also has an employment agreement with its executive vice president which provides for an annual base salary and bonus. Additionally, in 1997 the employee was awarded 1,845,656 shares of Class A common stock in the Company, which vested through January 2000. At December 31, 1999, the estimated fair value associated with this award of Class A common stock was $27.7 million. The Company has recorded $0.9 million, $0.5 million and $26.3 million of compensation expense for the years ended December 31, 1997, 1998 and 1999, respectively. This award originally provided for a repurchase option which has been eliminated. As such, the award was considered variable. Compensation expense for 1999 was determined using an estimate by management based primarily on the estimated IPO price as the fair market value. In January 1999, the Company entered into an employment agreement with its senior vice president which expires on January 4, 2002 and provides for an annual base salary and bonus to be paid to the employee. As part of this agreement, ECC LLC originally granted an option to the employee to purchase Class D membership units. As amended in April 2000, ECC LLC sold the employee 164,390 restricted shares of Class A common stock at $0.01 per share. The Company may repurchase the restricted shares at $0.01 per share. The number of shares subject to the Company's repurchase option is eliminated proportionately over three years from the original grant date. The intrinsic value of the original option at the grant date was determined by management using the estimated IPO price as the fair value of the underlying shares. In accordance with APB No. 25, the Company recorded $2.8 million in compensation expense during 1999 attributable to the original option grant which is reflected as non-cash stock-based compensation in the statement of operations. This amount approximates the total intrinsic value of the amended employee restricted stock purchase. SFAS No. 123 requires the disclosure of pro forma net income and earnings per share had the Company adopted the fair value method. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option-pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options with vesting restrictions which significantly differ from the Company's stock option award. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated value. The Company's fair value calculation was made using the Black-Scholes option-pricing model with the following assumptions: expected life of three years following complete vesting; stock volatility of 50%; risk-free interest rate of 6.17% and no dividends during the expected life. F-27 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) If the computed fair value of the award had been amortized to expense over the vesting period of the award, proforma net loss of the Company would have been approximately $0.1 million higher in 1999. NOTE 9. RELATED-PARTY TRANSACTIONS Related-party transactions not discussed elsewhere consist of the following: The Company has unsecured advances of $0.2 million payable to related parties, which bear interest, and are due on demand at December 31, 1998 and 1999. The Company has unsecured stock subscriptions due from officer/stockholders of the Company amounting to $0.6 million at December 31, 1998 and 1999. The advances are due on demand and have been recorded as a reduction of equity. In addition, the Company has unsecured advance receivables from related parties amounting to $0.3 million at December 31, 1998 and 1999. The Company utilizes the services of a law firm, a partner of which is a stockholder and director. Total legal fees incurred with this law firm aggregated approximately $0.3 million, $0.5 million and $0.5 million for the years ended December 31, 1997, 1998 and 1999, respectively. NOTE 10. 401(K) SAVINGS PLAN During 1999 the Company established a defined contribution 401(k) savings plan covering substantially all its employees. The Company currently matches 25% of the amounts up to a maximum of $1,000 per year by each participant. Employer matching contributions for the year ended December 31, 1999 aggregated approximately $0.1 million. NOTE 11. SUBSEQUENT EVENTS Subordinated note On March 2, 2000, the Company received $110 million from Univision pursuant to the existing subordinated note and option agreement (see Note 5). The note was also amended increasing the option exchange feature from 27.90% to 40% based on ownership prior to the additional issuance of common shares anticipated in the IPO, and other contemplated equity transactions. Acquisitions The following business and/or assets were or will be acquired after December 31, 1999: Magic Media, Inc. On July 19 1999, the Company entered into an asset purchase agreement with Magic Media, Inc. to acquire substantially all of the assets relating to the operations of radio stations KATH (FM) and KOFX (FM) in El Paso, Texas for approximately $14 million. At December 31, 1999 the Company had on deposit $0.5 million in an escrow relating to this acquisition. The acquisition closed on January 14, 2000. WHCT-TV In February 2000, the Company entered into an agreement to acquire the FCC license of television station WHCT in Hartford Connecticut, for $18 million. Management intends to close on this transaction upon receiving FCC and bankruptcy court approval, which it anticipates receiving in the third quarter of 2000. F-28 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Citicasters Co. In March 2000, the Company entered into an asset purchase agreement with Citicasters Co., a subsidiary of Clear Channel Communications, Inc., to acquire the FCC licenses relating to the operations of radio stations KACD (FM) Santa Monica, California and KBCD (FM) Newport Beach, California for approximately $85 million. On March 3, 2000 the Company deposited $17 million in escrow relating to this acquisition. Management intends to close this transaction upon receiving FCC approval, which it anticipates receiving in the second quarter of 2000. XHAS-TV In March 2000, the Company and ALCO entered into a binding letter agreement to acquire the stock of a Mexican corporation which holds the necessary authorizations from the Mexican government to own and operate television station XHAS, Channel 33, Tijuana, Mexico, and a 47.5% interest in Vista Television, Inc., and Channel 57, Inc. Additionally, ECC has entered into a time brokerage agreement in connection with this acquisition. The aggregate consideration to be paid in connection with this transaction is approximately $35.2 million of which $1 million was deposited into escrow at December 31, 1999. This transaction closed on March 16, 2000. Latin Communications Group Inc. (LCG) On April 20, 2000, the Company acquired all of the outstanding capital stock of LCG for approximately $252 million. LCG operates radio stations in California, Colorado, New Mexico, and Washington D.C. and also owns and operates two Spanish-language publications. In connection with this acquisition, the Company amended certain financial covenants related to its credit facility to provide for this acquisition and the issuance of a $90 million convertible subordinated note. Additionally, the Company entered into a $115 million term loan with its bank group, the proceeds from which will be used to finance this acquisition. All amounts outstanding under this term loan are due April 18, 2001 and bear interest at LIBOR plus 4%. This term loan is secured by a pledge of the Company's stock and lien on all of LCG's assets and a secondary pledge on all of the Company's assets. Z-Spanish Media On April 20, 2000, the Company agreed to acquire all of the outstanding capital stock of Z-Spanish Media. Z-Spanish Media owns 33 radio stations and an outdoor billboard business. The purchase price is approximately $475 million, including the assumption of approximately $109 million of debt. The purchase price will be paid 70% in cash and the remaining 30% in newly- issued Class A common stock of the Company after the reorganization as discussed in Note 1. Management intends to close on this transaction concurrently with the IPO. F-29 REPORT OF INDEPENDENT AUDITORS Board of Directors Latin Communications Group Inc. We have audited the accompanying consolidated balance sheets of Latin Communications Group Inc. and Subsidiaries as of December 26, 1999 and December 27, 1998, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended December 26, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Latin Communications Group Inc. and Subsidiaries at December 26, 1999 and December 27, 1998 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 26, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP San Jose, California March 30, 2000 F-30 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
December December 27, 1998 26, 1999 -------- -------- ASSETS Current assets: Cash and cash equivalents................................ $ 3,010 $ 6,695 Accounts receivable, less allowance for doubtful accounts of $1,965 in 1998 and $1,518 in 1999.................... 5,956 8,184 Prepaid expenses and other............................... 794 344 Deferred income taxes.................................... 1,278 1,288 -------- -------- Total current assets...................................... 11,038 16,511 Net assets of discontinued operations..................... 4,831 -- Land held for sale........................................ 4,000 -- Deferred finance costs, less accumulated amortization of $1,316 in 1998 and $751 in 1999.......................... 2,097 1,265 Property and equipment, at cost, less accumulated depreciation of $2,337 in 1998 and $3,618 in 1999........ 6,487 7,259 Broadcast licenses and other intangible assets, less accumulated amortization of $8,054 in 1998 and $11,583 in 1999..................................................... 137,349 131,162 Other assets (including notes receivable of $366 in 1999 from a related party).................................... 220 1,289 -------- -------- Total assets.............................................. $166,022 $157,486 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses.................... $ 5,136 $ 5,366 Accrued interest......................................... 1,175 715 Current portion of long-term debt........................ 4,318 69 -------- -------- Total current liabilities................................. 10,629 6,150 Long-term liabilities: Debt..................................................... 50,541 42,037 Deferred income taxes.................................... 17,471 18,889 Other.................................................... 1,492 1,442 -------- -------- Total liabilities......................................... 80,133 68,518 Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value; 15,000,000 shares authorized; 9,235,468 shares issued and outstanding..... 92 92 Additional paid-in capital............................... 94,485 94,485 Accumulated deficit...................................... (8,688) (5,609) -------- -------- Total stockholders' equity................................ 85,889 88,968 -------- -------- Total liabilities and stockholders' equity................ $166,022 $157,486 ======== ========
See notes to consolidated financial statements. F-31 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
Years Ended -------------------------------------- December 28, December 27, December 26, 1997 1998 1999 ------------ ------------ ------------ Gross revenue: Advertising............................ $ 33,710 $ 34,469 $ 41,814 Less agency commissions................ 3,472 3,692 4,623 ---------- ---------- ---------- 30,238 30,777 37,191 Circulation............................ 5,759 5,741 5,875 Other.................................. 998 1,378 1,179 ---------- ---------- ---------- Net revenue............................ 36,995 37,896 44,245 ---------- ---------- ---------- Expenses: Direct operating....................... 15,131 15,196 15,560 Selling, general and administrative.... 17,535 17,677 18,910 Corporate.............................. 1,713 2,901 1,795 Depreciation and amortization.......... 3,762 4,593 4,907 ---------- ---------- ---------- 38,141 40,367 41,172 ---------- ---------- ---------- Operating income (loss) (1,146) (2,471) 3,073 Interest expense (including amounts associated with related parties of $1,200 in 1997, $1,800 in 1998 and $1,900 in 1999)....................... (4,176) (6,211) (4,895) Interest income........................ -- 138 115 Other finance costs and related amortization (including amounts associated with related parties of $250 in 1999)......................... (335) (376) (626) Loss on sale of assets................. -- -- (121) ---------- ---------- ---------- Loss from continuing operations before income taxes........................... (5,657) (8,920) (2,454) Income tax benefits..................... 2,213 2,570 736 ---------- ---------- ---------- Loss from continuing operations......... (3,444) (6,350) (1,718) Income from discontinued operations, net of income taxes of $595 in 1997, $974 in 1998 and $271 in 1999............... 1,161 1,312 418 Gain on sale of discontinued operations, net of income taxes of $3,123 in 1999.. -- -- 5,006 ---------- ---------- ---------- Net income (loss) before extraordinary item................................... (2,283) (5,038) 3,706 Extraordinary loss from early extinguishment of debt, net of income tax benefits of $153 in 1997 and $415 in 1999................................ (222) -- (627) ---------- ---------- ---------- Net income (loss)....................... $ (2,505) $ (5,038) $ 3,079 ========== ========== ========== Net income (loss) per share: Basic and diluted: Loss from continuing operations........ $ (0.39) $ (0.69) $ (0.19) Discontinued operations................ 0.13 0.14 0.59 Extraordinary loss..................... (0.03) -- (0.07) ---------- ---------- ---------- Net income (loss)...................... $ (0.29) $ (0.55) $ 0.33 ========== ========== ========== Weighted average common shares outstanding: Basic and diluted...................... 8,761,301 9,165,468 9,235,468 ========== ========== ==========
See notes to consolidated financial statements. F-32 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data)
Additional Common Paid-in Accumulated Total Shares Stock Capital Deficit Stockholders' Equity --------- ------ ---------- ----------- -------------------- Balance at December 29, 1996................... 7,740,468 $78 $77,084 $(1,145) $76,017 Shares issued to purchase a business... 700,000 7 8,743 -- 8,750 Shares issued with senior subordinated debt.................. 525,000 5 5,210 -- 5,215 Net loss............... -- -- -- (2,505) (2,505) --------- --- ------- ------- ------- Balance at December 28, 1997................... 8,965,468 90 91,037 (3,650) 87,477 Shares issued with senior subordinated debt.................. 120,000 1 1,199 -- 1,200 Shares issued in connection with purchase of radio station assets........ 150,000 1 2,249 -- 2,250 Net loss............... -- -- -- (5,038) (5,038) --------- --- ------- ------- ------- Balance at December 27, 1998................... 9,235,468 92 94,485 (8,688) 85,889 Net income............. -- -- -- 3,079 3,079 --------- --- ------- ------- ------- Balance at December 26, 1999................... 9,235,468 $92 $94,485 $(5,609) $88,968 ========= === ======= ======= =======
See notes to consolidated financial statements. F-33 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years Ended -------------------------------------- December 28, December 27, December 26, 1997 1998 1999 ------------ ------------ ------------ Operating activities Net income (loss)....................... $ (2,505) $(5,038) $ 3,079 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.......... 4,435 5,343 5,279 Provision for doubtful accounts........ 994 827 558 Provision for deferred taxes........... (1,847) (1,741) 1,732 Gain on sale of discontinued operations............................ -- -- (8,128) Extraordinary loss on early debt extinguishments....................... 375 -- 1,042 Loss on sale of assets................. -- -- 121 Amortization of debt discount.......... 477 733 749 Changes in assets and liabilities, net of amounts acquired and net of disposals: (Increase) decrease in accounts receivable........................... (1,095) 434 (2,786) (Increase) decrease in prepaid expenses and other................... (921) 130 461 (Decrease) increase in accounts payable and accrued expenses......... 2,372 (147) (554) (Decrease) increase in other assets and liabilities...................... 46 57 (446) -------- ------- -------- Net cash provided by operating activities............................. 2,331 598 1,107 -------- ------- -------- Investing activities Capital expenditures.................... (1,010) (1,272) (2,291) Proceeds from sale of discontinued operations............................. -- -- 12,949 Proceeds from disposal of assets........ -- -- 6,608 Payments for businesses acquired, net of cash received of, $404 in 1997 and for purchase of intangibles in 1998........ (70,015) (1,218) -- Investments in companies to be acquired............................... 4,470 -- (603) -------- ------- -------- Net cash provided by (used in) investing activities............................. (66,555) (2,490) 16,663 -------- ------- -------- Financing activities Proceeds from debt...................... 58,285 2,800 26,200 Payments on debt........................ (23,078) (1,634) (39,703) Debt issuance costs..................... (2,728) (344) (582) Net proceeds from sale of common stock.. 5,215 1,200 -- -------- ------- -------- Net cash (used in) provided by financing activities............................. 37,694 2,022 (14,085) -------- ------- -------- Net increase in cash and cash equivalents............................ (26,530) 130 3,685 Cash and cash equivalents at beginning of year................................ 29,410 2,880 3,010 -------- ------- -------- Cash and cash equivalents at end of year................................... $ 2,880 $ 3,010 $ 6,695 ======== ======= ========
See notes to consolidated financial statements. F-34 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 1. ORGANIZATION Latin Communications Group Inc. (the "Company") is a Spanish language media company that provides advertisers with radio broadcasting and newspaper publishing for the Hispanic community. The Company operates 17 radio stations in California, Colorado, New Mexico and Washington, D.C. Operations also include a Spanish language newspaper in New York City. In February 1999, the Company disposed of its Spanish language television operations (see Note 8). On December 21, 1999, the Company entered into a plan of merger agreement with Entravision Communications Company, L.L.C. ("ECC"), a Delaware limited liability company engaged in the ownership and operation of television and radio stations. The merger is expected to close by the second quarter of 2000. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the Company and its wholly- owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. Fiscal Year The Company closes its year on the last Sunday in December. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Fair Value of Financial Instruments The Company's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, are carried at cost which approximates fair value due to the short maturity of these instruments. Senior and subordinated debt bear interest at what is estimated to be current market rates of interest. Accordingly, book values approximate fair value for these instruments. Original Issue Discount and Debt Issuance Costs Original issue discounts on debt are recorded as discounts against the face value of the debt issued and are amortized on the effective interest method over the life of the related debt. Debt issuance costs are recorded as finance costs and are amortized over the life of the related debt. Property and Equipment Property and equipment are reported at cost. Depreciation of property and equipment is calculated on the straight-line basis over the estimated useful lives of the assets. F-35 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 Broadcast Licenses and Other Intangible Assets Intangible assets, which include broadcast licenses, goodwill, network affiliation agreements and other intangibles arising from the Company's acquisitions, are carried at cost, less accumulated amortization. These assets are amortized on a straight-line basis, generally over 40 years. In accordance with Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long Lived Assets and Changes in Long Lived Assets to be Disposed Of, the carrying value of intangible assets is reviewed when events or changes in circumstances suggest that the recoverability of an asset may be impaired. If this review indicates these intangible assets will not be recoverable, as determined based on the undiscounted cash flows over the remaining life, the carrying value of these assets will be reduced to their respective fair values. The cash flow estimates that will be used will contain management's best estimates, using appropriate and customary projections at the time. No intangible assets were considered impaired at December 26, 1999. Revenue Recognition Advertising, publishing and other revenue is recognized as services are provided. Uncollectible amounts are charged to expense in the period that determination becomes reasonably estimable. Trade and Barter Agreements Trade and barter agreements are recorded as revenue at the fair value of the goods or services to be received when advertising space or time is provided. Barter expenses are recorded when merchandise or services are received. Barter revenue and costs were approximately $1.5 million in 1999, $1.5 million in 1998 and $1.6 million in 1997. Advertising Costs These costs are expensed as incurred and amounted to $0.4 million in 1999, $0.6 million in 1998 and $0.2 million in 1997. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Concentration of Credit Risk The Company provides advertising space and airtime to national, regional and local advertisers within the geographic areas in which the Company operates. In addition, the Company provides newspapers to wholesalers for distribution to retail outlets, as well as directly to vendors. Credit is extended based on an evaluation of the customer's financial condition and generally advance payment or collateral is not required of creditworthy customers. Credit losses are provided for in the financial statements and have been within management's expectations. F-36 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 Risks and Uncertainties The Company is party to two collective bargaining agreements in connection with its newspaper operations. The Company is due to renegotiate a labor agreement with one of the unions whose agreement expired on March 30, 2000. The Company intends to continue negotiations to reach a new labor agreement. Accounting for Stock-Based Compensation The Company accounts for employee stock options and stock appreciation rights in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"), and has adopted the "disclosure only" alternative described in Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"). Earnings Per Share Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of common shares and dilutive securities outstanding (none for all years presented). Antidilutive securities relating to stock options totaled 83,178 in 1999 and 73,045 in 1998 and 1997. Reclassifications Certain prior years' balances have been reclassified to conform to the current year's presentation. New Accounting Pronouncements In December of 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. This SAB, as amended in March 2000, is effective for us beginning in the second quarter of our fiscal year beginning December 27, 1999. The adoption of SAB 101 will not have a material impact on our financial statements. 3. DETAIL OF BALANCE SHEET ACCOUNTS AND SUPPLEMENTARY CASH FLOW INFORMATION Property and equipment consists of the following:
Estimated Useful Life in December 27, December 26, Years 1998 1999 (in millions of dollars) ---------- ------------ ------------ Land....................................... $0.2 $0.2 Building................................... 25 0.1 0.1 Broadcast equipment........................ 5 5.4 4.8 Machinery and equipment.................... 3-5 1.9 3.1 Leasehold improvements..................... Lease-term 1.2 1.1 Construction in progress................... -- 1.6 ---- ---- 8.8 10.9 Less accumulated depreciation.............. 2.3 3.6 ---- ---- $6.5 $7.3 ==== ====
F-37 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 Broadcast licenses and other intangible assets consist of the following:
December 27, December 26, 1998 1999 (in millions of dollars) ------------ ------------ Broadcasting licenses and other intangible assets.... $104.4 $101.7 Goodwill............................................. 41.0 41.0 ------ ------ 145.4 142.7 Less accumulated amortization........................ 8.1 11.5 ------ ------ $137.3 $131.2 ====== ======
In 1997, the Company acquired 100% of the stock of Embarcadero Media Inc. (EMI), the owners and operators of eight radio stations. The acquisition was accounted for under the purchase method. The total purchase price was allocated to the fair market value of the net assets acquired. Included in those assets were broadcast licenses and other intangibles totaling $83.5 million, which are generally being amortized over forty years. Below is a summary of the allocation of the purchase price relating to this acquisition, along with a summary of intangible assets purchased in 1998.
Years Ended ------------------------- December 28, December 27, 1997 1998 ------------ ------------ Purchase of businesses, net of cash acquired: Working capital, other than cash and current portion of long-term debt.................................. $ (0.7) $ -- Land held for sale.................................. (4.0) -- Property and equipment.............................. (3.2) -- Broadcast licenses and other intangible assets...... (83.5) (5.4) Deferred income taxes............................... 13.1 -- Stock and notes payable issued for assets........... 8.3 4.2 ------ ----- Net cash used to acquire businesses................. $(70.0) $(1.2) ====== =====
4. DEBT Debt consists of the following:
December 27, December 26, 1998 1999 (in millions of dollars) ------------ ------------ Senior bank debt under a term loan agreement that was extinguished in October 1999........................ $36.5 $ -- Senior bank debt under a revolving line of credit totaling $35 million, maturing in October 2002 and bearing interest at 8.34% at December 26, 1999...... -- 25.0 Senior subordinated debt maturing in February 2005 and bearing interest at 5%.......................... 16.2 17.0 Other................................................ 2.1 0.1 ----- ----- Total debt........................................... 54.8 42.1 Less current portion of long-term debt............... 4.3 0.1 ----- ----- Long-term debt....................................... $50.5 $42.0 ===== =====
F-38 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 On October 22, 1999, the Company entered into a $35 million revolving bank credit facility (the "Facility") for the purpose of refinancing its senior bank debt. The Facility is secured by a first priority lien on the capital stock of the Company's subsidiaries and bears interest at rates of either the London Interbank Offered Rate (LIBOR) plus a margin ranging from 1.75% to 3.00%, or the Prime Rate plus a margin ranging from 0.25% to 1.50% per annum depending on the Company's total leverage ratio, as defined. The Facility contains affirmative and negative covenants relating to the business and operations of the Company. These include various financial and performance covenants with respect to indebtedness, investments, liens, sale of assets, mergers, consolidation and dividend payments, as well as leverage, cash flow and interest coverage ratios. In connection with the refinancing, the Company also re-paid the note payable plus accrued interest, paid current amounts due for interest on the senior subordinated debt and began accruing interest at stated rates. In October 1999, debt issuance costs totaling $1.0 million were recognized as an extraordinary loss due to the early extinguishment of the term loan. The previously outstanding senior bank debt under a term loan agreement was secured and incurred interest at rates of either LIBOR plus a margin ranging from 1.5% to 3.75%, or the Prime Rate plus a margin ranging from 0.50% to 4.75% per annum depending on the Company's total leverage ratio. The rate on the senior bank debt at December 27, 1998 was Prime plus 4.75% or approximately 12.5%. As a result of senior bank debt covenant violations beginning on July 15, 1998, the Company was restricted from paying interest and principal on any other outstanding debt. The Company also began accruing penalty interest on its senior bank loans and subordinated debt. Senior subordinated debt consists of borrowings from certain stockholders and officers of the Company (see Note 10). It is comprised of two issuances, Tier I and Tier II (collectively, the "senior subordinated debt"). Tier 1, was issued in February 1997, in the amount of $17.5 million. Tier II, in the amount of $4.0 million, was issued in February 1998. Unamortized original issue discount on the senior subordinated debt was approximately $4.5 million at December 26, 1999 and $5.3 million at December 27, 1998. At December 26, 1999, scheduled maturities of long-term debt were as follows:
(in millions of dollars) Year ending: 2002............................................................. $25.0 2005............................................................. 17.0 ----- $42.0 =====
For the years ended December 26, 1999, December 27, 1998 and December 28, 1997, interest paid was approximately $5.4 million, $5.5 million and $2.9 million, respectively. 5. STOCK OPTION AND EQUITY APPRECIATION INCENTIVE PLANS The Company has adopted two stock option plans, which provide for the issuance of options for the purchase of up to 835,000 shares of the Company's common stock as incentive to key officers and employees. The term of the options granted under the plans is generally ten years. Vesting generally occurs on a prorated basis over a three year period. Generally, all options become immediately exercisable in full should any of the following events occur: termination of the optionee's employment by the optionee for good reason, termination of the optionee's employment by the Company without cause, death or permanent disability or the consummation of a sale of all F-39 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 or substantially all of the assets of the Company. No compensation cost has been recognized in connection with stock option grants because options are issued with an exercise price equal to fair value on the date of grant. Under SFAS No. 123, had grants been measured based on the fair market value at the grant date for awards in 1999, 1998 and 1997, the Company's pro forma net income in 1999 would have decreased by approximately $0.1 million, to $2.8 million, and the pro forma loss in 1998 and 1997 would have increased by $0.1 million and $0.2 million, to $5.1 million and $2.7 million, respectively. These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted or forfeited in future years. The fair value of these options was estimated at the date of grant using the Black- Scholes minimum value method. The minimum value method calculates the excess of the fair value of the stock at the date of grant over the present value of both the exercise price and the expected dividend payments, each discounted at the risk free interest rate, over the life of the options. The following assumptions were used in the calculation:
1997 1998 1999 ------- ------- --------- Expected dividend yield......................... 0% 0% 0% Risk free interest rate......................... 6.31% 6.31% 7.00% Expected life of options........................ 5 years 5 years 4-5 years
The weighted average fair value of options granted during 1999, 1998 and 1997 was $1.71, $1.41 and $1.58, respectively. Stock option activity is summarized as follows:
Available Stock Weighted for Options Average Grant Outstanding Exercise Price --------- ----------- -------------- Outstanding at December 29, 1996.......... 605,000 230,000 $10.75 Granted.................................. (300,000) 300,000 15.42 Forfeited................................ 10,000 (10,000) 10.00 -------- -------- ------ Outstanding at December 28, 1997.......... 315,000 520,000 13.46 Granted.................................. -- -- -- Forfeited................................ 133,332 (133,332) 16.25 -------- -------- ------ Outstanding at December 27, 1998.......... 448,332 386,668 12.49 Granted.................................. (133,332) 133,332 13.19 Forfeited................................ 48,332 (48,332) 13.15 -------- -------- ------ Outstanding at December 26, 1999.......... 363,332 471,668 $12.62 ======== ======== ======
Options for 347,446, 281,667 and 108,000 shares were exercisable at December 26, 1999, December 27, 1998 and December 28, 1997, respectively. F-40 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 Following is a summary of the weighted-average exercise price and weighted- average remaining contractual life for options outstanding at December 26, 1999:
Weighted- Weighted- # of Average Average Options Contractual Exercise Price Outstanding Life Remaining -------------- ----------- -------------- $10.00--$15.00 438,334 4.6 years $15.01--$20.00 33,334 1 year
In January 1998, the Company approved an Equity Appreciation Incentive Plan (the "EAI Plan") for its key employees. Under the EAI Plan, key employees have the opportunity to receive stock appreciation rights, which provide for cash payments upon vesting amounting to the difference between the Company's common stock value per share at the vesting date and $15.00 per share. Vesting is automatically triggered by an initial public offering, merger of the Company, sale of the Company or four years of continuous service by the employee. In conjunction with the approval of the EAI Plan, the Company has 130,000 outstanding stock appreciation rights as of December 26, 1999. In 1999, the Company recorded approximately $0.3 million of compensation expense associated with this plan. All awards under this plan will be accelerated upon consummation of the merger with ECC. 6. INCOME TAXES The Company accounts for income taxes using the liability method pursuant to Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under the liability method, deferred income taxes consist of the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Federal, state and local income taxes (benefits) consist of the following:
Years Ended -------------------------------------------------- December 28, December 27, December 26, 1997 1998 1999 ---------------- ---------------- ---------------- Current Deferred Current Deferred Current Deferred (in millions of dollars) ------- -------- ------- -------- ------- -------- Federal (benefit).......... $0.1 $(1.4) $-- $(1.8) $0.2 $ 1.7 State and local (benefit).. 0.1 (0.6) 0.1 0.1 0.6 (0.3) ---- ----- ---- ----- ---- ----- Total...................... $0.2 $(2.0) $0.1 $(1.7) $0.8 $ 1.4 ==== ===== ==== ===== ==== ===== Provisions for: Continuing operations...... $0.2 $(2.4) $0.1 $(2.7) $0.3 $(1.0) Discontinued operations.... -- 0.5 -- 1.0 0.1 0.2 Gain on sale of discontinued operations... -- -- -- -- 0.4 2.6 Extraordinary loss from early debt payment........ -- (0.1) -- -- -- (0.4) ---- ----- ---- ----- ---- ----- Total...................... $0.2 $(2.0) $0.1 $(1.7) $0.8 $ 1.4 ==== ===== ==== ===== ==== =====
F-41 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 The differences between income tax expense for continuing operations shown in the statements of operations and the amounts determined by applying the federal statutory rate of 34% in each year are as follows:
1997 1998 1999 ----- ----- ----- Federal statutory income tax (benefit)............. (34.0)% (34.0)% (34.0)% State and local income taxes, net of federal benefit........................................... (8.6) 0.9 (6.0) Nondeductible goodwill............................. 4.2 2.6 8.9 Others, net........................................ (0.8) 1.7 1.1 ----- ----- ----- Total.............................................. (39.2)% (28.8)% (30.0)% ===== ===== =====
The deferred tax asset and liability at the fiscal year end consist of the following components:
1998 1999 (in millions of dollars) ------ ------ Deferred tax assets: Accounts receivable....................................... $ 1.0 $ 0.9 Accrued compensation...................................... 1.1 1.3 Net operating loss carry forwards......................... 5.0 1.9 Other..................................................... -- 0.2 ------ ------ Gross deferred tax asset.................................... 7.1 4.3 Deferred tax liability: Depreciation and amortization............................. (23.3) (21.9) ------ ------ Net deferred tax liability.................................. $(16.2) $(17.6) ====== ======
Tax loss carryforwards totaling $5.4 million will expire by 2010 if not utilized. The components of deferred taxes included in the consolidated balance sheet are as follows:
1998 1999 ------ ------ Current asset............................................... $ 1.3 $ 1.3 Noncurrent liability........................................ (17.5) (18.9) ------ ------ Net deferred tax liability.................................. $(16.2) $(17.6) ====== ======
For the years ended December 26, 1999, December 27, 1998 and December 28, 1997, income taxes paid were approximately $0.3 million, $0.2 million and $0.3 million, respectively. 7. EXCHANGE OF BROADCASTING ASSETS On May 27, 1998, the Company, exchanged radio broadcasting licenses, radio broadcasting equipment and facilities in Portland and San Jose along with a $2.0 million short term note payable and 150,000 shares of common stock valued at $2.25 million for similar productive assets in Sacramento and San Francisco. Acquired assets were not self-sustaining. Integrated sets of support activities were not transferred in the exchange, nor were programming formats, or broadcast personalities. Acquired assets were redeployed and integrated into broadcasting and support activities originating from the San Jose area headquarters. The exchange was accounted for as a non-monetary exchange of similar productive assets. Acquired assets were recorded at the value of the assets surrendered, plus the value of the note payable and the common stock. F-42 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 8. DISCONTINUED OPERATIONS In February 1999, the Company sold to ECC substantially all of its assets relating to television stations WVEA, in Tampa, Florida, and WVEN, Orlando, Florida. It also sold to ECC all of its capital stock in Los Cerezos Television Company which operated television station WMDO in Washington, D.C. The net proceeds in connection with these transactions was approximately $12.9 million. 9. BENEFIT PLANS The Company sponsors two qualified 401(k) defined contribution plans, one for the radio division and one for the print division. For all eligible employees, the Company matches employee contributions within certain limits, and for the print division plan, the Company also contributes a fixed minimum annual contribution. Plan participants may make pretax contributions from their salaries up to the maximum allowed by the Internal Revenue Code. The Company's expense for both defined contribution plans for the years ended December 26, 1999 and December 27, 1998 was approximately $0.1 million. The Company is obligated, through its agreement with the union that represents employees who deliver El Diario/La Prensa, the Company's Spanish language daily newspaper, to contribute amounts to the defined benefit pension, welfare and 401(k) plans administered by the Publishers' Association of New York City. The pension and welfare plans provide pension benefits and medical insurance. The Company contributes approximately 9% and 11% of gross compensation for each eligible employee per year to the pension plan and welfare plan, respectively. The Company contributes $23 per shift per eligible employee to the union's 401(k) plan. For the years ended December 26, 1999, December 27, 1998 and December 28, 1997, the Company's expense for these multi- employer plans was approximately $0.3 million, $0.2 million and $0.2 million, respectively. The Company is obligated under a union contract to make severance payments to its union employees under certain circumstances. Non-union print division severance pay is calculated in a similar manner. The Company does not fund these commitments. The balance sheet accrual for severance is based on the net present values of the projected vested benefit obligation and, accordingly, provides for both vested and non-vested employees. The balance at December 26, 1999 and December 27, 1998 was approximately $1.4 million and $1.5 million, respectively, and is included in other liabilities. The Company's severance expense for the three years in the period ended December 26, 1999 was approximately $0.2 million in each year. 10. RELATED PARTY TRANSACTIONS During 1999, the Company paid other finance costs in the amount of $0.3 million to one of its stockholders and is committed to pay an additional $0.1 million in the year 2000. Interest expense on senior subordinated debt held by certain stockholders and officers of the Company amounted to $1.9 million in 1999, $1.8 million in 1998 and $1.2 million in 1997, see note 4 for a description of the terms of this indebtedness. During 1999, the Company assisted an officer with relocation costs by advancing cash in exchange for two notes receivable of $0.2 million each. One note specifies that no repayment is required if related employment continues for four years. Both notes specify that no repayment is required if the company is acquired. (See second paragraph of Note 1.) At December 26, 1999, the balance due on these notes totaled $0.4 million. F-43 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 11. COMMITMENTS AND CONTINGENCIES The Company has entered into various leases for office space and broadcast towers. Future minimum lease payments required at December 26, 1999 are:
(in millions of dollars) 2000............................................................. $ 1.8 2001............................................................. 1.6 2002............................................................. 1.4 2003............................................................. 1.2 2004............................................................. 1.0 Thereafter....................................................... 3.9 ----- $10.9 =====
Rental expense relating to these leases totaled $1.9 million, $2.0 million and $1.6 million for the years ended December 26, 1999, December 27, 1998 and December 28, 1997, respectively. During 1999, the Company purchased an option to acquire the land and buildings housing its corporate operations for an option price of $0.1 million. On January 12, 2000, the Company signed a letter of intent to exercise the option for $5.3 million. In September of 1999, the Company entered a ten-year lease commitment for facilities currently under construction in San Jose, California. The Company's corporate headquarters will be relocated to the new facility upon its completion and the lease is expected to begin in April 2000. Minimum monthly rentals are subject to annual consumer price index adjustments beginning in year three of the lease. The lease contains two five-year renewal options. On November 21, 1999, the Company entered into agreements to acquire the assets and licenses to operate two radio stations in Las Vegas and Reno, Nevada for aggregate purchase consideration of $17.5 million. The sale is expected to close by the second quarter of 2000 and is contingent upon receipt of FCC approval. As of December 26, 1999, the Company had deposited $0.5 million in escrow in connection with these acquisitions. In February 2000, the Company signed a letter of intent to sell its AM radio station in Washington, D.C. for proceeds of $2.5 million. The sale is expected to be completed by the second quarter of 2000 and the Company expects to record a gain in connection to the sale of approximately $1.5 million. The Company and its subsidiaries are parties to various legal proceedings and claims incident to the normal conduct of its business. The Company believes that it is unlikely that the outcome of all pending litigation in the aggregate will have a material adverse effect on its consolidated financial condition or results of operations. 12. SEGMENT INFORMATION The Company operates in two reportable segments, radio broadcasting and newspaper publishing. The radio broadcasting segment has operations in the San Francisco/San Jose bay area of California, the Salinas/ Monterey area of California, Riverside, California, Sacramento, California, Albuquerque, New Mexico, Denver, Colorado and Washington, DC. The newspaper publishing segment publishes a daily newspaper in New York, New York. Each segment is managed separately. Management evaluates performance based on several factors, of which the primary financial measure is segment operating profit. Total revenue of each segment represents sales to unaffiliated customers. There are no inter- segment sales. No single customer provides more than 10% of the Company's revenue. The accounting policies of the segments are the same as those described in Note 2. Corporate includes general and administrative costs that are not directly related to the reportable segments. F-44 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of December 27, 1998 and December 26, 1999 and for each of the three years in the period ended December 26, 1999 Financial information for these business segments includes:
Years Ended -------------------------------------- December 28, December 27, December 26, 1997 1998 1999 (in millions of dollars) ------------ ------------ ------------ Revenue: Radio Broadcasting...................... $ 19.2 $ 19.3 $ 25.1 Newspaper Publishing.................... 17.8 18.6 19.1 ------ ------ ------ $ 37.0 $ 37.9 $ 44.2 ====== ====== ====== Operating Profit (loss): Radio Broadcasting...................... $ (0.1) $ (1.0) $ 3.7 Newspaper Publishing.................... 0.7 1.4 1.2 ------ ------ ------ Total Reportable Segments.............. 0.6 0.4 4.9 Corporate............................... (1.7) (2.9) (1.8) ------ ------ ------ $ (1.1) $ (2.5) $ 3.1 ====== ====== ====== Identifiable Assets: Radio Broadcasting...................... $130.9 $131.9 $131.0 Newspaper Publishing.................... 23.3 23.8 24.5 ------ ------ ------ Total Reportable Segments.............. 154.2 155.7 155.5 Corporate............................... 4.3 5.5 1.9 Discontinued operations................. 4.5 4.8 -- ------ ------ ------ $163.0 $166.0 $157.4 ====== ====== ====== Depreciation and Amortization: Radio Broadcasting...................... $ 3.0 $ 3.8 $ 3.9 Newspaper Publishing.................... 0.7 0.8 1.0 ------ ------ ------ $ 3.7 $ 4.6 $ 4.9 ====== ====== ====== Capital Expenditures: Radio Broadcasting...................... $ 0.7 $ 0.2 $ 1.1 Newspaper Publishing.................... 0.2 0.9 1.2 ------ ------ ------ Total Reportable Segments.............. 0.9 1.1 2.3 Discontinued Operations.................. 0.1 0.2 -- ------ ------ ------ $ 1.0 $ 1.3 $ 2.3 ====== ====== ======
F-45 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Z-Spanish Media Corporation: We have audited the accompanying combined balance sheets of Z-Spanish Media Corporation and its Predecessor as of December 31, 1998 and 1999, and the related combined statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999. The combined financial statements include the accounts of Z-Spanish Media Corporation and three related companies, Achievement Radio Holdings, Inc., PAR Communications, Inc. and PAR Holdings, Inc., which collectively represent the Predecessor to Z-Spanish Media Corporation. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the financial position of the Z-Spanish Media Corporation and its Predecessor as of December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Sacramento, California March 24, 2000 F-46 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED BALANCE SHEETS December 31, 1998 and 1999 (In thousands, except share and per share data)
1998 1999 -------- -------- ASSETS Current assets: Cash and cash equivalents................................... $ 3,602 $ 4,493 Accounts receivable, net of allowance for doubtful accounts of $869 and $1,233 at December 31, 1998 and 1999, respectively............................................... 5,717 8,471 Notes receivable............................................ -- 7,500 Other current assets........................................ 752 1,983 -------- -------- Total current assets...................................... 10,071 22,447 Property and equipment, net.................................. 27,049 34,267 Investments.................................................. -- 2,501 Intangible assets, net....................................... 155,243 225,408 Other assets................................................. 4,911 4,420 -------- -------- Total assets................................................. $197,274 $289,043 ======== ======== LIABILITIES, REDEEMABLE PREFERRED STOCK, COMMON STOCK PUT OPTIONS AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................ $ 1,090 $ 810 Current portion of long-term debt........................... 4,056 22,779 Accrued expenses............................................ 3,854 4,636 Accrued interest............................................ 1,163 1,160 Other liabilities........................................... 2,732 5,020 Income taxes payable........................................ 521 628 -------- -------- Total current liabilities................................. 13,416 35,033 Long-term debt............................................... 62,251 89,066 Other long-term liabilities.................................. 1,003 1,101 Deferred income taxes........................................ 26,563 27,442 Minority interest............................................ 225 11 Commitments and contingencies (note 9) Redeemable preferred stock................................... 3,870 -- Common stock put options..................................... 24,984 37,591 Stockholders' equity: Preferred stock--$0.01 par value, 105,000 shares authorized and 10,079 shares issued and outstanding at December 31, 1998 ($11,837 liquidation value at December 31, 1998) and 10,000 shares authorized and no shares issued and outstanding at December 31, 1999........................... 10,523 -- Common stock--$0.01 par value; 62,000,000 shares authorized; 15,435,157 and 25,090,000 issued and outstanding at December 31, 1998 and 1999, respectively.... 154 251 Additional paid-in capital.................................. 59,813 115,751 Loans to stockholders....................................... (570) (1,010) Deferred stock compensation................................. -- (4,187) Accumulated deficit......................................... (4,958) (12,006) -------- -------- Total stockholders' equity................................ 64,962 98,799 -------- -------- Total liabilities, redeemable preferred stock, common stock put options and stockholders' equity........................ $197,274 $289,043 ======== ========
See notes to combined financial statements. F-47 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1997, 1998 and 1999 (In thousands)
1997 1998 1999 ------- ------- ------- Revenue: Revenue.......................................... $13,339 $27,598 $38,561 Less agency and broker commissions............... 297 1,740 2,523 ------- ------- ------- Net revenue.................................... 13,042 25,858 36,038 ------- ------- ------- Operating expenses: Direct operating expenses........................ 4,391 10,108 14,183 Selling, general and administrative.............. 5,105 6,459 8,382 Depreciation and amortization.................... 2,747 6,736 8,670 Corporate expenses............................... 2,975 3,669 4,773 ------- ------- ------- Total operating expenses....................... 15,218 26,972 36,008 ------- ------- ------- Gain on sale of assets, net........................ 2,671 5,685 4,442 ------- ------- ------- Operating income................................... 495 4,571 4,472 Interest expense................................... (2,425) (5,664) (7,485) Interest and other income.......................... 356 340 1,014 ------- ------- ------- Income (loss) before minority interest, income taxes and extraordinary item...................... (1,574) (753) (1,999) Minority interest in (loss) income of subsidiaries...................................... (31) (86) 182 Income taxes benefit (provision)................... 538 (394) 102 ------- ------- ------- Loss before extraordinary loss..................... (1,067) (1,233) (1,715) Extraordinary loss on debt extinguishment (Net of income tax benefit of $378 in 1997 and $699 in 1999).......................................... (568) -- (1,047) ------- ------- ------- Net loss....................................... $(1,635) $(1,233) $(2,762) ======= ======= =======
See notes to combined financial statements. F-48 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 1997, 1998 and 1999 (In thousands except share data)
Preferred Stock Common Stock ----------------- ----------------------------- Additional Deferred Paid-in Loans to Stock Accumulated Shares Amount Shares Amount Capital Stockholders Compensation Deficit Total ------- -------- ---------- ------ ---------- ------------ ------------ ----------- -------- Balance at January 1, 1997................... -- -- 5,876,490 $ 59 $ 25,441 -- -- $ (1,824) $ 23,676 Issuance of common stock.................. -- -- 4,723,814 47 20,453 -- -- -- 20,500 Issuance of stock-- Vista acquisition...... 10,079 $ 10,523 1,714,105 17 191 $ (504) -- -- 10,227 Net loss............... -- -- -- -- -- -- -- (1,635) (1,635) ------- -------- ---------- ---- -------- ------- ------- -------- -------- Balance at December 31, 1997................... 10,079 10,523 12,314,409 123 46,085 (504) -- (3,459) 52,768 Formation of Z-Spanish Media Corporation and acquisition of subsidiaries........... -- -- 3,720,874 37 16,773 -- -- -- 16,810 Redeemable preferred stock dividends........ -- -- -- -- -- -- -- (266) (266) Purchase of common stock.................. -- -- (600,126) (6) (3,045) -- -- -- (3,051) Increase in loans to stockholders........... -- -- -- -- -- (66) -- -- (66) Net loss............... -- -- -- -- -- -- -- (1,233) (1,233) ------- -------- ---------- ---- -------- ------- ------- -------- -------- Balance at December 31, 1998................... 10,079 10,523 15,435,157 154 59,813 (570) -- (4,958) 64,962 Purchase of common stock.................. -- -- (228,550) (2) (1,141) -- -- -- (1,143) Issuance of common stock.................. -- -- 5,212,120 52 29,448 -- -- -- 29,500 Stockholder common stock purchase......... -- -- 103,618 1 517 (518) -- -- -- Issuance of stock--JB Broadcasting acquisition............ -- -- 681,264 7 3,350 -- -- -- 3,357 Issuance of preferred stock.................. 11,400 11,456 -- -- -- -- -- -- 11,456 Deferred stock compensation........... -- -- -- -- 4,333 -- (4,333) -- -- Amortization of deferred stock compensation........... -- -- -- -- -- -- 146 -- 146 Acquisition of minority interests in subsidiaries and exchange of preferred for common stock....... (21,479) (21,979) 3,886,391 39 32,038 -- -- (4,462) 5,636 Redeemable preferred stock dividend settlement............. -- -- -- -- -- -- -- 176 176 Increase in fair value of common stock put options................ -- -- -- -- (12,607) -- -- -- (12,607) Decrease in loans to stockholders........... -- -- -- -- -- 78 -- -- 78 Net loss............... -- -- -- -- -- -- -- (2,762) (2,762) ------- -------- ---------- ---- -------- ------- ------- -------- -------- Balance at December 31, 1999................... -- $ -- 25,090,000 $251 $115,751 $(1,010) $(4,187) $(12,006) $ 98,799 ======= ======== ========== ==== ======== ======= ======= ======== ========
See notes to combined financial statements. F-49 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1998 and 1999 (In thousands)
1997 1998 1999 -------- -------- --------- Cash flows from operating activities: Net loss....................................... $ (1,635) $ (1,233) $ (2,762) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.................. 2,747 6,736 8,670 Deferred income taxes.......................... (1,223) (11,946) 879 Minority interest.............................. 31 86 (182) Loss on debt extinguishment.................... 568 -- 1,047 Gain on sale of assets......................... (2,671) (5,685) (4,442) Loss on write-off of advertising displays...... -- -- 1,664 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable........................... (455) 567 (2,754) Other current assets.......................... (531) 1,144 (1,539) Receivable from affiliate..................... (12,929) 4,637 -- Other assets.................................. (6) 180 (29) Accounts payable and accrued liabilities...... 741 (1,109) (717) Other liabilities............................. (1,077) 2,227 (115) -------- -------- --------- Net cash used in operating activities........ (16,440) (4,396) (280) -------- -------- --------- Cash flows from investing activities: Proceeds from sale of assets................... 19,396 43,600 23,710 Escrow deposits on pending acquisitions........ -- (4,335) 520 Purchase of property and equipment and intangible assets............................. (40,042) (7,003) (103,305) -------- -------- --------- Net cash (used in) from investing activities.................................. (20,646) 32,262 (79,075) -------- -------- --------- Cash flows from financing activities: Repayment of notes payable..................... (2,354) -- -- Issuance of notes payable...................... 482 -- 7,100 Proceeds from long-term debt................... 26,983 -- 109,100 Repayment of long-term debt.................... (15,000) (19,018) (70,662) Debt issuance costs............................ (857) -- (1,313) Issuance of common and preferred stock......... 30,727 24,984 40,956 Repurchase of common stock..................... -- (3,051) (1,143) Redemption of redeemable preferred stock....... -- -- (3,870) Purchase of Z-Spanish Radio Network net of cash acquired...................................... -- (30,683) -- Loans to stockholders.......................... -- (66) 78 Minority interest in subsidiary................ -- 56 -- -------- -------- --------- Net cash from (used in) financing activities.................................. 39,981 (27,778) 80,246 -------- -------- --------- Net increase in cash and cash equivalents....... 2,895 88 891 Cash and cash equivalents, beginning of year.... 619 3,514 3,602 -------- -------- --------- Cash and cash equivalents, end of year.......... $ 3,514 $ 3,602 $ 4,493 ======== ======== ========= Supplemental disclosure of cash flow information: Interest paid.................................. $ 2,128 $ 6,221 $ 7,480 Income taxes paid.............................. 806 268 298 Non-cash investing and financing activities: Radio station property and equipment financed through seller notes payable.................. $ 120 -- -- FCC license and other intangibles acquired financed through seller notes payable......... 6,150 -- -- Write off of programming library and offsetting liability..................................... 575 -- -- Write off of network costs..................... 116 -- -- Reduction of debt obligation................... 165 -- -- Outdoor advertising assets and liabilities assumed through seller notes payable.......... 2,176 -- -- Acquisition of net assets of Z-Spanish Radio, net of cash acquired through issuance of common stock.................................. -- $ 16,810 -- Acquisition of radio station assets acquired through the cancellation of debt from seller, and issuance of debt.......................... -- 13,292 -- Accrued dividends on redeemable preferred stock......................................... -- 266 -- Sale of radio station assets for a note receivable.................................... -- -- $ 7,500 Purchase of land through seller notes payable.. -- -- 2,250 Barter transaction............................. -- -- 2,501 Reversal of accrued dividends on redeemable preferred stock............................... -- -- 176 Acquisition of radio station assets through issuance of common stock, cancellation of debt from seller and cancellation of LMA payable... -- -- 3,357
See notes to combined financial statements. F-50 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS For the years ended December 31, 1997, 1998 and 1999 1. DESCRIPTION OF BUSINESS Basis of Presentation The accompanying combined financial statements reflect the combined accounts of Z-Spanish Media Corporation ("Z-Media") and its predecessor of Z-Media, referred to as PAR, which was comprised of three companies under common control, Achievement Radio Holdings, Inc. ("ARH"), PAR Communications, Inc. ("PARCOM") and PAR Holdings, Inc. ("Holdings"). Z-Media was incorporated on January 23, 1998 as a holding company and subsequently obtained sole ownership of Z-Spanish Radio Network, Inc. ("Z- Spanish") and ARH, pursuant to certain agreements entered into in May 1998. On December 31, 1999, Z-Media acquired all the outstanding capital stock of Vista Media Group, Inc. ("Vista"), whereby Vista became a wholly owned subsidiary of Z-Media. Z-Media and Vista have shared a common controlling stockholder group since August 29, 1997. As such, the business combination has been accounted for as a common control business combination, and the accounts of Vista are included in the accompanying combined financial statements from August 29, 1997. The Z-Spanish, ARH and Vista business combinations and related financial accounting treatment are described in Note 3--Business Acquisitions and Dispositions. Z-Media, Vista and PAR are collectively referred to as the Company except where otherwise noted. Operations Z-Media and ARH own and operate radio stations and distribute programming to affiliates throughout the United States. Vista is engaged in operating outdoor advertising displays and owns 10,060 billboards concentrated in the Los Angeles and New York metropolitan areas. Vista formed Vista Joliet LLC ("Joliet"), a 80% owned subsidiary of Vista, in the state of Delaware on June 12, 1998 to manage operations in the Chicago area. As of December 31, 1999, the Company owned and operated 32 radio stations including one station under a Local Marketing Agreement ("LMA"). Under an LMA, the Company pays a fee to operate another company's radio station. The results of operations of LMA stations are accounted for in the same manner that the Company accounts for the operations of its owned and operated stations. The Company's radio broadcasting operations cover five major geographic areas: the West Coast (California), Midwest (Chicago), lower Midwest (Dallas), Southeast (Miami) and Southwest (Phoenix). Owned and operated stations are located in San Jose, Sacramento, Salinas/Monterey, Fresno, Stockton, Modesto, and Chico, California; Houston and Dallas/Ft Worth, Texas; Chicago, Illinois; Phoenix, Tucson, and Nogales, Arizona; and Miami, Florida. As part of its radio broadcasting operations, the Company produces, controls and distributes its own radio programs. Programming is distributed to owned and operated stations via satellite transmission. The Company also transmits via satellite its programming to 42 other stations ("affiliate stations") throughout the U.S. and charges these stations network fees under affiliation agreements. Revenue of the Company's broadcasting operations is principally generated from the sale of advertising associated with its programming to national accounts, local and regional retail advertisers. The Company's radio stations are licensed by the Federal Communications Commission ("FCC"). Outdoor advertising revenue consists mainly of fees earned by selling billboard space to advertisers. F-51 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Combination The accompanying combined financial statements include the accounts of companies controlled by a common stockholder group ("Controlling Stockholders"). All intercompany balances and transactions have been eliminated in the combined financial statements. Cash and Cash Equivalents The Company considers cash investments with maturities of three months or less at the time of purchase to be cash equivalents. Property and Equipment, Net The Company's property and equipment is recorded at cost less accumulated depreciation. The Company depreciates property and equipment using the straight-line method over their estimated useful lives. The Company amortizes leasehold improvements using the straight-line method over the lesser of the life of the lease or the estimated useful life of the leased asset. Estimated useful lives are as follows: Buildings and improvements......................................... 30 years Advertising displays............................................... 15 years Station transmitter, towers and antennas........................... 7 years Furniture, fittings and fixtures................................... 5 years Motor vehicles..................................................... 5 years Computer hardware and software..................................... 3-5 years
Investments Investments are comprised of equity securities. These securities are classified as available-for-sale and carried at historical value as market prices are unavailable. There were no unrealized gains or losses on these investments recorded for the year ended December 31, 1999. Intangible Assets, Net Intangible assets consist primarily of FCC licenses, goodwill, deferred charges and non-compete agreements recorded at cost. Goodwill represents the excess of the purchase price over the fair value of the net assets at the date of acquisition. Amortization of intangible assets and other assets is provided in amounts sufficient to allocate the asset cost to operations over the estimated useful lives on a straight-line basis. The estimated useful lives are as follows: FCC licenses..................................................... 40 years Goodwill......................................................... 15-40 years Deferred charges................................................. 7 years Non-competition agreements....................................... 3-5 years
Revenue Recognition Revenue from the sale of radio advertising time and from network operations is recognized when the advertisement or network programming is broadcast. Outdoor advertising revenue is recognized over the life of advertising contracts and is recorded net of discounts. F-52 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 Barter The Company trades commercial airtime and outdoor advertising space for goods and services used principally for promotional, sales and other business activities. An asset and liability is recorded at the fair market value of the goods and services received. Barter revenue is recorded and the liability relieved when commercials are broadcast or outdoor advertising space is utilized. Barter expense is recorded and the asset relieved when goods or services are received or used. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. Advertising production costs are expensed at the first use of the related advertising and costs of communicating an advertisement are expensed as the communication occurs. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Credit Risk In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers and the geographic diversification of the Company's customer base. The Company performs credit evaluations on new customers and believes adequate allowances for any uncollectible trade receivables are maintained. During the years ended December 31, 1997, 1998 and 1999, no customer accounted for more than 10% of net revenue. Stock-Based Compensation The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board No. 25, Accounting for Stock Issued to Employees ("APB 25"). During 1999, the Company recognized $0.1 million of compensation expense related to stock options. Income Taxes The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement basis of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable earnings. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income during the period that includes the enactment date. Comprehensive Income Statement of Financial Accounting Standard ("SFAS") No. 130, Reporting Comprehensive Income, became effective in 1998. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. During 1997, 1998, and 1999 the Company had no items of other comprehensive income. Accordingly, comprehensive income equals net income. F-53 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 Impairment of Long-Lived Assets The Company accounts for the impairment of long-lived assets in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. As required by the statement, the Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or intangibles may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company periodically evaluates the propriety of the carrying amount of property and equipment, investments, intangible assets and other assets as well as the depreciation or amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation involves an assessment of the recoverability of the asset by determining whether the depreciation or amortization of the asset balance can be recovered through undiscounted future operating cash flows over its remaining useful life. The assessment of the recoverability of the intangible assets will be impacted if estimated future operating cash flows are not achieved. Derivative Financial Instruments The Company does not use derivative financial instruments for trading purposes. They are used to manage interest rate risks related to interest on the Company's outstanding debt. As interest rates change, the differential to be paid or received under interest rate swap agreements is recognized as an adjustment to interest expense. The Company had interest rate swap agreements with banks as of December 31, 1998 and 1999 (see Note 7--Long-Term Debt). Fair Value of Financial Instruments The Company's financial instruments include cash and cash equivalents, receivables, accounts payable and certain other accrued liabilities. The carrying amounts of these items approximate their fair values because of their short duration to maturity. The fair value of the interest rate swap contracts is estimated by obtaining quotations from the counterparties. The fair value is an estimate of the amounts that the Company would (receive) pay at the reporting date if the contracts were transferred to other parties or cancelled by the counterparties. Recently Issued Accounting Standards SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued in June 1998. The Standard defines derivatives, requires that all derivatives be carried at fair value, and provides for hedge accounting when certain conditions are met. The requirements of SFAS No. 133 will be effective for the Company in the first quarter of the fiscal year ending December 31, 2001. The Company is currently evaluating the impact SFAS No. 133 will have on its financial statements. Presentation of Common Shares and Per Share Amounts On February 12, 1999, the Company authorized a 10,000-to-1 reverse stock split for all its classes of common stock. On December 23, 1999, the Company effected a 20,000-for-1 split of its common stock. F-54 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 3. BUSINESS ACQUISITIONS AND DISPOSITIONS The Company has accounted for acquisitions using the purchase method of accounting, except where disclosed otherwise, recording assets acquired and liabilities assumed at their fair values at the acquisition date. The excess of purchase prices over the fair values of net tangible and intangible assets acquired has been recorded as goodwill. The results of operations of acquired businesses are included in the combined statements of operations from the date of each respective acquisition. 1997 Radio Station Transactions On February 7, 1997, PAR acquired all of the outstanding stock of KAMT, Inc. which operated radio station KKMO in Seattle, Washington, for $0.9 million. PAR paid cash of $0.3 million, issued a note payable to the seller of $0.6 million, and assumed a $0.3 million capital lease obligation. The note was paid off in December 1997. On May 29, 1997, PAR acquired the assets of KTNO in Dallas, Texas, for $2.4 million. The Company paid $0.5 million in cash and issued two notes payable for $0.1 million and $1.8 million. The two notes were paid off in December 1997. On August 7, 1997, PAR sold the assets of radio station WVVX in Chicago, Illinois, resulting in a gain of $0.8 million. The $9.5 million proceeds of this sale, plus $1.2 million of cash, were used to purchase the assets of two other stations in separate transactions; WEJM, in Chicago, Illinois, for $7.5 million and KKSJ, in San Jose, California, for $3.2 million. In December 1997, PAR sold the assets of radio station WEJM in Chicago, Illinois for $9.9 million. PAR's gain on the sale of WEJM was $1.9 million. A summary of the gains from sales transactions recorded in 1997 is as follows (in millions): Gain on sale of WEJM.................................................... $1.9 Gain on sale of WVVX.................................................... 0.8 ---- Total................................................................... $2.7 ====
The allocation of purchase price to net assets of radio stations acquired in 1997 was as follows (in millions):
KKMO KTNO WEJM KKSJ Total ---- ---- ---- ---- ----- Land, property and equipment..................... $0.2 $0.1 $1.2 $0.3 $ 1.8 Goodwill and FCC licenses........................ 1.0 2.3 6.3 2.9 12.5 Liabilities...................................... (0.3) -- -- -- (0.3) ---- ---- ---- ---- ----- Total............................................ $0.9 $2.4 $7.5 $3.2 $14.0 ==== ==== ==== ==== =====
F-55 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 1998--PAR Dispositions and Reorganization Pursuant to an agreement dated May 22, 1998, PAR sold the assets of radio stations WNJR in New Jersey, KYPA in Los Angeles, KWPA in Pomona, California, KXPA in Bellevue, Washington, KOBO in Yuba City, KEST in San Francisco and KSJX in San Jose, California for $41.0 million consisting of $10.0 millon in cash and a note receivable of $31.0 million. In addition, pursuant to an agreement dated April 7, 1998, PAR sold the assets of radio station KKMO and other assets and liabilities remaining in Holdings, including the $31.0 million note receivable and its investment in Douglas Broadcasting, Inc. ("DBI") through the sale of the stock of Holdings for $34.5 million in cash. The aggregate net gain on these dispositions was $5.7 million. Subsequent to the PAR dispositions referred to above, and as a result of the reorganization of certain operations within PAR earlier in 1998, the remaining assets and liabilities and operations of PAR resided solely in ARH. 1998--Z-Spanish and ARH Business Combinations Z-Media's ownership of Z-Spanish and ARH resulted from certain simultaneous transactions between the former stockholders and warrant holders of Z-Spanish and stockholders of ARH pursuant to the agreements dated May 29, 1998, the Warrant Purchase and Contribution agreements. Under the Warrant Purchase agreement, ARH acquired warrants ("Z-Spanish Warrants") to purchase Z-Spanish common stock directly from Z-Spanish stockholders, for cash consideration of $33.6 million. The Z-Spanish Warrants represented the majority of all such warrants outstanding, except for a small number of warrants held by a lender to Z-Spanish ("Lender"). Under the Contribution agreement, Z-Spanish and ARH stockholders and the Lender contributed the operations of Z-Spanish and ARH to Z-Media. The parties contributed their respective interests in ARH common stock, Z-Spanish warrants and Z-Spanish common stock to Z-Media in exchange for common stock of Z-Media. For financial accounting purposes, these transactions resulted in a change of control in Z-Spanish. As a result, the acquisition of Z-Spanish was recorded using the purchase method of accounting. The accompanying combined financial statements include the operations of Z-Spanish for the period from May 29, 1998 through December 31, 1999 and reflect the new basis of accounting for Z-Spanish assets and liabilities based on their estimated fair values as of May 29, 1998. The cost of acquiring Z-Spanish based on the purchase price was allocated to estimated fair values of the assets and liabilities of Z-Spanish as follows (in millions): Cash................................................................. $ 2.9 Other current assets................................................. 4.6 Property and equipment............................................... 1.6 Intangibles and other................................................ 133.0 Current liabilities.................................................. (3.3) Long-term debt....................................................... (51.0) Deferred income taxes................................................ (29.9) Redeemable Preferred Stock........................................... (3.9) ------ Total costs.......................................................... $ 54.0 ======
There was no change in control in ARH for financial accounting purposes as a result of the transaction discussed above. Accordingly, Z-Media recorded ARH on an "as pooled" basis because the contribution of ARH to Z-Media was a business contribution between companies under common control (a "common control business combination"). F-56 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 1998 Radio Station Transactions On June 9, 1998, ARH acquired radio station WYPA-AM in Chicago, Illinois by purchasing all of the outstanding stock of PAR of Illinois, Inc. (owner of WYPA) from a stockholder by canceling $8.3 million of debt the affiliate had borrowed from ARH to finance the original acquisition of WYPA-AM. On July 31, 1998, Z-Media sold assets of Z-Spanish station KZWC-FM in Walnut Creek, California for $4.5 million in cash. There was no significant gain or loss on the sale since the assets sold had been recorded at fair value by Z- Media on May 28, 1998. On December 22, 1998, Z-Media acquired all of the assets of radio station KHZZ-FM (formerly KQBR-FM) in Sacramento, California for $5.5 million, consisting of $0.5 million in cash and notes payable totaling $5.0 million. On December 31, 1998, Z-Media acquired the assets of two radio stations, KZSL-FM and KTGE-AM, in Salinas, California for $1.6 million in cash. The allocation of purchase price to net assets of radio stations acquired in 1998 was as follows (in millions):
KTGE-AM WYPA-AM KHZZ-FM KZSL-FM Total ------- ------- ------- ----- Land, property and equipment.................. $0.3 $0.2 $0.1 $ 0.5 Goodwill and FCC licenses..................... 8.0 5.3 1.5 14.9 ---- ---- ---- ----- Total......................................... $8.3 $5.5 $1.6 $15.4 ==== ==== ==== =====
1999 Radio Station Transactions with Third Parties On January 8, 1999, the Company sold the assets of stations KZSF-FM and KZSF-FM1 for $16.5 million in cash. There was no significant gain or loss on the sale since the assets sold had been recorded at fair value by Z-Media. On January 25, 1999, the Company purchased the assets of radio station WLQY- AM in Miami, Florida for $5.7 million in cash. On January 29, 1999, the Company sold the assets of station WBPS-AM, licensed in Dedham, Massachusetts, for $4.0 million in cash. The gain on sale of the related assets was $2.2 million. On February 26, 1999, the Company purchased the assets of station KLNZ-FM in Phoenix, Arizona for $22.0 million in cash. On May 18, 1999, the Company purchased the assets of station KZMP-FM in Dallas, Texas for $26.5 million in cash. On May 24, 1999, the Company purchased the assets of three radio stations, KCTY-AM, KRAY-FM and KLXM-FM, in Salinas, California for $4.5 million in cash. On August 27, 1999, the Company sold the assets of station KZNO-AM, licensed in Nogales, Arizona, for $0.2 million in cash. The loss on sale of the related assets was recognized of $0.1 million. F-57 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 On September 23, 1999, the Company sold the assets of station WYPA-AM, licensed in Chicago, Illinois, for $10.5 million with $3.0 million in cash and $7.5 million in notes receivable due on September 23, 2000. The gain on sale of the related assets was $2.3 million. A summary of the gains (loss) from sales transactions recorded in 1999 is as follows (in millions): Gain on sale of WBPS-AM............................................... $ 2.2 Loss on sale of KZNO-AM............................................... (0.1) Gain on sale of WYPA-AM............................................... 2.3 ----- Total................................................................. $ 4.4 =====
The allocation of purchase price to net assets of the radio stations acquired in 1999 was as follows (in millions):
KCTY-AM KRAY-FM and WLQY-AM KLNZ-FM KZMP-FM KLXM-FM Total ------- ------- ------- ------- ----- Land, property and equipment......... $0.7 $ 0.9 $ 0.5 $0.3 $ 2.4 Goodwill and FCC licenses............ 5.0 21.1 26.0 4.2 56.3 ---- ----- ----- ---- ----- Total................................ $5.7 $22.0 $26.5 $4.5 $58.7 ==== ===== ===== ==== =====
1999 Radio Station Acquisition from Related Parties On October 18, 1999, Z-Media acquired JB Broadcasting, Inc. ("JB"), previously owned by two officers of the Company, for $3.4 million through the issuance of 681,264 shares of Z-Media's Class B Common Stock pursuant to its rights under an Option Agreement. The acquisition was accounted for using the purchase method and the purchase price was allocated primarily to FCC licenses and goodwill. As part of the transaction, the Company's note receivable and accrued interest totaling $0.3 million was offset against the Company's note payable for LMA fees and accrued interest totaling $0.7 million. The Company had operated KZMS during 1998 and 1999 for a fee of $12,000 a month, under an LMA. JB was owned by two officers of the Company. The Company also had $0.2 million in notes receivable with an interest rate of 12% compounded annually from JB at December 31, 1998. 1999 Acquisitions of Outdoor Advertising Businesses On September 30, 1999, Vista acquired all of the outstanding capital stock of Seaboard Outdoor Advertising Co., Inc. ("Seaboard"), for $33.4 million. The acquisition of Seaboard was recorded using the purchase method of accounting. The accompanying combined financial statements include the operations of Seaboard for the period from October 1, 1999 through December 31, 1999 and reflect the new basis of accounting for Seaboard assets and liabilities based on their estimated fair values as of September 30, 1999. F-58 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 The purchase price was allocated to estimated fair values of the assets and liabilities of Seaboard as follows (in millions): Cash................................................................. $ 0.5 Other current assets................................................. 1.3 Property and equipment............................................... 4.1 Intangibles and other................................................ 30.2 Current liabilities.................................................. (0.8) Deferred income taxes................................................ (1.9) ----- Total costs.......................................................... $33.4 =====
On December 21, 1999, Vista acquired 18 billboards of Heywood Outdoor Advertising, Inc. for $2.0 million cash and 180 signs having a net book value of $0.3 million. Of the purchase price, $1.6 million was allocated to goodwill and $0.7 million was allocated to the assets acquired. 1999--Merger of Vista into Z-Media On December 31, 1999, Vista was combined with Z-Media pursuant to a statutory merger agreement whereby Vista stockholders exchanged their common shares of Vista for common shares of Z-Media. The merger of Vista into Z-Media has been accounted for as a pooling of interests with Vista's net assets carried over at historical cost to the extent Vista was previously under common ownership with Z-Media. The portion of Vista's net assets acquired by Z-Media that were previously owned by minority stockholders has been accounted for as a purchase and recorded at fair value. Furthermore, the accompanying combined financial statements include the accounts of Vista on the basis described above, from the date such common control existed, August 29, 1997. Pursuant to the merger agreement, Vista preferred stockholders, who were also the previous holders of Vista common stock, exchanged their preferred stockholdings for additional Z-Media common stock. The difference between the fair value of Z-Media common stock received by the preferred stockholders and the historical cost carrying amount of the preferred stock was approximately $4.5 million and was recorded as an increase in the Company's accumulated deficit as of December 31, 1999. 4. NOTES RECEIVABLE The Company received two promissory notes as partial settlement of its sale of the assets of one of its radio stations, WYPA-AM, during 1999 (see Note 3). The notes in the amount of $7.0 million and $0.5 million are secured and mature on September 20, 2000, with an interest rate of 9% paid quarterly. F-59 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31 (in millions):
1998 1999 ----- ----- Land........................................................... $ 0.2 $ 0.3 Buildings and improvements..................................... 0.6 1.1 Furniture, fittings and fixtures............................... 0.9 0.4 Station, transmitters and antennas............................. 1.4 0.9 Advertising displays........................................... 24.5 27.6 Machinery and equipment........................................ 2.3 5.3 Motor vehicles................................................. 0.1 0.2 Computer hardware and software................................. 0.2 0.4 Construction-in-progress....................................... 0.3 3.8 ----- ----- Total........................................................ 30.5 40.0 Less accumulated depreciation and amortization................. (3.5) (5.7) ----- ----- Property and equipment, net.................................... $27.0 $34.3 ===== =====
6. INTANGIBLE ASSETS Intangible assets consist of the following at December 31 (in millions):
1998 1999 ------ ------ FCC licenses................................................. $125.7 $158.5 Goodwill..................................................... 31.2 69.2 Deferred charges............................................. 2.8 4.0 Non-competition agreements................................... 0.4 0.4 Other........................................................ 1.0 2.6 ------ ------ Total...................................................... 161.1 234.7 Less accumulated amortization................................ (5.9) (9.3) ------ ------ Intangible assets, net....................................... $155.2 $225.4 ====== ======
F-60 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 7. LONG-TERM DEBT Borrowing arrangements consist of the following at December 31 (in millions):
1998 1999 ----- ------ 1999 Credit Agreement Revolving credit facility of $30.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (9.075% at December 31, 1999), available through January 20, 2006................................................... -- $ 7.1 Term facility of $45.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (9.075% at December 31, 1999), quarterly principal repayments beginning March 31, 2000 at $1.1 million, increasing to $1.7 million on March 31, 2002 and $2.8 million on March 31, 2004 until maturity on January 20, 2006................ -- 45.0 1997 Credit Agreement Revolving credit facility of $15.0 million, with quarterly reductions of availability beginning March 31, 2001, as defined, through maturity on September 30, 2006, interest payable quarterly at LIBOR plus Applicable Margin, as defined (8.69% at December 31, 1999), secured by substantially all of the Company's assets.................. $ 1.2 4.0 Term facility of $35.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (9.625% at December 31, 1999), principal repayment in quarterly installments of $0.8 million beginning June 30, 2001 increasing to $1.1 million on March 31, 2002, $1.3 million on March 31, 2003, $1.5 million on March 31, 2004, $1.8 million on March 31, 2005 and $3.2 million on March 31, 2006 until maturity on September 30, 2006, secured by substantially all of the Company's assets.................. 14.3 35.0 Other Borrowings Credit line of $20.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (9.5% at December 31, 1999), principal due December 31, 2000................. -- 18.1 Note payable, interest payable monthly at 9%, monthly installments of principal and interest of $0.03 million beginning December 1, 2004 and ending November 1, 2014, secured by a deed of trust................................. -- 2.3 Other....................................................... 1.1 0.4 ----- ------ Total....................................................... 66.3 111.9 Less current portion........................................ (4.0) (22.8) ----- ------ Long-term debt.............................................. $62.3 $ 89.1 ===== ======
Senior notes at 8.34%, repaid in 1999....................... 29.9 -- Subordinated notes for $10.9 million, due to a former stockholder of the Company, $2.9 million due to a stockholder of the Company and $6.0 million, at rates ranging from 12% to 13%, repaid in 1999.................... 19.8 -- F-61 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 The 1999 and 1997 credit agreements require the maintenance of specific financial covenants, including leverage, fixed charge and interest expense coverage ratios and certain limitations on indebtedness levels and overhead expenses. The $20.0 million credit line also includes restrictive covenants, which, among other things, require that the Company not incur additional debt. The 1999 credit agreement requires under certain circumstances that the Company enter into interest rate protection agreements to fix the Company's floating rate debt on no less than 50% of the principal amount of total term debt outstanding. At December 31, 1999, the Company had outstanding two interest rate swap agreements with commercial banks, having a total notional principal amount of $24.1 million. These outstanding swap agreements mature August 7, 2000 and September 18, 2000, and require the Company to pay fixed rates of 6.63% and 5.33%, respectively, while the counterparty pays floating rate based on the three-month LIBOR. During the years ended December 31, 1997, 1998 and 1999, the Company recognized additional interest expense under its interest rate swap agreements of $0.1 million, $0.1 million, and $0.1 million, respectively. The aggregate fair value of the interest rate swap agreements at December 31, 1999 was $18,000. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties. As required by the 1997 credit agreement, at December 31, 1997 and 1998, the Company had outstanding one interest rate swap agreement with a commercial bank, having a total notional principal amount of $10.0 million. The outstanding swap agreement matured on August 31, 1999, and required the Company to pay a fixed rate of 6.08%, while the counterparty paid a floating rate based on adjusted LIBOR. During the years ended December 31, 1997, 1998 and 1999, the Company recognized additional interest expense under the interest rate swap agreement of $7,000, $41,000, and $67,000, respectively. Future minimum principal payments on long-term debt based on the credit agreements and notes in place as of December 31, 1999 were as follows (in millions): 2000.................................................................. $ 22.8 2001.................................................................. 7.0 2002.................................................................. 11.0 2003.................................................................. 12.0 2004.................................................................. 17.4 Thereafter............................................................ 41.6 ------ Total................................................................. $111.8 ======
Company management believes that the fair value of its principal short and long term borrowings are equal to the book value since the terms were recently negotiated with the lenders. F-62 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 8. INCOME TAXES The Company's combined income tax (benefit) provision or the years ended December 31, included the following (in millions):
1997 1998 1999 ----- ----- ----- Current taxes: Federal.................................................. $ 0.1 $ 4.6 $ 0.1 State.................................................... 0.2 1.3 0.1 ----- ----- ----- Total................................................. 0.3 5.9 0.2 ----- ----- ----- Deferred income taxes: Federal.................................................. (1.0) (4.5) (0.9) State.................................................... (0.2) (1.0) (0.1) ----- ----- ----- Total................................................. (1.2) (5.5) (1.0) ----- ----- ----- Total income taxes....................................... (0.9) 0.4 (0.8) Less income taxes related to extraordinary items......... 0.4 -- 0.7 ----- ----- ----- Total.................................................... $(0.5) $ 0.4 $(0.1) ===== ===== =====
Deferred income tax assets (liabilities) resulting from tax effects of temporary differences at December 31 are as follows (in millions):
1998 1999 ------ ------ Deferred income tax assets: Net operating loss and tax credit carryforwards............... $ 5.5 $ 7.5 Allowance for doubtful accounts............................... 0.8 0.5 Other......................................................... 2.4 2.2 ------ ------ Total...................................................... 8.7 10.2 ------ ------ Deferred income tax liabilities: Property, equipment and intangible assets..................... (35.3) (37.6) ------ ------ Total...................................................... (35.3) (37.6) ------ ------ Net deferred income tax liability............................. $(26.6) $(27.4) ====== ======
A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:
1997 1998 1999 ----- ----- ----- Federal tax at statutory rate................... (35.0)% (35.0)% (35.0)% State income taxes, net of federal benefit..... (4.2) (3.2) (3.5) Non-deductible goodwill amortization........... 1.3 25.5 10.6 Non-deductible meals and entertainment.......... 1.0 2.4 1.5 Other accruals.......... -- 57.3 -- Other................... 1.0 -- 3.9 ----- ----- ----- Total................... (35.9)% 47.0 % (22.5)% ===== ===== =====
F-63 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 Z-Media and its subsidiaries file their federal and state tax returns on a consolidated basis. As of December 31, 1999, the Company has federal net operating loss carryforward of $18.3 million which will begin to expire in 2009. The Company's state net operating loss carryforward is $11.2 million at December 31, 1999 and will begin to expire in 2001. A portion of the Company's net operating loss carryforward may be subject to annual limitations due to ownership changes of the Company. In addition, the Company has federal and state tax credits of $0.1 million and $23,000, respectively. 9. COMMITMENTS AND CONTINGENCIES The Company leases various facilities and equipment under noncancelable operating leases expiring through 2031. Certain operating leases are renewable at the end of the contract term. Future minimum rental commitments for operating leases with noncancelable terms in excess of one year are as follows (in millions): Year ending December 31: 2000................................................................. $ 1.6 2001................................................................. 1.3 2002................................................................. 1.1 2003................................................................. 0.9 2004................................................................. 0.8 Thereafter........................................................... 5.0 ----- Total................................................................. $10.7 =====
Rent expense charged to operations in 1997, 1998, and 1999 was $1.2 million, $1.9 million, and $1.6 million, respectively. The Company is subject to routine claims and litigation incidental to its business operations. It is the Company's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. The management of the Company believes that the ultimate resolutions of these matters will not have a material adverse effect on the Company's financial statements. 10. REDEEMABLE PREFERRED STOCK In March 1998, Z-Spanish acquired radio stations KMIX and KCVR located in Stockton, California for $4.0 million by issuing 1,000 shares of Series A 9% redeemable non-voting preferred stock with a fair value of $3.9 million and a note payable with a face amount of $0.1 million. The terms of the stock required that the Company redeem the stock by February 2001. The stock and note were redeemed and paid by the Company at face amounts plus accrued dividends and interest on January 20, 1999. 11. STOCKHOLDERS' EQUITY Common Stock As of December 31, 1999, the Company had authorized the issuance of 62,000,000 shares of Common Stock, consisting of 31,000,000 shares of Class A Common Stock ("Class A Common"), 20,000,000 shares of Class B Common Stock ("Class B Common") 5,000,000 shares of Class C Common Stock ("Class C Common") and 6,000,000 shares of Class D Common Stock ("Class D Common"). As of December 31, 1999, the Company had issued and outstanding 25,090,000 shares of Common Stock, consisting of 1,068 shares of Class A Common, 19,488,436 shares of Class B Common and 5,600,496 shares of Class D Common. F-64 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 In accordance with the Company's Amended and Restated Certificate of Incorporation in the State of Delaware, each of the classes of Common Stock have a par value of $0.01 and have identical rights and privileges, except as discussed below. Voting Rights--Class A Common stockholders are entitled to vote on matters submitted to a vote of the stockholders, with each share of Class A Common entitled to one vote, Class D Common has 4.45 votes for every 100,000 shares. Class B and C Common stockholders have no voting rights. Conversion Rights--The shares of Class B Common and Class C Common are convertible into Class A Common on a one for one basis at any time at the option of the stockholder. The shares of Class A Common and Class D Common are also convertible into either Class B Common or Class C Common on a one for one basis at any time at the option of the stockholder. Each share of Class C Common will convert automatically on a one for one basis into Class A Common upon the sale, gift or other transfer to a person or entity other than the Class C Common stockholder. Dividends may be declared and paid at the discretion of the Company's Board of Directors in cash, property, securities or rights or otherwise. If dividends are declared, Common Stock stockholders of record will be entitled to participate ratably, on a share for share basis as if all shares were of a single class in determining the amount of the dividend payable to each stockholder, except that any dividends payable in shares of Common Stock shall be paid with the same class of Common stock as are held by the Class A, B, C and D Common stockholders. Put Options--At December 31, 1998 and 1999, the Company had 4,545,454 shares of Class C Common put options outstanding, which were issued on October 9, 1998 for $25 million. The options are exercisable by notice to the Company at a purchase price equal to the fair market value of the Company. These options are recorded at fair value as of December 31, 1998 and 1999. The options may be exercised at any time after February 9, 2005 and prior to the consummation of a public offering. Preferred Stock The Company has authorized the issuance of 10,000 shares of $0.01 par value per share Preferred Stock that may be issued in one or more series subject to the provisions of the Company's Amended and Restated Certificate of Incorporation. At December 31, 1999, no shares of Preferred Stock had been issued. Stock Option Plan At December 31, 1999, the Company has reserved an aggregate of 3,292,828 shares of Class B Common stock for issuance, at the discretion of the Board of Directors, to officers, employees, directors and consultants pursuant to its 1999 Stock Incentive Plan (the "Plan"). The option price is determined by the Board of Directors. Options granted under the Plan generally vest ratably over four years, and expire ten years from the date of grant. F- 65 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 Stock option activity under the plan is summarized as follows:
Weighted Weighted Average Average Exercise Options Exercise Options Price Exercisable Price --------- -------- ----------- -------- Outstanding, January 1, 1999....... -- -- -- -- Granted (weighted average fair value of $5.78)................... 1,696,806 $5.78 -- -- --------- Outstanding, December 31, 1999..... 1,696,806 $5.78 -- $5.78 =========
Additional information regarding options outstanding as of December 31, 1999 is as follows:
Options Outstanding Options Vested ------------------------------------- -------------------- Weighted Average Remaining Weighted Weighted Contractual Average Average Range of Number Life Exercise Number Exercise Exercise Price Outstanding (Years) Price Vested Price -------------- ----------- ----------- -------- -------- -------- $5.00 to $10.00 1,696,806 9.9 $5.78 -- --
Deferred Stock Compensation The Company recorded deferred compensation of $4.3 million to reflect the difference between the grant price and the estimated fair value of the related stock. This amount is being amortized over the vesting period of the individual options, generally four years. Amortization of this compensation expense was $0.1 million for the year ended December 31, 1999. Additional Stock Plan Information--Since the Company continues to account for its stock-based awards to employees using the intrinsic value method in accordance with APB No. 25, SFAS No. 123, Accounting for Stock-Based Compensation, requires the disclosure of pro forma net income (loss) had the Company adopted the fair value method. The Company's calculations were made using the minimum value pricing model which requires subjective assumptions, including expected time to exercise, which affects the calculated values. The following weighted average assumptions were used for 1999: expected life, four years; no volatility; risk free interest rate of 6.5%; and no dividends during the expected term. The Company's calculations are based on a single option award valuation approach and forfeitures are recognized as they occur. If the computed fair values of the 1999 awards had been amortized to expense over the vesting period of the awards, the Company's pro forma net loss would have been approximately $2.7 million in 1999. 12. EMPLOYEE BENEFIT PLANS Z-Media initiated an employee 401(k) plan on September 1, 1999. Employees can contribute 2% to 15% of their annual compensation, subject to IRC/ERISA limitations. Eligibility requirements include three months of service and a minimum of 1,000 hours of service per year, and the employee must be at least 21 years old. Matching is 50% of the amount of the compensation with a maximum match of 3% of compensation with employer contributions vesting over a six-year period. Z-Media's contributions to the plan totaled $47,000 for the year ended December 31, 1999. Vista has an employee 401(k) plan. Employees can contribute 2% to 15% of their annual compensation, subject to IRC/ERISA limitations. Eligibility requirements include one year of service and a minimum of 1,000 hours of service per year, and the employee must be at least 21 years old. Matching is discretionary with employer contributions vesting over a six-year period. Vista's contributions to the plan totaled $39,000 for the year ended December 31, 1998. There were no employer contributions in the years ended December 31, 1997 and 1999. F-66 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 13. SEGMENT DATA The Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," in 1999. SFAS No. 131 establishes standards for reporting information about operating segments and related disclosures about products, geographic information and major customers. Operating segment information for 1997 and 1998 is also presented in accordance with SFAS No. 131. Management has determined that there are two reportable segments consisting of radio broadcasting and outdoor advertising. Such determination was based on the level at which executive management reviews the results of operations in order to make decisions regarding performance assessment and resource allocation. Information about each of the operating segments follows: Radio Group--The Company's Radio Group portfolio consisted of 32 radio stations (19 FM and 13 AM) at December 31, 1999, including one station operated under LMA. Outdoor Advertising--The Company's Outdoor Advertising Group owned and operated 10,060 outdoor advertising billboards and display faces in four states at December 31, 1999. Separate financial data for each of the Company's business segments is provided below. The Company evaluates the performance of its segments based on the following (in millions):
1997 1998 1999 ---- ----- ----- Radio broadcasting: Net revenue................................................. $9.8 $15.4 $23.8 Operating expenses.......................................... 7.9 10.9 13.9 Depreciation and amortization............................... 2.1 4.8 6.0 Operating (loss) income..................................... (0.3) 2.2 4.1 Total assets................................................ 68.1 169.7 218.2 Outdoor advertising: Net revenue................................................. $3.2 $10.5 $12.2 Operating expenses.......................................... 1.6 5.7 8.7 Depreciation and amortization............................... 0.6 1.9 2.7 Operating income............................................ 0.8 2.4 0.4 Total assets................................................ 28.3 27.6 70.8
14. OTHER RELATED PARTY TRANSACTIONS During 1998 the Company operated station KZSJ-AM under an LMA with an officer of the Company, and paid the officer $10,000 per month. The Company also had an option to purchase KZSJ-AM from the officer pursuant to a purchase option. The LMA and Option agreements were terminated on December 31, 1998 by mutual consent of the parties. As of December 31, 1999, there was a payable due to an officer of $0.1 million related to the LMA. The Company's long-term debt at December 31, 1998 included $10.9 million of notes payable to a former stockholder of the Company and $2.9 million to a stockholder of the Company. At December 31, 1999, the Company had a payable to a stockholder for $0.2 million. Under leases that expire in 2019 and 2009, the Company rents its corporate office building and a studio building from an officer of the Company for $63,000 and $42,000 per year, respectively. Annual rents increase annually by 5% per year for the term of both leases. F-67 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998 and 1999 15. SUBSEQUENT EVENTS On February 14, 2000, the Company purchased the assets of a radio station in Soledad, California for $0.3 million in cash. On February 24, 2000, the Company entered into a letter of intent with Entravision Communications Corporation ("ECC") whereby ECC will acquire directly or thorough a merger of all of the outstanding stock of the Company. ****** F-68 INDEPENDENT AUDITOR'S REPORT To the Partners DeSoto -- Channel 62 Associates, Ltd. (a Florida limited partnership) Sarasota, Florida We have audited the accompanying statements of operations, partners' (deficit) and cash flows of DeSoto-- Channel 62 Associates, Ltd. (a Florida limited partnership) for the period from January 1, 1999 to September 20, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of DeSoto -- Channel 62 Associates, Ltd. for the period from January 1, 1999 to September 20, 1999 in conformity with generally accepted accounting principles. As explained in Note 6 to the financial statements, on September 20, 1999, the Company sold substantially all assets of the Company to Entravision Communications Company, L.L.C. No adjustments as a result of this transaction are reflected in these financial statements. /s/ McGladrey & Pullen, LLP Pasadena, California February 25, 2000 F-69 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT Period From January 1, 1999 through September 20, 1999 (In thousands) Gross revenue......................................................... $ 879 Less agency commissions............................................... (79) ------- Net revenue.......................................................... 800 ------- Expenses: Direct operating..................................................... 405 Selling, general and administrative (including related-party management fee of $130)............................................. 934 Professional fees.................................................... 410 Depreciation and amortization........................................ 366 ------- 2,115 ------- Operating (loss).................................................... (1,315) ------- Interest (income)..................................................... (230) Interest expense (including amounts to related parties of $106)....... 1,366 ------- Net (loss).......................................................... $(2,451) =======
PARTNERS' DEFICIT Period From January 1, 1999 through September 20, 1999 (In thousands)
General Limited Partner Partners Total ------- -------- ------- Balance, December 31, 1998......................... $(1,505) $(5,101) $(6,606) Net (loss)........................................ $(1,348) (1,103) (2,451) ------- ------- ------- Balance, September 20, 1999........................ $(2,853) $(6,204) $(9,057) ======= ======= =======
See Notes to Financial Statements. F-70 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) STATEMENT OF CASH FLOWS Period From January 1, 1999 through September 20, 1999 (In thousands) Cash Flows from Operating Activities Net (loss)........................................................... $(2,451) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization....................................... 366 Changes in assets and liabilities: Decrease in accounts receivable.................................... (221) (Increase) in prepaid expenses and other assets.................... (134) Increase in accounts payable, accrued expenses and other liabilities....................................................... 1,123 ------- Net cash (used in) operating activities............................ (1,317) ------- Cash Flows from Financing Activities Net proceeds from borrowings on notes payable........................ 303 Due to affiliates.................................................... 932 ------- Net cash provided by financing activities........................... 1,235 ------- Net (decrease) in cash and cash equivalents......................... (82) Cash and Cash Equivalents Beginning............................................................ 93 ------- Ending............................................................... $ 11 ======= Supplemental Disclosures for Cash Flow Information Cash payments for interest........................................... $ 125 =======
See Notes to Financial Statements. F-71 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of business DeSoto -- Channel 62 Associates, Ltd. (the Company), a Florida limited partnership, was formed in 1989. The Company was formed to purchase the construction permit for and operate Channel 62, a commercial five million-watt television station located in Venice (Sarasota), Florida. Funding for the Company's acquisition and development of Channel 62 was obtained from DeSoto Broadcasting, Inc. (DBI), the Company's general partner, and a $4.0 million offering of limited partnership interests. The partnership is set to dissolve December 31, 2025. Significant accounting policies Personal assets and liabilities and partners' salaries In accordance with the generally accepted method of presenting partnership financial statements, the financial statements do not include the personal assets and liabilities of the partners, including their rights to refunds on its net (loss). In addition, the expenses shown in the income statements do not include any salaries to the partners. Allocation of partnership income and loss The partnership agreement requires operating cash flow available for distribution to first be applied to the payment of any loans by the general partner to the partnership. The remainder, if any, is then allocated and distributed 55% to the general partner and 45% to the limited partners. Allocation to the limited partners is based upon the number of units held relative to the total units held by all limited partners. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company's operations are affected by numerous factors including changes in audience acceptance (i.e., ratings), priorities of advertisers, new laws and governmental regulations and policies, and technological advances. The Company cannot predict if any of these factors might have a significant impact on the television and radio industries in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on the Company's operations. Cash and cash equivalents For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Revenue recognition Revenue related to the sale of advertising is recognized at the time of broadcast. F-72 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(Continued) Trade transactions The Company enters into agreements in which advertising time is traded for various products or services. Trade transactions are reported at the normal advertising rates in effect. Revenue or expense and a corresponding asset or liability are reported when advertisements are aired or when goods and services are received. Trade revenue and costs were not significant for the period from January 1 through September 20, 1999. Depreciation and amortization of property and equipment Property and equipment is stated at cost. Depreciation is computed principally by the straight-line method over the estimated lives of the assets which range from 5 to 31 years. Improvements to leased property are amortized over the lesser of the term of the lease or the estimated life of the improvements. Intangible assets Intangible assets are amortized on a straight-line basis as follows:
Years ----- Licenses, permits and associated costs................................. 40 Other intangible assets................................................ 1-5
Deferred debt costs related to the credit facility are amortized on a straight-line basis over the respective life of the credit facility. Television Programming The Company has various contracts granting the Company the right to broadcast television programs over a period of time for a specified fee. Each contract is recorded as an asset and liability at an amount equal to the gross contractual commitment. The capitalized costs of each contract are amortized on a straight-line basis, based on the estimated number of future showings over the length of the agreement for agreements with unlimited showings. The capitalized costs of rights to program materials are recorded at the lower of unamortized cost or estimated realized value. Rent expense The Company leases its office and studio space, the tower and various equipment under various operating lease agreements with various terms and conditions. Total rent expense was approximately $0.2 million for the period ended September 20, 1999. Income taxes The Company is a partnership, and accordingly, is not a tax paying entity. Instead, the partners are responsible for any tax liability or benefit, based on their respective percentages of the Company's taxable income or loss. Impairment of long-lived assets The Company reviews its long-lived assets and intangibles related to those assets periodically to determine potential impairment by comparing the carrying value of the long-lived assets and identified goodwill with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, the F-73 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(Continued) Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows) of the long-lived assets. To date, management has determined that no impairment of its long-lived assets exists. Segment information In accordance with Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, management has determined that the Company has one reportable segment. Comprehensive income SFAS No. 130, Reporting Comprehensive Income, established the requirements for the reporting and presentation of comprehensive income and its components. For the period ended September 20, 1999, the Company had no components of comprehensive income and, therefore, net income is equal to comprehensive income. Advertising Advertising costs, which are principally included in sales expenses, are expensed as incurred. NOTE 2. LONG-TERM DEBT The Company has a 12% credit agreement (Agreement) with a financial institution which provides for a maximum extension of credit of $5.0 million. At September 20, 1999 the outstanding balance was $4.3 million. The Agreement expires September 30, 2000 and is collateralized by all of the Company's and DBI's assets and is guaranteed by DBI and Omni Investments International, Inc. (OMNI) (the parent company of DBI). The Agreement provides for monthly interest only payments of 12% and provides for additional deferred interest at the option of the Lender equal to either (a) 10% or (b) an amount equal to 15% of the combined net equity value of the Company and DBI as defined by the Agreement, which option may be exercised upon certain events including sale of the borrowers. Subsequent to September 20, 1999, the Lender exercised the net equity proceeds option in connection with the sale of assets as described in Note 5 to these financial statements. The Company also has an advance from DBI in the amount of approximately $0.6 million and bears interest at the rate of approximately 5% as of September 20, 1999. There is no stated maturity on this advance. Approximately $23,000 of interest expense has been included in the accompanying statement of operations in connection with this debt. NOTE 3. RELATED-PARTY TRANSACTIONS The Company recorded advertising revenue and incurred advertising, promotion and certain administration expenses with vendors who are also subsidiaries of Omni. For the period ended September 20, 1999, such income and expenses totaled approximately $7,000. DBI manages and administers the business and affairs of the Company. Compensation to DBI as an annual management fee is $0.2 million plus 5% of operating cash flows calculated monthly after deductions for interest and depreciation. The management fee for the period ended September 20, 1999 totaled $0.1 million. As of and during the period ended September 20, 1999, the Company had amounts due to certain organizations related through common ownership. Interest paid on these borrowings for the period from January 1, 1999 through September 20, 1999 was approximately $0.1 million. F-74 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 4. EMPLOYEE BENEFIT PLAN The Company has a defined contribution plan for all employees. Under the terms of the plan, employees must be 21 years of age with one year of eligible service to participate. The Company may make matching contributions equal to a discretionary percentage, to be determined by the Company, of the participant's salary reductions. There have been no matching contributions made by the Company. The plan is currently in the process of being terminated in connection with the sale of assets as described in Note 5. NOTE 5. SALE LEASEBACK TRANSACTION During 1998, the Company entered into a sale-leaseback transaction with an unrelated entity. The gain from this transaction was approximately $0.9 million, recorded as deferred income and is being amortized over the subsequent lease term of three years. Income of $0.2 million has been included in the accompanying statement of operations during the period ended September 30, 1999. NOTE 6. SUBSEQUENT EVENT AND SALES OF ASSETS On September 20, 1999, the Company and DBI sold substantially all assets of the Company and the FCC license held by DBI to Entravision Communications Company, L.L.C. for $17.0 million in cash. Entravision did not assume any liabilities with the exception of certain prorated expenses, leases material to operations of the Company and liabilities associated with certain program rights. The accompanying financial statements have been prepared without giving effect to the transaction except for the payment or accrual of certain costs totaling approximately $0.4 million. F-75 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ENTRAVISION LOGO] ENTRAVISION COMMUNICATIONS CORPORATION Class A Common Stock --------------------- PROSPECTUS --------------------- , 2000 Donaldson, Lufkin & Jenrette Book Running Manager Credit Suisse First Boston Co-Lead Manager Merrill Lynch & Co. Co-Lead Manager ---------------- Salomon Smith Barney Bear, Stearns & Co. Inc. DLJdirect Inc. - -------------------------------------------------------------------------------- We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or our solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or the affairs of Entravision have not changed since the date hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Until , 2000 (25 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses to be paid by us in connection with the sale and distribution of the securities being registered. All of the amounts shown are estimated except the registration fee of the Securities and Exchange Commission, the NASD filing fee and the New York Stock Exchange listing fee. Securities and Exchange Commission registration fee................ $162,360 NASD filing fee.................................................... 30,500 New York Stock Exchange listing fee................................ * Legal fees and expenses............................................ * Accounting fees and expenses....................................... * Printing expenses.................................................. * Blue sky fees and expenses......................................... * Transfer agent and registrar fees and expenses..................... * Miscellaneous...................................................... * -------- Total.............................................................. $ * ========
- -------- * To be filed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law, as the same exists or may hereafter be amended, provides that a Delaware corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, were or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reasons of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorney's fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer, director, employee or agent is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. Section 145 of the Delaware General Corporation Law further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify him or her under Section 145. II-1 Our first restated certificate of incorporation provides that, to the fullest extent permitted by Delaware law, as it may be amended from time to time, none of our directors will be personally liable to us or our stockholders for monetary damages resulting from a breach of fiduciary duty as a director, except for (i) liability resulting from a breach of the director's duty of loyalty to us or our stockholders, (ii) acts or omissions which are not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) unlawful payment of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law or (iv) a transaction from which the director derived an improper personal benefit. Our first restated certificate of incorporation also provides mandatory indemnification for the benefit of our directors and officers and discretionary indemnification for the benefit of our employees and agents, in each instance to the fullest extent permitted by Delaware law, as it may be amended from time to time. In addition, we will enter into individual indemnification agreements with each of our directors and officers providing additional indemnification benefits. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors or officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. We will also provide directors' and officers' liability insurance coverage for our directors and officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since our incorporation on February 11, 2000, we have issued unregistered securities as follows: On February 12, 2000, we issued 1,000 shares of our common stock to Entravision Communications Company, L.L.C. for an aggregate purchase price of $1,000, such shares to be held until and cancelled concurrently with the reorganization described in the following paragraph. These shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. Before the closing of this offering, we will complete a reorganization in which direct and indirect ownership interests in our predecessor and Univision's subordinated vote and option will be exchanged for newly-issued shares of our common stock. As part of this reorganization and our acquisition of Z-Spanish Media, we will also issue newly-issued shares of our common stock to the stockholders of Z-Spanish Media. All of these shares will be issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. II-2 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits The following exhibits are attached hereto and incorporated herein by reference.
Exhibit Exhibit Description Number ------------------- ------- 1.1(2) Form of Underwriting Agreement. 2.1(1) Asset Purchase Agreement dated as of October 30, 1998 by and among Univision Television Group, Inc., KLUZ License Partnership, G.P. and Entravision Communications Company, L.L.C. 2.2(1) Agreement and Plan of Merger dated December 21, 1999 by and among Entravision Communications Company, L.L.C., LCG Acquisition Corporation, Latin Communications Group Inc. and certain of its representatives. 2.3(1) Asset Purchase Agreement dated as of February 29, 2000 by and between Citicasters Co. and the registrant. 2.4(2) Acquisition Agreement and Plan of Merger dated April 20, 2000 by and among the registrant, Entravision Communications Company, L.L.C., ZSPN Acquisition Corporation, Z-Spanish Media Corporation and certain of its stockholders. 2.5(2) Form of Exchange Agreement by and among the registrant, Entravision Communications Company, L.L.C., certain exchanging members and stockholders and Univision Communications Inc. 3.1(1) Certificate of Incorporation of the registrant as currently in effect. 3.2(1) Form of First Restated Certificate of Incorporation of registrant as in effect immediately prior to the closing of the offering. 3.3(1) Form of First Amended and Restated Bylaws of the registrant as in effect immediately prior to the closing of the offering. 4.1(2) Form of specimen Class A common stock certificate of the registrant. 5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 10.1(2) 2000 Omnibus Equity Incentive Plan of the registrant. 10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and certain entities controlled by such individuals. 10.3(1) Amended and Restated Credit Agreement dated November 10, 1998 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc. Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.4(1) First Amendment to Amended and Restated Credit Agreement dated as of December 29, 1999 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.5(1) Second Amendment to Amended and Restated Credit Agreement dated as of January 14, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.6(2) Third Amendment to Amended and Restated Credit Agreement dated April 18, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.7(1) Amended and Restated Security Agreement dated as of November 10, 1998 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent.
II-3
Exhibit Exhibit Description Number ------------------- ------- 10.8(1) Amended and Restated Pledge Agreement dated as of November 10, 1998 by certain pledgors in favor of Union Bank of California, N.A., as agent. 10.9(2) Term Loan Agreement dated April 19, 2000 by and among LCG Acquisition Corporation, the lender parties thereto and Union Bank of California, N.A. 10.10(2) Security Agreement dated April 19, 2000 by and between LCG Acquisition Corporation and Union Bank of California, N.A. 10.11(2) Pledge Agreement dated April 19, 2000 by Walter F. Ulloa and Philip C. Wilkinson in favor of Union Bank of California, N.A. 10.12(1) Univision Roll-Up Agreement dated March 2, 2000 by and between Univision Communications Inc. and Entravision Communications Company, L.L.C. 10.13(1) First Amended and Restated Non-Negotiable Subordinated Note dated March 2, 2000 in the principal amount of $120 million from Entravision Communications Company, L.L.C. in favor of Univision Communications Inc. 10.14(1) Amended and Restated Subordinated Note Purchase and Option Agreement dated as of December 30, 1996 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.15(1) First Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated as of March 31, 1999 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.16(1) Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated March 2, 2000 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.17(1) Secured Promissory Note and Pledge Agreement dated October 16, 1996 in the principal amount of $360,366.38 from Paul A. Zevnik in favor of Entravision Communications L.L.C. 10.18(2) Form of Indemnification Agreement for officers and directors of the registrant. 10.19(2) Convertible Subordinated Note Purchase Agreement dated as of April 20, 2000 by and among Entravision Communications Company, L.L.C., the registrant and certain investors. 10.20(2) Subordinated Convertible Promissory Note dated April 20, 2000 in the principal amount of $90 million from Entravision Communications Company, L.L.C. in favor of TSG Capital Fund III, L.P. 10.21(2) Investor Rights Agreement dated April 20, 2000 by and among Entravision Communications Company, L.L.C., the registrant and TSG Capital Fund III, L.P. 10.22(2) Form of Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the registrant. 10.23(2) Form of Investor Rights Agreement by and among the registrant and certain of its stockholders. 10.24(1) Form of Network Affiliation Agreement by and between Univision Television Network and Entravision Communications Company, L.L.C. 10.25(2) Office Lease dated August 19, 1999 by and between Water Garden Company, L.L.C. and Entravision Communications Company, L.L.C. 21.1(2) Schedule of subsidiaries of the registrant. 23.1(2) Consent of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. (included in Exhibit 5.1). 23.2(2) Consent of McGladrey & Pullen, LLP. 23.3(2) Consent of Ernst & Young LLP. 23.4(2) Consent of Deloitte & Touche LLP. 24.1(1) Power of Attorney (included on the signature page to this registration statement).
- -------- (1) Filed herewith. (2) To be filed by amendment. (b) Financial Statement Schedules--None. II-4 ITEM 17. UNDERTAKINGS. The registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Monica, State of California, on April 20, 2000. ENTRAVISION COMMUNICATIONS CORPORATION /s/ Walter F. Ulloa By: ______________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Walter F. Ulloa and Jeanette Tully, and each of them, with full power of substitution and full power to act without the other, his or her true and lawful attorney-in-fact and agent to act for him or her in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, any and all registration statements filed pursuant to Rule 462(b) of the Securities Act (including post-effective amendments) and to file this registration statement, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in order to effectuate the same as fully, to all intents and purposes, as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Walter F. Ulloa Chairman and Chief Executive April 20, 2000 ____________________________________ Officer (principal Walter F. Ulloa executive officer) /s/ Philip C. Wilkinson President, Chief Operating April 20, 2000 ____________________________________ Officer and Director Philip C. Wilkinson /s/ Jeanette Tully Executive Vice President, April 20, 2000 ____________________________________ Treasurer and Chief Jeanette Tully Financial Officer (principal financial officer and principal accounting officer) /s/ Paul A. Zevnik Secretary and Director April 20, 2000 ____________________________________ Paul A. Zevnik /s/ Amador S. Bustos President of Radio Division April 20, 2000 ____________________________________ and Director Amador S. Bustos /s/ Darryl B. Thompson Director April 20, 2000 ____________________________________ Darryl B. Thompson /s/ Andrew W. Hobson Director April 20, 2000 ____________________________________ Andrew W. Hobson /s/ Michael D. Wortsman Director April 20, 2000 ____________________________________ Michael D. Wortsman
II-6 EXHIBIT INDEX
Exhibit Number Exhibit Description ------- ------------------- 1.1(2) Form of Underwriting Agreement. 2.1(1) Asset Purchase Agreement dated as of October 30, 1998 by and among Univision Television Group, Inc., KLUZ License Partnership, G.P. and Entravision Communications Company, L.L.C. 2.2(1) Agreement and Plan of Merger dated December 21, 1999 by and among Entravision Communications Company, L.L.C., LCG Acquisition Corporation, Latin Communications Group Inc. and certain of its representatives. 2.3(1) Asset Purchase Agreement dated as of February 29, 2000 by and between Citicasters Co. and the registrant. 2.4(2) Acquisition Agreement and Plan of Merger dated April 19, 2000 by and among the registrant, Entravision Communications Company, L.L.C., ZSPN Acquisition Corporation, Z-Spanish Media Corporation and certain of its stockholders. 2.5(2) Form of Exchange Agreement by and among the registrant, Entravision Communications Company, L.L.C., certain exchanging members and stockholders and Univision Communications Inc. 3.1(1) Certificate of Incorporation of the registrant as currently in effect. 3.2(1) Form of First Restated Certificate of Incorporation of registrant as in effect immediately prior to the closing of the offering. 3.3(1) Form of First Amended and Restated Bylaws of the registrant as in effect immediately prior to the closing of the offering. 4.1(2) Form of specimen Class A common stock certificate of the registrant. 5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 10.1(2) 2000 Omnibus Equity Incentive Plan of the registrant. 10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and certain entities controlled by such individuals. 10.3(1) Amended and Restated Credit Agreement dated November 10, 1998 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc. Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.4(1) First Amendment to Amended and Restated Credit Agreement dated as of December 29, 1999 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.5(1) Second Amendment to Amended and Restated Credit Agreement dated as of January 14, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.6(2) Third Amendment to Amended and Restated Credit Agreement dated April 18, 2000 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent. 10.7(1) Amended and Restated Security Agreement dated as of November 10, 1998 by and among KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc., Entravision Communications Company, L.L.C., the lender parties thereto and Union Bank of California, N.A., as agent.
Exhibit Number Exhibit Description ------- ------------------- 10.8(1) Amended and Restated Pledge Agreement dated as of November 10, 1998 by certain pledgors in favor of Union Bank of California, N.A., as agent. 10.9(2) Term Loan Agreement dated April 19, 2000 by and among LCG Acquisition Corporation, the lender parties thereto and Union Bank of California, N.A. 10.10(2) Security Agreement dated April 19, 2000 by and between LCG Acquisition Corporation and Union Bank of California, N.A. 10.11(2) Pledge Agreement dated April 19, 2000 by Walter F. Ulloa and Philip C. Wilkinson in favor of Union Bank of California, N.A. 10.12(1) Univision Roll-Up Agreement dated March 2, 2000 by and between Univision Communications Inc. and Entravision Communications Company, L.L.C. 10.13(1) First Amended and Restated Non-Negotiable Subordinated Note dated March 2, 2000 in the principal amount of $120 million from Entravision Communications Company, L.L.C. in favor of Univision Communications Inc. 10.14(1) Amended and Restated Subordinated Note Purchase and Option Agreement dated as of December 30, 1996 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.15(1) First Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated as of March 31, 1999 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.16(1) Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated March 2, 2000 by and among Univision Communications Inc., Entravision Communications Company, L.L.C., its member entities, Walter F. Ulloa and Philip C. Wilkinson. 10.17(1) Secured Promissory Note and Pledge Agreement dated October 16, 1996 in the principal amount of $360,366.38 from Paul A. Zevnik in favor of Entravision Communications L.L.C. 10.18(2) Form of Indemnification Agreement for officers and directors of the registrant. 10.19(2) Convertible Subordinated Note Purchase Agreement dated as of April 19, 2000 by and among Entravision Communications Company, L.L.C., the registrant and certain investors. 10.20(2) Subordinated Convertible Promissory Note dated April 19, 2000 in the principal amount of $90 million from Entravision Communications Company, L.L.C. in favor of TSG Capital Fund III, L.P. 10.21(2) Investor Rights Agreement dated April 19, 2000 by and among Entravision Communications Company, L.L.C., the registrant and TSG Capital Fund III, L.P. 10.22(2) Form of Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the registrant. 10.23(2) Form of Investor Rights Agreement by and among the registrant and certain of its stockholders. 10.24(1) Form of Network Affiliation Agreement with Univision Network Limited Partnership. 10.25(2) Office Lease dated August 19, 1999 by and between Water Garden Company, L.L.C. and Entravision Communications Company, L.L.C. 21.1(2) Schedule of subsidiaries of the registrant. 23.1(2) Consent of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. (included in Exhibit 5.1). 23.2(2) Consent of McGladrey & Pullen, LLP. 23.3(2) Consent of Ernst & Young LLP. 23.4(2) Consent of Deloitte & Touche LLP. 24.1(1) Power of Attorney (included on the signature page to this registration statement).
- -------- (1) Filed herewith. (2) To be filed by amendment. (b) Financial Statement Schedules--None. EX-2.1 2 ASSET PURCHASE AGREEMENT - OCT. 30, 1998 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this 30th day of October, 1998, by and between UNIVISION TELEVISION GROUP, INC., a Delaware corporation ("Seller"), KLUZ LICENSE PARTNERSHIP, G.P., a California general partnership (the "License Partnership"), and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company ("Buyer"). R E C I T A L S Seller owns certain assets used or held for use exclusively in connection with the operation of the television broadcast station KLUZ (TV), Channel 41 in Albuquerque, New Mexico (the "Station") and License Partnership holds the rights to the FCC Licenses (as defined below). Seller and License Partnership desire to sell, assign and transfer to Buyer, and Buyer desires to purchase from Seller and License Partnership such assets, as more specifically described below, and the rights associated with the FCC Licenses, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants, warranties and agreements contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I PURCHASE AND SALE ----------------- 1.1 Assets. Upon the terms and subject to the representations, ------ warranties, covenants and conditions set forth in this Agreement, at the Closing Seller and License Partnership shall grant, convey, sell, assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire, and accept all right, title and interest of: (i) License Partnership in and to the FCC Licenses, and (ii) Seller in and to all of the real property, furniture, fixtures, equipment and other tangible assets owned, leased or held by Seller on the Closing Date that are used or held for use exclusively in connection with the business and operation of the Station without regard to where located (collectively, the "Assets") for the Purchase Price (as defined below). The Assets include (to the extent not an Excluded Asset, as such term is defined below), without limitation, all: (a) fee simple ownership, leaseholds, easements and other interests of every kind and description in and to all of the real property, buildings, towers, antennae and improvements owned or leased by Seller as of the date hereof and used or held for use exclusively in connection with the Business, without regard to where located, all as set forth on Schedule 1.1(i) --------------- (the "Real Property"); 1 (b) equipment, software, machinery, vehicles, office furniture and fixtures, transmitting tuners, transmitters, antennae, office materials and supplies, spare parts and other tangible personal property of every kind and description, owned, leased by Seller as of the date of this Agreement and used or held for use exclusively in connection with the Business, without regard to where located, including any replacements thereof and those acquired by Seller between the date of this Agreement and the Closing Date, all as set forth on Schedule 1.1(ii), and any additions, improvements, replacements and alterations - ---------------- thereto made between the date of this Agreement and the Closing Date (collectively, the "Tangible Personal Property"), but excluding any Consumed Property (as defined below); (c) Contracts (which shall include all program Contracts for the Station) listed on Schedule 1.1(iii) (the "Assigned Contracts"), together with ----------------- all Contracts that will have been entered into by Seller in the ordinary course of business of the Station between the date of this Agreement and the Closing Date (which, to be included within the Assigned Contracts must be approved in advance in writing by Buyer , unless such Contract would not be required to be listed on Schedule 1.1(iii) in accordance with Section 3.6, and those Contracts ----------------- which Buyer consents to pursuant to Section 5.2. (d) technical materials and guidelines, brochures, sales literature, promotional material and other selling material of the Station, wherever situated, except such items that relate to the business and operations of Seller or License Partnership other than with respect to the Station; (e) papers, documents, instruments, books and records, files (including, without limitation, the files required to be kept by the Station pursuant to the rules and regulations of the FCC), agreements, books of account and other records by which any of the Assets might be identified or enforced or otherwise pertaining to the Assets that are located at the offices or other locations used in connection with the Assets (including, without limitation, customer invoices, customer lists, vendor and supplier lists, drafts and other documents and materials relating to customer transactions, blueprints, specifications, designs, drawings, operating and marketing plans and all other documents, tapes, discs, programs or other embodiments of information related thereto), except such items that refer to the business and operations of Seller or License Partnership other than with respect to the Station; and (f) all right, title and interest in and to the trade names and trademarks of Seller and License Partnership, including, without limitation, the marks "KLUZ", "KLUZ-TV", "KLUZ-TV 41" or "K48AM" and any and all variations thereof. 1.2 Excluded Assets. There shall be excluded from the Assets and --------------- retained by Seller, to the extent in existence on the Closing Date, all of right, title, and interest of Seller and License Partnership in and to (collectively, the "Excluded Assets"): (a) cash on hand or in bank accounts, and any other cash equivalents, including without limitation certificates of deposit, commercial paper, treasury bills, asset or money market accounts and all such similar accounts or investments; (b) accounts receivable and any notes or written obligations reflecting accounts receivable ("Seller's Receivables"); (c) prepaid items such as deposits, reserves and prepaid expenses and prepaid ad valorem taxes; 2 (d) securities; (e) Tangible Personal Property consumed in the ordinary course of the business of the Station between the date hereof and the Closing Date (collectively, "Consumed Property"); (f) contracts of insurance; (g) pension, profit sharing or savings plans and trusts and any assets thereof or other Employee Benefit Plan or program; (h) duplicate files and records relating to the Business; (i) rights to or claims for refunds of taxes and other governmental charges for periods ending on or prior to the Closing Date and the benefit of net operating loss carry-forwards or other tax credits; (j) rights of indemnification, contribution or reimbursement that may exist under the Assigned Contracts in respect of liabilities or obligations retained by Seller; (k) "Univision" marks, including any and all trademarks or service marks, trade names, slogans or other like property which includes the name "Univision", the mark Univision or any derivative thereof and Univision's logo or any derivative thereof; (l) assets used by Seller or any Affiliate in any other business of Seller or any Affiliate, all nontransferable Permits and assets relating to corporate and partnership functions of Seller and License Partnership (including, but not limited to, the corporate and partnership records, corporate charter, taxpayer and other identification numbers, income tax records, seals, minute books, the partnership agreement and stock transfer books); and (m) rights of Seller and License Partnership under this Agreement and the Ancillary Documents. 1.3 Liabilities. The Assets shall be sold and conveyed to Buyer free ----------- and clear of all Liabilities and Encumbrances except for (i) Permitted Encumbrances, (ii) the Liabilities arising out of the Assigned Contracts, and (iii) the Liabilities prorated to Buyer in accordance with Section 1.4 (collectively the "Assumed Liabilities"). On and after the Closing Date Buyer ------------------- will assume and discharge, and indemnify and hold Seller and License Partnership harmless from the Assumed Liabilities. Except for the Assumed Liabilities, Buyer will not assume or be obligated to pay or discharge any Liabilities of any kind, whether known or unknown, contingent or otherwise, accrued by Seller or License Partnership and relating to the time period prior to the Closing Date in connection with the Assets and the Business. Buyer does not assume or undertake to discharge any obligation or Liability of Seller or License Partnership other than the Assumed Liabilities. 1.4 Prorations. ---------- (a) All income, expenses and deposits for services or advertising to be rendered arising from the conduct of the Business shall be prorated between Buyer and Seller as of 12:01 a.m. (pacific standard time) on the date immediately after the Closing (the "Adjustment Date"). Such prorations shall be based upon the principle that Seller shall be entitled to all income earned and shall be responsible for all Liabilities incurred or accruing in connection with the Business to the Adjustment Date and Buyer shall be 3 entitled to all such income earned and shall be responsible for all such Liabilities in connection with the Business from and after the Adjustment Date. All program Contracts shall be prorated in accordance with the rules of the Financial Accounting Standards Board. (b) Such prorations shall include, without limitation, all expenses for goods or services received both before and after the Adjustment Date, prepaid cash time sales agreements, ad valorem, real estate and other property taxes, regulatory, business and license fees, music and other license fees, commissions, wages, payroll taxes, and other fringe benefits of employees of Seller who enter the employment of Buyer (including accrued vacation pay), power and utility expenses, commissions, rents and similar prepaid and deferred items deposits, reserves and all other expenses attributable to the Business. All special assessments and similar charges or liens imposed against the Real Property and Tangible Personal Property in respect of any period of time through the Adjustment Date, whether payable in installments or otherwise, shall be the responsibility of Seller, and amounts payable with respect to such special assessments, charges or liens in respect of any period of time after the Adjustment Date shall be the responsibility of Buyer, and such charges shall be adjusted as required hereunder. Schedule 1.4 contains a full and complete list ------------ of all known Liabilities to be prorated in accordance with the provisions of this Section 1.4. (c) To the extent that any of the foregoing prorations and adjustments cannot be determined as of the Adjustment Date, Buyer and Seller shall conduct a final accounting and make any further payments, as required, within 60 days after the Closing. The prorations shall be made in accordance with generally accepted accounting principles or, if no such principles exist with respect to the proration of any item, the proration shall be made in accordance with industry practice. 1.5 Purchase Price. The aggregate consideration paid by Buyer (the -------------- "Purchase Price") shall be (i) One Million Dollars ($1,000,000), for the Assets other than the FCC Licenses, payable in cash in immediately available funds on the Closing Date, and (ii) for the FCC Licenses, the right to acquire an additional two percent (2%) fully diluted ownership interest in Buyer pursuant to the Note Purchase Option Agreement Amendment to be executed and delivered to Seller on the Closing Date. 1.6 Allocation of Purchase Price. Buyer, Seller and License ---------------------------- Partnership shall allocate the Purchase Price in accordance with the respective fair market values of the Assets and the FCC Licenses in accordance with the requirements of Section 1060 of the Code. The allocation shall be determined by mutual agreement of the parties prior to the Closing and set forth on Schedule -------- 1.6. Buyer, Seller and License Partnership each further agrees to file its - --- federal income tax returns and its other tax returns reflecting such allocation in accordance with the determination made by them. 1.7 Contribution of FCC Licenses. Seller hereby acknowledges and ---------------------------- agrees that concurrently with the Closing, Buyer intends to convey all of its right, title and interest in and to the FCC Licenses to Entravision Holdings, LLC, a California limited liability company and wholly-owned subsidiary of Buyer and its managing members 1.8 FCC Filing Fees. Each of Buyer and Seller shall pay an equal --------------- portion of all filling fees in connection with the FCC Application. 4 ARTICLE II CLOSING ------- 2.1 Closing. The consummation of the transactions provided for in ------- this Agreement ("Closing") shall take place at (i) the offices of Zevnik Horton ------- Guibord McGovern Palmer & Fognani, L.L.P., Los Angeles, California at 10:00 a.m. (pacific daylight time) on the date, not later than ten (10) business days after the FCC Transfer Approval (subject to the right of Buyer to waive Final FCC Transfer Approval, in which case the Closing shall occur at such time and place as the parties may mutually agree), or (ii) such other place, time or date as the parties may agree upon in writing. 2.2 Closing Obligations of Seller. At the Closing, Seller or License ----------------------------- Partnership, as the case may be, will deliver to Buyer: (a) such bills of sale and assignments, and such other good and sufficient instruments and documents of conveyance and transfer, in form and substance satisfactory to Buyer and its counsel, as shall be necessary and effective, as determined by Buyer and its counsel, to transfer and assign to, and vest in, Buyer all right, title and interest in and to the Assets and the FCC Licenses; (b) the closing certificate required by Section 7.2(a); (c) resolutions of the Board of Directors of Seller and a written consent of the general partner of License Partnership authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of Seller and the general partner of License Partnership, respectively; (d) an affidavit to the effect that Seller is not a "foreign person" within the meaning of Section 1445 of the IRC; (e) a certificate of good standing for Seller issued by the Delaware Secretary of State not more than 10 days prior to the Closing Date; (f) an executed Univision Network Affiliation Agreement with respect to the Station, substantially in the form attached hereto as Exhibit ------- "C"; and - --- (g) such other documents as may be reasonably requested by counsel for Buyer as necessary to consummate the transactions contemplated hereby. 2.3 Closing Obligations of Buyer. At the Closing, Buyer will deliver ---------------------------- or cause to be delivered to Seller and License Partnership: (a) the cash portion of the Purchase Price in immediately available funds pursuant to instructions of License Partnership delivered to Buyer at least 3 days prior to the Closing; and the Note Purchase Option Agreement Amendment, duly executed by Buyer, evidencing the non-cash portion of the Purchase Price; (b) the closing certificate required by Section 7.3(a); 5 (c) resolutions of the managing members of Buyer authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of Buyer; (d) a good standing certificate for Buyer issued by the Delaware Secretary of State not more than 10 days prior to the Closing Date; (e) an executed Univision Network Affiliation Agreement with respect to the Station, substantially in the form attached hereto as Exhibit ------- "C"; and - --- (f) the Assignment and Assumption Agreement, duly executed by Buyer. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller represents and warrants to Buyer as follows: 3.1 Organization and Related Matters. Seller is a corporation duly -------------------------------- organized, validly existing and in good standing under the laws of the state of Delaware and is duly qualified to do business as a foreign corporation in the jurisdictions in which Seller operates the Station, except where the failure so to qualify will not have a Material Adverse Effect on the Business. Seller has all requisite corporate power and authority to own, operate and lease the Assets, to operate the Station, to execute and deliver the Ancillary Documents and to perform its obligations thereunder. License Partnership is a general partnership duly formed and validly existing under the laws of the state of California. License Partnership has all requisite partnership power and authority to hold the FCC Licenses and to execute and deliver the Ancillary Documents and to perform its obligations thereunder. 3.2 Authority. The execution, delivery and performance by Seller and --------- License Partnership of this Agreement and each of the Ancillary Documents to which it is a party have been duly and validly authorized by all corporate action necessary on the part of Seller and all partnership action necessary on the part of License Partnership. This Agreement and any Ancillary Documents to which Seller and License Partnership is a party, have been duly and validly executed and delivered by such party and, assuming the due authorization hereof and thereof by Buyer, constitute the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 3.3 No Conflicts. Neither the execution nor delivery by Seller or ------------ License Partnership of this Agreement or the Ancillary Documents, if any, to which it is a party, nor the consummation by Seller or License Partnership of the transactions contemplated hereby and thereby, nor the performance by Seller or License Partnership, its obligations hereunder or thereunder will violate, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise), under the charter documents of Seller or License Partnership or any Material Contract, or result in the imposition of any material Encumbrance (other than Permitted Encumbrances) against any of the Assets, provided that the appropriate Permits and Approvals listed on Schedule -------- 3.3 are secured. Schedule 3.3 lists all Permits and Approvals required to be - --- ------------ obtained by the Seller or License Partnership or filings or registrations 6 with any third party or Governmental Entity required by Seller or License Partnership to consummate the transactions contemplated by this Agreement and the Ancillary Documents. The execution and delivery by Seller or License Partnership of this Agreement and the Ancillary Documents to which it is a party, the consummation by Seller and License Partnership of the transactions contemplated hereby and thereby, and the performance by Seller and License Partnership of their respective obligations hereunder or thereunder will not violate any Law, the violation of which would have a Material Adverse Effect on the Business or the ability of Seller or License Partnership to consummate the transactions contemplated hereby. 3.4 Financial Statements. Seller has delivered to Buyer copies of the -------------------- Station Financial Statements. The Station Financial Statements fairly present in all material respects the financial condition and the results of operations of the Station as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP. The Station Financial Statements reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes thereto. 3.5 Absence of Certain Changes or Events. Since December 31, 1997, ------------------------------------ the operation of the Station has been conducted only in the ordinary course, and there has not occurred or arisen any event, individually or together with any other event or events, having or, insofar as reasonably can be foreseen, that in the future is likely to have, a Material Adverse Effect on the Business. For purposes of this Section 3.5, no change shall be considered to have a "Material Adverse Effect" if such change is consistent with circumstances affecting the television broadcasting industry generally or the markets generally where the Station competes. 3.6 Material Contracts. Schedule 3.6 lists each Contract relating to ------------------ ------------ the Station to which Seller or License Partnership is a party or to which it or any of its properties is subject or by which it is bound that is deemed a Material Contract under this Agreement. The following Contracts shall be deemed to be Material Contracts: any Contract relating to the Station that (i) obligates Seller or License Partnership to pay after the date hereof an amount of $10,000 or more, (ii) the Station substantially depends upon, (iii) contains a covenant not to compete or other covenant that restricts the ability of Seller to conduct the business of the Station, (iv) grants a power of attorney, agency or similar authority to another Person, (v) grants to a third party a right of first refusal, (vi) grants a right to, or obligates, any Affiliate of Seller, (vii) is an employment or consulting agreement, (viii) grants any Person a license or other right to broadcast, televise or otherwise air taped, filmed or live television programs, shows, motion pictures sports, commercials or infomercials, or (ix) was not made in the ordinary course of business. Seller and License Partnership have duly performed all of its material obligations under each Material Contract to the extent that such obligations have accrued, and no material breach or default, alleged material breach or default, or event that would (whether upon lapse of time and/or the occurrence of any act or event or otherwise) constitute a material breach or default thereunder by Seller or License Partnership, or, to the knowledge of Seller or License Partnership any other party or obligor with respect thereto, has occurred or as a result of this Agreement will occur. 3.7 Property. Seller has good and marketable title to all items of -------- Real Property and Tangible Personal Property listed on Schedules 1.1(i) and -------------------- 1.1(ii) respectively. Neither the Real Property nor the Tangible Personal - -------------------- Property is subject to any Encumbrance except for Permitted Encumbrances and those set forth on Schedule 3.7. Seller has not received any notice of proposed ------------ special assessments or a material change in property tax or land use laws affecting any real or personal property used in the Business. All material leasehold properties relative to the Business held by Seller as lessee are held under valid, binding and enforceable 7 leases. All Real Property and Tangible Personal Property of Seller necessary to the Business is in good operating condition and repair in all material respects, ordinary wear and tear excepted. 3.8 Legal Proceedings and Claims. There is no Order or Action ---------------------------- pending, or, to the knowledge of Seller, threatened against or affecting the Station, or any of properties or assets used in its operations, that individually or when aggregated with any other Order or Action has or would reasonably be expected to have a Material Adverse Effect on the Business. 3.9 Taxes. Seller has timely filed all Tax Returns required of it and ----- has either paid all Taxes due for all periods or portions of periods ending on or before the Closing Date, or, to the extent not paid, adequately reserved for such Taxes, to the extent required by GAAP, whether or not due and payable and whether or not disputed, such that there will be no Encumbrances on any of the Assets as of the Closing relating to Taxes. 3.10 Insurance. Schedule 3.10 lists all material insurance policies --------- ------------- maintained by Seller that afford coverage to the Station or the Assets. All such policies are in full force and effect and, except as disclosed on Schedule -------- 3.10, all premiums with respect thereto covering all periods up to and including - ---- the date hereof have been paid to the extent due, and no notice of cancellation or termination has been received with respect to any such policy. 3.11 Compliance with Laws. Seller and the License Partnership are in -------------------- compliance in all material respects with all applicable Laws (including, but not limited to, the receipt of all Permits and Approvals) relating to the Station, the FCC Licenses and the Assets. No suspension, cancellation or termination of any Permits or Approvals required by any Governmental Entity to permit the operation of the Station is, to the knowledge of Seller, threatened or imminent. 3.12 Certain Interests. No Affiliate of Seller has any material ----------------- interest in any property used in or pertaining to the Station or in any customer or supplier doing business with the Station. 3.13 No Brokers or Finders. No agent, broker, finder, or investment or --------------------- commercial banker, or other Person or firm engaged by or acting on behalf of Seller, License Partnership or any of their Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any brokerage or finder's or similar fee or other commission as a result of this Agreement or such transactions. 3.14 FCC Matters; Operation and Condition of the Station. --------------------------------------------------- (a) The License Partnership has all requisite power and authority and holds all FCC Licenses required under the Communications Act or the current rules, regulations, and policies of the FCC (the "FCC Rules") to own and operate the Station. (b) Set forth on Schedule 3.14(b) is a complete list of all FCC ---------------- Licenses of the License Partnership relating to or used in connection with the Station, with the expiration date thereof. Each such FCC License is validly issued and is in full force and effect. Collectively, the FCC Licenses constitute all authorizations from each Communications Regulatory Authority necessary for the operation of the Station in the same manner presently conducted. Each of the Seller and License Partnership, to its respective knowledge, has taken all actions and performed all of its obligations that are necessary to maintain the FCC Licenses 8 without adverse modification or impairment. Complete and correct copies of the FCC Licenses have been delivered to Buyer. Except as set forth on Schedule -------- 3.14(b), none of the FCC Licenses requires that any assignment thereof must be - ------- approved by any Governmental Entity other than the FCC. (c) Neither Seller nor License Partnership is not a party to, nor to the knowledge of either is there threatened, any investigation, notice of apparent liability, violation, forfeiture or other notice, order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceeding (other than proceedings to amend FCC Rules of general applicability) that could in any manner threaten or adversely affect the validity or continued effectiveness of the FCC Licenses. Neither Seller nor License Partnership has reason to believe that each of the FCC Licenses listed on Schedule 3.14(b) will not be renewed in the ordinary course. Each of Seller ---------------- and License Partnership has filed in a substantially timely manner all material reports, applications, documents, instruments and information relating to the Station required to be filed by it pursuant to the Communications Act or the FCC Rules or the request of any Communications Regulatory Authority, including equal employment opportunity reports. All such filings are accurate and complete in all material respects. (d) To the knowledge of Seller, none of the facilities used in connection with the television broadcasting operations of the Station (including, but not limited to, the transmitter and tower sites owned or used by Seller in connection with the operation of the Station) violates in any material respect the provisions of any applicable building code, fire regulation, building restriction or zoning ordinance, and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof, and there are no outstanding variances or special use permits materially affecting any of the Station facilities or the uses thereof. (e) The Station, its physical facilities, electrical and mechanical systems and transmitting and studio equipment (i) are being operated in all material respects in accordance with the specifications of the applicable FCC License, (ii) are being operated in all material respects in compliance with all applicable requirements of the FCC Rules and the Communications Act and (iii) to the knowledge of Seller, are in good operating condition customary in the broadcast industry. (f) The Station is in compliance in all material respects with the FCC Licenses, the Communications Act, and the FCC Rules. (g) Neither Seller nor License Partnership is aware of any facts, and neither has received any notice or other communication, indicating that Seller or License Partnership, in connection with the ownership and operation of the Station, is not in compliance in all material respects with all requirements of (i) the FCC Rules or the Communications Act, or (ii) applicable state and local statutes, regulations and ordinances. Neither Seller nor License Partnership is aware of any facts, and neither has received any notice or communication, formal or informal, indicating that the FCC is considering modifying, revoking, suspending, canceling, rescinding or terminating any FCC License. 3.15 Intellectual Property. Schedule 3.15 lists each Mark owned or --------------------- ------------- licensed by relating to the Station or the operations of the Station and the nature of Seller's interest in such Mark. Except as set forth on Schedule 3.15, ------------- Seller has no knowledge of nor has Seller received any notice of any claim that has been asserted by any Person (i) to the effect that the conduct of the Business by Seller infringes on any Marks owned or licensed by Seller, (ii) against 9 the use by Seller of any Mark, technology or know-how necessary to the operations of the Station or (iii) challenging the ownership, validity or effectiveness of any of the Marks listed on Schedule 3.15. No item listed on ------------- Schedule 3.15 would, individually or in the aggregate, have a Material Adverse - ------------- Effect on the Business. 3.16 Labor Matters. ------------- (a) No employee of the Station is represented pursuant to any collective bargaining agreements with a labor union. No work stoppage against the Station is pending or, to the knowledge of Seller, threatened. Except as set forth on Schedule 3.16, Seller is not involved in or, to the knowledge of ------------- Seller, threatened with any labor dispute, arbitration, lawsuit, internal investigation or administrative proceeding relating to labor matters relating to the employees of the Station. (b) Schedule 3.16 sets forth a list of each employee of the ------------- Station, the date each such employee was hired by such Station, whether such employee is involved in the business of such Station full-time or part-time, the date of the last compensation increase of such employee, the title or category of each such employee and the present compensation of each such employee, including a description of the basis for determining any deferred compensation, accrued bonuses or other bonuses payable on or after the Closing Date. Except as set forth on Schedule 3.16, as of the Closing Date, each employee of the Station ------------- will be an at-will employee. 3.17 Employee Benefit Plans. Schedule 3.17 lists all employee ---------------------- ------------- benefit, compensation and fringe benefit plans and arrangements, including without limitation, any "employee benefit plan" (within the meaning of Section 3(3) of ERISA) to which Seller is bound, legally or otherwise and which may cover employees of the Station. Buyer will not assume any such plan or arrangement. 3.18 Environmental Matters. --------------------- (a) Seller, to its knowledge, has operated the Station in all material respects in compliance with all applicable Environmental Laws. Except as set forth on Schedule 3.18 Seller has obtained and presently maintains all ------------- permits or other governmental authorizations required to operate the Station in compliance with all applicable Environmental Laws. (b) To the knowledge of Seller, no Environmental Condition exists upon the Real Property, and no investigation, inquiry or other proceeding relating to any actual or alleged Environmental Condition or failure to comply with any applicable Environmental Law is pending or to the knowledge of Seller threatened by any Governmental Entity with respect to the Real Property or the Station. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer represents and warrants to Seller and License Partnership as follows: 4.1 Authority. The execution, delivery and performance by Buyer of --------- this Agreement and each of the Ancillary Documents to which it is a party have been duly and validly authorized by all limited liability company action necessary on the part of Buyer. This Agreement and any Ancillary Documents to which Buyer is a party, have been duly and validly 10 executed and delivered by Buyer and, assuming the due authorization hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 4.2 Organization and Related Matters. Buyer is a limited liability -------------------------------- company duly organized, validly existing and in good standing under the laws of Delaware. Buyer has all necessary limited liability company power and authority to carry on its business as now being conducted. Buyer has the necessary corporate power and authority to execute, deliver and perform this Agreement and each of the Ancillary Documents to which it is a party. Buyer is or will be prior to the Closing Date qualified to do business and is in good standing in New Mexico. 4.3 No Conflicts. Neither the execution nor delivery by Buyer of ------------ this Agreement or the Ancillary Documents to which it is a party, nor the consummation by Buyer of the transactions contemplated hereby and thereby, nor the performance by Buyer of its obligations hereunder or thereunder will violate, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise) under the limited liability company agreement of Buyer or any material Contract of Buyer, provided that the appropriate Permits and Approvals listed on Schedule 4.3 are secured. Schedule ------------ -------- 4.3 contains a list of all Permits and Approvals or filings or registrations - --- with any third party or Governmental Entity required by Buyer to consummate the transactions contemplated by this Agreement and the Ancillary Documents. The execution and delivery of this Agreement and the Ancillary Documents by Buyer will not violate any Law the violation of which would have a Material Adverse Effect on Buyer or Buyer's ability to consummate the transactions contemplated hereby. 4.4 No Brokers or Finders. No agent, broker, finder or investment or --------------------- commercial banker, or other Person or firm engaged by or acting on behalf of Buyer or any of its Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any broker's or finder's or similar fee or other commission as a result of this Agreement or such transactions. 4.5 Buyer's Qualifications. Buyer is legally and financially ---------------------- qualified to acquire the Assets and operate the Station. To the knowledge of Buyer, there are no facts that would disqualify Buyer under the Communications Act from acquiring or operating the Station or would cause the FCC not to approve the assignment of the FCC Licenses to Buyer as contemplated in this Agreement and the Ancillary Documents. ARTICLE V COVENANTS OF SELLER PENDING THE CLOSING --------------------------------------- 5.1 Operation of the Station. ------------------------ (a) Prior to the Closing Date, Seller will: (i) conduct the business of the Station in the usual and ordinary manner in which conducted in the past; (ii) operate the Station in accordance with the terms of the FCC Licenses and in compliance in all material respects with all applicable laws, rules and regulations, including applicable FCC Rules; and (iii) use all reasonable efforts to preserve the business of the Station intact, retain substantially as at 11 present the Station's employees, consultants and agents, and preserve the goodwill of the Station's suppliers, advertisers, customers and others having business relations with it. (b) Notwithstanding the foregoing, nothing contained in this Agreement shall give Buyer any right to control the programming, operations, finances or any other matter relating to the Station prior to the Closing Date, and Seller shall have complete control of such matters up to the Closing Date. 5.2 Negative Covenants. Prior to the Closing Date, Seller shall not, ------------------ without the prior written consent of Buyer, except in the ordinary course of business: (a) sell, lease, transfer, or agree to sell, lease or transfer, any Assets or any other assets of the Station except for sales or leases, except as may be required by applicable law, or engage in any similar transaction; or grant any raises to employees of the Station, pay any substantial bonuses or enter into any contract of employment with any employee of the Station, except pursuant to any agreement in existence on the date hereof; (b) renew, renegotiate, modify, amend or terminate any existing time sales contracts with respect to the Station; (c) enter into, renew or amend any other Material Contract with respect to the Station; (d) apply to the FCC for any construction permit that would restrict any of the present operations of the Station, or make any change in any of the buildings, leasehold improvements or fixtures of the Station; or (e) enter into any barter or trade contract or contracts that are prepaid, or contracts with any Affiliate of Seller. 5.3 Access to Station, Files and Records. At the reasonable request ------------------------------------ of Buyer and upon reasonable advance notice, Seller shall from time to time give or cause to be given to the officers, employees, accountants, counsel, agents, consultants and representatives of Buyer: (i) full access during normal business hours upon reasonable notice to all facilities, properties, accounts, books, financial statements, deeds, title papers, insurance policies, licenses, agreements, contracts, leases, commitments, records and files of every character, program libraries, equipment, machinery, fixtures, furniture, vehicles, notes and accounts payable and receivable of Seller with respect to the Station; (ii) all such other information concerning the affairs of the Station as Buyer may reasonably request; and (iii) access to the Real Property and such information as Buyer may require to conduct a Phase I environmental study of the Real Property. 5.4 Confidentiality. All non-public information disclosed by any --------------- party (or its representatives), in connection the transactions contemplated by, or the discussions and negotiations preceding, this Agreement to any other party (or its representatives) shall be kept confidential by such other party and its representatives and shall not be used by any such Persons other than as contemplated by this Agreement, except to the extent that such information may otherwise be required by Law or to the extent such duty as to confidentiality is waived in writing by the other party. If this Agreement is terminated, each party shall use all reasonable efforts to return upon written request from the other party all documents (and reproductions thereof) received by it or its representatives from such other party (and, in the case of reproductions, all 12 such reproductions made by the receiving party) that include information not within the exceptions contained in the first sentence of this Section 5.4, unless the recipients provide assurances reasonably satisfactory to the requesting party that such documents have been destroyed. 5.5 Representations and Warranties. Prior to the Closing Date Seller ------------------------------ shall promptly notify Buyer in writing if Seller becomes aware of any fact or condition that causes or constitutes a breach of any of the representations or warranties of Seller in this Agreement, or if Seller becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representations or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. 5.6 Transfer Approval. ----------------- (a) Seller will cooperate and use its commercially reasonable best efforts to obtain, and will, as soon as reasonably practicable, prepare all registrations, filings and applications, requests and notices preliminary to, all Approvals and Permits that may be necessary or that may be reasonably requested by Buyer to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Seller covenants and agrees to use its commercially reasonable best efforts to prepare and file with the FCC, within five (5) business days after the date hereof, the FCC Applications. Subsequent to filing the FCC Applications, Seller will prosecute such FCC Applications with due diligence and shall use its reasonable efforts to obtain FCC Transfer Approval. (b) Seller will inform Buyer promptly of any material non- confidential communication from any Communications Regulatory Authority, or any other Governmental Entity regarding any of the transactions contemplated hereby. If Seller or any of its Affiliates receives a request for additional information or documentary material from any such Governmental Entity with respect to the transactions contemplated hereby, then such party will endeavor in good faith to make or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. Seller shall notify Buyer in the event it becomes aware of any facts, actions, communications or occurrences that would directly or indirectly materially affect FCC Transfer Approval. 5.7 Consents. Seller will use all reasonable efforts to obtain all -------- of the consents noted on Schedule 5.7, which shall not include the payment of ------------ consideration to the consenting party, other than the payment of usual and customary charges incurred in the preparation of consent or assignment documents. If any such consent or approval is not obtained, then Seller will use all reasonable efforts to secure an arrangement reasonably satisfactory to Buyer intended to provide for Buyer after the Closing the material benefits under such Contract. In the event that Seller is denied any required consent and is otherwise unable to provide for Buyer to receive the benefits of such Contract, Buyer shall not be required to assume performance under said Contract. Marked with two asterisks on Schedule 1.1(iii) are those consents the receipt of which ----------------- is a condition precedent to Buyer's obligation to close under this Agreement (the "Seller's Required Consents"). -------------------------- 13 ARTICLE VI COVENANTS OF BUYER PENDING THE CLOSING -------------------------------------- Buyer covenants and agrees that from the date hereof until the Closing Date Buyer will: (a) promptly notify Seller in writing if Buyer becomes aware of any fact or condition that causes or constitutes a breach of any of the representations or warranties of Buyer in this Agreement, or if Buyer becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representations or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. (b) cooperate and use its reasonable best efforts to obtain, and will as soon as reasonably practicable prepare all registrations, filings and applications, requests and notices preliminary to, all Approvals and Permits that may be necessary or that may be reasonably requested by Seller to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Buyer covenants and agrees to use its commercially reasonable best efforts to prepare and file with the FCC, within five (5) business days after the date hereof, the FCC Applications. Subsequent to filing the FCC Applications, Buyer shall prosecute said FCC Applications with due diligence and shall use its reasonable efforts to obtain FCC Transfer Approval. (c) promptly inform Seller of any material non-confidential communication from any Communications Regulatory Authority, or any other Governmental Entity regarding any of the transactions contemplated hereby. If Buyer or any of its Affiliates receives a request for additional information or documentary material from any such Governmental Entity with respect to the transactions contemplated hereby, then such party will endeavor in good faith to make or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. Buyer shall notify Seller in the event it becomes aware of any facts, actions, communications or occurrences that would directly or indirectly materially affect FCC Transfer Approval. ARTICLE VII CONDITIONS TO CLOSING --------------------- 7.1 General Conditions. The obligations of the parties to effect the ------------------ Closing are subject to the following conditions unless waived in writing by all parties: (a) no Law or Order shall have been enacted, entered, issued, promulgated or enforced by any Governmental Entity, nor shall any Action have been instituted and remain pending or, to the knowledge of Seller or Buyer, have been threatened and remain so by any Governmental Entity at what would otherwise be the Closing Date, that prohibits or restricts or would (if successful) prohibit or restrict the transactions contemplated by this Agreement; and (b) the Final FCC Transfer Approval shall have occurred. 14 7.2 Conditions to Obligations of Buyer. The obligations of Buyer to ---------------------------------- effect the Closing shall be subject to the following conditions except to the extent waived in writing by Buyer: (a) The representations and warranties of Seller and License Partnership contained herein, including in any schedule, document or instrument delivered in connection herewith, shall be true and correct in all material respects from the date hereof to and including the Closing Date with the same effect as though made at such time. Each of Seller and License Partnership shall have in all material respects performed all obligations and complied with all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date and Seller shall have delivered to Buyer a certificate of Seller in form and substance reasonably satisfactory to Buyer, dated the Closing Date to such effect. (b) Buyer shall have received evidence reasonably satisfactory to it and its counsel that: (i) the Permits and Approvals listed on Schedule 3.3 have ------------ been obtained; and (ii) Seller's Required Consents shall have been obtained. (c) The deliveries set forth in Section 2.2 shall have been made. (d) Seller has terminated all of the employees of the Station listed on Schedule 3.16 effective as of the Closing Date. ------------- 7.3 Conditions to Obligations of Seller. The obligations of Seller ----------------------------------- and License Partnership to effect the Closing shall be subject to the following conditions, except to the extent waived in writing by the Seller and License Partnership: (a) The representations and warranties of Buyer herein contained, including in any schedule, document or instrument delivered in connection herewith, shall be true and correct in all material respects on the Closing Date with the same effect as though made at such time; Buyer shall have in all material respects performed all obligations and complied with all covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date, and Buyer shall have delivered to the Seller a certificate of Buyer in form and substance reasonably satisfactory to the Seller, dated the Closing Date, to such effect. (b) The deliveries set forth in Section 2.3 shall have been made. (c) Seller shall have received evidence reasonably satisfactory to it and its counsel that Buyer shall have obtained the Permits and Approvals specified in Schedule 4.3. ------------- (d) Buyer has employed all employees of the Station listed on Schedule 3.16 in accordance with the following terms: (i) such employment is - ------------- effective as of the Closing Date; (ii) each such employee shall commence his/her employment with Buyer with vacation accrual equal to the vacation accrual for such employee with Seller as of the Closing Date; and (iii) each such employee's vacation accrual as an employee of Buyer will equal or exceed the accrual rate to which such employee was entitled as an employee of Seller. 15 ARTICLE VIII POST-CLOSING OBLIGATIONS ------------------------ 8.1 Indemnification by Seller. Seller shall indemnify and hold ------------------------- harmless Buyer each of Buyer's managers, officers, members, partners, employees, Affiliates, agents, representatives, attorneys, licensees and assigns from and against all Losses of any such Person as a result of, arising from, or otherwise in respect of (a) any material breach of any representation or warranty made by Seller in this Agreement or any Ancillary Document, (b) any material failure to perform any covenant or agreement of Seller in this Agreement or any Ancillary Document, (c) any and all claims, Liabilities, and obligations of any kind or nature, contingent or otherwise, other than the Assumed Liabilities, arising from or relating to the Assets or the operation of the Station prior to the Closing Date. 8.2 Indemnification by Buyer. Buyer shall indemnify and hold ------------------------ harmless Seller, License Partnership and each of its respective directors, officers, shareholders, partners, employees, Affiliates, agents, representatives, attorneys, licensees and assigns from and against all Losses of any such Person as a result of, arising from, or otherwise in respect of (i) any material breach of any representation or warranty made by Buyer in this Agreement or any Ancillary Document, (ii) any material failure to perform any covenant or agreement of Buyer in this Agreement or any Ancillary Document, (iii) any and all claims, Liabilities and obligations arising from or relating to the Assets or the operation of the Station from and after the Closing Date, and (iv) the Assumed Liabilities. 8.3 Procedure. --------- (a) If any Person (an "Indemnified Party") has a claim for Loss ----------------- under Section 8.1 or Section 8.2, such Indemnified Party shall give notice of such claim (a "Claim Notice") to the party from whom such Person is seeking ------------ indemnification (the "Indemnifying Party") within 30 days after the Indemnified ------------------ Party has knowledge of the circumstances giving rise to the claim; provided, -------- however, that the Indemnified Party shall not be liable for any failure to give - ------- such notice unless the Indemnifying Party is materially adversely affected by such failure. The Claim Notice shall state the total dollar amount of the claim and set forth in reasonable detail why the Indemnified Party is entitled to indemnification. Within 30 days after receipt of any Claim Notice from the Indemnified Party, the Indemnifying Party shall send a notice of dispute of all or a portion of such claim (a "Dispute Notice"). If the Indemnifying Party has -------------- not delivered a Dispute Notice within 30 days after delivery of a Claim Notice, the amount of the Loss set forth in the Claim Notice for a Loss under Section 8.1 or Section 8.2 shall, except as provided in this Section 8.3(a), be paid within 10 days of the expiration of such 30-day period by the Indemnifying Party. If a Dispute Notice is timely delivered and the Indemnified Party and Indemnifying Party have not resolved the disputed matters of a claim (the "Disputed Matters") within 30 days of such delivery, (x) the Indemnified Party ---------------- and Indemnifying Party shall submit only the Disputed Matters to arbitration pursuant to Section 8.3(c) for resolution and (y) the amount of any Loss not disputed in the Dispute Notice shall, except as provided in this Section 8.3(a), be paid within 10 days of delivery of the Dispute Notice by the Indemnifying Party. The amount of any Loss relating to a Disputed Matter resolved in favor of the Indemnified Party shall be paid within 10 days of such resolution by the Indemnifying Party. (b) If any claim against an Indemnified Party shall arise by reason of any claim made by third parties against it (a "Pending Claim"), the ------------- Indemnified Party shall give 16 notice to the Indemnifying Party setting forth the basis of such claim and the amount being claimed. Such notice shall be given within 30 days after the Indemnified Party receives notice of the Pending Claim; provided, however, that -------- ------- if the Pending Claim relates to the initiation of an Action or other matter that requires that an answer or other response be made, the Indemnified Party shall give notice to the Indemnifying Party at least 10 days prior to the due date for such answer or response or, if the time for such 10-day prior notice already has passed, within 24 hours after the Indemnified Party receives notice of the Pending Claim; and provided, further, that the Indemnified Party shall not be -------- ------- liable for any failure to give such notice unless the Indemnifying Party is materially adversely affected by such failure. Such notice shall constitute a Claim Notice for purposes of this Section 8.3. The Indemnifying Party shall have the right to assume the defense of the Pending Claim through counsel of its selection reasonably acceptable to the Indemnified Party at the Indemnifying Party's expense, and the Indemnified Party shall have the right, at its own expense, to employ counsel to represent it, which counsel shall act in an advisory capacity only. The Indemnified Party shall cooperate fully to make available to the Indemnifying Party all pertinent information under the Indemnified Party's control as to the Pending Claim and shall make its appropriate personnel, if any, available for any discovery, trial or appeal. If the Indemnifying Party fails or refuses to undertake the defense within 30 days of receiving the notice of the Pending Claim, the Indemnified Party shall have the right to assume the defense of such matter on behalf of and for the account of the Indemnifying Party. Unless the Indemnifying Party has failed or refused to undertake the defense, the Indemnified Party shall not settle or compromise any Pending Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. The Indemnifying Party may settle without the consent of the Indemnified Party any claim for money at any time, at its sole expense if the Indemnified Party is unconditionally released from all further potential liability in connection therewith. (c) Any Disputed Matter submitted in accordance with Section 8.3(a) shall be settled by arbitration conducted in accordance with the Commercial Arbitration Rules or then existing rules for commercial arbitration of the American Arbitration Association before the arbitrator. The arbitration shall be governed by the Federal Arbitration Act (9 U.S.C. (S)(S) 1-16). The arbitration of such Disputed Matters, including the determination of any amount of damages suffered by any party hereto by reason of the acts or omissions of any party, shall be final and binding upon the parties, except that the arbitrator shall not be authorized to award punitive damages with respect to any such Disputed Matter. No party shall seek punitive damages relating to any matter under, arising out of, in connection with or relating to this Agreement in any other forum. The parties intend that this Article 8 shall be valid, --------- binding, enforceable and irrevocable and shall survive the termination of this Agreement. Any arbitration proceedings hereunder shall be held in Los Angeles, California. 8.4 Maximum Losses. Notwithstanding anything to the contrary -------------- contained herein, Seller shall not be liable to indemnify any Person pursuant to Section 8.1 until the total amount of all Indemnifiable Claims pursuant to Section 8.1 exceeds $50,000 and then only for such excess; provided that Seller's liability for Indemnifiable Claims pursuant to Section 8.1 shall not exceed $1,000,000 in the aggregate. 8.5 Measure of Liability of Seller in Respect of Deficiencies. The --------------------------------------------------------- amount of Seller's liability for any Losses for which indemnification obligations exist shall be measured taking into account any net income tax or other savings (whether realized with respect to the year in which such Losses occurs or with respect to an earlier or later year) that reduce the overall impact of the Losses upon Buyer or the Station. If any Loss is covered by insurance Buyer shall 17 first exhaust claims against such policies prior to being entitled to indemnification by Seller hereunder with respect to such Loss. 8.6 Effect of Closing Over Known Unsatisfied Conditions. If Buyer --------------------------------------------------- elects to proceed with the Closing knowing of any failure of any condition or breach of any representation and warranty of Seller, such condition or breach shall be deemed to be waived, and as a result Buyer shall be deemed to fully release and forever discharge Seller on account of all claims, demands or charges (known or unknown) with respect to the such condition or breach and any facts or circumstances giving rise to or in respect thereof. 8.7 Limit on Survival of Representations and Warranties. The --------------------------------------------------- representations and warranties contained in this Agreement (except for any representations and warranties with respect to which a Claim Notice has theretofore been given pursuant to Section 8.3 which shall survive to the extent of the Disputed Matters relating thereto until such Disputed Matters are resolved pursuant to Article 8) shall expire on the date 180 days after the Closing Date, or if such date is not a business day on the next succeeding business day; provided, however, that (i) the representations and warranties -------- ------- contained in Section 3.18 shall survive until the third anniversary of the Closing Date, (ii) the representations and warranties contained in Section 3.7 and Section 3.9 shall survive until the expiration of the statutory period of limitations applicable to the matters referred to in such section, respectively. 8.8 Absolute Indemnity. The indemnification provided in this Article ------- 8 shall constitute the exclusive remedy of the parties hereto and their - - respective directors, officers, partners, employees, Affiliates, agents and assigns from and against any and all Losses asserted against, resulting to, imposed upon or incurred or suffered by, any of them, directly or indirectly, as a result of, or based upon or arising from the breach of any representation or warranty or the non-fulfillment of any agreement or covenant in or pursuant to this Agreement or any other agreement, document, or instrument required hereunder. ARTICLE IX TERMINATION AND POSTPONEMENT ---------------------------- 9.1 Termination; Postponement. ------------------------- (a) This Agreement shall terminate if the Closing has not occurred by the earlier of: (i) May 15, 1999 ; or (ii) if the FCC has denied the FCC Transfer Approval in an order that has become Final, or the FCC designates the FCC Applications for hearing, the date on which either Buyer or Seller gives notice to the other party that such party elects to terminate this Agreement. (b) If, no later than 90 days after the date of this Agreement, Buyer has provided the Seller with a written report by an approved consultant indicating, on the basis of a "Phase I" environmental study of the Real Property, that it is likely that a material Environmental Condition exists upon the Real Property, then Buyer shall have the right, by giving written notice to Seller, to terminate this Agreement. 18 9.2 Effect of Termination. If this Agreement shall be terminated --------------------- pursuant to Section 9.1, all further obligations of the parties under this Agreement shall terminate without further liability of any party to another; provided, however, that the obligations of the parties contained in Section - -------- ------- 11.11 shall survive any such termination. ARTICLE X POST CLOSING AGREEMENTS ----------------------- 10.1 Collection of Seller's Accounts Receivables. At the Closing, ------------------------------------------- Seller will designate Buyer as its agent solely for the purposes of collecting Seller's Receivables. (a) Buyer will use reasonable efforts, in accordance with Buyer's customary business practices, to collect Seller's Receivables during the "Collection Period," which shall be the period beginning on the Closing Date and ending on the last day of the sixth calendar month beginning after the Closing Date. At the end of such time period, Buyer will provide Seller with copies of all information collected by Buyer regarding the Receivables collected by Buyer on behalf of Seller. Buyer shall not be obligated to use any efforts to collect any of Seller's Receivables that are more extensive than the efforts that Buyer uses to collect its own accounts receivable. Buyer shall not make any referral or compromise of any of Seller's Receivables to a collection agency or attorney for collection and shall not settle or adjust the amount of any of Seller's Receivables without the written approval of Seller. If Buyer receives monies from an account debtor of Buyer that is also an account debtor of Seller with respect to any of Seller's Receivables, Buyer shall credit the sums received to the oldest account due, unless such account debtor makes a written request to the contrary. (b) Buyer shall pay the amounts received by Buyer from the collection of Seller's Receivables to the Seller on the first and fifteenth of every month. (c) Within 10 days after the end of each month through the seventh calendar month beginning after the Closing Date, Buyer will provide Seller with a written accounting, showing on both a monthly and a cumulative basis (i) the Seller's Receivables that have been collected on behalf of Seller, and (ii) that amount that has been paid to Seller on account of the collection of the Seller's Receivables. (d) The parties acknowledge and agree that all Seller's Receivables collected by Buyer as agent of Seller shall be Seller's property and shall be deemed to be held in trust for the benefit of Seller to be applied in accordance with Section 10.1(c). Buyer agrees that it shall receive an acknowledgment from any party providing financing for the transactions contemplated by this Agreement (or for working capital) to such effect. Buyer further agrees not to place or permit to be placed any Encumbrance on the Seller's Receivables or the proceeds therefrom. 10.2 Preservation of Records. Buyer covenants that it will preserve ----------------------- and make available (including the right to inspect and copy) to Seller, its attorneys and accountants, for the three year period after the Closing Date and during normal business hours, such of the books, records, files, correspondence, memoranda and other documents transferred pursuant to this Agreement as Seller may reasonably require in connection with any legitimate purpose, including, but not limited to, the preparation of tax reports and returns and the preparation of financial statements. 19 10.3 Non-Assignable Contracts. Nothing contained in this Agreement ------------------------ shall be construed as an assignment or an attempted assignment of any contract which is by law non-assignable without the consent of the other party or parties thereto, unless such consent shall be given. 10.4 Further Assurances. From time to time prior to, on and after the ------------------ Closing Date, each party hereto will execute all such instruments and take all such actions as any other party, being advised by counsel, shall reasonably request, without payment of further consideration, in connection with carrying out and effectuating the intent and purpose hereof and all transactions and things contemplated by this Agreement, including without limitation the execution and delivery of any and all confirmatory and other instruments in addition to those to be delivered on the Closing Date, and any and all actions which may reasonably be necessary or desirable to complete the transactions contemplated hereby. The parties shall cooperate fully with each other and with their respective counsel and accountants in connection with any steps required to be taken as part of their respective obligations under this Agreement. ARTICLE XI MISCELLANEOUS ------------- 11.1 Publicity and Reports. Buyer and Seller shall coordinate all --------------------- publicity relating to the transactions contemplated by this Agreement, and no party shall issue any press release, publicity statement or other public notice relating to this Agreement, the Ancillary Documents or the transactions contemplated by them without obtaining the prior consent of both Buyer and Seller except to the extent that a party is advised by its legal counsel that a particular action is required by applicable law. 11.2 Amendments;Waivers. This Agreement and any schedule attached ------------------ hereto may be amended only by agreement in writing of all of the parties. No waiver of any provision nor consent to any exception to the terms of this Agreement shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided. 11.3 Schedules; Exhibits; Integration. Each schedule delivered -------------------------------- pursuant to the terms of this Agreement shall be in writing and shall constitute a part of this Agreement, although schedules and exhibits need not be attached to each copy of this Agreement. This Agreement, together with such schedules, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the parties in connection therewith, including, without limitation, that certain Letter of Intent dated June 15, 1998, as amended from time to time. 11.4 Best Efforts; Further Assurances. Each party shall use its best -------------------------------- efforts to cause all conditions to its obligations hereunder to be timely satisfied and to perform and fulfill all obligations on its part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be effected substantially in accordance with its terms as soon as reasonably practicable. Each party shall execute and deliver both before and after the Closing Date such further certificates, agreements and other documents and take such other actions as may be necessary or appropriate to consummate or implement the transactions contemplated hereby or to evidence such events or matters. 20 11.5 Governing Law. This Agreement and the legal relations between ------------- the parties shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by federal law. 11.6 Jurisdiction; Service of Process. Any action or proceeding -------------------------------- seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of California, County of Los Angeles, or, if it has or can require jurisdiction, in the United States District Court in Los Angeles, California, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 11.7 Headings. The descriptive headings of the Articles, Sections -------- and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement. 11.8 Counterparts. This Agreement and any amendment hereto or any ------------ other agreement (or document) delivered pursuant hereto may be executed in one or more counterparts and by different parties in separate counterparts. All of such counterparts shall constitute one and the same agreement (or other document) and shall become effective (unless otherwise provided therein) when one or more counterparts have been signed by each party and delivered to the other parties. 11.9 Parties in Interest. This Agreement shall be binding upon and ------------------- inure to the benefit of each party, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to (or to confer any right of subrogation or action against) any party to this Agreement. 11.10 Notices. Any notice or other communication hereunder must be ------- given in writing and (i) delivered in person, (ii) transmitted by telecommunications mechanism, provided that any notice so given is also mailed as provided in clause (iv), (iii) delivered by a recognized air express company, or (iv) mailed by certified or registered mail, postage prepaid, receipt requested as follows: If to Buyer: Entravision Communications Company, L.L.C. Attention: Walter F. Ulloa and Philip C. Wilkinson 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Telephone: (310) 820-5355 Facsimile: (310) 820-2445 21 With a copy to: Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. Attention: Kenneth D. Polin, Esq. 101 West Broadway, Seventeenth Floor San Diego, California 92101 Telephone: (619) 515-9600 Facsimile: (619) 515-9628 If to Seller: Univision Communications Inc. Attention: Andrew W. Hobson 1999 Avenue of the Stars, Suite 3050 Century City CA 90067 Telephone: (310) 556-7690 Facsimile: (310) 556-7615 With a copy to: Univision Legal Department 6701 Center Drive West, 15th Floor Los Angeles, CA 90045-5073 Attention: General Counsel Telephone: (310) 348-3675 Facsimile: (310) 348-3679 or to such other address or to such other person as any party shall have last designated by such notice to the other parties. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 11.10 and an appropriate answer back or confirmation of transmission is received, (ii) if given by mail, 3 days after such communication is deposited in the mails by certified or registered mail, postage prepaid, addressed as aforesaid, (iii) if given via a recognized overnight air express company, upon delivery or refusal of delivery as evidenced by the records of the air express company, or (iv)if given by any other means, when actually delivered at such address. 11.11 Expenses and Attorneys' Fees. Each party shall pay its own expenses incident to the negotiation, preparation and performance of this Agreement, including, but not limited to, the fees, expenses and disbursements of its respective accountants, advisers and counsel; provided, however, that the -------- ------- filing fees for the FCC Application shall be paid one-half by Buyer and one-half by Seller. In the event of any arbitration relating to a claim for Loss pursuant to Article 8, the prevailing party as determined by the arbitrator arbitrating --------- the claim for Loss shall be entitled to recover from the other party reasonable attorneys' fees, expenses and costs incurred in bringing and prosecuting such action or proceeding and/or enforcing any judgment, order, ruling or award issued in favor of such prevailing party therein. In determining the prevailing party, the arbitrator shall consider the last offer, if any, made by each party immediately preceding the commencement of arbitration. 11.12 Bulk Transfer Laws. Seller and Buyer hereby waive compliance ------------------ with any applicable bulk transfer laws, including, but not limited to, the bulk transfer provisions of the Uniform Commercial Code of any state, or any similar statute, with respect to the transactions contemplated hereby. 22 11.13 Participation in Drafting; Interpretation. The provisions ----------------------------------------- hereof have been thoroughly reviewed by all parties and have been the subject of negotiations. Accordingly, no party (or its counsel) shall be considered to have been the exclusive preparer or draftsman of this Agreement, nor shall the provisions hereof be construed strictly against any such party on that account. Without limiting the generality of the foregoing, the parties waive the provisions of Section 1654 of the California Civil Code and any legal decision that would require interpretation of any claimed ambiguities against the party that drafted it. The provisions of this Agreement are to be interpreted in a reasonable manner to give effect to the intent of the parties reflected herein. 11.14 Severability. If any clause or provision of this Agreement is ------------ illegal, invalid, or unenforceable under present or future laws effective during the term hereof, it is the intention of the parties hereto that the remainder of this Agreement shall not be affected thereby so long as such remainder continues to have the economic effect intended by this Agreement. ARTICLE XII DEFINITIONS ----------- 12.1 General. For all purposes of this Agreement, except as ------- otherwise expressly provided: (a) the terms defined in this Article 12 have the meanings assigned to them in this Article 12 and include the plural as well as the singular, (b) all accounting terms not otherwise defined herein have the meanings assigned under generally accepted accounting principles, (c) all references in this Agreement to designated "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of the body of this Agreement, (d) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, and (e) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 12.2 Defined Terms. As used in this Agreement and the Exhibits and -------------- Schedules delivered pursuant to this Agreement, the following definitions shall apply: "Accrued Liabilities" has the meaning set forth in Section 1.4. "Action" means any action, claim, complaint, petition, investigation, suit or other proceeding, whether civil or criminal, in law or in equity. "Adjustment Date" has the meaning set forth in Section 1.4. "Affiliate" means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. 23 "Ancillary Documents" means the Assignment and Assumption Agreement and the Note Purchase Option Agreement Amendment. "Approval" means any approval, authorization, consent, qualification or registration, or any waiver of any of the foregoing, required to be obtained from, or any notice, statement or other communication required to be filed with or delivered to, any Governmental Entity or any other Person. "Assets" has the meaning set forth in Section 1.1. "Assignment and Assumption Agreement" means an assignment and assumption agreement substantially in the form of Exhibit "A" pursuant to which Buyer ----------- shall assume and agree to pay, perform and discharge when due the Assumed Liabilities. "Assigned Contracts" has the meaning set forth in Section 1.1. "Assumed Liabilities" has the meaning set forth in Section 1.3. "Business" means the business and operations of the Station. "Buyer" has the meaning set forth in first paragraph of this Agreement. "Claim Notice" has the meaning set forth in Section 8.3(a). "Closing" has the meaning set forth in Section 2.1. "Closing Date" means the date on which the Closing occurs. "Code" means the Internal Revenue Code of 1986, as amended, or as hereafter amended. "Communications Act" means the Communications Act of 1934, as amended, or any successor statute or statutes thereto, and all rules, regulations, policies, orders and decisions of the FCC thereunder, in each case as from time to time in effect. "Communications Regulatory Authority" means each communications regulatory commission, agency, department, board or authority (including, but not limited to, the FCC) having jurisdiction over the Station. "Consumed Property" has the meaning set forth in Section 1.2. "Contract" means any agreement, arrangement, bond, commitment, contract, franchise, indemnity, indenture, instrument, lease, license or understanding, whether or not in writing. "Dispute Notice" has the meaning set forth in Section 8.3(a). "Disputed Matter" has the meaning set forth in Section 8.3(a). "Employee Benefit Plan" means any "employee welfare benefit plan" and any "employee pension benefit plan" within the meaning of Sections 3(1) or 3(2) of ERISA covering any employees of the Seller. 24 "Encumbrance" means any liability, charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership. "Environmental Condition" means the presence on, in, under or about the Real Property of any Regulated Material that, if the presence of such Regulated Material were known, would be reportable under any Environmental Law or that could reasonably be anticipated to require investigation or re- mediation pursuant to any Environmental Law. "Environmental Laws" means any federal, state or local statute, law, rule, regulation, ordinance, judgment, decree, license, permit, franchise, certificate or authority or order, or any waiver of any of the foregoing, concerning, relating to or controlling (i)the handling, transportation, sale, offering for sale, storage, treatment, discharge, disposal, release, use, processing or manufacture of any Regulated Material; or (ii)the introduction of any Regulated Material into the environment or workplace, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Occupational Safety and Health Act and any similar state or local statute. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the related regulations and published interpretations. "Excluded Assets" has the meaning set forth in Section 1.2. "FCC" means the Federal Communications Commission or any successor Governmental Entity. "FCC Applications" means all requisite applications and other instruments or documents necessary to request the FCC Transfer Approval. "FCC Licenses" Any license (whether for NTSC or DTV operation of the Station), waiver, consent, permit or other authorization issued or granted by the FCC in connection with K48AM and the ownership and operation of the Station, including without limitation all rights in and to the call letters "KLUZ" and "KLUZ -TV," and any variations thereof, and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto. "FCC Rules" has the meaning set forth in Section 3.14(a). "FCC Transfer Approval" means the FCC's written approval of the assignment of the FCC Licenses from License Partnership to Buyer as contemplated hereby, including, but not limited to, its approval of any waivers of FCC Rules requested by Buyer with respect to such transfer, which approvals shall have been granted on terms (i) not in any material respect more onerous to Buyer than are the terms applicable to Seller under the existing FCC Licenses and (ii) that otherwise would not be materially adverse to Buyer or would not in any material adverse respect diminish the value of the Station or of any of Buyer's other television stations. 25 "Final" means that action shall have been taken by the FCC (including action duly taken by the FCC's staff, pursuant to delegated authority) which shall not have been reversed, stayed, enjoined, set aside, annulled or suspended; with respect to which no timely request by a party in interest for stay, petition for rehearing, appeal or certiorari or sua --- sponte action of the FCC with comparable effect shall be pending; and as to ------ which the time for filing any such request, petition, appeal or certiorari or for the taking of any such sua sponte action by the FCC shall have --- ------ expired or otherwise terminated with no such action having been timely taken. "GAAP" means generally accepted accounting principles consistently applied in the United States, as in effect from time to time. "Governmental Entity" means any government or any agency, district, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. "Indemnified Party" has the meaning set forth in Section 8.3(a). "Indemnifying Party" has the meaning set forth in Section 8.3(a). "Law" means any constitutional provision, statute or other law, rule, regulation, or interpretation of any Governmental Entity, including, but not limited to, any Environmental Law, and any "Liability" means as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute, contingent or otherwise, of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected or required to be reflected in the balance sheets or other books and records of such Person. "License Partnership" has the meaning set forth in the first paragraph of this Agreement. "Loss" means any cost, damage, disbursement, expense, liability, loss, deficiency, diminution in value, obligation, penalty or settlement of any kind or nature, whether foreseeable or unforeseeable, including but not limited to, interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims and amounts paid in settlement, that may be imposed on or otherwise incurred or suffered by the specified Person, net of any insurance proceeds actually recovered by an Indemnified Party minus all costs and expenses incurred in collecting such insurance proceeds (including, but not limited to, reasonable attorneys' fees). "Mark" means any brand name, copyright, patent, service mark, trademark, trade name, and all registrations and applications for registration of any of the foregoing. "Material Adverse Effect" means, with respect to any party, a material adverse effect (or any development which, insofar as can reasonably be foreseen, in the future is likely to have a material adverse effect) on the business, assets, financial or other condition, results of operations or prospects of such party and to the extent applicable, its subsidiaries, taken as a whole. 26 "Material Contract" means any Contract deemed material in accordance with Section 3.6. "Note Purchase Option Agreement Amendment" means an amendment (substantially in the form attached hereto as Exhibit "B") to that certain ----------- Amended and Restated Subordinated Note Purchase and Option Agreement dated December 30, 1996 by and among Univision Communications Inc. ("UCI"), Buyer, KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Entravision Merger Corp., and Walter Ulloa and Philip Wilkinson, pursuant to which UCI acquired an option to purchase Class A Membership units in Buyer (which right will be assignable by UCI to any of its Affiliates). "Order" means any decree, injunction, judgment, order, ruling, assessment or writ. "Pending Claim" has the meaning set forth in Section 8.3(b). "Permit" means any license, permit, franchise, certificate of authority, or order, or any waiver of the foregoing, required to be issued by any Governmental Entity. "Permitted Encumbrances" means (a) statutory Encumbrances not yet delinquent; (b) Encumbrances, with respect to the properties and assets of Seller and License Partnership, taken as a whole, that do not individually or in the aggregate, materially impair or materially interfere with the present use of the properties or assets or otherwise materially impair present business operations at such properties; (c) Encumbrances for Taxes not yet delinquent or the validity of which are being contested in good faith by appropriate actions; and (d) Encumbrances reflected on the financial statements or on the disclosure schedules attached hereto. "Person" means an association, a corporation, an individual, a partnership, a trust or any other entity or organization, including a Governmental Entity. "Programming Contracts" means all contracts, agreements or other arrangements pursuant to which there has been granted a license or other right to broadcast, televise or otherwise air taped, filmed or live television programs, shows, motion pictures, sports, commercials or infomercials. "Purchase Price" has the meaning set forth in Section 1.5. "Real Property" has the meaning set forth in Section 1.1. "Regulated Material" means any substance that is defined or listed in, or otherwise classified pursuant to, any applicable law as a "hazardous substance," "hazardous material," "hazardous waste" or toxic substance," or any other formulation intended to define, list or classify materials or substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity or "EP toxicity," and petroleum and drilling fluids, produced waters and other wastes associated with the exploration, development, or production of crude oil, natural gas or geothermal energy. "Seller" has the meaning set forth in the first paragraph of this Agreement. 27 "Seller's Receivables" has the meaning set forth Section 1.2(b). "Seller's Required Consents" has the meaning set forth in Section 5.6. "Station" has the meaning set forth in the Recitals. "Station Financial Statements" means the balance sheets of the Station as of December 31, 1997 and September 30, 1998 for the twelve (12) month and nine (9) month periods respectively then ended and the related statements of income. "Tangible Personal Property" has the meaning set forth in Section 1.1. "Tax" means any federal, state, county or local income, sales, use, excise, franchise, ad valorem, real and personal property, transfer, gross receipt, stamp, premium, profits, customs, duties, windfall profits, capital stock, production, business and occupation, disability, employment, payroll, severance or withholding taxes, fees, assessments or charges of any kind whatsoever imposed by any Governmental Entity, any interest and penalties (civil or criminal), additions to tax, payments in lieu of taxes or additional amounts related thereto or to the nonpayment thereof, and any Loss in connection with the determination, settlement or litigation of any Tax Liability. "Tax Return" means a declaration, statement, report, return or other document or information required to be filed or supplied with respect to Taxes. 28 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:/s/ Walter F. Ulloa Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By:/s/ Philip C. Wilkinson Philip C. Wilkinson, President, Chief Operating Officer and Managing Member UNIVISION TELEVISION GROUP, INC., a Delaware corporation By:/s/ Robert Cahill KLUZ LICENSE PARTNERSHIP, a California general partnership By: /s/ Robert Cahill [Signature Page to Asset Purchase Agreement] S-1 Exhibit A Assignment and Assumption Exhibit B First Amendment to Amended and Restated Subordinated Note Purchase And Option Agreement Exhibit C Network Affiliation Agreement Schedule 1.1(i) Real Property Schedule 1.1(ii) Tangible Personal Property Schedule 1.1(iii) Assigned Contracts Schedule 1.4 Prorated Liabilities Schedule 1.6 Purchase Price Allocation Schedule 3.3 Permits and Approvals Schedule 3.6 Material Contracts Schedule 3.7 Encumbrances Schedule 3.10 Insurance Schedule 3.14(b) FCC Licenses Schedule 3.15 Marks Schedule 3.16 Employee Matters Schedule 3.17 Employee Benefit Plans Schedule 3.18 Environmental Matters Schedule 4.3 Permits and Approvals (Buyer) Schedule 5.7 Consents The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. S-2 EX-2.2 3 AGREEMENT AND PLAN OF MERGER - DEC. 21, 1999 EXHIBIT 2.2 ================================================================================ AGREEMENT AND PLAN OF MERGER by and among Entravision Communications Company, L.L.C., LCG Acquisition Corporation, Latin Communications Group Inc. and Certain of its Representatives dated December 21, 1999 ================================================================================ AGREEMENT AND PLAN OF MERGER ---------------------------- This Agreement and Plan of Merger (the "Agreement") is entered into this 21st of December, 1999 by and among Entravision Communications Company, L.L.C., a Delaware limited liability company ("Entravision"), and LCG Acquisition Corporation, a Delaware corporation ("Acquisition Co."), on the one hand, and Latin Communications Group Inc., a Delaware corporation ("LCG"), and the LCG Representatives (as defined below), on the other hand, with respect to the following facts: WHEREAS, Entravision is a duly formed Delaware limited liability company engaged in the ownership and operation of television and radio stations. WHEREAS, Acquisition Co. is a duly incorporated Delaware corporation formed by Entravision for the purpose of effecting the Merger (as defined below) contemplated by this Agreement, with authorized capital stock consisting of 1,000 shares of Common Stock, $0.001 par value per share, of which 1,000 shares are duly and validly issued and outstanding, and all of which shares are held by Entravision as of the date hereof. WHEREAS, LCG is a duly incorporated Delaware corporation that owns and operates (i) the radio stations (the "Radio Stations") listed on Schedule "A" ------------ attached hereto and incorporated herein by this reference and (ii) the newspaper and other publication (the "Newspapers") listed on Schedule "A," with authorized ------------- capital stock consisting of fifteen million (15,000,000) shares of Common Stock, $0.01 par value per share, of which 9,235,468 shares are duly authorized, issued and outstanding (the "Shares"), and all of which are held of record by the individuals and entities set forth on Schedule "B" attached hereto and ------------ incorporated herein by this reference (the "Stockholders"), as of the date hereof. WHEREAS, the managing members of Entravision, the stockholders of Acquisition Co. and the respective Boards of Directors of Acquisition Co. and LCG have approved and declared the advisability of the acquisition of the Shares by Acquisition Co. via merger (the "Merger") of Acquisition Co. with and into LCG pursuant to applicable Delaware law and the terms and conditions of this Agreement. WHEREAS, promptly following the execution and delivery of this Agreement (and in no event later than January 6, 2000), LCG will notice a meeting of its Stockholders (the "Meeting") to vote on the Merger and this Agreement and, subject to Section 6.13 below, the Board of Directors of LCG will recommend that such Stockholders vote in favor of the Merger and this Agreement. WHEREAS, as of the date hereof, Stockholders holding Shares representing over fifty percent (50%) of the issued and outstanding Shares entitled to vote at the Meeting have entered into Voting Agreements, in the form attached hereto as Exhibit "A" and incorporated herein by this reference (the "Voting ----------- Agreements"), agreeing to vote in favor of the Merger. WHEREAS, the parties hereto desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions with respect thereto. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each signatory hereto, the parties hereto covenant and agree as follows: ARTICLE 1. DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings: 1.1 "Applicable Contract" means any Contract (as defined below) under which LCG or any of the LCG Subsidiaries (as defined below) is a party or by which LCG or any of the LCG Subsidiaries is bound which: (i) provides for future payments thereunder of more than $250,000 in a twelve (12) month period; (ii) restricts the kinds of business in which LCG or any of the LCG Subsidiaries may engage or the geographical area in which any of them may conduct their business; (iii) is an indenture, mortgage, loan agreement or other Contract for the borrowing of money or a line of credit; (iv) is a collective bargaining agreement or union Contract; (v) is a material license (whether as licensor or licensee) or similar agreement permitting the use of any Intellectual Property Assets (as defined below); (vi) is a brokerage or finder's agreement; (vii) is a joint venture, partnership or similar agreement; (viii) is a stock purchase agreement, asset purchase agreement or other acquisition or divestiture agreement which has not been fully performed; (ix) is an employment, consulting, severance termination or management agreement (either written or, if oral, providing for over $250,000 in payments annually); (x) is with any director, officer, employee or stockholder of LCG or any Related Person (as defined below); (xi) is a Real Property Lease (as defined below); or (xii) is not of the foregoing type and is material to the business or financial condition of LCG and the LCG Subsidiaries, taken as a whole. 1.2 "Breach" means a breach of a representation, warranty, covenant, obligation or other provision of this Agreement or any instrument delivered pursuant to this Agreement and will be deemed to have occurred if there is or has been any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision. 1.3 "Cash on Hand" means the aggregate amount of any cash and cash equivalents on hand at LCG or any of the LCG Subsidiaries (including the amount of any uncashed checks payable to LCG or any of the LCG Subsidiaries) or in bank accounts or lockboxes of LCG or any of the LCG Subsidiaries as of 11:59 p.m. New York City time on the day immediately preceding the Closing Date (as defined below). -2- 1.4 "Certificate of Merger" means the Certificate of Merger to be filed with the Delaware Secretary of State to perfect the Merger, substantially in the form attached hereto as Exhibit "B" and incorporated herein by this reference. ----------- 1.5 "Closing Date" means the date and time as of which the Closing (as defined below) actually takes place. 1.6 "Commercially Reasonable Efforts" means the efforts that a prudent business Person (as defined below) desirous of achieving a result would use in similar circumstances to achieve promptly such result; provided, however, that "Commercially Reasonable Efforts" shall not require the expenditure of funds, except for any filing fees for third-party consents or approvals to be paid by any party as contemplated by this Agreement. 1.7 "Consent" means any approval, consent, ratification, waiver or other authorization (including the FCC Consent, the consent required under the HSR Act (as defined below) and any other necessary Governmental Authorization, each as defined below). 1.8 "Contemplated Transactions" means all of the transactions contemplated by this Agreement, including, without limitation, the Merger and the performance by the parties hereto of their respective covenants and obligations under this Agreement. 1.9 "Contract" means any agreement, contract, obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding. 1.10 "Delaware Code" means the Delaware General Corporation Law, as amended. 1.11 "Escrows and Deposits" means the aggregate outstanding amount as of the Closing Date of (i) the escrow deposit made by Portland Radio, Inc. pursuant to that certain Purchase and Sale Agreement dated June 30, 1999 by and between Portland Radio, Inc. and the Port of Portland (the "Portland Land Sale") and (ii) the notes receivable in the aggregate amount of $358,500 in favor of EMI Sacramento Radio, Inc. (the "Huth Notes") pursuant to that certain Asset Purchase Agreement dated April 8, 1999 by and between EMI Sacramento, Inc. and Tom Huth d/b/a Huth Broadcasting, as amended (the "Huth Asset Purchase Agreement"). 1.12 "Employee Benefit Plan" means any material "employee benefit plan" as defined in Section 3(3) of ERISA (as defined below) of LCG or the LCG Subsidiaries and any other material plan, policy, program, practice or arrangement providing compensation or other benefits to any current or former officer or employee of LCG or the LCG Subsidiaries or any beneficiary or dependent thereof that is maintained by LCG or the LCG Subsidiaries. 1.13 "Encumbrances" means any and all encumbrances, charges, claims, penalties, community property interests, conditions, equitable interests, liens, options, pledges, security interests or rights of first refusal, other than Permitted Encumbrances (as defined below). -3- 1.14 "Environmental Law(s)" means all federal, state and local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directives, licenses, authorizations, permits and agreements issued or signed by any federal, state or local government authority, relating to environmental, health or safety matters, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Clean Water Act of 1977, the Clean Air Act, the Resource Conservation and Recovery Act of 1976, the Federal Insecticide, Fungicide and Rodenticide Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act of 1986, the Occupational Safety and Health Act of 1970 and the Safe Drinking Water Act, and state and local counterparts to such acts, in each case, as amended and in effect on the date hereof. 1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor law, and the rules and regulations issued pursuant to that act or any successor law. 1.16 "FCC" means the Federal Communications Commission, or any successor agency. 1.17 "Final Order" means an order, action or decision of the FCC that has not been reversed, stayed, enjoined, annulled or suspended and as to which (i) no timely request for stay, appeal, petition for reconsideration, application for review or reconsideration by the FCC on its own motion is pending and (ii) the time for filing any such request, appeal, petition or application or for reconsideration by the FCC on its own motion, has expired. 1.18 "Financial Statements" means (i) the audited balance sheets of LCG as of December 31, 1998, and the related statements of income and cash flows for the period then ended (including notes thereto), as compiled by Ernst & Young LLP, certified public accountants, and the unaudited balance sheets of LCG as of October 31, 1999, and the related statements of income and cash flows for the period then ended. 1.19 "GAAP" means generally accepted accounting principles. 1.20 "Governmental Authorization" means any approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of the FCC, any Governmental Body or pursuant to any Legal Requirement, each as defined below. 1.21 "Governmental Body" means (i) any nation or state, (ii) any federal, state or foreign government, (iii) any federal, state or foreign governmental or quasi-governmental authority of any nature (including any federal, state or foreign governmental agency, branch, department or entity and any court or other tribunal of such entity), (iv) any federal, state or foreign body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, regulatory or taxing authority or (v) the FCC. -4- 1.22 "Hazardous Substance(s)" means (i) any substance, the presence of which requires investigation or remediation under any Environmental Law, (ii) any dangerous, toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous substance which is regulated by any Environmental Law and (iii) radon, ureaformaldehyde, polychlorinated biphenyls, asbestos or asbestos-containing materials, petroleum and petroleum products. 1.23 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 1.24 "Income Tax(es)" means any net income Tax (as defined below), any franchise Tax based on net income or any Tax measured by or calculated with respect to net income or net receipts, proceeds of profits or based upon or measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise or occupation taxes) if such Tax may be based upon, measured by, or calculated with respect to one or more of the bases described above. 1.25 "IRC" means the Internal Revenue Code of 1986, as amended, or any successor law, and the rules and regulations issued by the IRS (as defined below) pursuant to the IRC or any successor law. 1.26 "IRS" means the United States Internal Revenue Service, or any successor agency, and, to the extent relevant, the United States Department of the Treasury. 1.27 "Knowledge" of LCG means the actual knowledge of any of Athena S. Marks, Martin Gausvik, Martin D. Payson, Stephen D. Royer or Rossana Rosado after a reasonable inquiry. 1.28 "LCG Material Adverse Effect" means one or more events, occurrences, facts, conditions, changes or effects which cumulatively have a material adverse effect on the assets, liabilities or properties of LCG and the LCG Subsidiaries collectively, excluding matters affecting the broadcasting or print industries generally and excluding general economic conditions. 1.29 "Legal Requirement" means any FCC, federal, state or foreign administrative order, law, regulation or statute. 1.30 "Liabilities" means, as to any Person, all liabilities, debts and obligations to pay money, direct, indirect, absolute, contingent or otherwise, of such Person, whether accrued, vested or otherwise, whether in Contract, tort, strict liability or otherwise and whether or not actually reflected, or required by the federal income tax method of accounting to be reflected, in such Person's balance sheets or other books and records. -5- 1.31 "Material Adverse Effect" means one or more events, occurrences, facts, conditions, changes or effects which cumulatively have a material adverse effect on the assets, liabilities or properties of any entity, its ultimate parent and their respective Subsidiaries (as defined below) collectively, excluding matters affecting the broadcasting or print industries generally and excluding general economic conditions. 1.32 "Order" means any award, decision, injunction, judgment, order, ruling or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body. 1.33 "Organizational Documents" means (i) the articles or certificate of incorporation and the bylaws of a corporation, (ii) the partnership agreement and any statement of partnership of a general partnership, (iii) the limited partnership agreement and the certificate of limited partnership of a limited partnership, (iv) the articles of organization or certificate of formation and the operating agreement of a limited liability company, (v) any charter or similar document adopted or filed in connection with the creation, formation or organization of a Person or (vi) any amendment to any of the foregoing. 1.34 "Other Tax(es)" means any Tax that is not an Income Tax. 1.35 "Permitted Encumbrances" means Encumbrances (i) set forth on Schedule -------- 4.9, (ii) liens for Taxes, assessments and other governmental charges not yet - --- due and payable or being contested in good faith by appropriate proceedings and (iii) Encumbrances created by FCC licenses or other Governmental Authorizations. 1.36 "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body. 1.37 "Proceeding" means any action, litigation, formal arbitration, formal mediation, bankruptcy or suit (whether civil, criminal or administrative) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator. 1.38 "Real Property" means all of the land, buildings, plants, facilities, installations, fixtures and other structures and improvements owned by LCG. 1.39 "Real Property Leases" shall mean, collectively, any written real property leases to which LCG or any of the LCG Subsidiaries is a party. 1.40 "Related Person" means an "affiliate" (as such term is defined in the rules promulgated under the Securities Exchange Act of 1934, as amended) of a Person. -6- 1.41 "Representative" means with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors. 1.42 "Schedules" means the schedules attached hereto and incorporated herein by this reference relating to the representations and warranties of the parties hereto. 1.43 "Securities Act" means the Securities Act of 1933, as amended, or any successor law, and the rules and regulations issued pursuant to that act or any successor law. 1.44 "Subsidiary(ies)" means any corporation, limited liability company or other entity with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the Common Stock or other equity ownership interest or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors or managers. 1.45 "Surviving Corporation" means LCG as the surviving corporation following the Merger. 1.46 "Tax(es)" means taxes of any kind, accrued or accruing, including any and all federal, state or local taxes, charges, fees, levies or other assessments of any nature whatsoever (including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, property or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever) together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) upon the entity to which reference is being made, including any such Taxes imposed by reason of such entity being or having been a member of a consolidated, combined or unitary group. 1.47 "Tax Return" means any return (including any information return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax. "Income Tax Returns" and "Other Tax Returns" shall have correlative meanings. 1.48 "Threatened" means a claim, Proceeding, dispute or other matter will be deemed to have been "Threatened" if any demand or statement has been made in writing or any notice has been given in writing. -7- ARTICLE 2. MERGER 2.1 Merger. Subject to the terms and conditions hereof, the Merger shall ------ be consummated in accordance with the Delaware Code. Effective as of Closing, subject to the terms and conditions of this Agreement and in accordance with the applicable laws of the State of Delaware, Acquisition Co. shall be merged with and into LCG, which shall be the Surviving Corporation. 2.2 Execution of Certificate of Merger. At the Closing, LCG shall execute ---------------------------------- the Certificate of Merger, and counsel for Entravision shall cause the Certificate of Merger to be delivered to the Delaware Secretary of State for filing. 2.3 Effect of the Merger. The Merger shall have the effects set forth in -------------------- Section 259 of the Delaware Code. 2.4 Certificate of Incorporation; Bylaws. Except as otherwise provided ------------------------------------ herein, following the effectiveness of the Merger, the Certificate of Incorporation of LCG, as amended by the Certificate of Merger, shall be the Certificate of Incorporation of the Surviving Corporation and the Bylaws of Acquisition Co. shall be the Bylaws of the Surviving Corporation. 2.5 Directors. The directors of Acquisition Co. as of the Closing Date --------- shall be the directors of the Surviving Corporation and the existing directors of LCG shall resign effective as of the Closing Date. 2.6 Officers. The officers of the Surviving Corporation as of the Closing -------- Date shall be as follows, and the existing officers of LCG shall resign effective as of the Closing Date: Name Title ---- ----- Walter F. Ulloa Chairman and Chief Executive Officer Philip C. Wilkinson President and Chief Operating Officer Jeanette L. Tully Chief Financial Officer and Treasurer Paul A. Zevnik Secretary 2.7 Conversion of Shares. On the Closing Date, by virtue of the Merger -------------------- and without any action on the part of any party: (a) each share of Common Stock, $0.001 par value per share, of Acquisition Co. issued and outstanding immediately prior to the Closing Date shall remain outstanding and shall represent one share of Common Stock, $0.0001 par value per share, of the Surviving -8- Corporation, so that from and after the Closing Date, Entravision shall be the holder of all of the issued and outstanding shares of the Common Stock of the Surviving Corporation; (b) each of the Shares (except for Dissenting Shares (as defined in Section 2.10(a) below), if any) shall be converted into the right to receive only the Adjusted Merger Consideration (as defined in Section 2.8(a) below) divided by the total number of Shares (the "Per Share Merger Consideration"), and the pro rata portion of any Escrow Payment (as defined in Section 2.9(e) below), each without interest, and shall otherwise cease to be outstanding, shall be cancelled and retired and cease to exist. 2.8 Aggregate Merger Consideration. ------------------------------ (a) The aggregate consideration to be paid in the Merger for the Outstanding Shares (the "Aggregate Merger Consideration") shall be an amount in cash equal to Two Hundred Thirty-Five Million Dollars ($235,000,000) plus Cash on Hand plus any amounts paid pursuant to Section 2.8(b), 2.8(c) or 2.8(d) below, less the sum of (i) the Indebtedness Payment plus (ii) the 1997 Debenture Payment plus (iii) the 1998 Debenture Payment plus (iv) the Option Payments plus (v) the LCG Transaction Expenses (each of the foregoing terms as defined in Section 2.8(e) below). The "Adjusted Merger Consideration" shall be an amount equal to the Aggregate Merger Consideration less the Escrow Payment. (b) Notwithstanding the foregoing, the amount of the Aggregate Merger Consideration shall be subject to the following terms and conditions: (i) If, prior to the Closing, LCG or the LCG Subsidiaries have consummated the transactions contemplated by that certain Asset Purchase Agreement - KVBC-FM and KRNV-FM dated November 21, 1999 by and among EXCL Communications, Inc., Sunbelt Communications Company, Sierra Radio Company and Radio News Company (the "Nevada Asset Acquisition"), the Aggregate Merger Consideration shall be increased by Fourteen Million Two Hundred Fifty Thousand Dollars ($14,250,000), less any amounts paid pursuant to clause (v) of this Section 2.8(b). (ii) If, prior to the Closing, LCG or the LCG Subsidiaries have consummated the transactions contemplated by that certain Stock Purchase Agreement dated November 21, 1999 by and among EXCL Communications, Inc., Suzanne E. Rogers, Kimberly Rogers Cell and Perry C. Rogers (the "Nevada Stock Acquisition" and collectively with the Nevada Asset Acquisition, the "Nevada Acquisitions"), the Aggregate Merger Consideration shall be increased by Three Million Two Hundred Fifty Thousand Dollars ($3,250,000). (iii) If, prior to the Closing, the transactions contemplated by the Nevada Acquisitions have not been consummated and the aggregate amount which has been deposited by LCG or any LCG Subsidiary as an earnest money deposit pursuant to the Nevada -9- Acquisitions has not been returned to LCG or any LCG Subsidiary, the Aggregate Merger Consideration shall be increased by such amount. (iv) The Aggregate Merger Consideration shall be increased by (a) the actual aggregate amount of out-of-pocket costs and expenses incurred by LCG or any LCG Subsidiary in connection with the Nevada Acquisitions and (b) the actual direct operating losses incurred by LCG or any LCG Subsidiary in connection with its ownership and operation of the facilities subject to the Nevada Acquisitions, up to a maximum of Five Hundred Thousand Dollars ($500,000) for clauses (a) and (b) above combined. (v) If the transactions contemplated by the Nevada Acquisitions are being consummated prior to the Closing, Entravision shall pay to LCG or any LCG Subsidiary, immediately prior to the closing of the Nevada Acquisitions, Seven Million Five Hundred Thousand Dollars ($7,500,000) to be used by LCG or any LCG Subsidiary to partially pay the consideration for the Nevada Acquisitions, in exchange for a forty-two and eighty-six one hundredths percent (42.86%) ownership interest in a single-purpose entity formed for purposes of the Nevada Acquisitions. If the Closing of the Contemplated Transactions does not occur, LCG would be obligated to repurchase Entravision's interest in such single-purpose entity for the amount paid plus interest thereon at a rate of LIBOR plus two and seventy-five hundredths percent (2.75%) per annum. If LCG failed to fulfill this obligation, then Entravision will have the right to purchase the interest of LCG and the LCG Subsidiaries in the Nevada Acquisitions on the same basis. (vi) If, prior to the Closing, LCG or the LCG Subsidiaries have consummated the transactions contemplated by the Nevada Acquisitions, the Aggregate Merger Consideration shall be increased by the aggregate amount of interest actually incurred by LCG for borrowed money used by LCG or any LCG Subsidiary as partial consideration for the Nevada Acquisitions. (c) Notwithstanding the foregoing, the amount of the Aggregate Merger Consideration shall be increased by the aggregate amount paid prior to the Closing Date by LCG and the LCG Subsidiaries in connection with the build-out of the property leased by EXCL Communications, Inc. at 665 Campbell Technology Parkway, Campbell, California (the "Campbell Build-Out Amount"), which amount shall not exceed, in the aggregate, $1,699,773.30; provided, however, that the parties acknowledge and agree that LCG and the LCG Subsidiaries have expended $500,414.30 toward the Campbell build-out as of the date hereof, and that such sum will not be included within the Campbell Build-Out Amount. Accordingly, the parties acknowledge and agree that Entravision's reimbursement obligation to LCG for the Campbell Build-Out shall in no event exceed $1,199,359.00. LCG shall deliver to Entravision, no later than the close of business on the business day immediately preceding the Closing Date, a certificate setting forth the Campbell Build-Out Amount. -10- (d) Notwithstanding the foregoing, the amount of the Aggregate Merger Consideration shall be increased by the aggregate amounts of any Escrows and Deposits which are returned to LCG after the Closing. Upon receipt of any such amounts, Entravision and the Surviving Corporation shall promptly pay any amounts so received to the LCG Representatives' respective Custodial Accounts for distribution to each LCG Representatives' respective Stockholders and Option Holders; provided, however, that the parties acknowledge and agree that on April 1, 2002, Entravision or the Surviving Corporation shall purchase the outstanding balance of principal and interest owing on the Huth Notes for their then-present value, to be calculated by mutual agreement of the parties. The LCG Representatives shall distribute such amounts to the Stockholders and Option Holders pursuant to Section 2.8(g) below. (e) For purposes of this Agreement, the following terms shall have the following meanings: (i) "Indebtedness Payment" means an amount equal to, as of the close of business on the Closing Date, the then outstanding principal of, accrued and unpaid interest on, any prepayment penalties or premiums on, and any other amounts payable with respect to, all indebtedness of LCG under that certain Credit Agreement (the "Credit Agreement") dated October 22, 1999 by and among Latin Communications Inc., a Delaware corporation and LCG Subsidiary, Suntrust Bank, Central Florida, N.A. (the "Bank") and certain lenders, but not including any undrawn amounts under outstanding letters of credit. (ii) "1997 Debenture Payment" means an amount equal to, as of the close of business on the Closing Date, the then outstanding principal of, accrued and unpaid interest on, any penalties or premiums on, and any other amounts payable with respect to, all indebtedness of LCG evidenced by the debentures (the "1997 Debentures") issued pursuant to that certain Securities Purchase Agreement dated as of February 28, 1997, as amended through the date hereof, by and between LCG and the purchasers party thereto. (iii) "1998 Debenture Payment" means an amount equal to, as of the close of business on the Closing Date, the then outstanding principal of, accrued and unpaid interest on, any penalties or premiums on, and any other amounts payable with respect to, all indebtedness of LCG evidenced by the debentures (the "1998 Debentures") issued pursuant to that certain Securities Purchase Agreement dated as of February 4, 1998, as amended through the date hereof, by and between LCG and the purchasers party thereto, as amended. (iv) "Option Payments" means the aggregate amount equal to (1) (i) the product of (x) the number of shares of Common Stock that would be issuable upon exercise of Options (as defined in Section 4.5 below) outstanding on the Closing Date if all such Options were exercisable in full on such date, multiplied by (y) the Per Share Merger Consideration, minus (ii) the aggregate exercise price to be paid upon exercise of all Options that would be paid if all such Options where exercised in full on such date and (2) the product of (x) the number of Stock Appreciation Rights (as defined in Section 4.5 below) outstanding on the Closing Date -11- multiplied by (y) the excess of the Per Share Merger Consideration over Fifteen Dollars ($15.00). No option payments shall be made with respect to any Option which has an exercise price equal to or greater than the Per Share Merger Consideration ("Out of the Money Options"). (v) "LCG Transaction Expenses" means the aggregate amount of transaction expenses and fees incurred by LCG and its agents, representatives, counsel and accountants solely in connection with the Contemplated Transactions, including, without limitation, the fees payable to Shamrock Capital Advisors, Inc. ("Shamrock") pursuant to that certain Letter Agreement dated December 17, 1999 by and between LCG and Shamrock. (f) Each holder of a Certificate (as defined in Section 2.8(g) below) which immediately prior to the Closing Date represented Shares will be entitled to receive, upon surrender to its appointed LCG Representative of such Certificate for cancellation, and in accordance with the terms of this Agreement, cash in an amount equal to the product of the number of Shares previously represented by such Certificate multiplied by the Per Share Merger Consideration less an amount necessary to satisfy existing and future expenses of the LCG Representatives pursuant to Section 12.2 or Section 12.5(a) below. All payments to holders of Certificates shall be subject to any required withholding of taxes. No interest shall accrue or be paid on the cash payable upon the surrender of Certificates. Neither the LCG Representatives nor any party hereto shall be liable to a holder of Shares for any cash or interest thereon delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws. (g) At the Closing, Entravision shall pay to the LCG Representatives the Adjusted Merger Consideration as follows: (i) Latin Investors (as defined below) shall receive, by wire transfer of immediately available funds to an account designated by Latin Investors (the "Latin Investors Custodial Account"), cash in an amount equal to Latin Investors' allocable portion of the Adjusted Merger Consideration (calculated pursuant to Section 2.7(b) above); (ii) the Trefoil Designee (as defined below) shall receive, by wire transfer of immediately available funds to an account or accounts designated by the Trefoil Designee (collectively, the "Trefoil Custodial Accounts"), cash in an amount equal to the Trefoil Entities' (as defined below) allocable portion of the Adjusted Merger Consideration (calculated pursuant to Section 2.7(b) above); and (iii) the Other Holders Designee (as defined below) shall receive, by wire transfer of immediately available funds to an account designated by the Other Holders Designee (the "Other Holders Custodial Account," and together with the Latin Investors Custodial Account and the Trefoil Custodial Accounts, the "Custodial Accounts"), cash in an amount equal to the Other Stockholders' (as defined below) allocable portion of the Adjusted Merger Consideration (calculated pursuant to Section 2.7(b) above). Each LCG Representative shall pay to each of the Stockholders it has been appointed to represent, if any, such Stockholder's allocable portion of the Adjusted Merger Consideration in accordance with Section 2.7(b) above upon receipt by such LCG Representative of the stock certificate(s) (a "Certificate(s)"), which immediately prior to the Closing Date represented the number of Shares held by such Stockholder, and a completed and duly executed Letter of Transmittal (a "Letter of Transmittal"). -12- (h) Within three (3) business days after the Closing Date, the Surviving Corporation shall mail a Letter of Transmittal to all holders of Certificates which were not previously surrendered to the LCG Representatives, to be completed by such holder and delivered to the holder's appointed LCG Representative together with such holder's Certificates. The LCG Representatives shall be (i) Latin Investors Limited Partnership, a Delaware limited partnership ("Latin Investors"), (ii) Stephen D. Royer (the "Trefoil Designee"), who shall be the representative of Trefoil Latin Investors, L.P., a Delaware limited partnership, Trefoil Latin II, L.L.C., a Delaware limited liability company, and Shamrock Holdings of California, Inc., a California corporation (collectively, the "Trefoil Entities"), and (iii) Martin D. Payson (the "Other Holders Designee"), who shall be the representative of all Stockholders except for Latin Investors and the Trefoil Entities (the "Other Stockholders") and Option Holders (as defined below) (collectively, with the Other Stockholders, the "Other Holders"). The LCG Representatives will, promptly upon receipt thereof, deliver surrendered Certificates and Letters of Transmittal received by them to the Surviving Corporation, and on the second (2nd) anniversary of the Closing Date, return to the Surviving Corporation any portion of the Adjusted Merger Consideration remaining to be paid to holders who have not yet surrendered their Certificates and Letters of Transmittal and any other funds in the Custodial Accounts which are to be distributed to Stockholders and holders of Options and Stock Appreciation Rights on the Closing Date (each, an "Option Holder," and collectively, the "Option Holders"). Any Stockholders and Option Holders will thereafter be entitled to look only to the Surviving Corporation for payment of their claim for the consideration set forth in this Section 2.8, without interest thereon, but will have no greater rights against the Surviving Corporation than may be accorded to general creditors thereof under applicable law. (i) Any distributions to be made from the Custodial Accounts of amounts deposited therein after the Closing Date from the Escrow Account (as defined in Section 2.9(e) below) or pursuant to the disbursement of an Escrow or Deposit or pursuant to an indemnification claim in accordance with Article 11 below for which any amounts have been deposited in the Custodial Accounts ("Subsequent Distributions") shall be made by the LCG Representatives to the Stockholders (other than with respect to Dissenting Shares) and the Option Holders, after deduction of costs, expenses and holdbacks as described in Sections 12.2 and 12.5 below, as follows: (i) Latin Investors shall disburse to Latin Investors its allocable share of such distribution, (ii) the Trefoil Designee shall disburse to each Trefoil Entity its allocable share of such distribution and (iii) the Other Holders Designee shall disburse to each of the Other Holders such Other Holder's allocable share of such distribution. The amount to be distributed to each Stockholder and Option Holder shall be equal to the product of (i) the number of Pro Forma Outstanding Shares (as defined below) (other than Dissenting Shares) held by such holder and (ii) the amount equal to (A) the applicable Subsequent Distribution divided by (B) the total number of Pro Forma Outstanding Shares (other than Dissenting Shares). "Pro Forma Outstanding Shares" means, as of the Closing Date, the number of Shares as of such time plus the number of shares of Common Stock of LCG that would be outstanding assuming all Options were exercised for cash pursuant to the terms of the applicable option agreement (each, an "Option Agreement," and collectively, the "Option Agreements") plus the number of Stock -13- Appreciation Rights. No Option Holder shall receive a Subsequent Distribution with respect to an Option held immediately prior to the Closing Date unless the sum of (x) the Per Share Merger Consideration plus (y) the per Pro Forma Outstanding Share amount of the Subsequent Distribution (calculated pursuant to the preceding two sentences) exceeds the exercise price of such Option. (j) LCG shall deliver to Entravision, no later than the close of business on the business day immediately preceding the Closing Date, a certificate setting forth (i) the Per Share Merger Consideration, (ii) the portion of the Adjusted Merger Consideration to be delivered to each of the Latin Investors Custodial Account, the Trefoil Custodial Accounts and the Other Holders Custodial Account, (iii) the Cash on Hand, (iv) the Indebtedness Payment, (v) the 1997 Debenture Payment, (vi) the 1998 Debenture Payment, (vii) the Option Payments and (viii) the LCG Transaction Expenses. 2.9 Closing Date Indebtedness Payment and Certain Closing Deliveries. ---------------------------------------------------------------- (a) At or prior to the Closing, (i) Entravision shall contribute to LCG, by wire transfer of immediately available funds, cash in an amount equal to the Option Payments (excluding any payments for Out of the Money Options), (ii) LCG shall process the Option Payments through its payroll system and (iii) LCG shall deliver the Option Payments less the withholding tax payable in respect thereof to the Other Holders Custodial Account, from which account the Other Holders Designee shall deliver the amount thereof to the persons entitled to Option Payments as a result of the Contemplated Transactions. LCG shall be responsible for and shall pay when due any withholding taxes payable in respect of the Option Payments. (b) At the Closing, Entravision shall contribute to LCG, by wire transfer of immediately available funds, cash in an amount equal to the Indebtedness Payment, and LCG (or an LCG Subsidiary) shall pay to the Bank (for the benefit of the lenders party to the Credit Agreement), by wire transfer of immediately available funds, an amount in cash equal to the Indebtedness Payment. (c) At the Closing, Entravision shall contribute to LCG, by wire transfer of immediately available funds, cash in an amount equal to the 1997 Debenture Payment, and LCG (or an LCG Subsidiary) shall pay to the LCG Representatives' respective Custodial Accounts (for the benefit of the holders of the 1997 Debentures), by wire transfer of immediately available funds, an amount in cash equal to the 1997 Debenture Payment as follows: (i) LCG shall deposit in the Latin Investors Custodial Account the Latin Investors' allocable share of such payment; (ii) LCG shall deposit in the Trefoil Custodial Accounts the Trefoil Entities' allocable share of such payment; and (iii) LCG shall deposit in the Other Holders Custodial Account the Other Stockholders' allocable share of such payment. (d) At the Closing, Entravision shall contribute to LCG, by wire transfer of immediately available funds, cash in an amount equal to the 1998 Debenture Payment, and LCG -14- (or an LCG Subsidiary) shall pay to the LCG Representatives' respective Custodial Accounts (for the benefit of the holders of the 1998 Debentures), by wire transfer of immediately available funds, an amount in cash equal to the 1998 Debenture Payment as follows: (i) LCG shall deposit in the Latin Investors Custodial Account the Latin Investors' allocable share of such payment; (ii) LCG shall deposit in the Trefoil Custodial Accounts the Trefoil Entities' allocable share of such payment; and (iii) LCG shall deposit in the Other Holders Custodial Account the Other Stockholders' allocable share of such payment. (e) At the Closing, Entravision shall pay to Union Bank of California, N.A., as the escrow agent (the "Escrow Agent"), the amount of Seven Million Dollars ($7,000,000) (the "Escrow Payment") by wire transfer of immediately available funds to an escrow account (the "Escrow Account") to be held in escrow through April 1, 2002 (Three Million Five Hundred Thousand Dollars ($3,500,000) of which may be released on the date that is eighteen (18) months after the Closing Date pursuant to the terms of the Indemnity Escrow Agreement described herein) in connection with the indemnification obligations of the Stockholders and the Option Holders pursuant to Article 11 below and established pursuant to the terms and conditions of that certain Indemnity Escrow Agreement, substantially in the form attached hereto as Exhibit "C" and incorporated herein ----------- by this reference (the "Indemnity Escrow Agreement"), to be entered into at the Closing by and among Entravision and the LCG Representatives. (f) At the Closing, Entravision shall pay such amounts to the obligees of LCG Transaction Expenses as are set forth on the certificate to be delivered by LCG to Entravision pursuant to Section 2.8(j) above. 2.10 Appraisal Rights. ---------------- (a) Notwithstanding any provision of this Agreement to the contrary, any Shares that are held immediately prior to the Closing Date by a holder who has neither voted in favor of the Merger nor consented thereto in writing and who has demanded and perfected the right, if any, for appraisal of such Shares within twenty (20) days after the date of mailing of notice to such holder of the effective date of the Merger (the "Stockholder Notice") in accordance with the provisions of Section 262 of the Delaware Code and has not withdrawn or lost such right to such appraisal ("Dissenting Shares") shall not be converted into or represent a right to receive an allocable portion of the Adjusted Merger Consideration represented thereby, but the holder of such Shares shall only be entitled to such appraisal rights as are granted by the Delaware Code. If a holder of Shares who demands appraisal of such Shares under the Delaware Code shall thereafter effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal with respect to such Shares, then, as of the occurrence of such event, such Shares shall be deemed to have been converted into and represent only the right to receive such Shares' allocable portion of the Adjusted Merger Consideration, without interest, upon the surrender of the Certificate or Certificates representing such Shares and upon delivery of a duly executed Letter of Transmittal. In accordance with the provisions of Sections 228(d) and 262(d)(2) of the Delaware Code, not later than the third (3rd) business day following the Closing -15- Date, the Surviving Corporation shall mail the Stockholder Notice to all holders of Certificates which were not previously surrendered to the LCG Representatives. (b) At their sole expense, the LCG Representatives shall direct and control any Proceedings relating to Dissenting Shares. The LCG Representatives shall keep Entravision and the Surviving Corporation reasonably informed of the status of such Proceedings. Subject to the Confidentiality Agreement (as defined below), and at the expense of the LCG Representatives (solely out of the Escrow Account), each of Entravision and the Surviving Corporation shall provide the LCG Representatives with such information and records and make such of their respective officers, directors, employees and agents available as may reasonably be requested by the LCG Representatives in connection with any Proceedings relating to Dissenting Shares. 2.11 Closing of Transfer Books. From and after the Closing Date, the stock ------------------------- transfer books of LCG shall be closed and no transfer of Common Stock of LCG shall thereafter be made. 2.12 Earnest Money Escrow Deposit. ---------------------------- (a) Upon full execution of this Agreement and the Voting Agreements (and in no event later than the end of business on December 27, 1999), Entravision shall deliver to the Escrow Agent, either via cashier's check or wire transfer of immediately available funds or an original, irrevocable stand- by letter of credit from the Escrow Agent in favor of LCG, the amount of Seven Million Dollars ($7,000,000) (the "Escrow Deposit"), to be held by the Escrow Agent in an interest bearing account pursuant to the terms and conditions of that certain Earnest Money Escrow Agreement of even date herewith by and among Entravision, LCG, the LCG Representatives and the Escrow Agent, substantially in the form attached hereto as Exhibit "D" and incorporated herein by this ----------- reference (the "Earnest Money Escrow Agreement"). The Escrow Deposit represents an earnest money deposit by Entravision for the Contemplated Transactions. (b) If the Escrow Deposit is in the form of immediately available funds, it shall be held by the Escrow Agent in accordance with the Earnest Money Escrow Agreement and shall be applied toward the Aggregate Merger Consideration at the Closing. Provided that this Agreement is not terminated by LCG pursuant to Section 9.1(b)(ii) or 9.1(b)(iv) below, it is expressly acknowledged and agreed by the parties hereto that Entravision is entitled to all interest earned on the Escrow Deposit in this form, and that such interest shall not be part of the Aggregate Merger Consideration. (c) If the Escrow Deposit is in the form of an original, irrevocable stand-by letter of credit in favor of LCG (the "Earnest Money Letter of Credit"), the Earnest Money Letter of Credit shall be held by the Escrow Agent in accordance with the terms of the Earnest Money Escrow Agreement. Unless this Agreement is terminated by LCG pursuant to Section 9.1(b)(ii) -16- or 9.1(b)(iv) below, at the Closing, Entravision and LCG shall instruct the Escrow Agent to release and return the Earnest Money Letter of Credit to Entravision for cancellation. (d) If this Agreement is terminated by LCG pursuant to Section 9.1(b)(ii) or 9.1(b)(iv) below, the Escrow Deposit, including all interest thereon, shall be disbursed to LCG as liquidated damages in accordance with Section 9.2(b) below. 2.13 FCC Licenses, Permits and Authorizations. The parties hereto ---------------------------------------- acknowledge and agree that, in connection with the FCC Consent, Entravision shall assign all of its right, title and interest in and to all FCC licenses, permits and authorizations (and the call letters with respect thereto) held by LCG and the LCG Subsidiaries to Entravision Holdings, LLC, a California limited liability company and wholly-owned subsidiary of Entravision and its managing members ("Holdings"), and that the applications for the FCC Consent will reflect Holdings as the assignee of the FCC licenses held by LCG and the LCG Subsidiaries. ARTICLE 3. CLOSING 3.1 Closing. The closing of the Merger provided for in this Agreement ------- (the "Closing") will take place at the offices of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. in Los Angeles, California at 10:00 a.m. (pacific time) on the fifth (5th) business day following the day on which each of the following has occurred (i) the FCC Consent to the Merger becomes a Final Order and (ii) the applicable waiting period under the HSR Act has expired or been terminated, or such date as the parties may mutually agree, or at such other time and place as the parties may mutually agree, and the parties agree to cooperate and use their Commercially Reasonable Efforts to close the Contemplated Transactions as soon as practicable after the FCC Consent becomes a Final Order; provided, however, that Entravision, in its sole and absolute discretion, may waive the condition to Closing that the FCC Consent be a Final Order and, in such case, the Closing shall occur at such time and place as the parties may mutually agree; provided, further, that, subject to the approval of Entravision's senior secured lender in its sole and absolute discretion, Entravision agrees to waive said condition and close immediately upon receipt by the parties of the preliminary FCC Consent (which for purposes of this Section 3.1 shall be deemed to occur when the FCC has approved the assignment of the last of the FCC licenses of LCG or any of the LCG Subsidiaries to Holdings as evidenced by a Public Notice released to the public by the FCC). Subject to the provisions of Article 9 below, failure to consummate the Merger on the date and time and at the place determined pursuant to this section will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. 3.2 Closing Obligations of LCG. At the Closing, LCG will deliver or cause -------------------------- to be delivered to Entravision: -17- (a) the original Certificates representing the Shares owned by the Stockholders, duly endorsed in blank (or accompanied by duly executed stock powers), to the extent delivered to the LCG Representatives prior to the Closing Date; (b) the Indemnity Escrow Agreement, executed by LCG and each of the LCG Representatives; (c) any and all required third-party Consents listed on Schedule -------- 3.2(c); - ------ (d) the Certificate of Merger, executed by LCG; (e) the closing certificate required by Section 8.1(c) below; (f) a certificate of the Secretary of LCG attesting to (i) the incumbency of the officers executing the Agreement and the other agreements and certificates delivered by LCG at the Closing and (ii) the authenticity of the Organizational Documents of LCG; (g) minutes of the Stockholders and written resolutions or minutes of the Board of Directors of LCG authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of LCG; (h) a certificate of good standing for LCG issued by the Delaware Secretary of State not more than ten (10) days prior to the Closing Date; and (i) the written legal opinions of Fried, Frank, Harris, Shriver & Jacobson, corporate counsel for LCG, and Leventhal, Senter & Lerman, P.L.L.C., FCC counsel for LCG, substantially in the forms attached hereto as Exhibits "E- ----------- 1" and "E-2" and incorporated herein by this reference. - ------------ 3.3 Closing Obligations of Entravision and Acquisition Co. At the ------------------------------------------------------ Closing, Entravision and Acquisition Co. will deliver or cause to be delivered to LCG and the LCG Representatives (or, in the case of item (g) of this Section 3.3, to the Escrow Agent): (a) the Aggregate Merger Consideration, less the Escrow Deposit, which shall be delivered to the LCG Representatives pursuant to this Agreement; (b) the Indemnity Escrow Agreement, executed by Entravision; (c) the closing certificate required by Section 8.2(c) below; (d) a certificate of the Secretary of each of Entravision and Acquisition Co. attesting to (i) the incumbency of the managing members and officers, as the case may be, executing the Agreement and the other agreements and certificates delivered by Entravision and -18- Acquisition Co. at the closing and (ii) the authenticity of the Organizational Documents of each of Entravision and Acquisition Co.; (e) written resolutions or minutes of the managing members of Entravision and written resolutions or minutes of the sole stockholder and Board of Directors of Acquisition Co. authorizing the execution, delivery and performance of this Agreement, each certified by the Secretary of Entravision and Acquisition Co., as the case may be; (f) a certificate of good standing for each of Entravision and Acquisition Co. issued by the Delaware Secretary of State not more than ten (10) days prior to the Closing Date; (g) subject to Section 2.12 above, the Escrow Deposit to the Escrow Agent; and (h) the written legal opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel for Entravision and Acquisition Co., substantially in the form attached hereto as Exhibit "F" and incorporated herein by this ----------- reference. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF LCG LCG hereby represents and warrants to Entravision and Acquisition Co. as follows: 4.1 Organization and Good Standing. LCG is a corporation duly organized, ------------------------------ validly existing and in good standing under the laws of the State of Delaware, and has full corporate power and authority to own, lease and operate its assets and properties and to carry on its businesses existing as of the date hereof. Each direct or indirect Subsidiary of LCG set forth on Schedule 4.1 ------------ (collectively, the "LCG Subsidiaries") is a corporation (or limited liability company) duly organized, validly existing and in good standing under the laws of the state of its incorporation (or formation) as set forth on Schedule 4.1, and ------------ has full corporate or limited liability, as the case may be, power and authority to own, lease and operate its assets and properties and to carry on its businesses existing as of the date hereof. 4.2 Authority; No Conflict; Consents. -------------------------------- (a) Assuming due authorization, execution and delivery of this Agreement by Entravision and Acquisition Co., this Agreement constitutes the legal, valid and binding obligation of LCG, enforceable against LCG in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally or is subject to general principles of equity. LCG has the corporate right, power, authority and capacity to execute and deliver this Agreement and to perform its obligations thereunder. -19- (b) Neither the execution and delivery of this Agreement by LCG nor the consummation or performance of any of the Contemplated Transactions by LCG will, subject to receipt of any required approval of the Stockholders to the Merger and this Agreement, violate, Breach or conflict with: (i) any provision of the Organizational Documents of LCG or the LCG Subsidiaries; (ii) any resolution related to the Contemplated Transactions adopted by the stockholders or the Board of Directors of LCG or the LCG Subsidiaries; (iii) any material Legal Requirement or material Order to which LCG or the LCG Subsidiaries may be subject; or (iv) any material Contract to which LCG or the LCG Subsidiaries are a party or by which LCG or the LCG Subsidiaries may be bound. (c) Except for the filing of the FCC Consent, the filing of the Certificate of Merger with the Delaware Secretary of State, the filing required by the HSR Act, obtaining any necessary third-party consents set forth on Schedule 4.2, and the approval by the Stockholders of the Merger and this - ------------ Agreement, neither LCG nor the LCG Subsidiaries will be required to give any notice to or obtain any material third-party Consents from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions, including, without limitation, the Merger and the transfer of the ownership and operation of the Radio Stations to Entravision. 4.3 Broker's or Finder's Fees. Except as set forth on Schedule 4.3, none ------------------------- ------------ of LCG, the LCG Subsidiaries or their agents have incurred any Liabilities for broker's or finder's fees or agents commissions or other similar payment in connection with this Agreement. 4.4 Qualifications To Do Business. LCG and the LCG Subsidiaries are ----------------------------- qualified to do business and are in good standing in each jurisdiction (listed on Schedule 4.4 to this Agreement) where the character or location of property ------------ owned and leased, the employment of personnel or the nature of the business and activities conducted by LCG and the LCG Subsidiaries require such qualification, licensing or domestication, except in such jurisdictions where the failure to be so qualified, licensed or domesticated and to be in good standing, individually or in the aggregate, would not have an LCG Material Adverse Effect. Except as set forth on Schedule 4.4, LCG and the LCG Subsidiaries do not file franchise, ------------ income or other tax returns in any jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom. 4.5 Capitalization. -------------- (a) The authorized capital stock of LCG consists of fifteen million (15,000,000) shares of Common Stock, $0.01 par value per share, of which 9,235,468 shares are duly authorized, issued and outstanding. The Stockholders are the record holders of all of the Shares. All of the Shares have been duly authorized and validly issued and are fully paid and nonassessable. -20- (b) As fully set forth on Schedule 4.5, there are outstanding options ------------ to acquire 471,668 shares of Common Stock of LCG (the "Options") and outstanding 130,000 stock appreciation rights pursuant to the Equity Appreciation Incentive Plan of LCG described in Schedule 4.5 (the "Stock Appreciation Rights"). Except ------------ as set forth on Schedule 4.5, (i) there are no other options, warrants, stock ------------ appreciation rights, subscriptions, convertible debentures, registration rights agreements or other rights, commitments or any other similar agreements for the purchase of any securities of LCG to which LCG is a party, (ii) there are no stockholders' agreements or other Contracts to which LCG is a party relating to the issuance, sale or transfer of any equity securities or other securities of LCG and (iii) there are no voting trust agreements or other Contracts, agreements or arrangements restricting voting rights or transferability with respect to LCG to which it is a party. Upon the consummation of the Contemplated Transactions, and provided that Entravision makes the payment set forth in Section 2.9(a) above, all of the outstanding Options and Stock Appreciation Rights will terminate and the Surviving Corporation will have no further obligations to the holders thereof with respect thereto. 4.6 LCG Subsidiaries. ---------------- (a) Schedule 4.6 sets forth a list of all direct or indirect ------------ Subsidiaries of LCG (the "LCG Subsidiaries"). Except as set forth on Schedule -------- 4.6, LCG owns, either directly or indirectly through one or more of the LCG - --- Subsidiaries, all of the capital stock or membership interests of each of the LCG Subsidiaries free and clear of any Encumbrances. (b) The authorized capital stock and number of outstanding shares or membership interests of each of the LCG Subsidiaries is set forth on Schedule -------- 4.6 (the "Subsidiary Shares"). LCG is and will be on the Closing Date the - --- record and beneficial owner and holder of all of the Subsidiary Shares, which will be at Closing free and clear of all Encumbrances, other than Encumbrances created by Entravision or Acquisition Co. All of the Subsidiary Shares have been duly authorized and validly issued and are fully paid and nonassessable. (c) Except as set forth on Schedule 4.6, (i) there are no options, ------------ warrants, stock appreciation rights, subscriptions, convertible debentures, registration rights agreements or other rights, commitments or any other similar agreements for the purchase of any securities of any of the LCG Subsidiaries, (ii) there are no stockholders' agreement or other Contracts relating to the issuance, sale or transfer of any equity securities or other securities of any of the LCG Subsidiaries and (iii) there are no voting trust agreements or other Contracts, agreements or arrangements restricting voting rights or transferability with respect to any of the LCG Subsidiaries. 4.7 Financial Statements. LCG has delivered to Entravision true, complete -------------------- and correct copies of the Financial Statements. Except as set forth on Schedule -------- 4.7, the Financial Statements fairly present in all material respects the - --- consolidated financial condition of LCG and the LCG Subsidiaries and the assets and liabilities of LCG and the LCG Subsidiaries as of the -21- respective dates thereof and the results of operations, changes in stockholders' equity and cash flows for the periods therein specified, and have been prepared from the books and records of LCG and the LCG Subsidiaries in accordance with GAAP in all material respects except for the following sentence. The Financial Statements reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements, and except that the unaudited Financial Statements were prepared on an interim basis, are subject to normal year-end adjustments and do not contain all of the footnote disclosures required by GAAP. 4.8 Books and Records. To the Knowledge of LCG, the minute books of LCG ----------------- and the LCG Subsidiaries contain, in all material respects, accurate and complete records of all meetings held of, and corporate action taken by, the stockholders and Board of Directors of LCG and the LCG Subsidiaries. 4.9 Ownership, Condition and Sufficiency of Assets. Except as set forth ---------------------------------------------- on Schedule 4.9, LCG or the LCG Subsidiaries, as the case may be, own all of ------------ their material tangible assets free and clear of all Encumbrances. The assets of LCG and the LCG Subsidiaries are, in all material respects, in good operating condition and repair (reasonable wear and tear in normal use excepted), and none of such assets is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. 4.10 No Undisclosed Liabilities. Except as set forth on Schedule 4.10, LCG -------------------------- ------------- and the LCG Subsidiaries have no material Liabilities of any nature which would be required to be disclosed under GAAP as of the date hereof (whether absolute, accrued, contingent or otherwise), except for (i) Liabilities reflected or reserved against in the Financial Statements, (ii) current Liabilities incurred in the ordinary course of business since October 31, 1999 which would not have an LCG Material Adverse Effect or (iii) Liabilities that will not be Liabilities of Entravision or Acquisition Co. after the Closing. 4.11 Taxes. ----- (a) LCG and the LCG Subsidiaries have filed or caused to be filed on a timely basis (taking into account all extensions) all material Tax Returns that are or were required to be filed by them pursuant to applicable Legal Requirements, and all such Tax Returns are true, correct and complete in all material respects. LCG has delivered or made available to Entravision copies of all such Tax Returns filed in the past five (5) years, and Schedule 4.11 ------------- contains a complete and accurate list of all material income Tax Returns filed by LCG and the LCG Subsidiaries in the past five (5) years. With respect to taxable periods ending on or before December 31, 1999, LCG has paid, or made provision for the payment of, all income Taxes that have become due pursuant to those Tax Returns or otherwise, or pursuant to any written assessment received by LCG or any of the LCG Subsidiaries. Except as set forth on Schedule 4.11, ------------- the Tax Returns of LCG and the LCG Subsidiaries have not been examined (nor are they -22- currently in the process of being examined) by the IRS or any other tax authority for any of the past five (5) years. (b) The charges, accruals and reserves with respect to Taxes on the Financial Statements are adequate (determined in accordance with GAAP) to cover Taxes through the date of the Financial Statements. To the Knowledge of LCG, there exists no proposed Tax assessment against LCG or the LCG Subsidiaries except as disclosed in the Financial Statements or on Schedule 4.11. No consent ------------- to the application of Section 341(f)(2) of the IRC has been filed with respect to any property or assets held, acquired or to be acquired by LCG or the LCG Subsidiaries. All material Taxes that LCG and the LCG Subsidiaries are or were required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person. There is no Tax sharing agreement that will require any payment by LCG or any of the LCG Subsidiaries after the date of this Agreement. LCG and the LCG Subsidiaries have timely paid all material Income Taxes for the periods ending on December 31, 1999 and all Other Taxes that are due and payable, nonpayment of which would (i) result in an Encumbrance on any of the assets of LCG or the LCG Subsidiaries or (ii) result in Entravision becoming liable therefor. 4.12 Employee Benefits. ----------------- (a) Schedule 4.12 lists each Employee Benefit Plan of LCG and the LCG ------------- Subsidiaries. Each Employee Benefit Plan is in substantial compliance with applicable law and has been administered and operated in all material respects in accordance with its terms. Each Employee Benefit Plan which is intended to be "qualified" within the meaning of Section 401(a) of the IRC has received a favorable determination letter from the IRS and no event has occurred and no condition exists which could reasonably be expected to result in the revocation of any such determination. (b) No event which constitutes a "reportable event" (as defined in Section 4043(c) of ERISA) for which the thirty (30) day notice requirement has not been waived by the Pension Benefit Guaranty Corporation (the "PBGC") has occurred with respect to any Employee Benefit Plan. No Employee Benefit Plan subject to Title IV of ERISA has been terminated or is or has been the subject of termination proceedings pursuant to Title IV of ERISA. Full payment has been made of all amounts which LCG or the LCG Subsidiaries were required under the terms of each Employee Benefit Plan to have paid as contributions to such Employee Benefit Plan on or prior to the date hereof (excluding any amounts not yet due) and no Employee Benefit Plan which is subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred any "accumulated funding deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the IRC), whether or not waived. (c) Neither LCG, the LCG Subsidiaries nor any other "disqualified person" or "party in interest" (as defined in Section 4975(e)(2) of the IRC and Section 3(14) of ERISA, respectively) has engaged in any transactions in connection with any Employee Benefit Plan that -23- could reasonably be expected to result in the imposition of a material penalty pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or a Tax pursuant to Section 4975(a) of the IRC. No material liability, claim, action or litigation has been made, commenced or, to the Knowledge of LCG, Threatened with respect to any Employee Benefit Plan (other than for benefits payable in the ordinary course of business and PBGC insurance premiums). No Employee Benefit Plan or related trust owns any securities in violation of Section 407 of ERISA. With respect to any Employee Benefit Plan subject to Title IV of ERISA, as of the most recent actuarial valuation prepared for each such Employee Benefit Plan, the aggregate present value of the accrued liabilities thereof did not exceed the aggregate fair market value of the assets allocable thereto (determined on the bases set forth therein). LCG and the LCG Subsidiaries do not presently and have not at any time in the past maintained a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). (d) To the Knowledge of LCG, except as set forth on Schedule 4.12, ------------- there are no Proceedings (other than routine claims for benefits) pending or Threatened against any Employee Benefit Plan or its assets, or arising out of such Employee Benefit Plan and, to the Knowledge of LCG, no facts exist which could give rise to any such Proceedings that might have a material adverse effect on such Employee Benefit Plan. To the Knowledge of LCG, there has been no act or omission by LCG or the LCG Subsidiaries that has given rise or may give rise to any fines, penalties, Taxes or late charges under Section 502(c), (i) or (l), Section 407(1) of ERISA or Chapter 43 of the IRC. 4.13 Compliance with Legal Requirements. Except as set forth on Schedule ---------------------------------- -------- 4.13 or as previously disclosed in writing to Entravision: (i) LCG and the LCG - ---- Subsidiaries are in compliance in all material respects with each material Legal Requirement that is applicable to them; (ii) to the Knowledge of LCG, no event has occurred or circumstance exists that (with or without notice or lapse of time) constitutes or results in a material violation by LCG or the LCG Subsidiaries of, or a failure on the part of LCG or the LCG Subsidiaries to comply in all material respects with, any material Legal Requirement or gives rise to any material obligation on the part of LCG or the LCG Subsidiaries to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) neither LCG nor any of the LCG Subsidiaries has received any written notice or other written communication from any Governmental Body regarding any actual, alleged, possible or potential material violation of, or material failure to comply with, any material Legal Requirement, any actual, alleged, possible or potential material obligation on the part of LCG or any of the LCG Subsidiaries to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. 4.14 Governmental Authorizations. Schedule 4.14 contains a complete and --------------------------- ------------- accurate list of each material Governmental Authorization that is held by LCG or the LCG Subsidiaries, except for authorizations of the FCC under Part 74 of its rules. Each Governmental Authorization listed or required to be listed on Schedule 4.14 is valid and in full force and effect in all material respects. - ------------- Except as set forth on Schedule 4.14 or as previously disclosed in writing to ------------- Entravision, LCG and each of the LCG Subsidiaries is and at all times has been in -24- compliance in all material respects with all of the terms and requirements of each Governmental Authorization identified or required to be identified on schedule 4.14, and, to the Knowledge of LCG, no event has occurred or - ------------- circumstance exists that (with or without notice or lapse of time) constitutes or results directly or indirectly in a violation of or a failure to comply with any material term or material requirement of any Governmental Authorization listed or required to be listed on Schedule 4.14 or may result directly or ------------- indirectly in a material revocation, withdrawal, suspension, cancellation, termination of or any modification to, any Governmental Authorization listed or required to be listed on Schedule 4.14. The Governmental Authorizations listed ------------- on Schedule 4.14 collectively constitute all of the material Governmental ------------- Authorizations necessary to permit LCG and the LCG Subsidiaries to lawfully conduct and operate the Radio Stations and the Newspapers in the manner currently conducted in all material respects. 4.15 Legal Proceedings. Except as set forth on Schedule 4.15, there is no ----------------- ------------- pending Proceeding (i) that is material and has been commenced by or against LCG or any of the LCG Subsidiaries or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Contemplated Transactions. To the Knowledge of LCG and except as set forth on Schedule 4.15, no such Proceeding described in clauses (i) and (ii) of ------------- this section has been Threatened and no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. LCG has delivered or made available to Entravision copies of all material pleadings relating to each Proceeding listed on Schedule 4.15. ------------- None of such Proceedings listed or required to be listed on Schedule 4.15 ------------- currently has or, to the Knowledge of LCG, is reasonably expected to have an LCG Material Adverse Effect. 4.16 Absence of Certain Changes and Events. Except as contemplated by this ------------------------------------- Agreement and as set forth on Schedule 4.16, since October 31, 1999, LCG and the ------------- LCG Subsidiaries have conducted the businesses of the Radio Stations and the Newspapers only in the ordinary course of business and there has not been any: (i) change in the authorized or issued capital stock of LCG or any of the LCG Subsidiaries (other than issuances pursuant to the exercise of Options), grant of any stock option or right to purchase shares of capital stock of LCG or any of the LCG Subsidiaries, issuance of any security convertible into such capital stock, grant of any registration rights, purchase, redemption, retirement or other acquisition by LCG or any of the LCG Subsidiaries of any shares of any such capital stock or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; (ii) payment or increase by LCG or any of the LCG Subsidiaries of any bonuses, salaries or other compensation to any employee (except in the ordinary course of business) or entry into any employment, severance or similar Contract with any employee; (iii) adoption of, or increase in the payments to or benefits under, any Employee Benefit Plan for or with any employees except in the ordinary course of business; (iv) damage to or destruction or loss of any of the assets of LCG or the LCG Subsidiaries, whether or not covered by insurance, which would have an LCG Material Adverse Effect; (v) entry into, termination of or written receipt of notice of termination of any material Contract, other than the expiration of Contracts pursuant to their terms; (vi) except as set forth on Schedule 4.16, ------------- sale (other than sales of inventory in the ordinary course of business), lease or -25- other disposition of any material assets or material properties or mortgage, pledge or imposition of any Encumbrance on any material asset or material property; (vii) material change in the accounting methods used by LCG or the LCG Subsidiaries, except as required by changes in GAAP; or (viii) any agreement, whether oral or written, to do any of the foregoing. 4.17 Applicable Contracts; No Defaults. --------------------------------- (a) Schedule 4.17 contains a complete and accurate list, and LCG has ------------- delivered or made available to Entravision, true, complete and correct copies of each Applicable Contract. Each Applicable Contract identified or required to be identified on Schedule 4.17 is in full force and effect and is valid and ------------- enforceable against LCG and to the Knowledge of LCG, against the other party or parties thereto, in accordance with its terms, except to the extent that such enforceability (i) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally or (ii) is subject to general principles of equity. (b) Except as set forth on Schedule 4.17: (i) LCG or the LCG ------------- Subsidiaries, as the case may be, are in material compliance with all applicable terms and requirements of each Applicable Contract; (ii) to the Knowledge of LCG, except for this Agreement and the Contemplated Transactions, no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or Breach of, or give LCG or the LCG Subsidiaries, as the case may be, or other Person the right to declare a default under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any material Applicable Contract; and (iii) LCG and the LCG Subsidiaries, as the case may be, have not given to or received from any other Person any written notice or other written communication regarding any actual, alleged, possible or potential material violation or material Breach of, or material default under, any Applicable Contract. 4.18 Insurance. --------- (a) LCG has delivered or made available to Entravision true, complete and correct copies of all material policies of insurance relating to LCG and the LCG Subsidiaries to which LCG or the LCG Subsidiaries are a party. (b) Except as set forth on Schedule 4.18, (i) all such material ------------- policies of insurance are valid and outstanding, (ii) LCG and the LCG Subsidiaries have not received any written notice of cancellation or any other written indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not able to perform its obligations thereunder and (iii) LCG and the LCG Subsidiaries have paid all premiums due, and have otherwise performed all of their material respective obligations, under each such policy. -26- 4.19 Real Property Matters. --------------------- (a) Schedule 4.19 contains a complete and accurate list of all Real ------------- Property and a complete and accurate list of all material Real Property Leases (which for purposes of this section shall be deemed to include all Real Property Leases for tower sites and studio facilities leased by LCG or any of the LCG Subsidiaries). LCG or the LCG Subsidiaries, as the case may be, own and have sufficient title to all of the Real Property. The Real Property and the real property leased pursuant to the Real Property Leases include all material land used for the conduct of the business and operations of LCG and the LCG Subsidiaries as they are currently conducted as of the date hereof. LCG has delivered or made available to Entravision true, complete and copies of the deeds and other instruments (as recorded) by which either LCG or the LCG Subsidiaries, as the case may be, acquired such real property interests, and true, complete and copies of all title insurance policies, opinions, abstracts and surveys in the possession of LCG relating to such properties or interests. (b) LCG has delivered or made available to Entravision copies of all material Real Property Leases (which for purposes of this section shall be deemed to include all Real Property Leases for tower sites and studio facilities leased by LCG or any of the LCG Subsidiaries) and copies of all material reports of any engineers, environmental consultants or other consultants in its possession relating to any of the Real Property or any of the Real Property leased pursuant to the Real Property Leases. To the Knowledge of LCG, none of the Real Property is subject to any material Encumbrance, easement, right-of- way, building or use restriction, exception, variance, reservation or limitation. 4.20 Compliance with Environmental Laws. Except as set forth on Schedule ---------------------------------- -------- 4.20 or as would not have an LCG Material Adverse Effect, (i) all of the - ---- operations of LCG and the LCG Subsidiaries are in material compliance with all Environmental Laws as currently in effect, (ii) neither LCG, the LCG Subsidiaries nor, to the Knowledge of LCG, any of their predecessors used, released or disposed of any Hazardous Substance in any manner that could reasonably be expected to result in material liability to LCG or any of the LCG Subsidiaries, (iii) to the Knowledge of LCG, none of the property owned, leased or operated by LCG or the LCG Subsidiaries is contaminated by any Hazardous Substance, (iv) to the Knowledge of LCG, none of the property owned, leased or operated by LCG or the LCG Subsidiaries is affected by any condition that could reasonably be expected to result in liability under any Environmental Law as currently in effect and (v) to the Knowledge of LCG, there is and has been no condition, activity or event respecting LCG or the LCG Subsidiaries that could reasonably be expected to subject Entravision or the Surviving Corporation to any liability under any Environmental Law as currently in effect. 4.21 Employees. LCG has delivered or made available to Entravision copies --------- of any and all material employee handbooks and policy manuals applicable to any of the employees of LCG or any of the LCG Subsidiaries, as well as any and all material written or oral severance policies applicable to such employees. -27- 4.22 Labor Relations; Compliance. --------------------------- (a) As of the date hereof, except as set forth on Schedule 4.22, ------------- neither LCG nor any of the LCG Subsidiaries is party to any collective bargaining or other labor Contract. With respect to LCG and the LCG Subsidiaries, in the past two (2) years, except as set forth on Schedule 4.22, ------------- there has not been, there is not presently pending or existing, and to the Knowledge of LCG, there is not Threatened, (i) any material strike, slowdown, picketing, work stoppage or employee grievance process, (ii) any material Proceeding against LCG or any of the LCG Subsidiaries relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission or any comparable Governmental Body, organizational activity or other labor or employment dispute against or affecting the Radio Stations or (iii) any material application for certification of a collective bargaining agent. (b) As of the date hereof, to the Knowledge of LCG, no event has occurred or circumstance exists that could provide the basis for any material work stoppage or other material labor dispute for the employees of LCG or the LCG Subsidiaries. To the Knowledge of LCG, there is no material lockout of any employees of LCG or the LCG Subsidiaries, and no such action is contemplated. LCG and the LCG Subsidiaries have complied in all material respects with all material Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health and plant closings. Neither LCG nor any of the LCG Subsidiaries are liable in any material respect for the payment of compensation, damages, Taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. 4.23 Intellectual Property. --------------------- (a) The term "Intellectual Property Assets" means the following proprietary items used or licensed by LCG or the LCG Subsidiaries as licensee or licensor in connection with their business: (i) the name and FCC call letters listed on Schedule 4.23, all fictional business names, trade names, registered ------------- trademarks and service marks and applications; (ii) patents and patent applications; (iii) copyrights; (iv) rights in mask works; and (v) confidential information. (b) Schedule 4.23 sets forth a complete and accurate list of all ------------- Applicable Contracts granting rights in material Intellectual Property Assets, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs under which LCG or the LCG Subsidiaries are the licensees. There are no outstanding and, to the Knowledge of LCG, no material Threatened disputes with respect to any Applicable Contract listed on Schedule 4.23. The Intellectual Property Assets are those used in the ------------- operation of the businesses of the Radio Stations and the Newspapers as they are currently -28- conducted. LCG and the LCG Subsidiaries are the owners of or have the right to use all of the material Intellectual Property Assets. 4.24 Relationships with Related Persons. Except as set forth on Schedule ---------------------------------- -------- 4.24, each Contract to which LCG or any of the LCG Subsidiaries, on the one - ---- hand, and a Related Person, on the other hand, are a party contains terms no less favorable to LCG or the LCG Subsidiaries, as the case may be, than could have been obtained by LCG or the LCG Subsidiaries, as the case may be, in an arm's length transaction between independent parties. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF ENTRAVISION AND ACQUISITION CO. Entravision and Acquisition Co., jointly and severally, hereby represent and warrant to LCG as follows: 5.1 Organization and Good Standing. Entravision is a limited liability ------------------------------ company duly organized, validly existing and in good standing under the laws of the State of Delaware. Acquisition Co. is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 5.2 Authority; No Conflict; Consents. -------------------------------- (a) Assuming due authorization, execution and delivery of this Agreement by LCG, this Agreement constitutes the legal, valid and binding obligation of Entravision and Acquisition Co., enforceable against Entravision and Acquisition Co. in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally or is subject to general principles of equity. Entravision and Acquisition Co. have the corporate or limited liability company, as the case may be, right, power, authority and capacity to execute and deliver this Agreement and to perform their respective obligations thereunder. (b) Neither the execution and delivery of this Agreement by Entravision or Acquisition Co. nor the consummation or performance of any of the Contemplated Transactions by Entravision or Acquisition Co. will violate, Breach or conflict with: (i) any provision of the respective Organizational Documents of Entravision and Acquisition Co.; (ii) any resolution related to the Contemplated Transactions adopted by the members, stockholders or the Board of Directors of Entravision or Acquisition Co., as the case may be; (iii) any material Legal Requirement or material Order to which Entravision or Acquisition Co. may be subject; or (iv) any material Contract to which Entravision or Acquisition Co. is a party or by which Entravision or Acquisition Co. may be bound. -29- (c) Except for the FCC Consent and the Filing required by the HSR Act, Entravision and Acquisition Co. are not and will not be required to give any notice to or obtain any material third-party Consents from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions, including, without limitation, the Merger and the transfer of the ownership and operation of the Radio Stations and the Newspapers to Entravision. 5.3 Broker's or Finder's Fees. Neither Entravision, Acquisition Co. nor ------------------------- their agents have incurred any Liabilities for broker's or finder's fees or agents commissions or other similar payment in connection with this Agreement. 5.4 Availability of Funds. As of the date hereof, Entravision has --------------------- sufficient available funds and/or a banker's commitment for sufficient funds to consummate the Contemplated Transactions, and on the Closing Date Entravision will have sufficient funds to enable Entravision and Acquisition Co. to consummate the Contemplated Transactions. Upon consummation of the Contemplated Transactions, Entravision and the Surviving Corporation will be solvent. 5.5 No Prior Activities. Except for obligations incurred in connection ------------------- with its incorporation or organization or the negotiation and consummation of this Agreement and the Contemplated Transactions, Acquisition Co. has neither incurred any obligation or liability nor engaged in any business or activity of any type or kind whatsoever or entered into any agreement or arrangement with any Person or entity. 5.6 FCC Matters. There are no facts which, under the Communications Act ----------- of 1934, as amended, or the published rules, regulations or policies of the FCC, would disqualify Entravision or Acquisition Co. as assignee of the FCC licenses related to LCG and the LCG Subsidiaries. Entravision and Acquisition Co. are qualified to consummate the Contemplated Transactions and to certify to their financial qualifications on FCC Form 314, and they shall so certify in the applications as originally filed with the FCC. 5.7 Litigation. There is no litigation pending or, to the actual ---------- knowledge, after reasonable inquiry, of Entravision, Threatened against Entravision or Acquisition Co. or any of their respective Subsidiaries or Affiliates (i) with respect to which there is a reasonable likelihood of a determination which would, individually or in the aggregate, have a Material Adverse Effect on the ability of Entravision or Acquisition Co. to perform their obligations under this Agreement, or (ii) which seeks to enjoin or obtain damages in respect of the consummation of the Contemplated Transactions. None of Entravision, Acquisition Co. or any of their Subsidiaries is subject to any outstanding Orders which, individually or in the aggregate, would have a Material Adverse Effect on the ability of Entravision or Acquisition Co. to perform their obligations under this Agreement. -30- 5.8 Limitations of LCG and LCG Subsidiary Representations and Warranties. -------------------------------------------------------------------- Entravision and Acquisition Co. acknowledge and agree that the representations and warranties in this Agreement of LCG and the LCG Subsidiaries (and the related Schedules) do not require disclosure of any matters related to (i) the Nevada Acquisitions or (ii) the Huth Asset Purchase Agreement. 5.9 Disclaimer. ENTRAVISION AND ACQUISITION CO. EACH ACKNOWLEDGE THAT LCG ---------- HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE TO ENTRAVISION OR ACQUISITION CO. ANY REPRESENTATION OR WARRANTY OTHER THAN THOSE EXPRESSLY MADE BY LCG IN SECTIONS 4.1 THROUGH 4.24 OF THIS AGREEMENT. ADDITIONALLY, ENTRAVISION AND ACQUISITION CO. EACH ACKNOWLEDGE THAT LCG MAKES NO REPRESENTATION OR WARRANTY TO ENTRAVISION OR ACQUISITION CO. (1) AS TO MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS BEING SO TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT (OR ANY OTHER REPRESENTATION OR WARRANTY REFERRED TO IN SECTION 2-312 OF THE DELAWARE UNIFORM COMMERCIAL CODE OR THE UNIFORM COMMERCIAL CODE OF ANY OTHER APPLICABLE JURISDICTION OR IN ANY STATUTE APPLICABLE TO REAL PROPERTY) OR (2) WITH RESPECT TO ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE AVAILABLE TO ENTRAVISION OR ACQUISITION CO. ARTICLE 6. COVENANTS OF LCG 6.1 Access and Investigation. Between the date of this Agreement and the ------------------------ Closing Date, LCG will, and will use Commercially Reasonable Efforts to cause its Representatives to, (i) afford Entravision and its Representatives reasonable access during normal business hours to the personnel, properties (including subsurface testing), Contracts, books and records and other documents and data of LCG, (ii) furnish Entravision and its Representatives with true, complete and correct copies of all such Contracts, books and records and other existing documents and data as they may reasonably request and (iii) furnish Entravision and its Representatives with such additional financial, operating and other data and information as they may reasonably request; provided, however, that LCG obtains any necessary landlord consents thereto, which consents LCG shall use Commercially Reasonable Efforts to obtain. LCG agrees that prior to consummation of the Contemplated Transactions, to the extent available, Entravision will be furnished with such accounting information and reports to the extent Entravision deems necessary to enable Entravision to satisfy the disclosure or exemption requirements of any lender providing financing for the Contemplated Transactions, or state or federal securities regulators. Nothing in this Section 6.1 or elsewhere in this Agreement shall require LCG to compile accounting information or prepare reports that it would not otherwise compile or prepare. All -31- such information is delivered subject to that certain Confidentiality Agreement dated September 17, 1999 (the "Confidentiality Agreement") by and between Entravision and LCG. 6.2 Operation of Business. Without the prior written consent of --------------------- Entravision (which shall not be unreasonably withheld), LCG will not and will cause each of the LCG Subsidiaries not to engage in any material practice, take any material action or enter into any material transaction outside the Ordinary Course of Business (as defined below); provided, however, that nothing herein shall be deemed to prohibit LCG and the LCG Subsidiaries from consummating in the Ordinary Course of Business the transactions contemplated by (i) the Nevada Acquisitions, (ii) the Huth Asset Purchase Agreement and (iii) that certain Work Letter Agreement dated as of August 26, 1999 by and between EXCL Communications, Inc. and WTA Campbell Technology Park LLC. Without limiting the generality of the foregoing, prior to the Closing, LCG will not and will cause each of the LCG Subsidiaries not to incur trade payables other than in the Ordinary Course of Business and not to accelerate collection of accounts receivable other than in the Ordinary Course of Business. For purposes of this Section 6.2 only, "Ordinary Course of Business" means an action taken by LCG or any of the LCG Subsidiaries that is consistent with their respective past practices and is taken in the ordinary course of their respective normal day-to-day operations. 6.3 Negative Covenant. Except as otherwise expressly permitted by this ----------------- Agreement, between the date of this Agreement and the Closing Date, LCG will not, without the prior written consent of Entravision, which consent shall not be unreasonably withheld, take any affirmative action as a result of which any of the changes or events listed in Section 4.16 above occurs; provided, however, that nothing contained herein shall be construed to prohibit LCG from taking any of the actions set forth on Schedule 4.16. ------------- 6.4 Notification. Between the date of this Agreement and the Closing ------------ Date, LCG will promptly notify Entravision in writing if it becomes aware of any fact or condition that causes or constitutes a material Breach of any of its representations and warranties in this Agreement, or if it becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a material Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition be disclosed to Entravision by LCG as set forth above, or any fact or condition that is discovered by Entravision independently prior to the Closing Date, require any change in the Schedules if the Schedules were dated the date of the occurrence or discovery of any such fact or condition between the date of this Agreement and the Closing Date, LCG will promptly deliver to Entravision a supplement to the Schedules specifying such change. 6.5 No Negotiation. Until the Closing Date, or such time, if any, as this -------------- Agreement is terminated pursuant to Article 9 below, LCG will not, and will cause its Representatives not to, directly or indirectly solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to or consider the merits of any unsolicited -32- inquiries or proposals (except with respect to any unsolicited inquiry or proposal received after the date hereof only to the extent necessary for the Board of Directors of LCG to discharge its fiduciary duties under applicable provisions of the Delaware Code based upon the good faith belief of the Board of Directors of LCG that the terms of such unsolicited inquiry or proposal are superior to the terms of this Agreement) from, any Person (other than Entravision, Acquisition Co. or their Related Persons) relating to any transaction involving the sale of the business or assets (other than in the ordinary course of business or as set forth on Schedule 4.16) of LCG, or any ------------- merger, consolidation, business combination, sale of ownership interests or similar transaction involving LCG or the Shares. 6.6 Commercially Reasonable Efforts. Between the date of this Agreement ------------------------------- and the Closing Date, LCG will use its Commercially Reasonable Efforts to cause the conditions in Section 8.1 below to be satisfied. 6.7 Applications for FCC Consent. Within ten (10) days after the full ---------------------------- execution of this Agreement, LCG will file (or cooperate with Entravision to file) such applications as are required with the FCC requesting its written consent to the assignment of the FCC licenses held by LCG (or any of the LCG Subsidiaries, as the case may be) from LCG (or any of the LCG Subsidiaries, as the case may be) to Holdings (the "FCC Consent"), which applications shall be in form and substance acceptable for filing with the FCC. LCG will diligently take, or cooperate in the taking of, all steps that are necessary, proper or desirable to expedite the preparation of such applications and their prosecution to a favorable conclusion. LCG will promptly provide Entravision with a true, complete and correct copy of any pleading or other document served on it relating to such applications. If the FCC Consent imposes any condition on LCG, LCG shall use its Commercially Reasonable Efforts to comply with such condition prior to the Closing. If reconsideration or judicial review is sought with respect to the FCC Consent, and such reconsideration or review relates to LCG or the operations of the Radio Stations, LCG shall vigorously oppose such reconsideration or judicial review at its own expense. 6.8 Filing Under HSR Act. Promptly after full execution of this -------------------- Agreement, LCG agrees to make a separate filing of the Notification and Report Form pursuant to the HSR Act with respect to the Contemplated Transactions as promptly as practicable and supply any additional information or documentary material that may be required under the HSR Act and to take all other actions as reasonably necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as possible. LCG will use its Commercially Reasonable Efforts to cooperate in all respects with Entravision in conjunction with any such filing submission or other inquiry and to promptly notify Entravision of any communication received from or given to the Antitrust Division of the Department of Justice or the Federal Trade Commission and to permit the other party to review such communication. 6.9 Third-Party Consents. LCG shall use its Commercially Reasonable -------------------- Efforts to obtain, or cause to be obtained prior to the Closing Date, any and all required third-party Consents listed on Schedule 4.2 to the extent ------------ reasonably requested by Entravision. -33- 6.10 No Inconsistent Action. Between the date of this Agreement and the ---------------------- Closing Date, LCG will not take any action which is materially inconsistent with their obligations under this Agreement, or that would hinder or delay the consummation of the Contemplated Transactions. LCG will not take any action that would disqualify or impair LCG as the assignor of the Radio Stations or as owners and operators of the Radio Stations. 6.11 Environmental Audit/Engineering/Soils Investigation. Provided that --------------------------------------------------- LCG has obtained any necessary landlord consents thereto, which consents LCG shall use Commercially Reasonable Efforts to obtain, at its sole option, within forty-five (45) days of the execution of this Agreement, Entravision may conduct and complete a Phase I (or Phase II, if necessary) environmental audit and an engineering and soils and geotechnical investigation of any of the Real Property (the "Environmental Audit") to be conducted by a company selected by Entravision (and reasonably satisfactory to LCG) and at Entravision's sole expense. If the Environmental Audit discloses the presence of any Hazardous Substances on any Real Property in violation of any Environmental Laws, Entravision may in its sole and absolute discretion and at its own expense, promptly comply with the applicable Environmental Laws to bring such property into compliance. If Entravision does not properly and timely exercise its termination rights pursuant to Section 9.1(e) below, the results of such Environmental Audit shall be deemed, without further action by any of the parties hereto, to be disclosed on the Schedules to this Agreement. 6.12 Option Notices. Prior to the Closing, LCG shall comply with the -------------- procedural provisions (including notice provisions) of each Option Agreement applicable to the Options in connection with the Contemplated Transactions. At the Closing Date, each outstanding Option shall be cancelled and the holder thereof shall only be entitled to receive at the Closing Date from LCG in consideration for such cancellation a cash payment of an amount equal to (i) the excess, if any, of the Per Share Merger Consideration minus (ii) the exercise price to be paid upon exercise of such Option pursuant to such Option Agreement (the "Option Amount") (subject to withholding required under all applicable laws). Prior to the Closing Date, the Board of Directors of LCG will take any corporate action necessary to effectuate the provisions of this Section 6.12. 6.13 Board Recommendation. LCG shall take all action necessary in -------------------- accordance with the Delaware Code and its Certificate of Incorporation and Bylaws to convene the Meeting on the date set forth in the notice of such Meeting (and in no event later than twenty-five (25) days after the date of the notice of the Meeting) in order to consider and vote upon the Merger, and the Board of Directors of LCG shall not adjourn, postpone or in any way prevent the Meeting from occurring on the date set forth in such notice. At the Meeting, the Board of Directors of LCG shall recommend that the Stockholders vote to approve the Merger and this Agreement; provided, however, that if, after the date hereof, LCG has received an unsolicited inquiry or proposal, then such recommendation may be withdrawn, modified or amended, after the Board of Directors has considered such unsolicited inquiry or proposal, solely to the extent that the Board of Directors of LCG concludes, in good faith after consultation with its outside financial advisor, -34- and upon advice of outside legal counsel, that it is inconsistent with such Board's fiduciary duties under applicable law not to do so; provided, further, that if the events set forth in the preceding clause do occur, the Board of Directors of LCG shall nonetheless put the approval of the Merger and this Agreement to a vote of the Stockholders. ARTICLE 7. COVENANTS OF ENTRAVISION AND ACQUISITION CO. 7.1 Notification. Between the date of this Agreement and the Closing ------------ Date, Entravision will promptly notify LCG in writing if Entravision become aware of any fact or condition that causes or constitutes a Breach of any of the representations and warranties of Entravision or Acquisition Co. in this Agreement, or if Entravision becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. 7.2 Commercially Reasonable Efforts. Between the date of this Agreement ------------------------------- and the Closing Date, Entravision and Acquisition Co. will use their Commercially Reasonable Efforts to cause the conditions in Section 8.2 below to be satisfied. 7.3 Applications for FCC Consent. Within ten (10) days after the full ---------------------------- execution of this Agreement, Entravision will file (or cooperate with LCG to file) such applications as are required in connection with the FCC Consent. Entravision will diligently take, or cooperate in the taking of, all steps that are necessary, proper or desirable to expedite the preparation of such applications and their prosecution to a favorable conclusion. Entravision will promptly provide LCG with a true, complete and correct copy of any pleading or other document served on it relating to such applications. If the FCC Consent imposes any condition on Entravision, Acquisition Co. or Holdings, Entravision, Acquisition Co. or Holdings shall use their Commercially Reasonable Efforts to comply with such condition prior to the Closing. If reconsideration or judicial review is sought with respect to the FCC Consent, and such reconsideration or review relates to Entravision or Acquisition Co. or Holdings, Entravision or Acquisition Co. or Holdings, as the case may be, shall vigorously oppose such reconsideration or judicial review at their own expense. 7.4 Filing Under HSR Act. Promptly after full execution of this -------------------- Agreement, Entravision agrees to make a separate filing of the Notification and Report Form pursuant to the HSR Act with respect to the Contemplated Transactions as promptly as practicable and supply any additional information or documentary material that may be required under the HSR Act and to take all other actions as reasonably necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as possible. Entravision will use its Commercially Reasonable Efforts to cooperate in all respects with LCG in conjunction with any such filing submission or other inquiry and to promptly notify LCG of any communication -35- received from or given to the Antitrust Division of the Department of Justice or the Federal Trade Commission and to permit the other party to review such communication. 7.5 No Inconsistent Action. Entravision and Acquisition Co. will not take ---------------------- any action which is materially inconsistent with their obligations under this Agreement, or that would hinder or delay the consummation of the Contemplated Transactions. Entravision and Acquisition Co. will not take any action that would disqualify or impair Entravision or Holdings as the assignees of the Radio Stations or as the owner and operator of the Radio Stations. 7.6 Certificate of Incorporation. ---------------------------- (a) At the Closing, the Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain provisions providing for exculpation of director and officer liability and indemnification to the fullest extent permitted by the Delaware Code. Such provisions in the Certificate of Incorporation of the Surviving Corporation shall not be amended, repealed or otherwise modified until April 1, 2002 in any manner that would in any material respect adversely affect the rights thereunder of individuals who at or prior to the Closing Date were directors, officers, employees or agents of LCG, unless such modification is required by law. (b) This Section 7.6 shall survive the Closing Date, is intended to benefit LCG, the Surviving Corporation and each of the persons referred to in paragraph (a) of this Section and shall be binding on all successors and assigns of the Surviving Corporation. 7.7 Escrows and Deposits. Entravision and the Surviving Corporation agree -------------------- to keep the LCG Representatives reasonably informed as to the status of any outstanding portion of the Escrows and Deposits and to promptly provide the LCG Representatives with any disbursements, notices or other materials Entravision or the Surviving Corporation receive with respect thereto. Entravision and the Surviving Corporation acknowledge and agree that the LCG Representatives shall direct and control any Proceedings relating to the Escrows and Deposits. Subject to the Confidentiality Agreement, and at the expense of the LCG Representatives (solely from the Escrow Account), each of Entravision and the Surviving Corporation shall provide the LCG Representatives with such information and records and make such of its respective officers, directors, employees and agents available as may reasonably be requested by the LCG Representatives in connection with any Proceedings relating to the Escrows and Deposits. ARTICLE 8. CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS TO CLOSE 8.1 Conditions Precedent to the Obligation of Entravision and Acquisition --------------------------------------------------------------------- Co. to Close. The obligation of Entravision and Acquisition Co. to effect the - ------------ Contemplated Transactions and to take the other actions required to be taken by Entravision and Acquisition -36- Co. at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Entravision, in whole or in part, where permissible): (a) Accuracy of Representations and Warranties. All of the ------------------------------------------ representations and warranties of LCG in this Agreement must be accurate in all respects as of the date of this Agreement, except for such inaccuracies as would not have an LCG Material Adverse Effect. Each of the following representations and warranties of LCG in this Agreement must be accurate when made, and as of the Closing Date as if made on the Closing Date, except for such inaccuracies as would not have an LCG Material Adverse Effect: Sections 4.1, 4.2(a), the first sentence through clause (i) of 4.2(b), 4.3, 4.4 (except for the last sentence), 4.5 (except that if any Options are exercised between the date of execution of this Agreement and the Closing Date, the number of outstanding Options and the number of outstanding Shares set forth in this Agreement and the Schedules hereto shall be deemed to be adjusted accordingly), 4.8, 4.11, 4.14, 4.16 and 4.24. (b) Performance. All of the material covenants and obligations that ----------- LCG is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects, including, without limitation, the obligations of LCG pursuant to Section 3.2 above. (c) Closing Certificate. Entravision shall have received from a duly- ------------------- authorized officer of LCG a certificate, dated as of the Closing, certifying that the conditions specified in Sections 8.1(a) and 8.1(b) above have been fulfilled. (d) No Order. There shall not be in effect any Order of a -------- Governmental Body which prevents, makes illegal or otherwise prohibits any of the Contemplated Transactions. (e) No Prohibition. There shall not be in effect any Legal -------------- Requirement that prevents, makes illegal or otherwise prohibits any of the Contemplated Transactions. (f) Consents. Subject to Section 3.1 above, the FCC Consent shall -------- have become a Final Order. The applicable waiting period under the HSR Act shall have expired or been terminated. (g) Stockholder Approval. The Stockholders shall have approved the -------------------- Merger and this Agreement at the Meeting in accordance with the Delaware Code and the Certificate of Incorporation and Bylaws of LCG. (h) Other Documents. Entravision shall have received such other --------------- agreements, receipts, pay-off letters and other instruments as it may reasonably require to evidence payment and satisfaction in full of, or release from, all obligations of LCG and the LCG Subsidiaries in respect of indebtedness for borrowed money set forth on Schedule 4.10, including, without limitation, the ------------- obligations of LCG with respect to the Credit Agreement, the 1997 Debentures -37- and the 1998 Debentures, and LCG shall have delivered or caused to be delivered to Entravision the original promissory note(s) or other instruments evidencing such indebtedness marked "cancelled," the release and termination of any and all security interests and liens on the assets of LCG or any of the LCG Subsidiaries issued in connection with such indebtedness and such other documentation reasonably requested by Entravision's counsel as necessary to evidence full repayment of such indebtedness and release of all legal rights and remedies in connection therewith. 8.2 Conditions Precedent to the Obligation of LCG to Close. The ------------------------------------------------------ obligation of LCG to effect the Contemplated Transactions and to take the other actions required to be taken by LCG at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by LCG, in whole or in part, where permissible): (a) Accuracy of Representations and Warranties. All of the ------------------------------------------ representations and warranties of Entravision and Acquisition Co. in this Agreement must be accurate in all respects when made, and as of the Closing Date as if made on the Closing Date, except for such inaccuracies as would not have a Material Adverse Effect on Entravision or Acquisition Co. (b) Performance. All of the material covenants and obligations that ----------- Entravision and Acquisition Co. are required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with in all material respects, including, without limitation, the obligations of Entravision and Acquisition Co. pursuant to Section 3.3 above. (c) Closing Certificate. LCG shall have received from a duly- ------------------- authorized officer of Entravision a certificate, dated as of the Closing, certifying that the conditions specified in Sections 8.2(a) and 8.2(b) above have been fulfilled. (d) No Order. There shall not be in effect any Order of a -------- Governmental Body which prevents, makes illegal or otherwise prohibits any of the Contemplated Transactions. (e) No Prohibition. There shall not be in effect any Legal -------------- Requirement that prevents, makes illegal or otherwise prohibits any of the Contemplated Transactions. (f) Consents. Subject to Section 3.1 above, the FCC Consent shall -------- have become a Final Order. The applicable waiting period under the HSR Act shall have expired or been terminated. (g) Stockholder Approval. The Stockholders shall have approved the -------------------- Merger and this Agreement at the Meeting in accordance with the Delaware Code and the Certificate of Incorporation and Bylaws of LCG. -38- ARTICLE 9. TERMINATION 9.1 Termination Events. This Agreement may, by written notice given prior ------------------ to or at the Closing, be terminated: (a) by Entravision: (i) if any of the material conditions set forth in this Agreement, including, without limitation, the material conditions set forth in Section 8.1 above, have not been materially satisfied as of the Closing Date or if satisfaction of such material conditions is or becomes impossible (other than through the failure of Entravision or Acquisition Co. to comply with their obligations under this Agreement) and Entravision has not waived such condition in writing on or before the Closing Date; (ii) if LCG remains in default in any material respect in the observance or in the due and timely performance of any of its material covenants, agreements, representations or warranties contained herein after fifteen (15) days written notice and opportunity to cure; or (iii) if the FCC dismisses or denies the application for the FCC Consent and such order is a Final Order or if the FCC designates the applications for FCC Consent for an evidentiary hearing; (b) by LCG: (i) if any of the material conditions set forth in this Agreement, including, without limitation, the material conditions set forth in Section 8.2 above, have not been materially satisfied as of the Closing Date or if satisfaction of such material conditions is or becomes impossible (other than through the failure of LCG to comply with its obligations under this Agreement) and LCG has not waived such condition in writing on or before the Closing Date; (ii) if Entravision and/or Acquisition Co. remains in default in any material respect in the observance or in the due and timely performance of any of their material covenants, agreements, representations or warranties contained herein after fifteen (15) days written notice and opportunity to cure; (iii) if the FCC dismisses or denies the application for the FCC Consent and such order is a Final Order or if the FCC designates the applications for FCC Consent for an evidentiary hearing; or (iv) if, upon satisfaction or waiver of all of Entravision and Acquisition Co.'s conditions to close set forth in this Agreement, Entravision does not have adequate available funds to pay the Aggregate Merger Consideration; (c) by mutual consent of Entravision and LCG; (d) by either Entravision or LCG if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to materially comply with its obligations under this Agreement) on or before the date which is six (6) months from the date of this Agreement; provided, however, that the Closing Date shall be extended for four (4) additional months if the only condition to the Closing which has not been satisfied or waived is the receipt of the FCC Consent as a Final Order, or such later date as the parties may agree upon; provided, however, that this section may not be utilized by any party at such time as such party is in Breach of or default under this Agreement in any material respect; or -39- (e) by Entravision within forty-five (45) days from the date of this Agreement if the Environmental Audit discloses any matters which would have an LCG Material Adverse Effect unless LCG agrees to fully indemnify Entravision and the Surviving Corporation for any Liability arising from such matter. (f) Notwithstanding anything in the foregoing to the contrary, no party that is in material Breach of this Agreement shall be entitled to terminate this Agreement except with the consent of the other parties hereto. 9.2 Rights of Parties for Nonperformance or Upon Termination. -------------------------------------------------------- (a) If LCG does not have a right to terminate under Section 9.1 above and all conditions precedent to LCG's obligation to close under Section 8.2 above have been satisfied, but LCG refuses to close the Contemplated Transactions, Entravision shall have the right to waive any grounds it may have to terminate under Section 9.1 above and to seek specific performance of the obligation of LCG to consummate the Contemplated Transactions. LCG acknowledges and agrees that the Radio Stations and the Newspapers are unique assets and LCG expressly agrees that monetary damages may be inadequate to compensate Entravision for the refusal of LCG to perform the obligations for which the remedy of specific performance is made available herein. Accordingly, LCG acknowledges and agrees that such refusals to perform may cause irreparable injury to Entravision and that Entravision shall be entitled to seek injunctive relief for specific performance of the obligations specifically listed in this Section 9.2. Notwithstanding anything herein to the contrary, LCG's monetary liability to Entravision and Acquisition Co. in the event of a termination of this Agreement pursuant to Section 9.1(a) above shall in no event exceed Seven Million Dollars ($7,000,000). (b) If this Agreement is terminated for any reason other than by LCG under Section 9.1(b)(ii) or 9.1(b)(iv) above, the parties acknowledge and agree that Entravision shall be entitled to the return of the entire Escrow Deposit, plus interest. If this Agreement is terminated by LCG under Section 9.1(b)(ii) or 9.1(b)(iv) above, the parties acknowledge and agree that LCG will suffer damages that are not practicable to ascertain. Accordingly, in such event, LCG shall be entitled to the entire Escrow Deposit as liquidated damages, payable (i) if the Escrow Deposit is in the form of immediately available funds, by release of the entire Escrow Deposit (plus interest) to LCG, and (ii) if the Escrow Deposit is in the form of the Earnest Money Letter of Credit, by LCG drawing upon the Earnest Money Letter of Credit. In the event of a dispute concerning the right of LCG to receive the liquidated damages provided for herein, the prevailing party shall be entitled to receive (in addition to the right to draw upon the Earnest Money Letter of Credit or the release of the entire Seven Million Dollars ($7,000,000) plus interest in funds) interest from Entravision and Acquisition Co., on the one hand, or from LCG, on the other hand, at the rate of eight percent (8%) per annum from the date of purported termination of this Agreement until the date on which such accrued and unpaid interest is paid in full. The parties agree that the foregoing liquidated damages are reasonable considering all the circumstances existing as of the date hereof and constitute the parties' good faith estimate of the actual damages -40- reasonably expected to result from the termination of this Agreement by LCG pursuant to Section 9.1(b)(ii) or 9.1(b)(iv) above. In such event, Entravision shall immediately instruct the Escrow Agent to deliver the Earnest Money Letter of Credit to LCG to permit it to draw upon the Earnest Money Letter of Credit or to release the funds. LCG AGREES THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO DRAW UPON THE EARNEST MONEY LETTER OF CREDIT OR THE RELEASE OF THE SEVEN MILLION DOLLARS ($7,000,000), AND THE RIGHT TO RECEIVE INTEREST, PROVIDED IN THIS SECTION 9.2(b) SHALL BE ITS SOLE AND EXCLUSIVE REMEDY IF THE CLOSING DOES NOT OCCUR WITH RESPECT TO ANY DAMAGES WHATSOEVER THAT LCG MAY SUFFER OR ALLEGE TO SUFFER AS A RESULT OF ANY CLAIM OR CAUSE OF ACTION ASSERTED BY LCG RELATING TO OR ARISING FROM BREACHES OF THE REPRESENTATIONS, WARRANTIES OR COVENANTS OF ENTRAVISION OR ACQUISITION CO. CONTAINED IN THIS AGREEMENT AND TO BE MADE OR PERFORMED AT OR PRIOR TO THE CLOSING. In the event of any dispute between the parties with respect to the right of LCG to receive the liquidated damages provided for herein, the prevailing party shall be entitled to receive from the other, on demand, its reasonable attorney's fees in connection with the final resolution of such dispute. (c) If this Agreement is terminated as provided in this Article 9, the Contemplated Transactions shall be abandoned without further action, rights or obligations by the parties hereto to one another, and all filings, applications and other submissions made hereunder shall, to the extent practicable, be withdrawn from the persons to which they were made, except that the last sentence of Section 6.1, Sections 13.1, 13.3, 13.4, 13.13, 13.14 and 13.17, and this Section 9.2 and the Confidentiality Agreement shall remain in effect, and provided that nothing herein shall relieve any party from liability for any breach of any covenant or agreement in this Agreement prior to such termination. ARTICLE 10. TAX RETURNS AND PAYMENTS 10.1 Returns. ------- (a) Income Tax Returns. ------------------ (i) Pre-Cut-Off Date Returns. The LCG Representatives shall ------------------------ cause to be prepared and Entravision shall cause to be timely filed all required federal, state, local and foreign Income Tax Returns of LCG and the LCG Subsidiaries for any period which ends on or before December 31, 1999 (the "Cut- Off Date"), for which returns have not been filed as of the Closing Date. Such Tax Returns shall, to the extent not otherwise required by law, be prepared in a manner consistent with LCG's past practice (including any Tax elections and methods of accounting). Entravision and its Related Persons, including the Surviving Corporation after the Closing Date, shall reasonably cooperate with the LCG Representatives and their Related Persons in the preparation of such returns. The LCG Representatives shall submit such returns to -41- Entravision not less than three (3) days before the due date (including extensions) for filing such returns. (ii) Straddle Returns. Entravision shall cause to be prepared ---------------- and timely filed all required federal, state, local and foreign Income Tax Returns of, or which include, LCG and the LCG Subsidiaries for taxable periods beginning before and ending after the Cut-Off Date ("Straddle Returns") which have not been filed as of the Closing Date. Such Tax Returns shall, to the extent not otherwise required by law, be prepared in a manner consistent with LCG's past practice (including any Tax elections and methods of accounting). At least fifteen (15) days prior to the filing of any Straddle Returns required to be caused to be filed by Entravision pursuant to the preceding sentence, Entravision shall submit for their approval copies of such returns to the LCG Representatives which approval shall not be unreasonably withheld. Entravision shall take no position on such returns that would adversely affect the Stockholders after the Closing Date unless such position would be reasonable in the case of a Person that owned LCG and the LCG Subsidiaries both before and after the Closing Date. (b) Other Tax Returns. ----------------- (i) Pre-Closing Date Returns. The LCG Representatives shall ------------------------ cause to be prepared and Entravision shall cause to be timely filed all required Other Tax Returns of LCG and the LCG Subsidiaries for any period which ends on or before the Closing Date for which returns have not been filed as of the Closing Date. Such Tax Returns shall, to the extent not otherwise required by law, be prepared in a manner consistent with LCG's past practice (including any Tax elections and methods of accounting). Entravision and its Related Persons, including the Surviving Corporation after the Closing Date, shall reasonably cooperate with the LCG Representatives and their Related Persons in the preparation of such returns. The LCG Representatives shall submit such returns to Entravision not less than three (3) days before the due date (including extensions) for filing such returns. (ii) Straddle Returns. Entravision shall cause to be prepared ---------------- and timely filed all required Other Tax Returns of, or which include, LCG and the LCG Subsidiaries for taxable periods beginning before and ending after the Closing Date ("Other Tax Straddle Returns") which have not been filed as of the Closing Date. Such Tax Returns shall, to the extent not otherwise required by law, be prepared in a manner consistent with LCG's past practice (including any Tax elections and methods of accounting). At least fifteen (15) days prior to the filing of any Other Tax Straddle Returns required to be caused to be filed by Entravision pursuant to the preceding sentence, Entravision shall submit for their approval copies of such returns to the LCG Representatives which approval shall not be unreasonably withheld. Entravision shall take no position on such returns that would adversely affect the Stockholders after the Closing Date unless such position would be reasonable in the case of a Person that owned LCG and the LCG Subsidiaries both before and after the Closing Date. 10.2 Payments. -------- -42- (a) Income Tax Payments. Entravision shall timely cause to be paid ------------------- all federal, state, local and foreign Income Taxes with respect to the Income Tax Returns to be caused to be filed by Entravision pursuant to Section 10.1(a) above. Such Income Taxes to be caused to be paid by Entravision, to the extent attributable to any period or portion of any period ending on or before the Cut- Off Date, shall be referred to herein as "Pre-Cut-Off Date Taxes." Prior to the Closing, LCG shall pay to Entravision an amount equal to the Pre-Cut-Off Date Taxes due and not yet paid or reserved for on the Financial Statements with respect to any such returns caused to be filed by Entravision. Where the Pre- Cut-Off Date Taxes involve a period which begins before and ends after the Cut- Off Date (a "Straddle Period"), such Pre-Cut-Off Date Taxes shall be calculated as through the taxable year of LCG terminated at the close of business on the Cut-Off Date. (b) Other Tax Payments. Entravision shall timely cause to be paid ------------------ all Other Taxes with respect to the returns to be caused to be filed by Entravision pursuant to Section 10.1(b) above. Such Other Taxes to be caused to be paid by Entravision, to the extent attributable to any period or portion of a period ending on or before the Closing Date, shall be referred to herein as "Pre-Closing Date Taxes." LCG shall pay to Entravision an amount equal to the Pre-Closing Date Taxes due and not yet paid or reserved for on the Financial Statements with respect to any such returns caused to be filed by Entravision. Where a Pre-Closing Date Tax involves a period which begins before and ends after the Closing Date (an "Other Tax Straddle Period"), such Pre-Closing Date Tax shall be equal to the amount of such Other Tax for the taxable year, multiplied by a fraction, the numerator of which shall be the number of days from the beginning of the taxable year through the Closing Date and the denominator of which shall be the number of days in the taxable year. Any amounts owed by LCG with respect to Tax Returns filed pursuant to Section 10.1(a)(i) or 10.1(b)(i) above shall be paid to Entravision by LCG ten (10) days prior to the due date of each such Tax Return. Prior to the Closing, any amounts owed by LCG to Entravision pursuant to this Section 10.2 attributable to Straddle Returns or Other Tax Straddle Returns shall be paid by LCG within the later of ten (10) days of Entravision's request therefor or ten (10) days prior to the date on which Entravision is required to cause to be paid the related Tax liability. All amounts due from LCG for periods prior to the Closing and not paid in a timely fashion shall bear interest until paid at the lesser of ten percent (10%) per annum or the highest rate allowed by law. 10.3 Refunds. ------- (a) Income Taxes. Any refunds or credits of federal, state, local ------------ or foreign Income Taxes (including any interest thereon) received by or credited to LCG or any of the LCG Subsidiaries attributable to periods ending on or prior to the Cut-Off Date or to Straddle Periods (in the case of Straddle Periods, which were not borne by Entravision) (collectively, the "Stockholders' Refunds") shall be for the benefit of the Stockholders, and Entravision shall use its Commercially Reasonable Efforts at the Stockholders' expense to obtain any of the -43- Stockholders' Refunds and shall cause the Surviving Corporation to pay over to the LCG Representatives any of the Stockholders' Refunds, net of any Tax costs to Entravision or any of its Related Persons, including the Surviving Corporation, immediately upon receipt thereof. In addition, if the Cut-Off Date Taxes with respect to a Straddle Period are conclusively determined to be less than the payments previously made by or credited to LCG or any of the LCG Subsidiaries with respect to such Straddle Period, Entravision shall cause the Surviving Corporation to pay to the LCG Representatives, on behalf of the Stockholders, the excess of such previous payments over such Pre-Cut-Off Date Taxes within ten (10) days of the Surviving Corporation receiving the benefit of such excess payments through a reduction in any Tax payment required to be made by the Surviving Corporation with respect to any period beginning after the Cut- Off Date. (b) Other Taxes. Any refunds or credits of Other Taxes (including ----------- any interest thereon) received or credited to LCG or any of the LCG Subsidiaries attributable to periods ending on or prior to the Closing Date or to Other Tax Straddle Periods (in the case of Other Tax Straddle Periods, which were not borne by Entravision) (collectively, the "Stockholders' Other Tax Refunds") shall be for the benefit of the Stockholders, Entravision shall use its Commercially Reasonable Efforts at the Stockholders' expense to obtain any of the Stockholders' Other Tax Refunds and shall cause the Surviving Corporation to pay over to the LCG Representatives any of the Stockholders' Other Tax Refunds, net of any Tax costs to Entravision or any of its Related Persons, including the Surviving Corporation, immediately upon receipt thereof. In addition, if the Pre-Closing Date Taxes with respect to an Other Tax Straddle Period are conclusively determined to be less than the payments previously made by or credited to LCG or any of the LCG Subsidiaries with respect to such Other Tax Straddle Period, Entravision shall cause the Surviving Corporation to pay to the LCG Representatives, on behalf of the Stockholders, the excess of such previous payments over such Pre-Closing Date Taxes within ten (10) days of the Surviving Corporation receiving the benefit of such excess payments through a reduction in any Tax payment required to be made by the Surviving Corporation after the Closing Date. 10.4 Tax Cooperation. Subject to the Confidentiality Agreement, --------------- Entravision and the LCG Representatives shall provide the other party with such information and records and make such of its officers, directors, employees and agents available as may reasonably be requested by such other party in connection with the preparation of any Tax Return or any audit or other proceeding that relates to LCG or any LCG Subsidiary. Entravision shall prepare and provide to the LCG Representatives such federal, state, local and foreign tax information packages as the LCG Representatives shall reasonably request for use in preparing any Tax Return that relates to LCG or any LCG Subsidiary. Such information packages shall be completed by Entravision and provided to the LCG Representatives within sixty (60) days after a request therefor. Notwithstanding any other provisions hereof, each party shall bear its own expenses in complying with the foregoing provisions. -44- 10.5 Entravision's Taxes. Notwithstanding anything in this Agreement to ------------------- the contrary, Entravision shall pay, or cause to be paid, and Entravision and the Surviving Corporation shall jointly and severally indemnify the LCG Representatives, the Stockholders, the Option Holders and their affiliates against and hold them harmless from any liability for Taxes arising from any action or failure to act by Entravision or any of their Related Persons (including the Surviving Corporation) from and after the Closing. 10.6 Taxes of Other Persons. Solely out of the funds in the Escrow ---------------------- Account, the Stockholders and the Option Holders agree to indemnify Entravision and the Surviving Corporation for any Liability to the Surviving Corporation for Taxes attributable to LCG or any of the LCG Subsidiaries as a transferee or successor or by Contract, for the periods ending on or before the Cut-Off Date with respect to Income Taxes (and in the case of Other Taxes, for the periods ending on or before the Closing Date). 10.7 Amended Returns. Entravision shall not amend or cause to be amended --------------- any Tax Return relating to any taxable period or portion of any taxable period ending on or before the Closing Date without first obtaining the written consent of the LCG Representatives, which shall not be unreasonably withheld. ARTICLE 11. INDEMNIFICATION; REMEDIES 11.1 Survival. All representations, warranties, covenants and obligations -------- in this Agreement, the Schedules and any other certificate or document delivered pursuant to this Agreement will survive the Closing until April 1, 2002. 11.2 Indemnification by Stockholders and Option Holders. Each of the -------------------------------------------------- Stockholders and the Option Holders hereby agrees to indemnify, defend and hold harmless (solely and exclusively out of funds on deposit in the Escrow Account and subject to the limitations contained herein) Entravision, Acquisition Co. and the Surviving Corporation, and their respective Representatives, successors, assigns, stockholders, members, officers, directors, agents, employees, controlling Persons and affiliates (collectively, the "Entravision Indemnified Parties") from and against, and will pay to the Entravision Indemnified Parties the amount of any loss, liability, claim, damage (including incidental and consequential damages), cost or expense (including costs of investigation and defense and reasonable out-of-pocket attorney's fees and expenses), whether or not involving a third-party claim (collectively, "Damages") (provided, however, that Damages shall be calculated net of the amount of insurance proceeds or third-party contribution or indemnification payments actually paid to such indemnified party as reimbursement for such Damages), arising, directly or indirectly, from or in connection with (i) any Breach of any representation, warranty, covenant, obligation or agreement made by LCG in this Agreement, the Schedules or any other certificate or document delivered by LCG pursuant to this Agreement, (ii) any payments by Entravision or the Surviving Corporation to holders of Dissenting Shares (a) arising from a final non-appealable court award that has been entered -45- against the Surviving Corporation with respect to Dissenting Shares or (b) arising from a final, written, binding settlement agreement with respect to Dissenting Shares, (iii) any claim by a party for broker's or finder's fees or commissions, or similar payment or remuneration in respect of the Contemplated Transactions, (iv) the sale or divestiture of Station KMYC(AM), Marysville, California pursuant to the Huth Asset Purchase Agreement and (v) the Portland Land Sale. 11.3 Indemnification by Entravision. Entravision hereby agrees to ------------------------------ indemnify, defend and hold harmless each of the LCG Representatives, Stockholders, the Option Holders and their respective Representatives, successors, assigns, stockholders, members, officers, directors, agents, employees, controlling Persons and affiliates (collectively, the "Stockholder Indemnified Parties") from and against, and will pay to the Stockholder Indemnified Parties the amount of, any Damages arising, directly or indirectly, from or in connection with (i) any Breach of any representation, warranty, covenant, obligation or agreement made by Entravision or Acquisition Co. in this Agreement or any other certificate or document delivered by Entravision or Acquisition Co. pursuant to this Agreement and (ii) any claim by a party for broker's or finder's fees or commissions, or similar payment or remuneration in respect of the Contemplated Transactions. 11.4 Procedure for Indemnification. ----------------------------- (a) Promptly (and in all cases within thirty (30) days) after receipt by an indemnified party in this Article 11 of notice of the commencement of any Proceeding against it or the existence of any written third-party claim against it relating to a matter covered by this Article 11, such indemnified party will, if a claim is to be made against an indemnifying party under such section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party is prejudiced by the indemnified party's failure to give such notice. (b) If any Proceeding referred to in Section 11.4(a) above is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party will be entitled to participate in such Proceeding and, to the extent that it wishes (unless the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate), to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this section for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding: (i) no compromise or settlement of such claims may be effected by the -46- indemnifying party without the indemnified party's consent (which shall not be unreasonably withheld) unless there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party and the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (ii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent, unless the indemnified party unreasonably withholds its consent. If the indemnified party unreasonably withholds its consent to a proposed compromise or settlement of a claim, the indemnifying party shall have no obligations whatsoever to the indemnified party with respect to Damages related to such claim in an amount in excess of the proposed compromise or settlement. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within thirty (30) days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party may assume the defense of such Proceeding, the indemnified party may assume the defense of such Proceeding. If the indemnified party assumes the defense of a Proceeding, no compromise or settlement of such claims may be effected by the indemnified party without the indemnifying party's consent (which consent shall not be unreasonably withheld). (c) A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. 11.5 Tax Claims. Notwithstanding the procedure set forth in Section 11.4 ---------- above, if a written claim shall be made to Entravision or the Surviving Corporation by any taxing authority with respect to Taxes which, if successful, might result in an indemnity payment to Entravision or the Surviving Corporation or any of their Related Persons, Entravision shall promptly notify the LCG Representatives of such claim (a "Tax Claim") and the LCG Representatives shall have sole control over the Proceedings and the filing of any amended Tax Returns and may make all decisions in connection with such Tax Claim. The LCG Representatives shall keep Entravision informed in respect of all material aspects of such Tax Claim. Entravision and the Surviving Corporation shall reasonably cooperate with the LCG Representatives in defending or contesting any such Tax Claim, which cooperation shall include the retention and (upon request) the provision of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim. Notwithstanding anything in this Agreement to the contrary, any Tax Claim shall not be subject to the Threshold Amount set forth in Section 11.6 below. 11.6 Threshold Indemnification Obligations. Subject to the last sentence ------------------------------------- of Section 11.5 above, the parties hereto shall have no liability for indemnification under this Article 11 unless and until the total of the alleged Damages with respect to any such individual matter equals or exceeds Five Hundred Thousand Dollars ($500,000) (the "Threshold Amount"). At such time as the aggregate Damages equal or exceed the Threshold Amount, the indemnified -47- party(ies) shall be indemnified to the full extent of all such Damages (in excess of the Threshold Amount). 11.7 Maximum Indemnification Obligations. The aggregate amount of all ----------------------------------- claims subject to indemnification (including claims and payments under Article 10) hereunder by the LCG Representatives, on behalf of the Stockholders and the Option Holders (solely from the funds in the Escrow Account), on one hand, and Entravision, on the other hand, shall not exceed Seven Million Dollars ($7,000,000). 11.8 Certificate of Incorporation and Bylaws. No Stockholder or Option --------------------------------------- Holder shall be entitled to indemnification directly or indirectly under the Certificates of Incorporation or Bylaws of LCG or any of the LCG Subsidiaries for any matter upon which such Stockholder or Option Holder has an indemnification obligation hereunder and such Certificates of Incorporation and Bylaws shall be deemed amended accordingly. However, the provisions of this Section 11.8 are intended only for the regulation of relations between the Entravision Indemnified Parties and the Stockholders and the Option Holders, and this Section 11.8 is not intended for the benefit of creditors or other third parties and does not grant any rights to creditors or other third parties. 11.9 Unaffected by Knowledge. The rights of the parties to ----------------------- indemnification, payment of Damages or other remedy under this Article 11 will not be affected by any knowledge with respect to the accuracy or inaccuracy of or compliance with, any representation, warranty, covenant or obligation of any party under this Agreement. 11.10 Exclusivity. Each of the parties hereby acknowledges and agrees that ----------- the indemnity obligations set forth above shall be the exclusive remedy of any party with respect to the Contemplated Transactions (including, without limitation, any matters or claims arising under the Environmental Laws) other than with respect to fraud or willful misconduct of any party. 11.11 Tax Benefit. Notwithstanding anything to the contrary in this ----------- Agreement, any indemnification obligation hereunder shall be reduced by the amount of any Tax benefit actually realized by an indemnified party as a result of the incurrence of the liability or event giving rise to such indemnification obligation. 11.12 Purchase Price Adjustment. Except as otherwise required by law, the ------------------------- parties agree to treat all payments made under this Article 11 as adjustments to the purchase price. ARTICLE 12. REPRESENTATIVES By virtue of the approval of this Agreement and the Merger by the Board of Directors of LCG and the approval of this Agreement and the Merger by the Stockholders pursuant to the -48- Certificate of Incorporation and Bylaws of LCG and the applicable provisions of the Delaware Code, each Stockholder and each Option Holder (whether or not he, she or it executes and delivers a Letter of Transmittal) will be agreeing as follows: 12.1 Authorization of the LCG Representatives. Upon adoption of this ---------------------------------------- Agreement and the Merger by the Board of Directors of LCG and approval of this Agreement and the Merger by the Stockholders pursuant to the Certificate of Incorporation and Bylaws of LCG and the applicable provisions of the Delaware Code, the LCG Representatives (and each successor appointed in accordance with Section 12.6 below) hereby are appointed, authorized and empowered to act, by unanimous decision of the LCG Representatives, as the LCG Representatives, on behalf of the Stockholders and the Option Holders, in connection with and to facilitate the consummation of the Contemplated Transactions, and in connection with the activities to be performed on behalf of the Stockholders and the Option Holders under the Indemnity Escrow Agreement and the Escrow Account for the purposes and with the powers and authority hereinafter set forth in this Article 12 and in the Indemnity Escrow Agreement, which shall include the power and authority: (a) to execute and deliver the Earnest Money Escrow Agreement and the Indemnity Escrow Agreement (collectively, the "Escrow Agreements") (with such modifications or changes therein as to which the LCG Representatives, in their sole unanimous discretion, shall have consented) and to agree to such amendments or modifications thereto as the LCG Representatives, in their sole unanimous discretion, may deem necessary or desirable; (b) to execute and deliver such waivers and consents in connection with this Agreement, the Escrow Agreements and the consummation of the Contemplated Transactions as the LCG Representatives, in their sole unanimous discretion, may deem necessary or desirable; (c) to deliver any Letters of Transmittal and all Certificates representing the Shares tendered therewith to Entravision and to collect and receive all moneys and other proceeds and property payable to the Stockholders and Option Holders pursuant to Section 2.8 above (including moneys and other proceeds and property payable to Stockholders who do not tender counterpart signature pages and/or Letters of Transmittals to the LCG Representatives for delivery to Entravision at the Closing) and, subject to the withholding and retention provisions hereinafter set forth in this Article 12 and the payment of expenses payable by the LCG Representatives, to disburse and pay the same to each of the Stockholders and Option Holders pursuant to Section 2.8 above (other than Stockholders who shall at such time be Dissenting Holders); (d) as the LCG Representatives of the Stockholders and Option Holders, to enforce and protect the rights and interests of the Stockholders and Option Holders and to enforce and protect the rights and interests of the LCG Representatives arising out of or under or in any manner relating to this Agreement, the Escrow Agreements and each other agreement, document, instrument or certificate referred to herein or therein or the transactions provided for -49- herein or therein (including, without limitation, in connection with any and all claims for indemnification brought by any Entravision Indemnified Party under Article 11 above) and, in connection therewith, to (i) assert by claim or institute any action, proceeding or investigation; (ii) investigate, defend, contest or litigate any claim, action, proceeding or investigation initiated by any Entravision Indemnified Party, or any other Person, against the LCG Representatives and/or the Escrow Account, and receive process on behalf of any or all Stockholders and Option Holders in any such claim, action, proceeding or investigation and compromise or settle on such terms as the LCG Representatives shall determine to be appropriate, and give receipts, releases and discharges on behalf of all of the Stockholders and Option Holders with respect to, any such claim, action, proceeding or investigation; (iii) file any proofs of debts, claims and petitions as the LCG Representatives may deem advisable or necessary; (iv) settle or compromise any claims asserted under Article 11 above; (v) assume, on behalf of all of the Stockholders and Option Holders, the defense of any Claim that is the basis of any claim asserted under Article 11 above; and (vi) file and prosecute appeals from any decision, judgment or award rendered in any of the foregoing actions, proceedings or investigations, it being understood that the LCG Representatives shall not have any obligation to take any such actions, and shall not have any liability to the Stockholders or the Option Holders for any failure to take any such actions; (e) to enforce payment from the Escrow Account and any other amounts payable to the Stockholders and Option Holders, in each case on behalf of the Stockholders and Option Holders, in the names of the LCG Representatives or, if the LCG Representatives so elect, in the names of one or more of the Stockholders or Option Holders; (f) to cause to be paid out of the Escrow Account the full amount of any judgment or judgments and legal interest and costs awarded in favor of any indemnified party arising out of the indemnification provisions set forth in Article 11 above; (g) to refrain from enforcing any right of the Stockholders, Option Holders or any of them and/or of the LCG Representatives arising out of or under or in any manner relating to this Agreement, the Escrow Agreements or any other agreement, instrument or document in connection with the foregoing; and (h) to make, execute, acknowledge and deliver all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the LCG Representatives, in their sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the activities described in paragraphs (a) through (g) above and the Contemplated Transactions. The grant of authority provided for in this Section 12.1: (i) is coupled with an interest and is being granted, in part, as an inducement to Entravision and Acquisition Co. to enter into this Agreement and the Indemnity Escrow Agreement and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Stockholder or Option Holder and shall be -50- binding on any successor thereto; (ii) subject to the provisions of Section 12.6 below, may only be exercised by all of the LCG Representatives, each acting by signing as an LCG Representative of each of the Stockholders and Option Holders; and (iii) shall survive the delivery of an assignment by a Stockholder or Option Holder of the whole or any fraction of his, her of its interest in the Escrow Accounts or distributions from the Custodial Account. 12.2 Payments of Expenses; Holdbacks. ------------------------------- (a) The LCG Representatives shall withhold and retain from any distributions to the LCG Representatives on behalf of the Stockholders and the Option Holders or withdrawals by the LCG Representatives on behalf of the Stockholders and the Option Holders out of the Custodial Accounts such amount or amounts as shall be sufficient to pay all known, or reasonably anticipated, expenses which are required to be paid or borne by the Stockholders and the Option Holders pursuant to this Agreement (including, without limitation, all transaction costs, fees and expenses), the Indemnity Escrow Agreement or are otherwise incurred by the LCG Representatives in performance of their duties hereunder, including, without limitation, their own out-of-pocket expenses and the payment of any fees and expenses under the Indemnity Escrow Agreement to the Escrow Agent, and shall pay all such expenses out of the amount or amounts so withheld. In the event that the amounts so withheld (if any) are insufficient to pay all such expenses, each Stockholder and Option Holder, upon written notification from the LCG Representatives of any such deficiency, shall promptly deliver to the LCG Representatives full payment of its ratable share of the amount of such deficiency in accordance with such Stockholder's or Option Holder's Pro Forma Outstanding Shares. (b) If a Stockholder or an Option Holder fails to make a payment referred to above or referred to in Section 12.5 below, or any portion thereof (a "Defaulting Stockholder"), all other Stockholders and Option Holders shall make such payment, or portion thereof, on behalf of each Defaulting Stockholder in proportion to their respective Pro Forma Outstanding Shares (computed without reference to the Pro Forma Outstanding Shares of any Defaulting Stockholder). In no event shall a Defaulting Stockholder be released from liability for failing to make such payment hereunder. A Defaulting Stockholder shall be liable to each other Stockholder, Option Holder and to the LCG Representatives for all payments, costs and expenses incurred as a result of the failure of the Defaulting Stockholder to comply with the terms hereof, including, without limitation, any costs and expenses incurred in enforcing the provisions of this Agreement. (c) In connection with the performance of their obligations hereunder and under the Indemnity Escrow Agreement, the LCG Representatives shall have the right at any time and from time to time to select and engage, at the cost and expense of the Stockholders and the Option Holders, attorneys, accountants, investment bankers, advisors, consultants and clerical personnel and obtain such other professional and expert assistance, and maintain such records, as the LCG Representatives may deem necessary or desirable and incur other out-of-pocket expenses. -51- 12.3 Disbursements. ------------- (a) All payments to the Stockholders and the Option Holders by the LCG Representatives hereunder, and all sums, proceeds and other property held by the LCG Representatives, shall be allocated among the Stockholders and the Option Holders (other than Stockholders who shall at such time be Dissenting Holders) in accordance with Section 2.8 above. (b) All money or other proceeds received by the LCG Representatives shall be distributed by the LCG Representatives as promptly as practicable to each Stockholders and Option Holder as set forth on Section 12.3(a) above, subject, however, to the right of the LCG Representatives to deduct and withhold amounts as contemplated by the provisions of Section 12.2 above. 12.4 Bank Accounts; Investments. -------------------------- (a) The LCG Representatives shall have the right to open such account or accounts in their own names as LCG Representatives of the Stockholders and the Option Holders in any bank or trust company as they may select in order to deposit all sums which they may receive and hold hereunder (including amounts under Section 12.2(a) above) and to issue checks or draw money upon the signature of any of the then-acting LCG Representatives (or the signature of one or more Persons the LCG Representatives may designate) on each such account. (b) The LCG Representatives shall have the right, in their sole and absolute unanimous discretion, to invest and reinvest any of the proceeds held by them under the terms of this Agreement in investments only of a type which the Escrow Agent is permitted to make pursuant to the Indemnity Escrow Agreement. Any securities or other property at any time held by the LCG Representatives may be held by them in bearer or registered form or in the name of any other Person or Persons they may designate, and the LCG Representatives may deal with such securities or other property to the same extent and with the same powers as an individual owner thereof might do. The LCG Representatives shall have no responsibility or obligation whatsoever to any Stockholder or Option Holder for the performance of any investments made in accordance with the provisions of this Agreement or for any losses realized by any thereof. 12.5 Compensation; Exculpation; Indemnity. ------------------------------------ (a) The LCG Representatives shall not be entitled to any fee, commission or other compensation for the performance of their services hereunder, but shall be entitled to the payment out of the Custodial Accounts of all of their out-of-pocket expenses incurred as LCG Representatives, and in furtherance of the foregoing, may pay or cause to be paid or reimburse themselves for the payment of any and all such expenses. -52- (b) In dealing with this Agreement, the Escrow Agreements and any instruments, agreements or documents relating thereto, and in exercising or failing to exercise all or any of the powers conferred upon the LCG Representatives hereunder or thereunder, (i) the LCG Representatives shall not assume any, and shall incur no, responsibility whatsoever to any Stockholder or Option Holder by reason of any error in judgment or other act or omission performed or omitted hereunder or in connection with this Agreement, the Escrow Agreements or any such other agreement, instrument or document and (ii) the LCG Representatives shall be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the LCG Representatives pursuant to such advice shall in no event subject the LCG Representatives to liability to any Stockholder, Option Holder, the Company, Entravision, Acquisition Co., the Surviving Corporation or any other Person. (c) Each Stockholder and each Option Holder, severally, shall indemnify the LCG Representatives up to, but not exceeding, an amount equal to the aggregate Per Share Merger Consideration received by such Person hereunder against all damages, liabilities, claims, obligations, costs and expenses, including reasonable attorney's, accountants' and other experts' fees and the amount of any judgment against them, of any nature whatsoever, arising out of or in connection with any claim, investigation, challenge, action or proceeding or in connection with any appeal thereof, relating to the acts or omissions of the LCG Representatives hereunder, or under the Escrow Agreements or otherwise. The foregoing indemnification shall not be deemed exclusive of any other right to which the LCG Representatives may be entitled apart from the provisions hereof. In the event of any indemnification under this Section 12.5(c), the LCG Representatives shall first proceed against any distributions to the LCG Representatives on behalf of the Stockholders and the Option Holders. Thereafter, upon written notice from the LCG Representatives to the Stockholders and the Option Holders as to the existence of a deficiency toward the payment of any such indemnification amount, each Stockholder and Option Holder shall promptly deliver to the LCG Representatives full payment of his, her or its ratable share of the amount of such deficiency, in accordance with such Stockholder's and Option Holder's Pro Forma Outstanding Shares. (d) All of the indemnities, immunities and powers granted to the LCG Representatives under this Agreement shall survive the Closing and/or any termination of this Agreement and the Escrow Agreements. (e) Entravision and the Surviving Corporation shall have the right to rely upon all actions taken or omitted to be taken by the LCG Representatives pursuant to this Agreement or any applicable ancillary document; provided, however, that Entravision and the Surviving Corporation shall not have the right to rely upon any such written action taken by the LCG Representatives unless such written action is evidenced by a writing executed by all three LCG Representatives. Notwithstanding anything herein to the contrary, none of Entravision, Acquisition Co., LCG or the Surviving Corporation shall have any responsibility or obligation -53- whatsoever to any Stockholder, Option Holder or to any other party with respect to or arising out of any actions taken or any inaction by the LCG Representatives. 12.6 Removal and Replacement of a LCG Representatives; Successor LCG --------------------------------------------------------------- Representatives; Action by LCG Representatives. ---------------------------------------------- (a) If one or more of the LCG Representatives is unable or unavailable to perform his, her or its duties hereunder, a successor for such LCG Representative or Representatives shall be appointed as follows: (i) in the case of Latin Investors, by Latin Investors, with written notice delivered to the LCG Representatives, Entravision and the Surviving Corporation; (ii) in the case of the Trefoil Designee, by the Trefoil Entities, with written notice delivered to the LCG Representatives, Entravision and the Surviving Corporation; and (iii) in the case of the Other Holders Designee, by the written vote of the holders of a majority of the Pro Forma Outstanding Shares with written notice delivered to the LCG Representatives, the Stockholders and Option Holders, Entravision and the Surviving Corporation. (b) Any LCG Representative or all of them may be removed at any time as follows: (i) in the case of Latin Investors, by written notice delivered by Latin Investors to the LCG Representatives, Entravision and the Surviving Corporation; (ii) in the case of the Trefoil Designee, by written notice delivered by the Trefoil Entities to the LCG Representatives, Entravision and the Surviving Corporation; and (iii) in the case of the Other Holders Designee, by written notice delivered by the holders of a majority of the Pro Forma Outstanding Shares to the LCG Representatives, the other Stockholders and Option Holders, Entravision and the Surviving Corporation. Any of Latin Investors, any Trefoil Designee or any Other Holders Designee so removed shall be replaced in the manner set forth in Section 12.6(a) above. (c) Any successor LCG Representative shall have all of the authority and responsibilities conferred upon or delegated to a LCG Representative pursuant to this Article 12. ARTICLE 13. GENERAL PROVISIONS 13.1 Expenses. Except as otherwise expressly provided in this Agreement, -------- each party to this Agreement shall separately bear its own expenses incurred in connection with the preparation, execution and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel and accountants, regardless of whether the Contemplated Transactions are consummated. 13.2 Public Announcements. Other than as required by law or those -------------------- incidental to filings required to comply with Legal Requirements, any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as the parties mutually determine. Unless consented to by -54- the other parties in advance or required by Legal Requirements, prior to the Closing, the parties hereto shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. 13.3 Confidentiality. Between the date of this Agreement and the Closing --------------- Date, the parties will abide by the terms and conditions of the Confidentiality Agreement and will maintain in confidence, and will cause the directors, officers, employees, agents and advisors of each of them to maintain in confidence, any information disclosed pursuant to the Confidentiality Agreement. 13.4 Notices. All notices, consents, waivers and other communications ------- under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by certified mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): If to Entravision or Acquisition Co: Entravision Communications Company, L.L.C. Attention: Walter F. Ulloa and Philip C. Wilkinson 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Telephone: (310) 820-5355 Facsimile: (310) 820-2445 with a required copy to: Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. Attention: Kenneth D. Polin, Esq. 101 West Broadway, 17th Floor San Diego, California 92101 Telephone: (619) 515-9600 Facsimile: (619) 515-9628 If to LCG: Latin Communications Group Inc. Attention: Martin D. Payson 750 Lexington Avenue, 25th Floor New York, New York 10022 Telephone: (212) 446-5203 Facsimile: (212) 446-5240
-55- with a required copy to: Shamrock Capital Advisors, Inc. Attention: Steven D. Royer 444 Lakeside Drive Burbank, California 91505 Telephone: (818) 973-4288 Facsimile: (818) 842-3142 and with a required copy to: Fried, Frank, Harris, Shriver & Jacobson Attention: David K. Robbins, Esq. 350 South Grand Avenue, 32nd Floor Los Angeles, California 90071 Telephone: (213) 473-2000 Facsimile: (213) 473-2222 If to Latin Investors: Latin Investors Limited Partnership Attention: James Costello c/o LI Management Inc. 204 Dudley Road Wilton, Connecticut 06897 Telephone: (203) 762-2773 Facsimile: (203) 831-0403 with a required copy to: Dewey Ballantine LLP Attention: E. Ann Gill, Esq. 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 259-8000 Facsimile: (212) 259-6333 If to the Trefoil Designee: Shamrock Capital Advisors, Inc. Attention: Stephen D. Royer 444 Lakeside Drive Burbank, California 91505 Telephone: (818) 973-4288 Facsimile: (818) 842-3142 with a required copy to: Sigma Hedge Partners, G.P. c/o General Electric Pension Trust Attention: Michael Pastore 3003 Summer Street Stamford, Connecticut 06905 Telephone: (203) 326-2312 Facsimile: (203) 326-4073 -56- with a required copy to: Fried, Frank Harris, Shriver & Jacobson Attention: David K. Robbins, Esq. 350 South Grand Avenue, 32nd Floor Los Angeles, California 90071 Telephone: (213) 473-2000 Facsimile: (213) 473-2222 If to the Other Holders Designee: Martin D. Payson 750 Lexington Avenue, 25th Floor New York, New York 10022 Telephone: (212) 446-5203 Facsimile: (212) 446-5240 with a required copy to: Fried, Frank Harris, Shriver & Jacobson Attention: David K. Robbins, Esq. 350 South Grand Avenue, 32nd Floor Los Angeles, California 90071 Telephone: (213) 473-2000 Facsimile: (213) 473-2222 13.5 Further Assurances. The parties agree to furnish upon request to ------------------ each other such further information, execute and deliver to each other such other documents and to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 13.6 Waiver. The rights and remedies of the parties to this Agreement are ------ cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (i) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party, (ii) no waiver that may be given by a party will be applicable except in the specific instance for which it is given and (iii) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 13.7 Entire Agreement and Modification. This Agreement supersedes all --------------------------------- prior agreements between the parties with respect to its subject matter, including, without limitation, that certain Letter of Intent dated November 3, 1999, as amended, except for the Confidentiality Agreement, and constitutes (along with the Confidentiality Agreement and recitals hereto, and -57- the exhibits, Schedules and documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 13.8 Schedules. The Schedules are hereby incorporated by reference into --------- this Agreement in their entirety. Entravision and Acquisition Co. hereby acknowledge and agree that any matter disclosed on any particular Schedule shall be deemed to be disclosed on all Schedules and shall modify all representations and warranties of LCG herein. 13.9 Assignment, Successors and No Third-Party Rights. No party may ------------------------------------------------ assign any of its rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld or delayed, except that Entravision and Acquisition Co. may assign any of their rights under this Agreement to one another or to any Related Person of Entravision and Acquisition Co., including, without limitation, to a newly-formed corporation created for purposes of a contemplated roll-up of the equity ownership of Entravision into such new entity; provided, however, that no such assignment shall be permitted if such assignment would impair or delay the consummation of the Contemplated Transactions. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Except as set forth in Section 7.6 above, nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 13.10 Severability. If any provision of this Agreement is held invalid or ------------ unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 13.11 Section Headings; Construction. The headings of sections in this ------------------------------ Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding section or sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 13.12 Time of Essence. With regard to all dates and time periods set forth --------------- or referred to in this Agreement, time is of the essence. 13.13 Attorney's Fees. The prevailing party(ies) in any Proceeding --------------- relating to the enforcement or interpretation of this Agreement may recover from the unsuccessful party(ies) all -58- costs, expenses and actual attorney's fees (including expert witness and other consultants fees and costs) relating to or arising out of (i) the Proceeding (whether or not the Proceeding results in a judgment) and (ii) any post-judgment or post-award Proceeding including, without limitation, one to enforce or collect any judgment or award resulting from the Proceeding. All such judgments and awards shall contain a specific provision for the recovery of all such subsequently incurred costs, expenses and actual attorney's fees. 13.14 Governing Law. This Agreement will be governed by the laws of the ------------- State of Delaware without regard to conflicts of laws principles. 13.15 Jurisdiction; Service of Process. Any Proceeding seeking to enforce -------------------------------- any provision of, or based on any right arising out of, this Agreement must be brought against any of the parties in the United States District Court for the Central District of California, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such Proceeding and waives any objection to venue laid therein. Process in any Proceeding referred to in the preceding sentence may be served on any party anywhere in the world. In the event that the dispute fails to meet the jurisdictional threshold requirements of the federal courts, venue shall lie in the appropriate state courts sitting in Los Angeles County, California. 13.16 Counterparts; Facsimile. This Agreement may be executed in one or ----------------------- more counterparts, all of which when fully executed and delivered by all parties hereto and taken together shall constitute a single agreement, binding against each of the parties. To the maximum extent permitted by law or by any applicable governmental authority, this Agreement may be signed and transmitted by facsimile with the same validity as if it were an ink-signed document. Each signatory below represents and warrants by his or her signature that he or she is duly authorized (on behalf of the respective entity for which such signatory has acted) to execute and deliver this instrument and any other document related to this transaction, thereby fully binding each such respective entity. 13.17 Transfer Taxes. Notwithstanding anything in this Agreement to the -------------- contrary, Entravision, on the one hand, and the LCG Representatives on behalf of the Stockholders and the Option Holders, on the other hand, shall each pay one- half ( 1/2) of all sales, use, transfer, real property transfer, documentary, recording, gains, stock transfer and similar taxes and fees, and any deficiency, interest or penalty asserted with respect thereto (collectively, "Transfer Taxes") arising out of or in connection with the Merger, and Entravision, on the one hand, and the Stockholders and the Option Holders, on the other hand, shall indemnify, defend and hold harmless the other parties and their respective Representatives with respect to such party's proportionate share of such Transfer Taxes. Entravision shall timely file the necessary documentation and Tax Returns with respect to such Transfer Taxes. [Remainder of Page Intentionally Left Blank] -59- IN WITNESS WHEREOF, the parties have executed and delivered this Acquisition Agreement and Plan of Merger as of the date first written above. Entravision ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa ------------------------------------------------------ Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By: /s/ Philip C. Wilkinson ------------------------------------------------------ Philip C. Wilkinson, President, Chief Operating Officer and Managing Member Acquisition Co. LCG ACQUISITION CORPORATION, a Delaware corporation By: /s/ Walter F. Ulloa ------------------------------------------------------ Walter F. Ulloa, Chairman and Chief Executive Officer By: /s/ Philip C. Wilkinson ------------------------------------------------------ Philip C. Wilkinson, President and Chief Operating Officer LCG LATIN COMMUNICATIONS GROUP INC., a Delaware corporation By: /s/ Stephen D. Royer ------------------------------------------------------ Name: Stephen D. Royer ----------------------------------------------------- Title: Vice President ---------------------------------------------------- [Signature Page No. 1 to Agreement and Plan of Merger] LCG Representatives /s/ James Costello ---------------------------------------------------------- James Costello, as the Latin Investors Designee /s/ Stephen D. Royer ---------------------------------------------------------- Stephen D. Royer, as the Trefoil Designee /s/ Martin D. Payson ---------------------------------------------------------- Martin D. Payson, as the Other Holders Designee [Signature Page No. 2 to Agreement and Plan of Merger] Schedule 3.2 Required Consents Schedule 4.1 LCG Subsidiaries Schedule 4.2 Third Party Consents Schedule 4.3 Broker's or Finder's Fee Schedule 4.4 Qualifications to Do Business Schedule 4.5 Capitalization Schedule 4.6 Subsidiaries Schedule 4.7 Financial Statements Schedule 4.9 Assets Schedule 4.10 Liabilities Schedule 4.11 Taxes Schedule 4.12 Employee Benefits Schedule 4.13 Non-Compliance with Legal Requirements Schedule 4.14 Governmental Authorizations Schedule 4.15 Legal Proceedings Schedule 4.16 Certain Changes and Events Schedule 4.17 Applicable Contracts; No Defaults Schedule 4.19 Real Property Schedule 4.20 Environmental Matters Schedule 4.22 Labor Relations Schedule 4.23 Intellectual Property Schedule 4.24 Relationships with Related Persons Schedule A Radio Stations and Newspapers Schedule B Stockholders Exhibit A Voting Agreement Exhibit B Certificate of Merger Exhibit C Indemnity Escrow Agreement Exhibit D Earnest Money Escrow Agreement Exhibit E-1 Legal Opinion of Corporate Counsel for LCG Exhibit E-2 Legal Opinion of FCC Counsel for LCG Exhibit F Legal Opinion of Counsel for Entravision and Acquisition Co. The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-2.3 4 ASSET PURCHASE AGREEMENT - FEB. 29, 2000 EXHIBIT 2.3 ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February 29, 2000, by and between Citicasters Co., an Ohio corporation ("Seller") and Entravision Communications Corporation, a Delaware corporation ("Buyer"). Recitals -------- A. Seller owns and operates the following radio broadcast stations (collectively, the "Stations") pursuant to certain authorizations issued by the Federal Communications Commission (the "FCC"): KACD(FM), Santa Monica, California KBCD(FM), Newport Beach, California B. Subject to the terms and conditions set forth herein, Buyer desires to acquire the Station Assets (defined below). C. Clear Channel Communications, Inc. (Seller's parent), CCU Merger Sub, Inc. and AMFM Inc. are parties to an Agreement and Plan of Merger dated October 2, 1999 (the "AMFM Agreement"). Agreement --------- NOW, THEREFORE, taking the foregoing into account, and in consideration of the mutual covenants and agreements set forth herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE 1: PURCHASE OF ASSETS ------------------ 1.1. Station Assets. On the terms and subject to the conditions hereof, -------------- on the Closing Date (defined below), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of the right, title and interest of Seller in and to all of the assets, properties, interests and rights of Seller of whatsoever kind and nature, real and personal, tangible and intangible, which are used exclusively in the operation of the Stations and specifically described in this Section 1.1, but excluding the Excluded Assets as hereafter defined (the "Station Assets"): (a) all licenses, permits and other authorizations which are issued to Seller by the FCC with respect to the Stations (the "FCC Licenses") including those listed and described on Schedule 1.1(a), including any renewals or --------------- modifications thereof between the date hereof and Closing; (b) all equipment, electrical devices, antennae, cables, tools, hardware, office furniture and fixtures, office materials and supplies, inventory, motor vehicles, spare parts and other tangible personal property of every kind and description which are used exclusively in the operation of the Stations and listed on Schedule 1.1(b), except any retirements or dispositions --------------- thereof made between the date hereof and Closing in the ordinary course of business and consistent with past practices of Seller (the "Tangible Personal Property"); (c) all Time Sales Agreements and Trade Agreements (both defined in Section 2.1), Real Property Leases (defined in Section 7.7), and other contracts, agreements, and leases which are used in the operation of the Stations and listed on Schedule 1.1(c), together with all contracts, agreements, --------------- and leases made between the date hereof and Closing in the ordinary course of business that are used in the operation of the Stations (except any employment or programming agreements not terminable by Buyer without penalty on 30 days notice) (the "Station Contracts"); (d) all of Seller's rights in and to the Stations' call letters and Seller's rights in and to the trademarks, trade names, service marks, franchises, copyrights, computer software, programs and programming material, jingles, slogans, logos, and other intangible property which are used exclusively in the operation of the Stations and listed on Schedule 1.1(d) (the --------------- "Intangible Property"); (e) Seller's rights in and to all the files, documents, records, and books of account (or copies thereof) relating exclusively to the operation of the Stations, including the Stations' local public files, programming information and studies, blueprints, technical information and engineering data, advertising studies, marketing and demographic data, sales correspondence, lists of advertisers, credit and sales reports, and logs, but excluding records relating to Excluded Assets (defined below); and (f) any real property which is used exclusively in the operation of the Stations (including any of Seller's appurtenant easements and improvements located thereon) and described on Schedule 1.1(f) (the "Real Property"). --------------- The Station Assets shall be transferred to Buyer free and clear of liens, claims and encumbrances ("Liens") except for (i) Assumed Obligations (defined in Section 2.1), (ii) liens for taxes not yet due and payable and for which Buyer receives a credit pursuant to Section 3.3, (iii) such liens, easements, rights of way, building and use restrictions, exceptions, reservations and limitations that do not in any material respect detract from the value of the property subject thereto or impair the use thereof in the ordinary course of the business of the Stations, and (iv) any items listed on Schedule 1.1(b) (collectively, "Permitted Liens"). - --------------- - 2 - 1.2. Excluded Assets. Notwithstanding anything to the contrary contained --------------- herein, the Station Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Assets"): (a) all cash and cash equivalents of Seller, including without limitation certificates of deposit, commercial paper, treasury bills, marketable securities, asset or money market accounts and all such similar accounts or investments; (b) all accounts receivable or notes receivable arising in the operation of the Stations prior to Closing; (c) all tangible and intangible personal property of Seller disposed of or consumed in the ordinary course of business of Seller between the date of this Agreement and Closing; (d) all Station Contracts that terminate or expire prior to Closing in the ordinary course of business of Seller; (e) Seller's name, corporate minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller, duplicate copies of the records of the Stations, and all records not relating exclusively to the operation of the Stations; (f) contracts of insurance, and all insurance proceeds or claims made thereunder; (g) except as provided in Section 10.4, all pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Seller; and (h) all rights, properties and assets described on Schedule 1.2(h), --------------- and all rights, properties and assets not specifically described in Section 1.1. ARTICLE 2: ASSUMPTION OF OBLIGATIONS ------------------------- 2.1. Assumed Obligations. On the Closing Date, Buyer shall assume the ------------------- obligations of Seller (the "Assumed Obligations") arising after Closing under the Station Contracts, including without limitation all agreements for the sale of advertising time on the Stations for cash in the ordinary course of business ("Time Sales Agreements") and all agreements for the sale of advertising time on the Stations for non-cash consideration ("Trade Agreements"). 2.2. Retained Obligations. Buyer does not assume or agree to discharge or -------------------- perform and will not be deemed by reason of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of the consummation of the transactions contemplated hereby, to have - 3 - assumed or to have agreed to discharge or perform, any liabilities, obligations or commitments of Seller of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to Buyer, other than the Assumed Obligations (the "Retained Obligations"). ARTICLE 3: PURCHASE PRICE -------------- 3.1. Purchase Price. In consideration for the sale of the Station Assets -------------- to Buyer, in addition to the assumption of the Assumed Obligations, Buyer shall at Closing (defined below) deliver to Seller by wire transfer of immediately available funds, Eighty-Five Million Dollars ($85,000,000), subject to adjustment pursuant to Section 3.3 (the "Purchase Price"). 3.2. Deposit. Within three (3) business days of the date of this ------- Agreement (with no Cure Period (defined below)), Buyer shall deposit an amount equal to 20% of the Purchase Price (the "Deposit") with NationsBank/Bank of America (the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow Agreement") of even date herewith among Buyer, Seller and the Escrow Agent. At Closing, the Deposit shall be applied to the Purchase Price and any interest accrued thereon shall be disbursed to Buyer. If this Agreement is terminated by Seller due to Buyer's failure to consummate the Closing on the Closing Date in accordance with this Agreement or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), the Deposit and any interest accrued thereon shall be disbursed to Seller as partial payment of liquidated damages pursuant to Section 16.3. If this Agreement is terminated for any other reason, the Deposit and any interest accrued thereon shall be disbursed to Buyer. 3.3. Prorations and Adjustments. Except as otherwise provided herein, all -------------------------- deposits, reserves and prepaid and deferred income and expenses relating to the Station Assets or the Assumed Obligations and arising from the conduct of the business and operations of the Stations shall be prorated between Buyer and Seller in accordance with generally accepted accounting principles as of 11:59 p.m. on the date immediately preceding the Closing Date. Such prorations shall include, without limitation, all ad valorem, real estate and other property taxes (but excluding taxes arising by reason of the transfer of the Station Assets as contemplated hereby which shall be paid as set forth in Section 13.1), business and license fees, music and other license fees (including any retroactive adjustments thereof), utility expenses, amounts due or to become due under Station Contracts, rents, lease payments and similar prepaid and deferred items. Real estate taxes shall be apportioned on the basis of taxes assessed for the preceding year, with a reapportionment, if any, as soon as the new tax rate and valuation can be ascertained. Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 3.3, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within ninety (90) calendar days of the Closing Date. In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided herein and such disputes shall be determined by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyer. - 4 - 3.4. Allocation. The Purchase Price shall be allocated among the Station ---------- Assets in a manner as mutually agreed between the parties based upon an appraisal prepared by Bond & Pecaro (whose fees shall be paid one-half by Seller and one-half by Buyer). Seller and Buyer agree to use the allocations determined pursuant to this Section 3.4 for all tax purposes, including without limitation, those matters subject to Section 1060 of the Internal Revenue Code of 1986, as amended. ARTICLE 4: CLOSING ------- 4.1. Closing. The consummation of the sale and purchase of the Station ------- Assets (the "Closing") shall occur on a date (the "Closing Date") and at a time and place designated solely by Seller after FCC Consent (defined below), subject to satisfaction or waiver of the conditions to Closing contained herein (other than those to be satisfied at Closing). If requested by Seller, prior to Closing the parties shall hold a pre-closing conference at a time and place designated by Seller, at which the parties shall provide (for review only) all documents to be delivered at Closing under this Agreement, each duly executed but undated, and otherwise confirm their ability to timely consummate the Closing. If Closing occurs prior to the FCC Consent becoming final (i.e., no longer subject to appeal), and prior to such finality the FCC Consent is reversed or otherwise set aside pursuant to a final order of the FCC (or court of competent jurisdiction), then the parties shall comply with such order in a manner that otherwise complies with applicable law and returns the parties to the status quo ante in all material respects, including the return of the Purchase Price and the Stations (it being understood that in such event Buyer may designate one or more third parties as the transferees of the Stations). ARTICLE 5: GOVERNMENTAL CONSENTS --------------------- Closing is subject to and conditioned upon (i) prior FCC consent (the "FCC Consent") to the assignment of the FCC Licenses to Buyer, (ii) United States Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the transactions contemplated hereby, including without limitation any such approval as may be necessary to enable Seller to consummate the merger under the AMFM Agreement, and (iii) expiration or termination of any applicable waiting period ("HSR Clearance") under the HSR Act (defined below). 5.1. FCC. On a date designated by Seller, Buyer and Seller shall file an --- application with the FCC (the "FCC Application") requesting the FCC Consent. Buyer and Seller shall diligently prosecute the FCC Application and otherwise use their best efforts to obtain the FCC Consent as soon as possible. If the FCC Consent imposes upon Buyer any condition (including without limitation any divestiture condition), Buyer shall timely comply therewith. 5.2. HSR. If not previously filed, then within five (5) business days --- after the execution of this Agreement, Buyer and Seller shall make any required filings with the Federal Trade Commission and the DOJ pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") with respect to the transactions contemplated hereby (including a request for early termination of the waiting period thereunder), and shall thereafter - 5 - promptly respond to all requests received from such agencies for additional information or documentation. 5.3. General. Buyer and Seller shall notify each other of all documents ------- filed with or received from any governmental agency with respect to this Agreement or the transactions contemplated hereby. Buyer and Seller shall furnish each other with such information and assistance as such the other may reasonably request in connection with their preparation of any governmental filing hereunder. If Buyer becomes aware of any fact relating to it which would prevent or delay the FCC Consent, the DOJ Consent or HSR Clearance, Buyer shall promptly notify Seller thereof and take such steps as necessary to remove such impediment, including but not limited to divesting any stations and terminating any agreements to acquire or program or market any stations. ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer hereby makes the following representations and warranties to Seller: 6.1. Organization and Standing. Buyer is duly organized, validly existing ------------------------- and in good standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Buyer has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Buyer pursuant hereto (collectively, the "Buyer Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 6.2. Authorization. The execution, delivery and performance of this ------------- Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized and approved by all necessary action of Buyer and do not require any further authorization or consent of Buyer. This Agreement is, and each Buyer Ancillary Agreement when executed and delivered by Buyer and the other parties thereto will be, a legal, valid and binding agreement of Buyer enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 6.3. No Conflicts Neither the execution and delivery by Buyer of this ------------ Agreement and the Buyer Ancillary Agreements or the consummation by Buyer of any of the transactions contemplated hereby or thereby nor compliance by Buyer with or fulfillment by Buyer of the terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Buyer or any law, judgment, order or decree to which Buyer is subject; or (ii) require the approval, consent, authorization or act of, or the making by Buyer of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent, and, if applicable, HSR Clearance. - 6 - 6.4. Qualification. Buyer is legally, financially and otherwise qualified ------------- to be the licensee of, acquire, own and operate the Stations under the Communications Act of 1934, as amended (the "Communications Act") and the rules, regulations and policies of the FCC. There are no facts that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, disqualify Buyer as an assignee of the FCC Licenses or as the owner and operator of the Stations. No waiver of any FCC rule or policy is necessary for the FCC Consent to be obtained. There is no action, suit or proceeding pending or threatened against Buyer which questions the legality or propriety of the transactions contemplated by this Agreement or could materially adversely affect Buyer's ability to perform its obligations hereunder. Buyer has and will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 6.5. No Finder. No broker, finder or other person is entitled to a --------- commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Buyer or any party acting on Buyer's behalf. ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller makes the following representations and warranties to Buyer: 7.1. Organization. Seller is duly organized, validly existing and in good ------------ standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Seller has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Seller pursuant hereto (collectively, the "Seller Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 7.2. Authorization. The execution, delivery and performance of this ------------- Agreement and the Seller Ancillary Agreements by Seller have been duly authorized and approved by all necessary action of Seller and do not require any further authorization or consent of Seller. This Agreement is, and each Seller Ancillary Agreement when executed and delivered by Seller and the other parties thereto will be, a legal, valid and binding agreement of Seller enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 7.3. No Conflicts. Neither the execution and delivery by Seller of this ------------ Agreement and the Seller Ancillary Agreements or the consummation by Seller of any of the transactions contemplated hereby or thereby nor compliance by Seller with or fulfillment by Seller of the - 7 - terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Seller or any law, judgment, order, or decree to which Seller is subject or, except as set forth on Schedule 1.1(c), any Station --------------- Contract; or (ii) require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent and, if applicable, HSR Clearance. 7.4. FCC Licenses. Seller (or one of the companies comprising Seller) is ------------ the holder of the FCC Licenses described on Schedule 1.1(a). The FCC Licenses --------------- listed in Schedule 1.1(a) comprise all material FCC licenses used in the present --------------- operation of the Stations and each is in full force and effect and has not been revoked, suspended, canceled, rescinded or terminated and has not expired. There is not pending, or to Seller's knowledge threatened, any action by or before the FCC to revoke, suspend, cancel, rescind or materially adversely modify any of the FCC Licenses (other than proceedings to amend FCC rules of general applicability), and there is not now issued or outstanding, by or before the FCC, any order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture against Seller with respect to the Stations. The Stations are operating in compliance in all material respects with the FCC Licenses, the Communications Act, and the rules, regulations and policies of the FCC. The Stations are being operated in all material respects in accordance with the terms and conditions of the FCC Licenses, the underlying construction permits, the Communications Act of 1934, as amended, and all rules, regulations and policies of the FCC. 7.5. Taxes. Seller has, in respect of the Stations' business, filed all ----- foreign, federal, state, county and local income, excise, property, sales, use, franchise and other tax returns and reports which are required to have been filed by it under applicable law and has paid all taxes which have become due pursuant to such returns or pursuant to any assessments which have become payable. 7.6. Personal Property. Schedule 1.1(b) contains a list of all material ----------------- --------------- items of Tangible Personal Property included in the Station Assets. Seller has title to the Tangible Personal Property free and clear of Liens other than Permitted Liens. The items of Tangible Personal Property listed on Schedule 1.1(b) are in all material respects in good working condition, ordinary wear and tear excepted. 7.7. Real Property. Schedule 1.1(f) contains a description of all Real ------------- --------------- Property included in the Station Assets. Seller has fee simple title to the owned Real Property ("Owned Real Property") free and clear of Liens other than Permitted Liens. Schedule 1.1(f) includes a description of each lease of Real --------------- Property or similar agreement included in the Station Assets (the "Real Property Leases"). The Owned Real Property includes, and the Real Property Leases provide, access to the Stations' facilities. To Seller's knowledge, the Real Property is not subject to any suit for condemnation or other taking by any public authority. 7.8. Contracts. Each of the Station Contracts (including without --------- limitation each of the Real Property Leases) is in effect and is binding upon Seller and, to Seller's knowledge, - 8 - the other parties thereto (subject to bankruptcy, insolvency, reorganization or other similar laws relating to or affecting the enforcement of creditors' rights generally). Seller has performed its obligations under each of the Station Contracts in all material respects, and is not in material default thereunder, and to Seller's knowledge, no other party to any of the Station Contracts is in default thereunder in any material respect. Seller has delivered to Buyer true and correct copies of all Real Property Leases. 7.9. Environmental. Except as set forth in any environmental report ------------- delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, no hazardous or toxic --------------- substance or waste regulated under any applicable environmental, health or safety law has been generated, stored, transported or released on, in, from or to the Real Property included in the Station Assets. Except as set forth in any environmental report delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, --------------- Seller has complied in all material respects with all environmental, health and safety laws applicable to the Stations. 7.10. Intangible Property. Schedule 1.1(d) contains a description of the ------------------- --------------- material Intangible Property included in the Station Assets. Except as set forth on Schedule 1.1(d), Seller has received no notice of any claim that its use of --------------- the Intangible Property infringes upon any third party rights. Except as set forth on Schedule 1.1(d), Seller owns or has the right to use the Intangible --------------- Property free and clear of Liens other than Permitted Liens. 7.11. Compliance with Law. Seller has complied in all material respects ------------------- with all laws, regulations, rules, writs, injunctions, ordinances, franchises, decrees or orders of any court or of any foreign, federal, state, municipal or other governmental authority which are applicable to the operation of the Stations. There is no action, suit or proceeding pending or threatened against Seller in respect of the Stations that will subject Buyer to liability or which questions the legality or propriety of the transactions contemplated by this Agreement. To Seller's knowledge, there are no governmental claims or investigations pending or threatened against Seller in respect of the Stations (except those affecting the industry generally). 7.12. No Finder. No broker, finder or other person is entitled to a --------- commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Seller or any party acting on Seller's behalf. ARTICLE 8: ACCOUNTS RECEIVABLE ------------------- 8.1. Accounts Receivable. All accounts receivable arising prior to the ------------------- Closing Date in connection with the operation of the Stations, including but not limited to accounts receivable for advertising revenues for programs and announcements performed prior to the Closing Date and other broadcast revenues for services performed prior to the Closing Date, shall remain the property of Seller (the "Accounts Receivable") and Buyer shall not acquire any right or interest therein. For a period of six months from Closing (the "Collection Period"), Buyer shall collect the Accounts Receivable in the normal and ordinary course of - 9 - Buyer's business and shall apply all such amounts collected to the debtor's oldest account receivable first. Buyer's obligation shall not extend to the institution of litigation, employment of counsel or a collection agency or any other extraordinary means of collection. During the Collection Period, neither Seller or its agents shall make any direct solicitation of any such account debtor for collection purposes or institute litigation for the collection of amounts due. Any amounts relating to the Accounts Receivable that are paid directly to Seller shall be retained by Seller. Within ten calendar days after the end of each month, Buyer shall make a payment to Seller equal to the amount of all collections of Accounts Receivable during the preceding month. At the end of the Collection Period, any remaining Accounts Receivable shall be returned to Seller for collection. ARTICLE 9: COVENANTS OF SELLER ------------------- 9.1. Seller's Covenants. Seller covenants and agrees with respect to the ------------------ Stations that, between the date hereof and Closing, except as permitted by this Agreement or with the prior written consent of Buyer, which shall not be unreasonably withheld, Seller shall: (a) operate the Stations in the ordinary course of business consistent with past practice and in all material respects in accordance with FCC rules and regulations and with all other applicable laws, regulations, rules and orders; (b) not, other than in the ordinary course of business in accordance with past practice, sell, lease or dispose of or agree to sell, lease or dispose of any of the Station Assets, or create, assume or permit to exist any Liens upon the Station Assets, except for Permitted Liens, and not modify or amend in any material adverse respect the Real Property Leases; (c) furnish Buyer with such information relating to the Station Assets as Buyer may reasonably request, at Buyer's expense and provided such request does not interfere unreasonably with the business of the Stations; (d) after Seller publicly announces the transaction contemplated by this Agreement and files this Agreement with the FCC, then, when reasonably requested by Buyer, provide Buyer access to the Station facilities that are included in the Station Assets during the Stations' normal business hours, provided such access does not interfere unreasonably with the business of the Stations; and (e) make available to Buyer, and authorize its accountants to cooperate and make available to Buyer, at Buyer's expense and reasonable request such financial information regarding the Stations as is maintained by Seller on a basis not consolidated with other stations. ARTICLE 10: JOINT COVENANTS --------------- Buyer and Seller hereby covenant and agree that between the date hereof and Closing: - 10 - 10.1. Cooperation. Subject to express limitations contained elsewhere ----------- herein, each party (i) shall cooperate fully with one another in taking any reasonable actions (including without limitation, reasonable actions to obtain the required consent of any governmental instrumentality or any third party) necessary or helpful to accomplish the transactions contemplated by this Agreement, including but not limited to the prompt satisfaction of any condition to Closing set forth herein, and (ii) shall not take any action that conflicts with its obligations hereunder or that causes its representations and warranties to become untrue in any material respect. 10.2. Control of Stations. Buyer shall not, directly or indirectly, ------------------- control, supervise or direct the operations of the Stations prior to Closing. Such operations, including complete control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. 10.3. Consents to Assignment. The parties shall use commercially ---------------------- reasonable efforts to obtain any third party consents necessary for the assignment of any Station Contract (which shall not require any payment to any such third party). To the extent that any Station Contract may not be assigned without the consent of any third party, and such consent is not obtained prior to Closing, this Agreement and any assignment executed pursuant hereto shall not constitute an assignment thereof, but to the extent permitted by law shall constitute an equitable assignment by Seller and assumption by Buyer of Seller's rights and obligations under the applicable Station Contract, with Seller making available to Buyer the benefits thereof and Buyer performing the obligations thereunder on Seller's behalf. 10.4. Employee Matters. ---------------- (a) Prior to Closing, Seller shall deliver to Buyer a list of employees of the Stations that Seller does not intend to retain after Closing. Buyer may interview and elect to hire such listed employees, but not any other employees of Seller. Buyer is obligated to hire only those employees that are under employment contracts (and assume Seller's obligations and liabilities under such employment contracts) which are included in the Station Contracts. With respect to employees hired by Buyer ("Transferred Employees"), to the extent permitted by law, Seller shall provide Buyer access to its personnel records and such other information as Buyer may reasonably request prior to Closing. With respect to such hired employees, Seller shall be responsible for the payment of all compensation and accrued employee benefits payable by it until Closing and thereafter Buyer shall be responsible for all such obligations payable by it. Buyer shall cause all employees it hires to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) in which similarly situated employees are generally eligible to participate; provided, however, that all such employees and their spouses and dependents shall be eligible for coverage immediately after Closing (and shall not be excluded from coverage on account of any pre-existing condition) to the extent provided under such plans. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which such employees may be eligible after Closing, Buyer shall ensure that service with Seller shall be deemed to have - 11 - been service with the Buyer. In addition, Buyer shall ensure that each such employee receives credit under any welfare benefit plan of Buyer for any deductibles or co-payments paid by such employees and dependents for the current plan year under a plan maintained by Seller. Notwithstanding any other provision contained herein, Buyer shall grant credit to each such employee for all unused sick leave accrued as of Closing as an employee of Seller. Notwithstanding any other provision contained herein, Buyer shall assume and discharge Seller's liabilities for the payment of all unused vacation leave accrued by such employees as of Closing. (b) As soon as administratively feasible following the execution of a closing agreement with the Internal Revenue Service relating to the tax- qualified status of Seller's 401(k) Plan (the "Savings Plan") and the issuance of a favorable determination letter as to the tax-qualified status of the Savings Plan under Section 401(a) of the Code (or an opinion of counsel that the form of the Savings Plan is so qualified), Buyer and Seller shall enter into a 401(k) plan asset transfer agreement pursuant to which Buyer shall establish a defined contribution plan (or cover Transferred Employees under an existing defined contribution plan sponsored by Buyer) for the benefit of Transferred Employees who were participants in the Savings Plan. Such Transferred Employees are referred to hereinafter as the "Savings Plan Employees." (c) Following execution of the agreement contemplated in clause (b) above, Seller shall cause to be transferred from the Savings Plan to the plan covering the Savings Plan Employees (the "Transferee Savings Plan") the liability for the account balances of the Savings Plan Employees (including outstanding loan balances of Savings Plan Employees), together with cash, cash equivalents or other mutually acceptable property, the value of which on such transfer date is equal to such liability, and Buyer shall cause the Transferee Savings Plan to accept such transfer, all in accordance with the rules and regulations under Section 414(l) of the Code. (d) Pending completion of the transfers described in this Section, Seller and Buyer shall make arrangements for any distributions, if any, to the Savings Plan Employees from the Savings Plan. Seller and Buyer shall provide each other with access to information reasonably necessary in order to carry out the provisions of this paragraph. In addition, until the asset transfer is effectuated, Buyer shall cooperate with the reasonable requests of Seller to continue to withhold from the pay checks of Transferred Employees' who have outstanding loan balances in the Seller's 401(k) Savings Plan and Buyer shall remit such withheld amounts to the Seller in a timely fashion such that the outstanding loans do not go into default. 10.5. 1031 Exchange. At or prior to Closing, Seller may assign its rights ------------- under this Agreement (in whole or in part) to a qualified intermediary (as defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar entity or arrangement ("Qualified Intermediary"). Upon any such assignment, Seller shall promptly give written notice thereof to Buyer, and Buyer shall cooperate with the reasonable requests of Seller and any Qualified Intermediary in connection therewith. Without limiting the generality of the foregoing, if Seller gives notice of such assignment, Buyer shall (i) promptly provide Seller with written acknowledgment of such - 12 - notice and (ii) at Closing, pay the Purchase Price (or any portion thereof designated by the Qualified Intermediary) to or on behalf of the Qualified Intermediary (which payment shall, to the extent thereof, satisfy the obligations of Buyer to make such payment hereunder). Seller's assignment to a Qualified Intermediary will not relieve Seller of any of its duties or obligations herein. Except for the obligations of Buyer set forth in this Section, Buyer shall not have any liability or obligation to Seller for the failure of the contemplated exchange to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code unless such failure is the result of the material breach or default by Buyer under this Agreement. 10.6. Trust. Notwithstanding anything in this Agreement to the contrary, ----- Seller may at it option assign this Agreement (in whole or part) and assign and transfer the Station Assets (in whole or in part) to a trustee to hold and operate pursuant to a trust agreement, provided such trustee assumes Seller's duties and obligations hereunder with respect to the Station Assets held in such trust. ARTICLE 11: CONDITIONS OF CLOSING BY BUYER ------------------------------ The obligations of Buyer hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 11.1. Representations, Warranties and Covenants. The representations and ----------------------------------------- warranties of Seller made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Seller at or prior to Closing shall have been complied with or performed in all material respects. Buyer shall have received a certificate dated as of the Closing Date from Seller, executed by an authorized officer of Seller to the effect that the conditions set forth in this Section have been satisfied. 11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if --------------------- applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. ARTICLE 12: CONDITIONS OF CLOSING BY SELLER ------------------------------- The obligations of Seller hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 12.1. Representations, Warranties and Covenants. The representations and ----------------------------------------- warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Buyer at or prior to Closing shall have been complied with or performed in all material respects. Seller shall have received a certificate dated as of the Closing Date from Buyer, executed by an authorized officer of Buyer, to the effect that the conditions set forth in this Section have been satisfied. - 13 - 12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if --------------------- applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. 12.3. AMFM Closing. The closing under the AMFM Agreement shall have been ------------ consummated. ARTICLE 13: EXPENSES -------- 13.1. Expenses. Each party shall be solely responsible for all costs and -------- expenses incurred by it in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement, except that (i) all recordation, transfer and documentary taxes, fees and charges, and any excise, sales or use taxes, applicable to the transfer of the Station Assets shall be paid by Buyer, (ii) all FCC filing fees shall be paid equally by Buyer and Seller, and (iii) all HSR Act filing fees and expenses shall be paid by Buyer. ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING ------------------------------------ 14.1. Seller's Documents. At Closing, Seller shall deliver or cause to be ------------------ delivered to Buyer: (i) certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 11.1; and (iii) such bills of sale, assignments, special warranty deeds, documents of title and other instruments of conveyance, assignment and transfer as may be necessary to convey, transfer and assign the Station Assets to Buyer, free and clear of Liens, except for Permitted Liens. 14.2. Buyer's Documents. At Closing, Buyer shall deliver or cause to be ----------------- delivered to Seller: (i) the certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 12.1; and (iii) such documents and instruments of assumption as may be necessary to assume the Assumed Obligations, and the Purchase Price in accordance with Section 3.1 hereof. - 14 - ARTICLE 15: SURVIVAL; INDEMNIFICATION ------------------------- 15.1. Survival. The covenants, agreements, representations and warranties -------- in this Agreement shall survive Closing for a period of twelve (12) months from the Closing Date whereupon they shall expire and be of no further force or effect, except those under (i) this Article 15 that relate to Damages (defined below) for which written notice is given by the indemnified party to the indemnifying party prior to the expiration, which shall survive until resolved and (ii) Sections 2.1 (Assumed Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1 (Accounts Receivable) and 13.1 (Expenses), and indemnification obligations with respect to such provisions, which shall survive until performed. 15.2. Indemnification. --------------- (a) From and after the Closing, Seller shall defend, indemnify and hold harmless Buyer from and against any and all losses, costs, damages, liabilities and expenses, including reasonable attorneys' fees and expenses ("Damages") incurred by Buyer arising out of or resulting from: (i) any breach or default by Seller under this Agreement; (ii) the Retained Obligations; or (iii) the business or operation of the Stations before Closing; provided, however, that (i) Seller shall have no liability to Buyer hereunder until, and only to the extent that, Buyer's aggregate Damages exceed $100,000 and (ii) the maximum liability of Seller hereunder shall be $17,000,000 (provided that such basket and cap limitations shall not apply to any return of the Purchase Price pursuant to the last sentence of Section 4.1 of this Agreement). (b) From and after the Closing, Buyer shall defend, indemnify and hold harmless Seller from and against any and all Damages incurred by Seller arising out of or resulting from: (i) any breach or default by Buyer under this Agreement; (ii) the Assumed Obligations; or (iii) the business or operation of the Stations after Closing. 15.3. Procedures. The indemnified party shall give prompt written notice ---------- to the indemnifying party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (a "Claim"), but a failure to give such notice or delaying such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, except to the extent the indemnifying party's ability to remedy, contest, defend or settle with respect to such Claim is thereby prejudiced. The obligations and liabilities of the parties with respect to any Claim shall be subject to the following additional terms and conditions: (a) The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. (b) In the event that the indemnifying party shall elect not to undertake such defense or opposition, or, within twenty (20) days after written notice (which shall include sufficient description of background information explaining the basis for such Claim) of any - 15 - such Claim from the indemnified party, the indemnifying party shall fail to undertake to defend or oppose, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to settlement, compromise or final determination thereof). (c) Anything herein to the contrary notwithstanding: (i) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (ii) the indemnifying party shall not, without the indemnified party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim; and (iii) in the event that the indemnifying party undertakes defense of or opposition to any Claim, the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate in good faith with respect to such Claim. (d) All claims not disputed shall be paid by the indemnifying party within thirty (30) days after receiving notice of the Claim. "Disputed Claims" shall mean claims for Damages by an indemnified party which the indemnifying party objects to in writing within thirty (30) days after receiving notice of the Claim. In the event there is a Disputed Claim with respect to any Damages, the indemnifying party shall be required to pay the indemnified party the amount of such Damages for which the indemnifying party has, pursuant to a final determination, been found liable within ten (10) days after there is a final determination with respect to such Disputed Claim. A final determination of a Disputed Claim shall be (i) a judgment of any court determining the validity of a Disputed Claim, if no appeal is pending from such judgment and if the time to appeal therefrom has elapsed; (ii) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award and if the time within which to move to set aside such award has elapsed; (iii) a written termination of the dispute with respect to such claim signed by the parties thereto or their attorneys; (iv) a written acknowledgment of the indemnifying party that it no longer disputes the validity of such claim; or (v) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. ARTICLE 16: TERMINATION ----------- 16.1. Termination. This Agreement may be terminated at any time prior to ----------- Closing as follows: - 16 - (a) by mutual written consent of Buyer and Seller; (b) by written notice of Buyer to Seller if Seller (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements herein contained and such breach or default is not cured within the Cure Period (defined below); (c) by written notice of Seller to Buyer if Buyer (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements herein contained and such breach or default is not cured within the Cure Period (defined below); (d) by written notice of Buyer to Seller, or by Seller to Buyer, if the FCC denies the FCC Application; (e) by written notice of Seller to Buyer if the Closing shall not have been consummated on or before the date four months after the date of this Agreement; or (f) by written notice of Seller to Buyer if the AMFM Agreement is terminated or expires. The term "Cure Period" as used herein means a period commencing the date Buyer or Seller receives from the other written notice of breach or default hereunder and continuing until the earlier of (i) thirty (30) days thereafter or (ii) the Closing Date; provided, however, that if the breach or default cannot reasonably be cured within such period but can be cured before the Closing Date, and if diligent efforts to cure promptly commence, then the Cure Period shall continue as long as such diligent efforts to cure continue, but not beyond the Closing Date. Except as set forth below, the termination of this Agreement shall not relieve any party of any liability for breach or default under this Agreement prior to the date of termination. Notwithstanding anything contained herein to the contrary, Section 13.1 shall survive any termination of this Agreement. 16.2. Remedies. The parties recognize that if either party refuses to -------- consummate the Closing pursuant to the provisions of this Agreement or either party otherwise breaches or defaults such that the Closing has not occurred ("Breaching Party"), monetary damages alone will not be adequate to compensate the non-breaching party ("Non-Breaching Party") for its injury. Such Non- Breaching Party shall therefore be entitled to obtain specific performance of the terms of this Agreement in lieu of, and not in addition to, any other remedies, including but not limited to monetary damages, that may be available to it; provided however, that Seller may elect to recover liquidated damages in lieu of obtaining specific performance. If any action is brought by the Non- Breaching Party to enforce this Agreement, the Breaching Party shall waive the defense that there is an adequate remedy at law. In the event of a default by the Breaching Party which results in the filing of a lawsuit for damages, specific performance, or - 17 - other remedy, the Non-Breaching Party shall be entitled to reimbursement by the Breaching Party of reasonable legal fees and expenses incurred by the Non- Breaching Party, provided that the Non-Breaching Party is successful in such lawsuit. 16.3. Liquidated Damages. If Seller terminates this Agreement due to ------------------ Buyer's failure to consummate the Closing on the Closing Date or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then Buyer shall pay Seller as liquidated damages an amount equal to 25% of the Purchase Price. It is understood and agreed that such liquidated damages amount represents Buyer's and Seller's reasonable estimate of actual damages and does not constitute a penalty. ARTICLE 17: MISCELLANEOUS PROVISIONS ------------------------ 17.1. Casualty Loss. In the event any loss or damage of the Station ------------- Assets exists on the Closing Date, Buyer and Seller shall consummate the Closing and Seller shall assign to Buyer the proceeds of any insurance payable to Seller on account of such damage or loss. 17.2. Further Assurances. After the Closing, Seller shall from time to ------------------ time, at the request of and without further cost or expense to Buyer, execute and deliver such other instruments of conveyance and transfer and take such other actions as may reasonably be requested in order to more effectively consummate the transactions contemplated hereby to vest in Buyer good title to the Station Assets, and Buyer shall from time to time, at the request of and without further cost or expense to Seller, execute and deliver such other instruments and take such other actions as may reasonably be requested in order more effectively to relieve Seller of any obligations being assumed by Buyer hereunder. 17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange) ---------- and 10.6 (Trust), neither party may assign this Agreement without the prior written consent of the other party hereto. With respect to any permitted assignment, the parties shall take all such actions as are reasonably necessary to effectuate such assignment, including but not limited to cooperating in any appropriate filings with the FCC or other governmental authorities. All covenants, agreements, statements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns of the parties hereto. 17.4. Amendments. No amendment, waiver of compliance with any provision ---------- or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 17.5. Headings. The headings set forth in this Agreement are for -------- convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. - 18 - 17.6. Governing Law. The construction and performance of this Agreement ------------- shall be governed by the laws of the State of Texas without giving effect to the choice of law provisions thereof. 17.7. Notices. Any notice, demand or request required or permitted to be ------- given under the provisions of this Agreement shall be in writing, including by facsimile, and shall be deemed to have been received on the date of personal delivery, on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery or when delivered by facsimile transmission, and shall be addressed as follows (or to such other address as any party may request by written notice): if to Seller: c/o Clear Channel Broadcasting, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: President Facsimile: (210) 822-2299 with a copy (which shall not constitute notice) to: Wiley, Rein & Fielding 1776 K Street, N.W. Washington, D.C. 20006 Attention: Richard J. Bodorff, Esq. Facsimile: (202) 719-7049 if to Buyer: Entravision Communications Corporation 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Attention: Walter Ulloa with copies (which shall not constitute notice) to: Michael Rowles Zevnick, Horton, Guibard McGovern Palmer & Fugnani 101 West Broadway 17th Floor San Diego, California 92101 and to: EXCL Communications, Inc. 2905 S. King Road San Jose, California 95122 Attention: Athena S. Marks Facsimile: (408) 274-1170 and to: McBride Baker & Coles - 19 - Northwestern Atrium Center 500 West Madison Street, 40th Floor Chicago, Illinois 60661-2511 Attention: Elias N. Matsakis, Esq. Facsimile: (312) 993-9350 17.8. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. 17.9. No Third Party Beneficiaries. Nothing herein expressed or implied ---------------------------- is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. 17.10. Severability. The parties agree that if one or more provisions ------------ contained in this Agreement shall be deemed or held to be invalid, illegal or unenforceable in any respect under any applicable law, this Agreement shall be construed with the invalid, illegal or unenforceable provision deleted, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby. 17.11. Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. This Agreement does not supersede any confidentiality agreement relating to the Stations. [SIGNATURE PAGE FOLLOWS] - 20 - SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT ------------------------------------------ IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SELLER: CITICASTERS CO. By: /s/ Mark P. Mays Print Name: Mark P. Mays Title: President BUYER: ENTRAVISION COMMUNICATIONS CORPORATION, a Delaware corporation By: /s/ Walter F. Ulloa Walter F. Ulloa, Chairman and Chief Executive Officer By: /s/ Philip C. Wilkinson Philip C. Wilkinson, President and Chief Operating Officer Schedules - --------- 1.1(a) - FCC Licenses 1.1(b) - Tangible Personal Property 1.1(c) - Station Contracts 1.1(d) - Intangible Property 1.1(f) - Real Property 1.2(h) - Excluded Assets The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-3.1 5 CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF ENTRAVISION COMMUNICATIONS CORPORATION ARTICLE I. The name of the corporation is Entravision Communications Corporation. ARTICLE II. The address of the registered office of the corporation in the State of Delaware is 15 East North Street, County of Kent, Dover, Delaware 19903-0899. The name of its registered agent at such address is Incorporating Services, Ltd. ARTICLE III. The name and mailing address of the incorporator is Kenneth D. Polin, Esq., Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., 101 West Broadway, Seventeenth Floor, San Diego, California 92101. ARTICLE IV. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE V. The corporation is authorized to issue one class of stock to be designated "Common Stock." The total number of shares which the corporation is authorized to issue is 1,000,000 shares, $0.001 par value per share. ARTICLE VI. Except as otherwise provided herein, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the corporation is expressly authorized to make, repeal, alter, amend and rescind any or all of the bylaws of the corporation, but the stockholders may make additional bylaws and may repeal, alter, amend or rescind any bylaw whether adopted by them or otherwise. ARTICLE VII. The number of directors of the corporation shall be fixed from time to time by, or in the manner provided in, the bylaws or amendment thereof duly adopted by the Board of Directors or by the stockholders. ARTICLE VIII. Elections of directors need not be by written ballot except and to the extent provided in the bylaws of the corporation. ARTICLE IX. Meetings of the stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the corporation may be kept (subject to any provisions contained in applicable statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the corporation. ARTICLE X. Directors and officers of the corporation shall, to the fullest extent permitted by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except for liability (i) for any breach of duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director or officer derived any improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article X to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the personal liability of directors or officers of the corporation shall be further eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law. Any repeal or modification of any of the foregoing provisions by the stockholders of the corporation, or the adoption of any provision hereof inconsistent with this Article X, shall not adversely affect any right or protection of directors or officers of the corporation existing at the time of, or increase the liability of directors and officers of the corporation with respect to any acts or omissions of such director or officer occurring prior to, such repeal or modification. ARTICLE XI. Each person who is or was a director or officer of the corporation (including the heirs, executors, administrators or estate of such person) shall be indemnified (including, without limitation, advancement of expenses) by the corporation as of right, to the fullest extent permitted or authorized by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, against any liability, cost or expense asserted against such director or -2- officer and incurred by such director or officer in any such person's capacity as a director or officer, or arising out of any such person's status as a director or officer, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law, subject only to the limits created by applicable Delaware law (whether statutory or non- statutory) with respect to actions for breach of duty to the corporation, its stockholders and others. The corporation may, but shall not be obligated to, maintain insurance, at its expense, to protect itself and any such person against any such liability, cost or expense. Any repeal or modification of any of the foregoing provisions by the stockholders of the corporation, or the adoption of any provision hereof inconsistent with this Article XI, shall not adversely affect any right or protection of directors or officers of the corporation existing at the time of, or increase the liability of directors and officers of the corporation with respect to any acts or omissions of such director or officer occurring prior to, such repeal or modification. ARTICLE XII. The corporation reserves the right to amend, alter, change or repeal any provision contained herein in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders, directors and officers of the corporation herein are granted subject to such revision. IN WITNESS WHEREOF, the undersigned hereby certifies under penalty of perjury that he has read the foregoing Certificate of Incorporation of Entravision Communications Corporation and knows the contents thereof, that it is his act and deed and that the facts stated therein are true. Dated: February 10, 2000. /s/ Kenneth D. Polin ---------------------------------- Kenneth D. Polin, Esq. -3- EX-3.2 6 FORM OF FIRST RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.2 FIRST RESTATED CERTIFICATE OF INCORPORATION OF ENTRAVISION COMMUNICATIONS CORPORATION Entravision Communications Corporation, a corporation organized and existing under and by virtue of the provisions of the Delaware General Corporation Law, does hereby certify: FIRST: That the name of the corporation is Entravision Communications Corporation and that the corporation was originally incorporated on February 11, 2000 under the name "Entravision Communications Corporation." SECOND: That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of the corporation, declaring said amendment and restatement to be advisable and in the best interests of the corporation, which resolution setting forth the proposed amendment and restatement is as follows: RESOLVED, that the Certificate of Incorporation of the corporation be amended and restated in its entirety as follows: ARTICLE 1. The name of the corporation is Entravision Communications Corporation. ARTICLE 2. The address of the registered office of the corporation in the State of Delaware is 15 East North Street, County of Kent, Dover, Delaware 19903-0899. The name of its registered agent at such address is Incorporating Services, Ltd. ARTICLE 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. ARTICLE 4. 4.1 Classes of Stock. The corporation shall have the authority to issue ---------------- 415,000,000 shares of Common Stock, par value $0.0001 per share, divided into the following classes: (i) 305,000,000 shares of Class A Common Stock (the "Class A Common Stock"); (ii) 60,000,000 shares of Class B Common Stock (the "Class B Common Stock"); and (iii) 50,000,000 shares of Class C Common Stock (the "Class C Common Stock" and together with the Class A Common Stock and the Class B Common Stock, the "Common Stock"). The corporation shall also have the authority to issue 50,000,000 shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"). The Common Stock and the Preferred Stock are collectively referred to herein as the "Capital Stock." 4.2 Certain Definitions. As used in this First Restated Certificate of ------------------- Incorporation, the following terms have the meanings indicated: "Affiliate" means any person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with another Person (as defined below). "Board" means the Board of Directors of the corporation. "Class B Holder(s)" means Walter F. Ulloa, Philip C. Wilkinson or Paul A. Zevnik, or any Permitted Transferee (as defined below) of Walter F. Ulloa, Philip C. Wilkinson or Paul A. Zevnik (hereinafter each of such individuals and his respective Permitted Transferee(s) is referred to as "Ulloa," "Wilkinson" and "Zevnik," respectively). "Class B Required Amount" means, in the case of each Class B Holder, a number of shares equal to thirty percent (30%) of the Class B Base Amount. The Class B Base Amount shall be equal to ______________ shares of Class B Common Stock with respect to Ulloa, _______________ shares of Class B Common Stock with respect to Wilkinson and ________________ shares of Class B Common Stock with respect to Zevnik, which shall be increased to give effect to stock dividends and stock splits and shall be decreased to give effect to reverse stock splits and repurchases by the corporation of the Class B Common Stock approved by the Board in accordance with the bylaws. "Class C Holder" means Univision Communications Inc. ("Univision"), or any Permitted Transferee of Univision. "Class C Required Amount" means, in the case of the Class C Holder, a number of shares equal to thirty percent (30%) of the Class C Base Amount. The Class C Base Amount shall be equal to _______________ shares of Class C Common Stock, which shall be increased to give effect to stock dividends and stock splits and shall be decreased to give effect to reverse stock splits and repurchases by the corporation of the Class C Common Stock approved by the Board in accordance with the bylaws. "Communications Act" means the Communications Act of 1934, and the rules, regulations, decisions and written policies of the Federal Communications Commission (the "FCC") thereunder (as the same may be amended from time to time). "Entire Board" means the number of directors of the corporation which would be in office if there are no vacancies on the Board and no unfilled newly- created directorships. -2- "Permitted Transferee" means: (i) any entity all of the equity (other than directors' qualifying shares) of which is directly or indirectly owned by the transferor that is not an Affiliate of any other Person; (ii) in the case of an transferor who is an individual, (a) such transferor's spouse, lineal descendants, adopted children and minor children supported by such transferor, (b) any trustee of any trust created primarily for the benefit of any, or some of or all of such spouse or lineal descendants (but which may include beneficiaries that are charities) or any revocable trust created by such transferor, (c) the transferor, in the case of a transfer from any "Permitted Transferee" back to its transferor and (d) any entity all of the equity of which is directly or indirectly owned by any of the foregoing which is not an Affiliate of any Person other than the Persons described in clauses (a) through (c) above; and (iii) in the case of a Class B Holder, any other Class B Holder. "Person" means any individual, a corporation, a partnership, an association, a limited liability company or a trust. "Transfer" means any direct or indirect sale, pledge, hypothecation, voluntary or involuntary, and whether by merger or other operation of law, other than a bona fide pledge of shares to secure financing; provided that a foreclosure on such pledged shares shall constitute a Transfer. 4.3 Common Stock. Except as otherwise provided by law or by this First ------------ Restated Certificate of Incorporation, each of the shares of Common Stock shall be identical in all respects, including with respect to dividends and upon liquidation. (a) Stock Dividends; Stock Splits. ----------------------------- (i) A dividend of Common Stock on any share of Common Stock shall be declared and paid only in an equal per share amount on the then outstanding shares of each class of Common Stock and only in shares of the same class of Common Stock as the shares on which the dividend is being declared and paid. For example, if and when a dividend of Class A Common Stock is declared and paid to the then outstanding shares of Common Stock: (i) the dividend of Class A Common Stock shall be paid solely to the outstanding shares of Class A Common Stock; and (ii) a dividend of Class B Common Stock and Class C Common Stock shall similarly be declared and paid in an equal per share amount solely to the then outstanding shares of Class B Common Stock and Class C Common Stock, respectively. (ii) If the corporation shall in any manner subdivide or combine, or make a rights offering with respect to, the outstanding shares of Class A Common Stock, Class B Common Stock or Class C Common Stock, the outstanding shares of the other classes of Common Stock shall be proportionally subdivided or combined, or a rights offering shall be made, in the same manner and on the same basis as the outstanding shares of Class A Common Stock, Class B Common Stock or Class C Common Stock, as the case may be, that have been subdivided or combined or made subject to a rights offering. -3- (b) Voting Rights. ------------- (i) The holders of the Class A Common Stock and the Class C Common Stock shall have one (1) vote for each share held; the holders of the Class B Common Stock shall have ten (10) votes for each share held. (ii) Members of the Board shall be elected as set forth in Section 4.5 below. (iii) Without the consent of the holders of at least a majority of the shares of Class C Common Stock then outstanding, voting as a separate class, given in writing or by vote at a meeting of such Class C Holder called for such purpose, the corporation will not: (A) merge, consolidate or enter into a business combination, or otherwise reorganize the corporation with or into one or more entities (other than a merger of a wholly-owned subsidiary of the corporation into another wholly-subsidiary of the corporation); (B) dissolve, liquidate or terminate the corporation; (C) directly or indirectly dispose of any interest in any FCC license with respect to television stations which are affiliates of Univision; (D) amend, alter or repeal any provision of the First Restated Certificate of Incorporation or bylaws of the corporation, each as amended, so as to adversely affect the rights, privileges or restrictions provided for the benefit of the holders of the Class C Common Stock. (c) Conversion Rights. ----------------- (i) Voluntary Conversion. Each share of Class B Common Stock -------------------- or Class C Common Stock shall be convertible into one fully paid and non- assessable share of Class A Common Stock at any time at the option of the holder thereof. (ii) Class B Automatic Conversion. Each share of Class B Common ---------------------------- Stock shall convert automatically into one (1) fully paid and non-assessable share of Class A Common Stock upon its Transfer to any party other than a Permitted Transferee of the holder thereof. Each share of Class B Common Stock held by a Class B Holder or his respective Permitted Transferee(s) shall convert automatically into one (1) fully paid and non-assessable share of Class A Common Stock (i) upon the death of such Class B Holder, (ii) when such Class B Holder is no longer actively involved in the business of the corporation or (iii) if such Class B Holder (or his Permitted Transferee(s)) owns less than the Class B Required Amount. Each share of Class B Common Stock shall automatically convert into one (1) fully paid and non-assessable share of Class A Common Stock (i) upon the death of the second to die of Ulloa and -4- Wilkinson or (ii) when the second of Ulloa and Wilkinson ceases to be actively involved in the business of the corporation. (iii) Class C Automatic Conversion. Each share of Class C Common ---------------------------- Stock shall convert automatically into one (1) fully paid and non-assessable share of Class A Common Stock upon its Transfer to any party other than Permitted Transferee of the holder thereof. Each share of Class C Common Stock shall convert automatically into one (1) fully paid and non-assessable share of Class A Common Stock when the Class C Holder (or its Permitted Transferee) owns less than the Class C Required Amount. (iv) Unconverted Shares. If less than all of the shares of ------------------ Class B Common Stock or Class C Common Stock are converted pursuant to subparagraphs (i), (ii) or (iii) above, and such shares are evidenced by a certificate surrendered to the corporation in accordance with the procedures as the Board may determine, representing shares in excess of the shares being converted, the corporation shall execute and deliver to or upon the written order of the holder of such certificate, without charge to the holder, a new certificate evidencing the number of shares of Class B Common Stock or Class C Common Stock, as the case may be, not converted. (v) Reservation. The corporation hereby reserves and shall at ----------- all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, to effect conversions, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock and Class C Common Stock. The corporation covenants that all of the shares of Class A Common Stock so issuable shall, when so issued, be duly and validly issued, fully paid and non-assessable, and free from liens and charges with respect to the issue. The corporation will take all such action as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation. (d) Elimination of Class Rights. --------------------------- (i) Class B Common Stock. Upon the occurrence of a Class B -------------------- Voting Election, the rights of the Class B Holders to vote as a separate class with respect to any matter (except as required by law) shall cease and be eliminated. The "Class B Voting Election" shall be conclusively deemed to have occurred upon receipt by the Secretary of the corporation of a written consent signed by the record holders of a majority of the outstanding shares of Class B Common Stock electing to eliminate the voting rights of the Class B Common Stock as provided in the preceding sentence and such election shall be irrevocable. Additionally, if at any time any of the Class B Holders own less than the Class B Required Amount (a "Class B Voting Event," and together with a Class B Voting Election, a "Class B Voting Conversion"), the rights of such Class B Holder(s) to vote as a separate class with respect to any matter (except as required by law) shall cease and be eliminated. From and after a Class B Voting Conversion, such Class B -5- Holder(s) shall vote together as a class with the holders of the Class A Common Stock (and, if a Class C Voting Conversion has occurred, the Class C Holder), except as required by law. (ii) Class C Common Stock. Upon the occurrence of a Class C -------------------- Voting Election, the rights of the Class C Holder to vote as a separate class with respect to any matter (except as required by law) shall cease and be eliminated. The "Class C Voting Election" shall be conclusively deemed to have occurred upon receipt by the Secretary of the corporation of a written consent signed by the record holders of a majority of the outstanding shares of Class C Common Stock electing to eliminate the voting rights of the Class C Common Stock as provided in the preceding sentence and such election shall be irrevocable. Additionally, if at any time the Class C Holder (or its Permitted Transferee) owns less than the Class C Required Amount (a "Class C Voting Event," and together with a Class C Voting Election, a "Class C Voting Conversion"), the rights of the Class C Holder to vote as a separate class with respect to any matter (except as required by law) shall cease and be eliminated. From and after a Class C Voting Conversion, the Class C Holder shall vote together as a class with the holders of the Class A Common Stock (and, if a Class B Voting Conversion has occurred, the Class B Holders), except as required by law. 4.4 Preferred Stock. The Board is authorized, subject to limitations --------------- prescribed by law and the provisions of this First Restated Certificate of Incorporation and the bylaws, by resolution or resolutions of the Board, from time to time to provide for the issuance of the shares of the Preferred Stock in one or more series and to establish the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board with respect to each series shall include, without limitation, determination of the following: (i) the number of shares constituting that series and the distinctive designation of that series; (ii) the dividend rate, if any, on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) whether that series shall be subject to conversion or exchange, and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board shall determine; (v) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the type and amount of consideration per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (vii) the rights, if any, of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; and (viii) any other relative rights, preferences and limitations, if any, of that series. -6- 4.5 Election of Directors. The directors of the corporation shall be --------------------- elected as follows: (a) Unless a Class C Voting Conversion has occurred, the holders of the Class C Common Stock, voting as a separate class, shall be entitled to elect two (2) directors to the Board. The directors that the holders of the Class C Common Stock have the right to elect hereunder are referred to as the "Class C Director(s)." Unless a Class C Voting Conversion has occurred, the holders of the Class C Common Stock, voting as a separate class, shall also have the sole right to remove any Class C Director without cause. Unless a Class C Voting Conversion has occurred, any vacancy in the office of a Class C Director shall be filled solely by (i) the holders of the Class C Common Stock, voting as a separate class, or (ii) the sole Class C Director. At such time as a Class C Voting Conversion has occurred, the voting rights of the holders of the Class C Common Stock pursuant to this Section 4.5(a) shall terminate and the directors formerly denominated Class C Directors shall be redesignated Class A/B Directors and shall be elected pursuant to the provisions of Section 4.5(b) below. (b) The remainder of the Entire Board after the elections described in Section 4.5(a) above shall be elected by all holders of the Class A Common Stock and Class B Common Stock (and if a Class C Voting Conversion has occurred, the Class C Common Stock) voting together as a single class, and shall be referred to herein as the "Class A/B Director(s)." All holders of Class A Common Stock and Class B Common Stock (and if a Class C Voting Conversion has occurred, the Class C Common Stock), voting together as a single class, shall also have the sole right to remove any of the Class A/B Directors without cause. Any vacancy in the office of a Class A/B Director or any newly-created Class A/B directorship shall be filled solely by the holders of the Class A Common Stock and Class B Common Stock (and if a Class C Voting Conversion has occurred, the Class C Common Stock), voting together as a single class. The number of Class A/B Directors shall be increased by the number of directors formerly denominated Class C Directors pursuant to Section 4.5(a) above upon the occurrence of a Class C Voting Conversion. ARTICLE 5. Except as otherwise provided herein, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the bylaws of the corporation, but the stockholders may make additional bylaws and may repeal, alter, amend or rescind any bylaw whether adopted by them or otherwise. ARTICLE 6. The number of directors of the corporation shall be fixed from time to time by, or in the manner provided in, the bylaws or amendment thereof duly adopted by the Board or by the stockholders. ARTICLE 7. -7- Elections of directors need not be by written ballot except and to the extent provided in the bylaws of the corporation. ARTICLE 8. Meetings of the stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the corporation may be kept (subject to any provisions contained in applicable statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the bylaws of the corporation. ARTICLE 9. Directors of the corporation shall, to the fullest extent permitted by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article 9 to authorize corporate action further eliminating or limiting the personal liability of directors, then the personal liability of directors of the corporation shall be further eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law. Any repeal or modification of any of the foregoing provisions by the stockholders of the corporation, or the adoption of any provision hereof inconsistent with this Article 9, shall not adversely affect any right or protection of directors of the corporation existing at the time of, or increase the liability of directors of the corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification. ARTICLE 10. The corporation reserves the right to amend, alter, change or repeal any provision contained herein in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders, directors and officers of the corporation herein are granted subject to such revision. ARTICLE 11. 11.1 Right to Indemnification. Each person who was or is made party or is ------------------------ threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he or she is or was a director or officer of the corporation or, while a -8- director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation (including any subsidiary of the corporation) or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide for broader indemnification rights than permitted as of the date this First Restated Certificate of Incorporation is filed with the State of Delaware), against all expense, liability and loss (including attorney's fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided in Section 11.2 below, with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section 11.1 shall be a contract right and shall include the obligation of the corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition (an "advance of expenses"); provided, however, that if and to the extent that the Board requires, an advance of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section 11.1 or otherwise. The corporation may, by action of its Board, provide indemnification to employees and agents of the corporation with the same or lesser scope and effect as the foregoing indemnification of directors and officers. 11.2 Procedure for Indemnification. Any indemnification of a director or ----------------------------- officer of the corporation or advance of expenses under Section 11.1 above shall be made promptly, and in any event within forty-five (45) days (or, in the case of an advance of expenses, twenty (20) days) upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article 11 is required, and the corporation fails to respond within sixty (60) days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advance of expenses, in whole or in part, or if payment in full pursuant to such request is not made within forty-five (45) days (or, in the case of an advance of expenses, twenty days), the right to indemnification or advances as granted by this Article 11 shall be enforceable by the director or officer in any court of competent jurisdiction. Such -9- person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses where the undertaking required pursuant to Section 11.1 above, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Delaware General Corporation Law, nor an actual determination by the corporation (including its Board, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The procedure for indemnification of other employees and agents for whom indemnification is provided pursuant to Section 11.1 above shall be the same procedure set forth in this Section 11.2 for directors or officers, unless otherwise set forth in the action of the Board providing for indemnification for such employee or agent. 11.3 Insurance. The corporation may purchase and maintain insurance on its --------- own behalf and on behalf of any person who is or was a director, officer, employee or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation (including any subsidiary of the corporation), partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such expenses, liability or loss under the Delaware General Corporation Law. 11.4 Service for Subsidiaries. Any person serving as a director, officer, ------------------------ employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least fifty percent (50%) of whose equity interests are owned by the corporation (a "subsidiary" for purposes of this Article 11) shall be conclusively presumed to be serving in such capacity at the request of the corporation. 11.5 Reliance. Persons who after the date of the adoption of this -------- provision are directors or officers of the corporation or who, while a director or officer of the corporation, or a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article 11 in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this Article 11 shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof. -10- 11.6 Non-Exclusivity of Rights. The rights to indemnification and to the ------------------------- advance of expenses conferred in this Article 11 shall not be exclusive of any other right which any person may have or hereafter acquire under this First Restated Certificate of Incorporation or under any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. 11.7 Merger or Consolidation. For purposes of this Article 11, references ----------------------- to "the corporation" shall include any constituent corporation (including any constituent of a constituent) absorbed into the corporation in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article 11 with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE 12. 12.1 Foreign Ownership Restrictions. ------------------------------ (a) The corporation shall at all times be in compliance with 47 C.F.R. (S) 310(a) and (b) and interpretations thereof by the FCC (the "Foreign Ownership Restrictions"). The Board shall have all powers necessary to insure compliance with this Article 12, including, without limitation, the redemption of shares of capital stock the transfer or ownership of which resulted in a violation of the Foreign Ownership Restrictions; provided, however, that the corporation may, at the request of a stockholder, first seek a waiver of such Foreign Ownership Restrictions from the FCC in the event that any violation thereof results from open-market purchases of publicly traded shares of the corporation, whether shares of capital stock in the corporation or shares of capital stock in an entity which holds capital stock of the Corporation, the foreign ownership of which is attributed to the corporation by operation of the rules of the FCC. As a last resort, the Board shall be required to redeem the shares of capital stock the transfer or ownership of which resulted in the violation of the Foreign Ownership Restrictions to insure such compliance (subject, however, to Sections 12(b) and (c) below). (b) In exercising powers or taking actions to achieve or preserve such compliance, the Board (acting in good faith and based upon advice of outside counsel expert in FCC matters) shall select the method that is least detrimental to the stockholders of the corporation affected by the action. In the case of redemption by the corporation of shares of different classes, the shares of the class having greater voting rights shall occur first. (c) If the Board, pursuant to Section 12(a) above, should invoke its powers to redeem any of the capital stock held by a party in order to secure compliance with the Foreign Ownership Restrictions, such redemption shall be at fair market value as determined by a third- -11- party valuation expert retained by the Board, whose costs and expenses shall be charged to the party from whom the shares are redeemed. 12.2 FCC Compliance Restrictions. The corporation shall at all times be in --------------------------- compliance with, and shall not take any action, nor shall it cause any act to be done, that would cause it to be in violation of the limitations on ownership of mass media, cable television and newspaper (or such other interests as the legislation or the FCC shall require in the future) interests, as set forth in the Communications Act or the rules of the FCC. THIRD: That the corporation has not yet received any payment for any of its stock and that the foregoing amendment and restatement was duly adopted in accordance with the provisions of Section 241 and 245 of the Delaware General Corporation Law. [Remainder of Page Intentionally Left Blank] -12- IN WITNESS WHEREOF, this First Restated Certificate of Incorporation has been executed by the President and Secretary of the corporation on this _____ day of ________________, 2000. ________________________________________ Philip C. Wilkinson, President ________________________________________ Paul A. Zevnik, Secretary [Signature Page to First Restated Certificate of Incorporation of Entravision Communications Corporation] EX-3.3 7 FORM OF FIRST AMENDED AND RESTATED BYLAWS EXHIBIT 3.3 ================================================================================ FIRST AMENDED AND RESTATED BYLAWS OF ENTRAVISION COMMUNICATIONS CORPORATION a Delaware corporation ================================================================================ FIRST AMENDED AND RESTATED BYLAWS OF ENTRAVISION COMMUNICATIONS CORPORATION a Delaware corporation ARTICLE 1. OFFICES 1.1 Registered Office. The registered office of Entravision ----------------- Communications Corporation, a Delaware corporation, shall be in the State of Delaware, located at Incorporating Services, Ltd. 15 East North Street, County of Kent, Dover, Delaware 19903-0899 and the name of the resident agent in charge thereof is the agent named in the Certificate of Incorporation of the corporation (as may be amended from time to time, the "Certificate of Incorporation") until changed by the Board of Directors (the "Board"). 1.2 Principal Office. The principal office for the transaction of the ---------------- business of the corporation shall be at such place as may be established by the Board. The Board is granted full power and authority to change said principal office from one location to another. 1.3 Other Offices. The corporation may also have an office or offices at ------------- such other places, either within or without the State of Delaware, as the Board may from time to time designate or the business of the corporation may require. ARTICLE 2. MEETINGS OF STOCKHOLDERS 2.1 Place of Meetings. Meetings of stockholders shall be held at such ----------------- time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. 2.2 Annual Meetings. An annual meeting of stockholders shall be held for --------------- the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. 2.3 Special Meetings. Special meetings of the stockholders of the ---------------- corporation for any purpose or purposes may be called at any time by the Board and shall be called by the President or Secretary at the request in writing of (i) the Chairman of the Board, (ii) a majority of the Board or (iii) stockholders owning a majority in voting power of the issued and outstanding shares of Common Stock of the corporation. 2.4 Stockholder Lists. The officer who has charge of the stock ledger of ----------------- the corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list, by class, of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or at the place of the meeting, and the list shall also be available at the meeting during the whole time thereof and may be inspected by any stockholder who is present. 2.5 Notice of Meetings. Written notice of each meeting of stockholders, ------------------ whether annual or special, stating the place, date and hour of the meeting, and in the case of a special meeting, the purpose of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) (or such other period as may be required under applicable law) nor more than sixty (60) days before the date of the meeting. 2.6 Quorum and Adjournment. Except as set forth below, the holders of a ---------------------- majority in voting interest of capital stock of the corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for holding all meetings of stockholders, except as otherwise provided by applicable law, these Bylaws or the Certificate of Incorporation. Notwithstanding the above, holders of a majority of the voting interest of the corporation's Class A Common Stock, Class B Common Stock or Class C Common Stock, as the case may be, shall each constitute a quorum for the holding of a meeting of stockholders of such class(es) for the sole purpose of electing or removing without cause the director or directors that such class(es) has the right to elect or to fill a vacancy or a newly created directorship which such class has a right to fill. If it shall appear that such quorum is not present or represented at any meeting of stockholders, the Chairman of the meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.7 Voting. In all matters other than the election of directors, the vote ------ of the holders of a majority in voting interest of the capital stock of the corporation as defined in the corporation's Certificate of Incorporation that are present in person or represented by proxy at a meeting at which a quorum is present, shall decide any question brought before such meeting of stockholders, unless the question is one upon which by express provision of applicable law, of the Certificate of Incorporation or of these Bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. Each director of the corporation shall be elected (i) by a plurality of the votes of the shares of the class(es) of stock which has the right to elect such director, present in person or represented by proxy at a meeting at which a quorum is present or (ii) by the written consent of the holders of a majority in voting interest of the outstanding shares of such class(es). Each Class A and Class C stockholder shall be entitled to cast one (1) vote for each share of the capital stock entitled to vote held by such -2- stockholder upon the matter in question, and each Class B stockholder shall be entitled to cast ten (10) votes for each share of the capital stock entitled to vote held by such stockholders. The presiding officer at a meeting of stockholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. 2.8 Proxies. Each stockholder entitled to vote at a meeting of ------- stockholders may authorize another person or persons to act for him or her by proxy, but no proxy shall be voted or acted upon after three (3) years from its date, unless the person executing the proxy specifies therein a longer period of time for which it is to continue in force. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the corporation. 2.9 Inspector of Election. The Board shall, if required by law, appoint --------------------- an Inspector or Inspectors of Election for any meeting of stockholders. Such Inspectors shall decide upon the qualification of the voters and report the number of shares represented at the meeting and entitled to vote, shall conduct the voting and accept the votes and when the voting is completed shall ascertain and report the number of shares voted respectively for and against each position upon which a vote is taken by ballot. An Inspector need not be a stockholder, and any officer of the corporation may be an Inspector on any position other than a vote for or against a proposal in which he or she shall have a material interest. 2.10 Action Without Meeting. Subject to Section 228 of the Delaware ---------------------- General Corporation Law, any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the State of Delaware (by hand or by certified or registered mail, return receipt requested), its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to those stockholders who have not consented in writing. ARTICLE 3. DIRECTORS 3.1 Powers. Subject to any limitations set forth in the Certificate of ------ Incorporation, the Board shall have the power to manage or direct the management of the property, business and -3- affairs of the corporation and, except as expressly limited by law, to exercise all of its corporate powers. Subject to applicable law, the Board may establish procedures and rules or may authorize the Chairman of any meeting of stockholders to establish procedures and rules, for the fair and orderly conduct of any stockholders' meeting, including without limitation, registration of the stockholders attending the meeting, adoption of an agenda, establishing the order of business at the meeting, recessing and adjourning the meeting for the purposes of tabulating any votes and receiving the result thereof, the timing of the opening and closing of the polls and the physical layout of the facilities for the meeting. 3.2 Number, Term and Classes. The Board shall consist of not less than ------------------------ seven (7) nor more than eleven (11) members, as shall be determined from time to time by resolution of the Board. Until otherwise determined by such resolution, the Board shall consist of seven (7) members. Except as provided in the Certificate of Incorporation, there shall be two (2) classes of directors: Class A/B Directors and Class C Directors, all of which shall be elected as provided in the Certificate of Incorporation. 3.3 Qualifications. Directors need not be stockholders, and each director -------------- shall serve until his or her successor is elected and qualified or until his or her earlier death, retirement, resignation or removal. 3.4 Vacancies and Newly-Created Directorships. Any vacancy on the Board ----------------------------------------- caused by death, resignation or removal or a newly-created directorship may be filled as provided in the Certificate of Incorporation. A director so elected to fill a vacancy or newly-created directorship shall serve until his or her successor is elected and qualified or until his or her earlier death, retirement, resignation or removal. 3.5 Regular Meetings. Regular meetings of the Board shall be held without ---------------- call or notice at such time and place within or without the State of Delaware as shall from time to time be fixed by standing resolution of the Board. 3.6 Special Meetings. Special meetings of the Board may be held at any ---------------- time or place within or without the State of Delaware whenever called by the Chairman of the Board, a majority of the Board or any Class C Director. Notice of a special meeting of the Board shall be given to all directors by the person or persons calling the meeting at least seventy-two (72) hours before the special meeting. 3.7 Telephonic Meetings. Members of the Board or any committee thereof ------------------- may, and shall be given the opportunity to, participate in a regular or special meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting. -4- 3.8 Quorum. At all meetings of the Board, a majority of the Entire Board ------ (as defined in the Certificate of Incorporation) shall constitute a quorum for the transaction of business. Except as otherwise set forth in these Bylaws, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. Any meeting of the Board may be adjourned to meet again at a stated day and hour. Notice of any adjourned meeting need not be given. 3.9 Fees and Expenses. Each director and each member of a committee of ----------------- the Board, shall receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attending meetings. Each director and each member of a committee of the Board, in each case who is neither (i) an owner of more than a five percent (5%) direct or indirect beneficial interest in the stock of the corporation (or the spouse, child or other family member of such an owner (a "Related Person")); (ii) an employee (a) of the corporation, (b) of any direct or indirect subsidiary of the corporation or (c) of such an owner or Related Person or an Affiliate (as defined in the Certificate of Incorporation of the corporation) of such owner or Related Person; nor (iii) any person who controls any such owner and the spouse, child or other family members of any such person, shall also receive a fee to be determined by the Board for attending any meeting of the Board or any such committee (provided that no director shall be entitled to receive such fee if such director is receiving a fee for attending a meeting of the Board or any other committee of the corporation held on the same day). Other than as set forth above, no director or stockholder of the corporation shall be reimbursed for any expenses incurred by it in its role as an investor or director. 3.10 Committees. Subject to the Certificate of Incorporation, the Board ---------- may, by resolution passed by a majority of the Entire Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. At least one Class C Director shall sit on the compensation and audit committees of the Board, if any. Any such audit or compensation committee, to the extent provided in a resolution of the Board and to the extent permitted by law and not inconsistent with the Certificate of Incorporation, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. 3.11 Action Without Meetings. Unless otherwise restricted by applicable ----------------------- law, the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. 3.12 Super Majority Board Approvals. Without the approval of the Board (or ------------------------------ where permitted under applicable law, a duly constituted committee of the Board which includes at least -5- one Class C Director) by a vote which includes, in addition to any other required vote of directors, the affirmative vote of at least one (1) of the Class C Directors (so long as a Class C Voting Conversion (as defined in the Certificate of Incorporation) has not occurred) on the Board or such committee, as the case may be, the corporation shall not directly or through its subsidiaries engage in any of the following acts or transactions: (a) create, designate, issue or sell out of treasury any Common Stock or Preferred Stock of, or other equity interests in, the corporation, any securities that are convertible into, exchangeable for, or participate in dividends with, the Common Stock or Preferred Stock of, or other equity interests in, the corporation, or any options or conversion, exchange or other rights in respect of the foregoing (other than (i) shares of Common Stock issued upon conversion of shares of Preferred Stock or as a dividend or distribution on Preferred Stock, (ii) shares of Common Stock issued to banks, lenders and equipment lessors in connection with debt financings or equipment leases, (iii) shares of Common Stock issued for consideration other than cash in connection with mergers, consolidations, acquisitions of assets and other acquisitions as approved by the Board, (iv) shares of Common Stock issuable or issued to officers, directors, employees of, or consultants to, the corporation pursuant to any equity incentive plan and/or stock option plan of the corporation, subject to appropriate adjustments for stock splits, stock dividend combinations or other recapitalizations, (v) shares of Common Stock issued or issuable in the initial public offering of the corporation or upon exercise of warrants or rights granted to underwriters in connection with such initial public offering or (vi) shares of Common Stock issued by way of dividend or other distribution on shares of Common Stock); (b) amend this Article 3, Section 3.12 of these Bylaws by action of the Board; (c) acquire or dispose of assets in any one transaction or series of related transactions for a purchase or sale price in excess of $25,000,000; or (d) incur debt (other than capitalized lease obligations) as of any date in an aggregate amount outstanding in excess of (x) the corporation's EBITDA for the twelve (12) month period ending on the last day of the quarter preceding such date, multiplied by (y) five (5). For purposes of this subparagraph (iv), EBITDA means the sum of net income, total depreciation expense, total amortization expense, interest expense and taxes as determined in conformity with generally accepted accounting principles; provided, however, that in the case of debt incurred for the purposes of an acquisition, EBITDA shall be determined on a pro-forma basis giving effect to such acquisition. ARTICLE 4. OFFICERS 4.1 Officers. The corporation shall have a Chairman of the Board, a -------- President, one or more Vice Presidents, a Secretary and a Treasurer. The corporation may also have, at the discretion of the Board, one or more Assistant Secretaries, one or more Assistant Treasurers and -6- such other officers as may be elected or appointed in accordance with the provisions of Section 4.2 below. Any two or more of such offices may be held by the same person. 4.2 Election. The officers of the corporation shall be elected annually -------- by the Board and, subject to whatever rights an officer may have under a contract of employment with the corporation, all officers shall serve at the pleasure of the Board. 4.3 Removal and Resignation. Any officer may be removed, either with or ----------------------- without cause, by the Board at any time. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment of the officer. Any officer may resign at any time by giving written notice to the corporation, but without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 4.4 Vacancies. A vacancy in any office because of death, resignation, --------- removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular election or appointment to such office. 4.5 Chairman of the Board. The Chairman of the Board shall preside at all --------------------- meetings of the stockholders and of the Board and shall be the Chief Executive Officer of the corporation unless the President is the Chief Executive Officer. 4.6 President. The President shall be the Chief Operating Officer of the --------- corporation and, if designated by the Board, the Chief Executive Officer of the corporation. Subject to the control of the Board (and to the Chief Executive Officer, if the President does not hold such office) and to the powers vested by the Board in any committee or committees appointed by the Board, the President shall have general supervision, direction and control of the business and officers of the corporation. The President shall have the general powers and duties of management usually vested in the Chief Executive Officer of a corporation and shall have such other powers and duties as may be prescribed by the Board or these Bylaws. 4.7 Vice Presidents. In the absence or disability of the President, the --------------- Vice Presidents, in order of their rank as fixed by the Board, or, if not ranked, the Vice President designated by the Board shall perform all the duties of the President and when so acting shall have all of the powers of and be subject to all of the restrictions upon the President. The Vice Presidents shall have such other powers and perform such duties as may be prescribed for them, respectively, from time to time, by the Board, the President or these Bylaws. 4.8 Secretary. The Secretary shall keep, or cause to be kept, at the --------- principal executive office and such other place as the Board may order, a book of minutes of all meetings of stockholders, the Board and its committees, with the time and place of holding, whether regular -7- or special, and if special, how authorized, the notice thereof given, the names of those present at Board and committee meetings, the number of shares present or represented at stockholders' meetings and the proceedings thereof. The Secretary shall keep, or cause to be kept, a copy of these Bylaws of the corporation at the principal executive office or business office. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, if one be appointed, a share register or a duplicate share register showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board and any committees thereof required by these Bylaws or by law to be given, shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board. 4.9 Treasurer. The Treasurer is the Chief Financial Officer of the --------- corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation and shall send or cause to be sent to the stockholders of the corporation such financial statements and reports as are by law or these Bylaws required to be sent to them. The books of account shall at all times be open to inspection by any director. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board, shall render to the President and the directors, whenever they request it, an account of all transactions as Treasurer and of the financial condition of the corporation and shall have such other powers and perform such other duties as may be prescribed by the Board. ARTICLE 5. STOCK CERTIFICATES 5.1 Form of Stock Certificate. Every holder of capital stock in the ------------------------- corporation shall be entitled to have a certificate signed by, or in the name of, the corporation by the Chairman of the Board, the President, the Chief Executive Officer or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation certifying the number of shares owned by him, her or it in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of the issue. -8- 5.2 Transfers of Stock. Subject to any restrictions on transfer ------------------ applicable thereto, upon surrender to the corporation or a transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. 5.3 Lost, Stolen or Destroyed Certificates. The corporation may direct a -------------------------------------- new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 5.4 Record Date. In order that the corporation may determine the ----------- stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date: (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; (ii) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten (10) days from the date upon which the resolution fixing the record date is adopted by the Board; and (iii) in the case of any other action, shall not be more than sixty (10) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and (c) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. -9- 5.5 Registered Stockholders. The corporation shall be entitled to treat ----------------------- the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by applicable law. ARTICLE 6. NOTICES 6.1 Manner of Notice. Whenever under the provisions of applicable law, ---------------- the Certificate of Incorporation or these Bylaws, notice is required to be given to any director, committee member, officer or stockholder, it shall not be construed to mean personal notice, but such notice may be given, in the case of stockholders, in writing, by mail, by depositing the same in the post office or letter box, in a postpaid sealed wrapper, addressed to such stockholder, at such address as appears on the books of the corporation, and, in the case of directors, committee members and officers, by telephone, by facsimile or other electronic transmission, or by recognized delivery service to the last business address known to the Secretary of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed, telephoned, sent via facsimile, transmitted or delivered. 6.2 Waiver of Notice. Whenever any notice is required to be given under ---------------- the provisions of applicable law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE 7. AMENDMENTS 7.1 Amendments. Subject to the provisions of the Certificate of ---------- Incorporation, the Board shall have the power to make, adopt, alter, amend and repeal from time to time these Bylaws, subject to the right of the stockholders entitled to vote with respect thereto to adopt, alter, amend and repeal Bylaws made by the Board, provided no amendment made by the Board may adversely affect the rights accorded to the holders of the Class B Common Stock or the Class C Common Stock which affects such class differently from the other classes of Common Stock of the corporation without the consent of a majority of the Class A/B Directors or a majority of the Class C Directors (unless a Class C Voting Conversion has occurred), as the case may be. ARTICLE 8. GENERAL PROVISIONS 8.1 Fiscal Year. The fiscal year of the corporation shall be determined ----------- by resolution of the Board. -10- 8.2 Seal. The corporate seal shall have the name of the corporation ---- inscribed thereon and shall be in such form as may be approved from time to time by the Board. 8.3 Waiver of Notice of Meetings of Stockholders, Directors and ----------------------------------------------------------- Committees. Any written waiver of notice, signed by the person entitled to - ---------- notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. 8.4 Form of Records. Any records maintained by the corporation in the --------------- regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. 8.5 Representation of Shares of Other Corporations. The Chief Executive ---------------------------------------------- Officer or any other officer or officers authorized by the Board are each authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority herein granted may be exercised either by any such officer in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officer. 8.6 Dividends. Dividends upon the capital stock of the corporation, --------- subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. 8.7 Checks. All checks or demands for money and notes of the corporation ------ shall be signed by such officer or officers or such other person or persons as the Board may from time to time designate. 8.8 Loans to Officers. The corporation may lend money to, or guarantee ----------------- any obligation of, or otherwise assist any officer or other employee of the corporation or of its -11- subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 8.9 Inspection of Books and Records. Any stockholder of record, in person ------------------------------- or by attorney or other agent, shall, upon written demand upon oath stating the purpose thereof, have the right during the usual hours of business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. 8.10 Section Headings. Section headings in these bylaws are for ---------------- convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. 8.11 Inconsistent Provisions. In the event that any provision of these ----------------------- bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the Delaware General Corporation Law or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. [Remainder of Page Intentionally Left Blank] -12- CERTIFICATE OF SECRETARY OF ENTRAVISION COMMUNICATIONS CORPORATION The undersigned, Paul A. Zevnik, hereby certifies that he the duly elected and acting Secretary of Entravision Communications Corporation, a Delaware corporation (the "Company"), and that the Amended and Restated Bylaws attached hereto constitute the Amended and Restated Bylaws of the Company as duly adopted by the Board of Directors of the Company by unanimous written consent on ____________________, 2000. IN WITNESS WHEREOF, the undersigned has hereunto subscribed his this _____ day of __________________, 2000. __________________________________________________ Paul A. Zevnik, Secretary -13- EX-10.3 8 AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.3 AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 10, 1998, among (1) KSMS-TV, INC., a Delaware corporation ("KSMS-TV"), TIERRA ALTA ------- BROADCASTING, INC., a Delaware corporation ("Tierra Alta"), CABRILLO ----------- BROADCASTING CORPORATION, a California corporation ("Cabrillo"), GOLDEN HILLS -------- BROADCASTING CORPORATION, a Delaware corporation ("Golden Hills"), LAS TRES ------------ PALMAS CORPORATION, a Delaware corporation ("Las Tres Palmas"), VALLEY CHANNEL --------------- 48, INC., a Texas corporation ("Valley Channel"), TELECORPUS, INC., a Texas -------------- corporation ("Telecorpus"), and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a ---------- Delaware limited liability company ("Entravision") (each a "Borrower," and ----------- -------- collectively, the "Borrowers"), whose obligations hereunder shall be joint and --------- several, (2) the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders") and (3) UNION BANK OF CALIFORNIA, ------- N.A., as agent for the Lenders hereunder (in such capacity, the "Agent"). ----- RECITALS -------- A. KSMS-TV, Tierra Alta, Cabrillo, Golden Hills, Las Tres Palmas, Valley Channel and Entravision (collectively, the "Original Borrowers") are party to ------------------ that certain Credit Agreement dated as of December 31, 1996 among the lenders referred to therein and the Agent, as agent for such lenders, as amended by the Consent and First Amendment to Credit Agreement dated as of January 23, 1997, the Consent and Second Amendment to Credit Agreement dated as of June 4, 1997, the Third Amendment to Credit Agreement dated as of December 31, 1997, the Fourth Amendment to Credit Agreement and Waiver dated as of April 21, 1998, the Fifth Amendment to Credit Agreement and Waiver dated as of May 12, 1998, the Sixth Amendment to Credit Agreement dated as of July 31, 1998 and the Seventh Amendment to Credit Agreement dated as of September 17, 1998 (the "Original -------- Credit Agreement"). - ---------------- B. Pursuant to the Original Credit Agreement, such lenders made available to the Original Borrowers term loan facilities in the maximum principal amount of $20,000,000 and a revolving loan facility in the maximum principal amount of $70,100,000. C. In connection with the Original Credit Agreement, Telecorpus executed certain documents in favor of the Agent for the benefit of such lenders, including a Nonrecourse Guarantee and a Pledge Agreement, each dated as of April 21, 1998. Telecorpus now desires to become a Borrower hereunder and to become jointly and severally liable for the Obligations (as defined below). D. The Borrowers have requested that the Lenders amend and restate the Original Credit Agreement and increase the principal amount of the credit facility available thereunder and the Lenders have agreed, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall ------------- have the following meanings: "Accountants": McGladrey & Pullen, LLP, or such other firm of independent ----------- certified public accountants of recognized national standing as shall be selected by the Borrowers and satisfactory to the Agent. "Activation Date": the date set forth in the Activation Notice as the --------------- effective date of the Aggregate Incremental Loan Commitment, which date must be during the period from and including the Closing Date to but excluding September 30, 2000. "Activation Notice": a notice given by the Borrowers and each Incremental ----------------- Loan Lender to the Agent, substantially in the form of Exhibit I. "Acquisitions": the acquisition by, or investment in, (i) U.S. television ------------ or radio properties by Entravision or its Subsidiaries (provided that -------- ---- Entravision shall be permitted to consummate the foreign investment contemplated by the Tecate Acquisition) and (ii) U.S. outdoor advertising properties, in each case as permitted by Section 6.7(e). "Additional Equity Rights": the right of Univision, pursuant to the ------------------------ Univision Option, to purchase up to an additional 2.0% Class A Membership Interest in Entravision in connection with, and as partial consideration for, the purchase by Entravision from Univision of television Station KLUZ, Channel 41, Albuquerque, New Mexico. "Affiliate": as to any Person, (a) any other Person (other than a --------- Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director, officer, shareholder or partner (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in the preceding clause (a). For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (i) vote securities having 5% or more of the ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Affiliation Agreements": each affiliation or similar agreement between ---------------------- any Borrower or Subsidiary and Univision, or between any Borrower or Subsidiary and another network or programmer, or between the licensee of any broadcast station subject to a Program Services Agreement and Univision or another network or programmer, and all sideletters or other agreements relating thereto, in each case in form and substance satisfactory to the Agent and as such agreements may be further amended from time to time in accordance with the terms hereof. "Agent": as defined in the preamble hereto. ----- -2- "Aggregate Available Incremental Loan Commitment": the sum of the ----------------------------------------------- Available Incremental Loan Commitments of each Incremental Loan Lender. "Aggregate Available Revolving Loan Commitment": the sum of the Available --------------------------------------------- Revolving Loan Commitments of each Revolving Loan Lender. "Aggregate Commitment": the sum of the Aggregate Revolving Loan Commitment -------------------- and, if activated, the Aggregate Incremental Loan Commitment. "Aggregate Incremental Loan Commitment": the sum of the Incremental Loan ------------------------------------- Commitments set forth in the Activation Notice, as the same may be adjusted from time to time pursuant to the provisions hereof, provided that the Aggregate Incremental Loan Commitment shall not exceed the Maximum Incremental Loan Facility. "Aggregate Revolving Loan Commitment": the sum of the Revolving Loan ----------------------------------- Commitments set forth on the signature pages hereto, as the same may be adjusted from time to time pursuant to the provisions hereof. "Agreement": this Amended and Restated Credit Agreement, as amended, --------- waived, supplemented or otherwise modified from time to time. "Applicable Lending Office": for any Lender, its offices for LIBOR Loans, ------------------------- Base Rate Loans and participations in Letters of Credit, specified below its signature on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a party hereto, as the case may be, any of which offices may, upon 10 days' prior written notice to the Agent and the Borrowers, be changed by such Lender. "Applicable Revolving Loan Margin": with respect to Revolving Loans and -------------------------------- Incremental Loans, for each LIBOR Loan and for each Base Rate Loan as set forth below: Revolving Loan Leverage Level LIBOR Base Rate -------------- ----- --------- -------------------------------------------------------------- Revolving Loan Leverage Level LIBOR Base Rate -------------- ----- --------- -------------------------------------------------------------- 1(**6.50:1) 2.375% 1.125% -------------------------------------------------------------- 2(**6.00:1 - *6.50:1) 2.125% 0.875% -------------------------------------------------------------- 3(**5.50:1 - *6.00:1) 1.875% 0.625% -------------------------------------------------------------- 4(**5.00:1 - *5.50:1) 1.625% 0.375% -------------------------------------------------------------- 5(**4.50:1 - *5.00:1) 1.375% 0.125% -------------------------------------------------------------- 6(**4.00:1 - *4.50:1) 1.125% 0.000% -------------------------------------------------------------- 7(*4.00:1) 0.875% 0.000% -------------------------------------------------------------- _____________ * Less than ** Greater than or equal to "Asset Disposition": the sale, sale and leaseback, transfer, conveyance, ----------------- exchange, long-term lease accorded sales treatment under GAAP or similar disposition (including by means of a merger, consolidation, amalgamation, joint venture or other substantive combination) of any of -3- the Properties, business or assets (other than marketable securities, including "margin stock" within the meaning of Regulation U, liquid investments and other financial instruments but, including, without limitation, the assignment of any lease, license or permit relating to the Properties) of the Borrowers or any of their Subsidiaries to any Person or Persons other than to the Borrowers or any of their Subsidiaries; provided that Asset Dispositions shall not include the -------- sale in the ordinary course of business of equipment. "Assignment and Acceptance": an Assignment and Acceptance in the form of ------------------------- Exhibit C to this Agreement. "Available Incremental Loan Commitment": with respect to each Lender ------------------------------------- having an Incremental Loan Commitment on the date of determination thereof, the amount by which (a) the Incremental Loan Commitment of such Lender exceeds (b) the principal amount of such Lender's Incremental Loans outstanding on such date. "Available Revolving Loan Commitment": with respect to each Lender having ----------------------------------- a Revolving Loan Commitment on the date of determination thereof, the amount by which (a) the Revolving Loan Commitment of such Lender on such date exceeds (b) the principal sum of such Lender's (i) Revolving Loans outstanding, (ii) Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (iii) Revolving Loan Commitment Percentage of the aggregate amount of unreimbursed drawings under all Letters of Credit on such date. "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, --------- to the next 1/16 of 1%) equal to the greater of (a) the Reference Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. "Reference Rate" shall mean the rate of interest per annum publicly -------------- announced from time to time by Union Bank of California, N.A. as its "reference rate" in effect at its office in Los Angeles, California. "Federal Funds ------------- Effective Rate" shall mean, for any day, the weighted average of the rates on - -------------- overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. If, for any reason, the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including, without limitation, the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Reference Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Reference Rate or the Federal Funds Effective Rate, respectively. "Base Rate Loans": Loans the rate of interest applicable to which is based --------------- upon the Base Rate. "Borrower" or "Borrowers": as defined in the preamble hereto. ----------------------- -4- "Business Day": a day other than a Saturday, Sunday or other day on which ------------ commercial banks in the State of California are authorized or required by law to close and which, in the case of a LIBOR Loan, is a Eurodollar Business Day. "Capital Expenditures": for any period, collectively, for any Person, the -------------------- aggregate of all expenditures which are made during such period (whether paid in cash or accrued as liabilities), and all contractual commitments for such expenditures which are entered into during such period (provided that if any such commitment is included in one fiscal year, the actual payment in a later fiscal year shall not be included in such later fiscal year), by such Person, for property, plant or equipment and which would be reflected as additions to property, plant or equipment on a balance sheet of such Person prepared in accordance with GAAP (including, without limitation, all Capitalized Lease Obligations); provided, however, that Capital Expenditures shall exclude any -------- ------- expenditures which arise from Program Obligations. "Capitalized Lease Obligations": obligations for the payment of rent for ----------------------------- any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other ------------- equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), any and all warrants, options or rights to purchase, or any other securities convertible into, any of the foregoing. "Cash Collateral Deposit": cash deposits made by the Borrowers to the ----------------------- Agent, to be held by the Agent as Collateral pursuant to the Security Agreement, for the reimbursement of drawings under Letters of Credit. "Cash Income Taxes": cash income taxes paid by the Borrowers and their ----------------- Subsidiaries during the fiscal quarter most recently ended and the immediately preceding three fiscal quarters. "Change in Control": the occurrence of any of the following: ----------------- (a) Walter F. Ulloa, Philip C. Wilkinson and Univision (in the event Univision exercises the Univision Option) cease collectively to have, directly or indirectly, Voting Control of each class of membership units of Entravision having voting power; or (b) So long as Entravision is a limited liability company, Walter F. Ulloa and Philip C. Wilkinson cease to (i) be the Managing Members thereof, (ii) have the veto rights with regard to decisions of the Executive Committee set forth in Section 16(a)(i) of the Operating Agreement and (iii) have the power to appoint the Executive Committee thereof. "Closing Date": the date on which the conditions precedent set forth in ------------ Section 4.1 have been satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. ---- -5- "Collateral": all of the property (tangible or intangible) purported to be ---------- subject to the lien or security interest purported to be created by any mortgage, deed of trust, security agreement, pledge agreement, assignment or other security document heretofore or hereafter executed by the Borrowers as security for all or part of the Obligations. "Collateral Documents": the Mortgages, the Security Agreement, all notices -------------------- of security interests in deposit accounts requested by the Agent pursuant to the Security Agreement, Form UCC-1 Financing Statements and amendments thereto and any other document encumbering the Collateral or evidencing or perfecting a security interest therein for the benefit of the Lenders executed by the Borrowers. "Commitment Percentage": as to any Lender at any time, the percentage of --------------------- the Aggregate Commitment then constituted by such Lender's Commitments. "Commitments": as to any Lender, any Revolving Loan Commitment and any ----------- Incremental Loan Commitment held by it hereunder. "Commonly Controlled Entity": as to any Person, an entity, whether or not -------------------------- incorporated, which is under common control with such Person within the meaning of Section 4001 of ERISA or is part of a group which includes such Person and which is treated as a single employer under Section 414 of the Code. "Communications Act": the Communications Act of 1934, as amended, and the ------------------ rules and regulations issued thereunder, as from time to time in effect. "Consents to Assign": the following consents, each executed in favor of ------------------ the Agent, for the benefit of the Lenders: (i) Consent to Assign and Encumber dated as of "May __, 1997" executed by Park Place Broadcasting with respect to the K06MB LMA and the K06MB LMA Option Agreement and (ii) Consents to Assign and Encumber executed by Univision with respect to each Univision Affiliation Agreement, and any other written consent required in connection herewith with respect to any Material Contract, in each case as such consents may be amended or modified from time to time in accordance with the terms hereof. "Consideration": with respect to any Acquisition, the aggregate ------------- consideration, in whatever form (including, without limitation, cash payments, the principal amount of promissory notes and Indebtedness assumed, the aggregate amounts payable to acquire, extend and exercise any option, the aggregate amount payable under Non-Compete Agreements and management agreements, and the fair market value of other property delivered) paid, delivered or assumed by any Borrower for such Acquisition and the expenses associated therewith, including all brokerage commissions, legal fees and similar expenses. "Continuation Notice": a request for continuation or conversion of a Loan ------------------- as set forth in Section 2.6, substantially in the form of Exhibit F. "Contractual Obligation": as to any Person, any provision of any security ---------------------- issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. -6- "Corporate Overhead": for any period, all general and administrative ------------------ expenses of the Borrowers and their Subsidiaries for such period not solely attributable to an individual Station or group of Stations. For the purpose of illustration (and not for the purpose of limiting the foregoing), Corporate Overhead shall include the general and administrative expenses of the headquarters office of Entravision, the salaries of its officers, lease expenses for its headquarters office and the legal and accounting expenses relating to Entravision, and Acquisitions by Entravision, and not relating solely to any Station or group of Stations. "Covenant Compliance Certificate": a certificate of the Chief Financial ------------------------------- Officer of Entravision substantially in the form of Exhibit E hereto. "Default": any of the events specified in Section 7, whether or not any ------- requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States. ------- - "Drawing Lender": as defined in Section 2.3(c). -------------- "El Centro Radio Station Acquisition": the acquisition by Entravision of ----------------------------------- the following radio stations: (i) KWST-FM, Brawley, California, (ii) KMXX-FM, Imperial California and (iii) KAMP(AM), El Centro, California. "El Paso Headquarters Deed of Trust": the Mortgage described in item 6 on ---------------------------------- Schedule 1.1. "El Paso Mortgage Modification": the Mortgage Modification to the El Paso ----------------------------- Headquarters Deed of Trust. "Entravision License Subsidiary": Entravision Holdings, LLC, a California ------------------------------ limited liability company, which is owned 99.999% by Entravision, 0.0005% by Walter F. Ulloa and 0.0005% by Philip C. Wilkinson, formed solely for the purpose of holding Media Licenses and FCC files and records with respect thereto. "Environmental Control Statutes": as defined in Section 3.16. ------------------------------ "Equity Offering": the sale or issuance (or reissuance) by any Borrower or --------------- Subsidiary of any equity interest (common stock, preferred stock, partnership interests, member interests or otherwise) or any options, warrants, convertible securities or other rights to purchase such beneficial or equity interests. "Equityholder Agreements" each shareholder agreement, member agreement, ----------------------- partner agreement, voting agreement, buy-sell agreement, option, warrant, put, call, right of first refusal, and any other agreement or instrument with conversion rights into equity of any Borrower or Subsidiary either (a) between any Borrower or Subsidiary and any holder or prospective holder of any equity interest of any Borrower or Subsidiary (including interests convertible into such equity) or (b) otherwise between any two or more such holders of equity interests. -7- "ERISA": the Employee Retirement Income Security Act of 1974, as amended ----- from time to time. "ERISA Affiliate": as to any Person, each trade or business including such --------------- Person, whether or not incorporated, which together with such Person would be treated as a single employer under Section 4001(a)(14) of ERISA. "Escrow Deposit": any escrow deposit made by any Borrower in connection -------------- with an Acquisition. "Eurodollar Business Day": shall mean any day on which banks are open for ----------------------- dealings in Dollar deposits in the London Interbank Market. "Event of Default": any of the events specified in Section 7, provided ---------------- -------- that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any period, for the Borrowers and their ---------------- Subsidiaries on a consolidated basis, an amount equal to Operating Cash Flow (provided that Program Payments deducted in the calculation thereof shall be limited to Program Payments actually made) for such period, less, during such ---- period (in each case, without duplication), (i) Total Debt Service, (ii) permitted Cash Income Taxes, (iii) Capital Expenditures, (iv) and increases (or plus decreases) in Net Working Investment. - ---- "Excluded Taxes": all taxes imposed on or by reference to the net income -------------- of the Agent or any Lender or its Applicable Lending Office by any Governmental Authority and all franchise taxes, taxes on doing business or taxes measured by capital or net worth imposed on the Agent or on any Lender or its Applicable Lending Office by any Governmental Authority and any taxes imposed by any Governmental Authority arising as a consequence of the failure of any Lender to provide accurate documentation required to be provided by such Lender pursuant to Section 2.14(b). "Existing Mortgages": each mortgage, deed of trust or similar instrument ------------------ referred to on Schedule 1.1, as modified to date (including as respectively modified by the Mortgage Modifications) and as each may be further amended or modified from time to time in accordance with this Agreement. "FCC": the Federal Communications Commission or any successor thereto. --- "Federal Funds Effective Rate": as defined in the definition of "Base ---------------------------- ---- Rate" contained in this Section 1.1. - ---- "Fixed Charge Coverage Ratio": for the Borrowers and their Subsidiaries on --------------------------- a consolidated basis, the ratio of Operating Cash Flow for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters to the sum of (i) Total Debt Service for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, (ii) Capital Expenditures for the fiscal quarter most recently ended and the immediately -8- preceding three fiscal quarters and (iii) permitted Cash Income Taxes for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters. "GAAP": generally accepted accounting principles in the United States in ---- effect from time to time. If, at any time, GAAP changes in a manner which will materially affect the calculations determining compliance by the Borrowers with any of the covenants in Section 6.1, such covenants shall continue to be calculated in accordance with GAAP in effect prior to such changes in GAAP. "Governmental Authority": any nation or government, any federal, state or ---------------------- other political subdivision thereof and any federal, state or local entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any -------------------- ------------------- obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counter-indemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") ------------------- of any other third Person (the "primary obligor") in any manner, whether --------------- directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall -------- ------- not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrowers in good faith. "Guarantees": the guarantees made by each of the Guarantors and all other ---------- guarantees executed by a Guarantor in favor of the Agent for the benefit of the Lenders, in form and substance substantially identical to those executed in connection with the Original Credit Agreement, as the same may be amended or modified from time to time in accordance with the terms hereof. "Guarantor Collateral": all of the property (tangible or intangible) -------------------- purported to be subject to the lien or security interest purported to be created by any mortgage, deed of trust, security agreement, pledge agreement, assignment or other security document heretofore or -9- hereafter executed by any Guarantor as security for all or part of the Obligations or the Guarantees. "Guarantor Collateral Documents": the Guarantor Security Agreements, all ------------------------------ notices of security interests in deposit accounts requested by the Agent pursuant to the Guarantor Security Agreements, Form UCC-1 Financing Statements and amendments thereto and any other document encumbering the Guarantor Collateral or evidencing or perfecting a security interest therein in favor of the Agent for the benefit of the Lenders executed by any Guarantor. "Guarantor Security Agreements": (i) each security agreement, in form and ----------------------------- substance substantially identical to those executed in connection with the Original Credit Agreement, made by each Subsidiary in favor of the Agent, for the benefit of the Lenders and (ii) the Pledge Agreements, as the same may be amended from time to time in accordance with the terms hereof. "Guarantors": (i) each License Subsidiary, (ii) each Pledgor and (iii) ---------- each Subsidiary of each Borrower (to the extent not referred to in clause (i)). "Incremental Loan": as defined in Section 2.2(a). ---------------- "Incremental Loan Commitment": with respect to each Lender having an --------------------------- Incremental Loan Commitment, the commitment listed as its "Incremental Loan Commitment" in the Activation Notice to make Incremental Loans hereunder through its Applicable Lending Office, as the same may be adjusted pursuant to the provisions hereof. "Incremental Loan Commitment Expiration Date": November 10, 2006 or such ------------------------------------------- earlier date as the Aggregate Incremental Loan Commitment shall expire (whether by acceleration, reduction to zero or otherwise). "Incremental Loan Commitment Percentage": with respect to each Incremental -------------------------------------- Loan Lender, the percentage equivalent of the ratio which such Incremental Loan Lender's Incremental Loan Commitment bears to the Aggregate Incremental Loan Commitment. "Incremental Loan Lenders": each Lender having an Incremental Loan ------------------------ Commitment and/or which shall have Incremental Loans outstanding. "Incremental Note" and "Incremental Notes": as defined in Section 2.2(c). "Indebtedness": of any Person at any date, without duplication, (a) all ------------ indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than (i) current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and (ii) current income taxes) or which is evidenced by a note, bond, debenture or similar instrument, excluding Program Obligations, (b) all obligations of such Person under Capitalized Lease Obligations, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (e) all obligations of such Person, whether absolute or contingent, in respect of letters of credit opened for the account of such Person (other -10- than any letters of credit opened for the purpose of facilitating the purchase of goods and services in the ordinary course of business and having a term of not more than 360 days), (f) all obligations of such Person under Non-Compete Agreements and (g) all Guarantee Obligations of such Person in respect of any indebtedness, obligations or liabilities of any other Person of the type referred to in clauses (a) through (g) of this definition. "Insolvency": with respect to any Multiemployer Plan, the condition that ---------- such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. --------- "Intellectual Property": as defined in Section 3.5. --------------------- "Interest Expense": as of any date, for the fiscal quarter most recently ---------------- ended and the immediately preceding three fiscal quarters, (A) the sum of (i) the amount of all interest on Total Debt which was paid, payable and/or accrued for such period (without duplication of previous amounts), (ii) all commitment, letter of credit or line of credit fees paid, payable and/or accrued for such period (without duplication of previous amounts) to any lender in exchange for such lender's commitment to lend and (iii) net amounts payable (or receivable) under all Interest Rate Agreements, less (B) all interest income. ---- "Interest Payment Date": (a) as to any Base Rate Loan, the last day of --------------------- each March, June, September and December to occur while the Loans are outstanding, (b) as to any LIBOR Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any LIBOR Loan having an Interest Period longer than three months, each day which is at the end of each three month-period within such Interest Period after the first day of such Interest Period and the last day of such Interest Period and (d) for each of (a), (b) and (c) above, on the day on which the Loans become due and payable in full or are paid or prepaid in full. "Interest Period": with respect to any LIBOR Loan: --------------- (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one, two, three or six months thereafter, as selected by the Borrowers in their notice of borrowing or Continuation Notice, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one, two, three or six months thereafter, as selected by the Borrowers by irrevocable notice to the Agent not less than three Eurodollar Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are - -------- subject to the following: (i) if any Interest Period pertaining to a LIBOR Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such -11- Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the date final payment is due on the Revolving Loans or the Incremental Loans, as applicable, shall end on the date of such final payment; (iii) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (iv) the Borrowers shall select Interest Periods so as not to require a payment or prepayment of any LIBOR Loan during an Interest Period for the Revolving Loans or the Incremental Loans. "Interest Rate Agreement": any interest rate protection agreement, ----------------------- interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement entered into pursuant to Section 5.13 with any Lender or any Affiliate of a Lender under which any Borrower is a party or a beneficiary. "Investment Company Act": as defined in Section 3.22. ---------------------- "KINT-FM": KINT-FM, El Paso, Texas. ------- "KNVO Mortgage Indebtedness": that certain debt of Entravision to the KNVO -------------------------- Mortgage Lender, in a principal amount not exceeding $2,000,000, secured by the KNVO Purchase Money Mortgage. "KNVO Mortgage Lender": the commercial mortgage lender extending the KNVO -------------------- Mortgage Indebtedness to Entravision. "KNVO Purchase Money Mortgage": that certain first-priority mortgage ---------------------------- executed by Entravision in favor of the KNVO Mortgage Lender, encumbering the KNVO Real Property. "KNVO Real Property": that certain real property to be owned by ------------------ Entravision and known as Lot 6-A, Block One (1), Market Center Subdivision, McAllen, Hidalgo County, Texas for use in connection with the operation of KNVO- TV, McAllen, Texas. "K06MB LMA": that certain Local Marketing Agreement dated as of September --------- 29, 1995 between Park Place Broadcasting, as licensee, and Las Tres Palmas, as operator, with regard to station K05MB, Indio, California, as it may be amended or modified from time to time in accordance with the Loan Documents. "K06MB Option Agreement": that certain Option Agreement dated as of ---------------------- September 29, 1995 between Park Place Broadcasting, as licensee and Las Tres Palmas, as operator, with regard to station K05MB, Indio, California, as it may be amended or modified from time to time in accordance with the Loan Documents. -12- "KSMS": KSMS-TV, Monterey, California. ---- "KSVE(AM)": KSVE(AM), El Paso, Texas. -------- "Lease Expense": for any period, the aggregate minimum rental obligations ------------- payable in respect of such period under leases of real and/or personal property (net of income from subleases thereof), whether or not such obligations are reflected as liabilities or commitments on a consolidated balance sheet or in the notes thereto. "Lenders": as defined in the preamble hereto and Section 8.8 hereof. When ------- used in any Collateral Document, Guarantee or Guarantor Collateral Document such term shall be deemed to include Affiliates of Lenders (and any Person that was a Lender or an Affiliate of a Lender at the time of its entry into an Interest Rate Agreement), to the extent the Borrowers have Obligations to such Person arising under an Interest Rate Agreement, it being understood that such documents shall secure such Obligations ratably with all other Obligations. "Letter of Credit": as defined in Section 2.1(a). ---------------- "Letter of Credit Amount": the stated maximum amount available to be drawn ----------------------- under a particular Letter of Credit, as such amount may be reduced or reinstated from time to time in accordance with the terms of such Letter of Credit. "Letter of Credit Request": a request by the Borrowers for the issuance of ------------------------ a Letter of Credit, on the Agent's standard form of Application for Irrevocable Standby Letter of Credit, the current form of which is attached hereto as Exhibit G, and containing terms and conditions satisfactory to the Agent in its sole discretion. "LIBOR": with respect to each day during each Interest Period pertaining ----- to a LIBOR Loan, the rate of interest determined by the Agent to be the rate per annum at which deposits in dollars would be offered to the Agent by leading banks in the London Interbank Market at or about 9:00 a.m., Los Angeles time, two Eurodollar Business Days prior to the beginning of such Interest Period, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its LIBOR Loan to be outstanding during such Interest Period. "LIBOR Adjusted Rate": with respect to each day during each Interest ------------------- Period pertaining to a LIBOR Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): LIBOR ----------------------- 1.00 - LIBOR Reserve Requirements "LIBOR Loans": Loans the rate of interest applicable to which is based ----------- upon LIBOR. "LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan, the -------------------------- aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve -13- System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such Federal Reserve System. "License Subsidiaries": the Entravision License Subsidiary and one or more -------------------- additional wholly-owned Subsidiaries of the Borrowers or any Subsidiary formed solely for the purpose of holding Media Licenses and FCC files and records with respect thereto. "Lien": any mortgage, pledge, hypothecation, assignment, deposit ---- arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Capitalized Lease Obligation having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing). "Loan": a Revolving Loan or an Incremental Loan. ---- "Loan Documents": this Agreement, the Notes, any Letter of Credit Requests -------------- that are executed by the Borrowers, the Letters of Credit, the Collateral Documents, the Subordination Agreement, the Guarantor Collateral Documents, the Consents to Assign, the Guarantees, any Interest Rate Agreements and any other agreement executed by an Obligor in connection therewith and herewith including, but not limited to, UCC-1 Financing Statements, as such agreements and documents may be amended, supplemented and otherwise modified from time to time in accordance with the terms hereof. "Luery Trust": Carol Kruidenier Luery TTE, Carol K. Luery Revocable Trust ----------- UA Dated 7/27/89. "Majority Incremental Loan Lenders": Incremental Loan Lenders having --------------------------------- Incremental Loan Commitments equal to or more than 51% of the Aggregate Incremental Loan Commitment, or, if the Incremental Loan Commitments have terminated, Lenders with outstanding Incremental Loans having an unpaid principal balance equal to or more than 51% of the unpaid principal balance of all Incremental Loans outstanding, excluding from such calculation Incremental Loan Lenders which have failed or refused to fund an Incremental Loan when required to do so. "Majority Lenders": Lenders having Commitments equal to or more than 51% ---------------- of the Aggregate Commitment, or, if any Commitment has terminated, with respect to such Commitment, Lenders with outstanding Loans and/or participations in Letters of Credit (if applicable) having an unpaid principal balance equal to or more than 51% of the sum of (i) the unpaid principal balance of all Loans outstanding and (ii) the aggregate Letter of Credit Amount (if applicable), excluding from such calculation Lenders which have failed or refused to fund a Loan when required to do so. "Majority Revolving Loan Lenders": Revolving Loan Lenders having Revolving ------------------------------- Loan Commitments equal to or more than 51% of the Aggregate Revolving Loan Commitment, or, if -14- the Revolving Loan Commitments have terminated, Lenders with outstanding Revolving Loans and/or participations in Letters of Credit having an unpaid principal balance equal to or more than 51% of the sum of (i) the unpaid principal balance of all Revolving Loans outstanding and (ii) the aggregate Letter of Credit Amount, excluding from such calculation Lenders which have failed or refused to fund a Revolving Loan when required to do so. "Management Fees": as defined in Section 6.13. --------------- "Managing Members": with respect to Entravision, Walter F. Ulloa and ---------------- Philip C. Wilkinson. "Margin Stock": as defined in Regulation U. ------------ "Material Adverse Effect": a material adverse effect on (a) the business, ----------------------- operations, property, condition or prospects (financial or otherwise) of Entravision and its Subsidiaries (taken as a whole), (b) the ability of Entravision and its Subsidiaries (taken as a whole) to perform their respective obligations under the Loan Documents or (c) the validity or enforceability of the Loan Documents or the rights or remedies of the Agent and the Lenders hereunder or thereunder. "Material Contracts": as defined in Section 3.8. ------------------ "Material Lease": each lease referred to on Schedule 1.1. -------------- "Maximum Incremental Loan Facility": $100,000,000 in principal amount of --------------------------------- Incremental Loans. "Maximum Total Debt Ratio": for the Borrowers and their Subsidiaries on a ------------------------ consolidated basis, the ratio of Total Debt to Operating Cash Flow. "Media Licenses": any franchise, license, permit, certificate, ordinance, -------------- approval or other authorization, or any renewal or extension thereof, from any federal, state or local government or governmental agency, department or body that is necessary for the broadcast or other operations of the Borrowers or any Subsidiaries. "Member": (a) any Person who at the time of execution hereof is a member ------ of any Borrower that is organized as a limited liability company or any successor, heir, personal representative, executor, administrator or authorized assignee thereof and (b) any other Person subsequently added as a Member of any such Borrower (with the consent of Lenders) or any successor, heir, personal representative, executor, administrator or authorized assignee thereof. "Minority Shareholders": the Luery Trust (as to the 10.20% interest in --------------------- Cabrillo owned by it) and Univision, if Univision shall exercise the Univision Option. "Mortgage Modifications": modifications to the Existing Mortgages, each in ---------------------- form and substance satisfactory to the Agent. -15- "Mortgages": the Existing Mortgages, and each other mortgage, deed of --------- trust, collateral assignment of leases and related documents made from time to time by any Borrower or any Subsidiary in favor of the Agent, for the benefit of the Lenders, in respect of certain of the Properties, securing the Obligations to the extent provided therein, in form and substance satisfactory to the Agent, as the same may be amended from time to time in accordance with the terms hereof. "Multiemployer Plan": a plan which is a multiemployer plan as defined in ------------------ Section 4001(a)(3) of ERISA. "Net Asset Value": as of any date of determination, with respect to the --------------- Borrowers and their Subsidiaries on a consolidated basis, Operating Cash Flow for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters multiplied by eight, less Total Debt. ---- "Net Income": for the Borrowers and their Subsidiaries on a consolidated ---------- basis, net income as determined in accordance with GAAP. "Net Operating Revenue": with respect to the Stations for any period (i) --------------------- all times sales, including barter and trade and television subscription revenue and all affiliate compensation received from Univision less (ii) advertising ---- commissions, music license fees and all similar commissions and fees paid by the Borrowers, calculated in accordance with GAAP. Unless otherwise agreed in writing by the Agent, barter and trade sales shall be valued at the fair market value of the goods or services received by the Borrowers. "Net Proceeds": (A) with respect to any Asset Disposition, the net amount ------------ equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Asset Disposition minus the sum of (a) the reasonable fees, ----- commissions and other out-of-pocket expenses incurred by the Borrowers or any of their Subsidiaries in connection with such Asset Disposition (other than amounts payable to Affiliates of the Person making such disposition), (b) Indebtedness, other than the Loans, required to be paid as a result of such Asset Disposition and (c) federal, state and local taxes incurred and paid in connection with such Asset Disposition; and (B) with respect to any Equity Offering, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Equity Offering minus the reasonable fees, commissions and ----- other out-of-pocket expenses incurred by the Borrowers in connection with such Equity Offering (other than amounts payable to Affiliates of the Person making such Equity Offering). "Net Working Investment": for the Borrowers and their Subsidiaries on a ---------------------- consolidated basis, (i) current assets (excluding cash and permitted liquid investments) less (ii) current liabilities (excluding the current portion of Total Debt). -16- "Non-Compete Agreements": all agreements pursuant to which any Borrower or ---------------------- any Station has agreed to make payments (whether in cash or in kind) to another Person for the agreement of such Person not to compete with such Borrower or such Station in a given area. "Nonrecourse Guarantee": each nonrecourse guarantee in form and substance --------------------- substantially identical to those executed in connection with the Original Credit Agreement, made by each Pledgor in favor of the Agent, for the benefit of the Lenders, as the same may be amended from time to time in accordance with the terms hereof. "Note": a Revolving Note or an Incremental Note, as the case may be, and ---- "Notes" shall mean the Revolving Notes and/or the Incremental Notes, as the case - ------ may be. "Note Purchase Agreement": the Subordinated Note Purchase and Option ----------------------- Agreement dated as of December 30, 1996, among Univision, the Borrowers and the Managing Members, as the same may be amended from time to time in accordance with the terms hereof. "Obligations": the unpaid principal of and interest on (including, without ----------- limitation, interest accruing after the maturity of the Incremental Loans and the Revolving Loans and interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrowers, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding and whether or not at a default rate) the Notes, the obligation to reimburse drawings under Letters of Credit (including the contingent obligation to reimburse any drawings under outstanding Letters of Credit), all obligations of the Borrowers to any Lender or Affiliate of a Lender (or any Person that was a Lender or Affiliate of a Lender at the time of its entry into an Interest Rate Agreement) arising under any Interest Rate Agreement, and all other obligations and liabilities of the Borrowers to the Agent and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the Notes, the Letters of Credit, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees and disbursements of counsel, and the allocated reasonable cost of internal counsel, to the Agent or the Lenders that are required to be paid by the Borrowers pursuant to the terms of this Agreement) or otherwise. "Obligor": each Borrower, each Subsidiary, each Guarantor and any other ------- Person (other than a Lender) obligated under any Loan Document. "Occupancy Agreements": as defined in Section 5.15. -------------------- "Operating Agreement": that certain First Amended and Restated Operating ------------------- Agreement for Entravision Communications Company, L.L.C. dated December 30, 1996, as amended by Amendment No. 1 to Amended and Restated Operating Agreement dated to be effective as of January 23, 1997, Second Amendment to the First Amended and Restated Operating Agreement dated to be effective as of December 31, 1997 and Third Amendment to the First Amended and Restated Operating Agreement dated to be effective as of November [10], 1998 and as such Agreement may be further amended from time to time in accordance with the terms hereof. -17- "Operating Cash Flow": for any period, for the fiscal quarter most ------------------- recently ended and the immediately preceding three fiscal quarters, Net Income after eliminating extraordinary gains and losses, plus (i) provisions for taxes, ---- (ii) depreciation and amortization (including amortization of Program Payments), (iii) Interest Expense, (iv) permitted termination payments owing by the Borrowers resulting from early termination of a time brokerage agreement, local marketing agreement or similar agreement and (v) other non-cash charges, all to the extent deducted from the computation of Net Income, but after deducting, without duplication, (A) Program Payments made or scheduled to be made, (B) non- cash revenues, (C) Management Fees and (D) Corporate Overhead, all to the extent included in the calculation of Net Income. "Option Agreement": any option or similar agreement providing for any ---------------- Borrower or its Subsidiaries to purchase the stock or assets of any Person owning any radio or television station or assets used or useful in the operation of any radio or television station, including the KO6MB Option Agreement. "Organic Documents": relative to any entity, its certificate and articles ----------------- of incorporation or organization, its by-laws or operating agreements, and all Equityholder Agreements, voting agreements and similar arrangements applicable to any of its authorized shares of capital stock, its partnership interests or its member interests, and any other arrangements relating to the control or management of any such entity (whether existing as corporation, a partnership, a limited liability company or otherwise). "Participant": as defined in Section 9.6(b). ----------- "PBGC": the Pension Benefit Guaranty Corporation established pursuant to ---- Subtitle A of Title IV of ERISA or any successor thereto. "Person": any individual, firm, partnership, joint venture, corporation, ------ association, limited liability company, business enterprise trust, unincorporated organization, government or department or agency thereof or other entity, whether acting in an individual, fiduciary or other capacity. "Plan": as to any Person, any plan (other than a Multiemployer Plan) ---- subject to Title IV of ERISA maintained for employees of such Person or any ERISA Affiliate of such Person (and any such plan no longer maintained by such Person or any of such Person's ERISA Affiliates to which such Person or any of such Person's ERISA Affiliates has made or was required to make any contributions within any of the five preceding years). "Pledge Agreements": each pledge agreement in form and substance ----------------- substantially identical to those executed in connection with the Original Credit Agreement, made by each Pledgor in favor of the Agent, for the benefit of the Lenders, as the same may be amended from time to time in accordance with the terms hereof. "Pledgor": each holder of an equity interest in any Borrower, other than ------- (i) any Borrower or (ii) the Minority Shareholders. "Program Contracts": all contracts for television, film, programs, music ----------------- and related audio rights and syndicated series exhibition rights acquired under license agreements. -18- "Program Obligations": all obligations in respect of the purchase, use, ------------------- license or acquisition of programs, programming materials, films and similar assets used in connection with the business and operations of the Borrowers. "Program Payments": for any period the sum (determined on a consolidated ---------------- basis and without duplication) of all payments by the Borrowers made or scheduled to be made during such period in respect of Program Obligations. "Program Services Agreements": any local marketing agreement, time --------------------------- brokerage agreement, program services agreement or similar agreement providing for any Borrower or its Subsidiaries (other than License Subsidiaries) to program or sell advertising on all or any portion of the broadcast time of any television or radio station, including the K06MB LMA. "Prohibited Transaction": with respect to any Plan, a prohibited ---------------------- transaction (as defined in Section 406 of ERISA) with respect to such Plan. "Properties": the collective reference to the real and personal property ---------- owned, leased, used, occupied or operated, under license or permit, (i) by the Borrowers and the Guarantors (other than the Pledgors) and (ii) by the Pledgors, to the extent encumbered by a Pledge Agreement. "Purchasing Lenders": as defined in Section 9.6(c). ------------------ "Register": as defined in Section 9.6(d). -------- "Regulation D": Regulation D of the Board of Governors of the Federal ------------ Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto. "Regulation U": Regulation U of the Board of Governors of the Federal ------------ Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto. "Reorganization": with respect to any Multiemployer Plan, the condition -------------- that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ---------------- ERISA, other than those events as to which the thirty day notice period is waived under PBGC regulations. "Requirement of Law": as to any Person, the Organic Documents of such ------------------ Person, and any law, treaty, rule or regulation, determination or policy statement or interpretation of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": with respect to any Person, the chief executive ------------------- officer, the president, the managing member or members (as applicable, with respect to any limited liability company), any executive vice president, any senior vice president or any vice president or, with respect to financial matters, the chief financial officer, treasurer or controller; provided that, -------- ---- with -19- respect to any Borrower (other than Entravision), a "Responsible Officer" shall be a Responsible Officer of Entravision to the extent such authority has been so delegated pursuant to resolutions of such Borrower delivered to the Agent. "Restricted Payments": as defined in Section 6.6. ------------------- "Revolving Loan": as defined in Section 2.1(a). -------------- "Revolving Loan Commitment": with respect to each Lender having a ------------------------- Revolving Loan Commitment, its commitment listed as its "Revolving Loan Commitment" on the signature pages hereto to make Revolving Loans and participate in Letters of Credit hereunder through its Applicable Lending Office, as the same shall be adjusted from time to time pursuant to this Agreement. "Revolving Loan Commitment Expiration Date": November 10, 2006 or such ----------------------------------------- earlier date as the Aggregate Revolving Loan Commitment shall expire (whether by acceleration, reduction to zero or otherwise). "Revolving Loan Commitment Percentage": with respect to each Revolving ------------------------------------ Loan Lender, the percentage equivalent of the ratio which such Revolving Loan Lender's Revolving Loan Commitment bears to the Aggregate Revolving Loan Commitment, as such Revolving Loan Lender's Revolving Loan Commitment and the Aggregate Revolving Loan Commitment may be adjusted from time to time pursuant to the terms hereof. "Revolving Loan Lender": each Lender having a Revolving Loan Commitment --------------------- and/or which shall have (i) Revolving Loans outstanding and/or (ii) participations in Letters of Credit which are outstanding. "Revolving Loan Leverage Level": if the Maximum Total Debt Ratio shall be ----------------------------- greater than or equal to 6.50:1, the Revolving Loan Leverage Level shall be 1; if the Maximum Total Debt Ratio shall be less than 6.50:1 and greater than or equal to 6.00:1, the Revolving Loan Leverage Level shall be 2; if the Maximum Total Debt Ratio shall be less than 6.00:1 and greater than or equal to 5.50:1, the Revolving Loan Leverage shall be 3; if the Maximum Total Debt Ratio shall be less than 5.50:1 and greater than or equal to 5.00:1, the Revolving Loan Leverage Level shall be 4; if the Maximum Total Debt Ratio shall be less than 5.00:1 and greater than or equal to 4.50:1, the Revolving Loan Leverage Level shall be 5; if the Maximum Total Debt Ratio shall be less than 4.50:1 and greater than or equal to 4.00:1, the Revolving Loan Leverage Level shall be 6; if the Maximum Total Debt Ratio shall be less than 4.00:1, the Revolving Loan Leverage Level shall be 7. "Revolving Note" and "Revolving Notes": as defined in Section 2.1(c). ------------------------------------ "Security Agreement": the Amended and Restated Security Agreement in form ------------------ and substance reasonably satisfactory to the Majority Lenders, made by the Borrowers in favor of the Agent, for the benefit of the Lenders, in respect of the tangible and intangible personal property of the Borrowers described therein, as the same may be amended from time to time in accordance with the terms hereof. -20- "Senior Debt": Total Debt other than Subordinated Indebtedness. ----------- "Single Employer Plan": any Plan which is covered by Title IV of ERISA, -------------------- but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, that: ------- (i) the present fair salable value of such Person's assets is in excess of the total amount of the probable liability on such Person's liabilities; (ii) such Person is able to pay its debts as they become due; and (iii) such Person does not have unreasonably small capital to carry on such Person's business as theretofore operated and all businesses in which such Person is about to engage. "Station": any radio station, any full power television station, low power ------- television station, any translator and any other television system now or hereafter owned, leased or operated by the Borrowers or any of their Subsidiaries. "Subordinated Indebtedness": the sum of (i) Indebtedness of the Borrower ------------------------- under the Univision Investment Documents and (ii) all other Indebtedness of the Borrowers which is subordinated to the payment of the Obligations on terms and conditions satisfactory to the Majority Lenders as evidenced by their written consent thereto prior to the incurrence of such Indebtedness. "Subordination Agreement": the Univision Subordination Agreement. ----------------------- "Subsidiary": as to any Person at any time of determination, a ---------- corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries or Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrowers. "Taxes": as defined in Section 2.14(a). ----- "Tecate Acquisition": the investment by Entravision, pursuant to the ------------------ Tecate Letter Agreement, in (i) a minority interest in a Mexican entity which is to own the Mexican concession for XHTEB-TV, Channel 49, Tecate, Mexico (which is, as of the Closing Date, in the process of being constructed), and (ii) 100% ownership of a Mexican entity which is to have the right to program such station. "Tecate Letter Agreement": that certain letter agreement dated as of May ----------------------- 6, 1998 among Entravision, Televisora Alco, S.A. de C.V., a Mexican corporation, Comercializadora Frontera -21- Norte S.A. de C.V., a Mexican corporation, and the other parties referred to therein, as amended from time to time in accordance with the terms of this Agreement. "Termination Event": (i) a Reportable Event, (ii) the institution of ----------------- proceedings to terminate a Single Employer Plan by the PBGC under Section 4042 of ERISA, (iii) the appointment by the PBGC of a trustee to administer any Single Employer Plan or (iv) the existence of any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment by the PBGC of a trustee to administer, any Single Employer Plan. "Total Debt": the aggregate principal amount of all Indebtedness ---------- (including Subordinated Indebtedness and Capitalized Lease Obligations) of the Borrowers (but excluding the Univision Subordinated Note). "Total Debt Service": as of any date, for the fiscal quarter most recently ------------------ ended and the immediately preceding three fiscal quarters, the sum of (i) Interest Expense and (ii) regularly scheduled principal payments due on Total Debt (excluding optional and mandatory prepayments but including principal payments on Revolving Loans due in connection with reductions in the Revolving Loan Commitment). "Total Interest Coverage Ratio": the ratio of Operating Cash Flow to ----------------------------- Interest Expense. "Tranche": the collective reference to LIBOR Loans the Interest Periods ------- with respect to all of which begin on the same date and end on the same later date (whether or not such LIBOR Loans shall originally have been made on the same day). "Transferee": as defined in Section 9.6(f). ---------- "Type": as to any Incremental Loan or any Revolving Loan, its nature as a ---- Base Rate Loan or a LIBOR Loan. "Univision": as applicable, Univision Communications, Inc., a Delaware --------- corporation, or The Univision Network Limited Partnership, a Delaware limited partnership. "Univision Investment Documents": the Note Purchase Agreement, the ------------------------------ Univision Subordinated Note, and such other documents as may relate to the Univision Subordinated Note, in form and substance acceptable to the Agent, as the same may be amended from time to time in accordance with the terms hereof. "Univision Option": Univision's option, pursuant to Section 3 of the ---------------- Univision Subordinated Note, to purchase Class A Membership Units in Entravision. "Univision Subordinated Note": that certain Non-Negotiable Subordinated --------------------------- Note dated December 30, 1996, executed by Entravision in favor of Univision in the principal amount of $10,000,000, as the same may be amended from time to time in accordance with the terms hereof. -22- "Univision Subordination Agreement": that certain Amended and Restated --------------------------------- Subordination Agreement in form and substance satisfactory to the Agent, made by Univision in favor of the Agent, for the benefit of the Lenders, with regard to the Univision Investment Documents, as the same may be amended from time to time in accordance with the terms hereof. "Voting Control": (i) with respect to any corporation, the power to elect -------------- a majority of the board of directors of such corporation and (ii) with respect to Entravision, ownership of a Majority in Interest (as defined in the Operating Agreement) of each class of membership units of Entravision having voting power. 1.2 Other Definitional Provisions. ----------------------------- (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes, any other Loan Document or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein, in the Notes, in any other Loan Document, and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (e) For the purpose of determining financial covenant compliance hereunder for any period, acquisitions, divestitures, and asset sales occurring during such period will be included in the calculations for such period on a pro forma basis, and will be deemed to have occurred on the first day of such period. SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS 2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment ---------------------------------------------------------------- Amounts. - ------- (a) Subject to the terms and conditions hereof, each Lender having a Revolving Loan Commitment severally agrees to (i) make loans on a revolving credit basis through its Applicable Lending Office to the Borrowers from time to time from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date (each a "Revolving Loan", and collectively, the "Revolving Loans") in accordance with the provisions of this Agreement and (ii) participate through its Applicable Lending Office in letters of credit issued for the account of the Borrowers pursuant to Section 2.3 from time to time from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date (each a "Letter of Credit", and collectively, the "Letters of Credit"); provided, however, that the sum of (A) the aggregate -23- principal amount of all Revolving Loans outstanding, (B) the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (C) the aggregate amount of unreimbursed drawings under all Letters of Credit shall not exceed the Aggregate Revolving Loan Commitment at any time; and provided, further, that the sum of (x) the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (y) the aggregate amount of unreimbursed drawings under all Letters of Credit shall not exceed $10,000,000 at any time. Within the limits of each Revolving Loan Lender's Revolving Loan Commitment, the Borrowers may borrow, have Letters of Credit issued for the Borrowers' account, prepay Revolving Loans, reborrow Revolving Loans, and have additional Letters of Credit issued for the Borrowers' account after the expiration of previously issued Letters of Credit. The principal amount of each Revolving Loan Lender's (A) Revolving Loan and (B) participation in a Letter of Credit shall be in an amount equal to the product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage (expressed as a fraction) and (ii) the total amount of the Revolving Loan or Revolving Loans, or the Letter of Credit or Letters of Credit, requested; provided that, in no event shall any Revolving Loan Lender be obligated to make - -------- ---- a Revolving Loan or participate in a Letter of Credit if after giving effect to such Revolving Loan or such participation the sum of such Revolving Loan Lender's (x) Revolving Loans outstanding, (y) Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (z) Revolving Loan Commitment Percentage of the aggregate amount of unreimbursed drawings under all Letters of Credit would exceed its Revolving Loan Commitment or if the amount of such requested Revolving Loan or such Revolving Loan Lender's Revolving Loan Commitment Percentage of such Letter of Credit is in excess of such Revolving Loan Lender's Available Revolving Loan Commitment. (b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrowers and notified to the Agent in accordance with either Section 2.1(d) or 2.6. Each Revolving Loan Lender may make or maintain its Revolving Loans or participate in Letters of Credit to or for the account of the Borrowers by or through any Applicable Lending Office. (c) The Revolving Loans made by each Revolving Loan Lender to the Borrowers shall be evidenced by a promissory note of the Borrowers, substantially in the form of Exhibit A (a "Revolving Note"), with appropriate -------------- insertions therein as to payee, date and principal amount, payable to the order of such Revolving Loan Lender and representing the obligations of the Borrowers to pay the aggregate unpaid principal amount of all Revolving Loans made by such Revolving Loan Lender to the Borrowers pursuant to Section 2.1(a) or 2.3(c), with interest thereon as prescribed in Sections 2.8 and 2.9. Each Revolving Loan Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Revolving Loans made to the Borrowers, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of LIBOR Loans, the length of each Interest Period with respect thereto, in the books and records of such Revolving Loan Lender, and any such recordation shall constitute prima facie evidence of ----- ----- the accuracy of the information so recorded. The failure of any Revolving Loan Lender to make any such recordation or notation in the books and records of the Revolving Loan Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrowers hereunder or under the Revolving Notes. Each Revolving Note shall (i) be dated the Closing Date, (ii) provide for the payment of -24- interest in accordance with Sections 2.8 and 2.9 and (iii) be stated to be payable on the Revolving Loan Commitment Expiration Date. (d) The Borrowers shall give the Agent irrevocable written notice (which notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day prior to each proposed borrowing date or, if all or any part of the Revolving Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to each proposed borrowing date) requesting that the Revolving Loan Lenders make the Revolving Loans on the proposed borrowing date and specifying (i) the aggregate amount of Revolving Loans requested to be made, (ii) subject to Section 2.1(b), whether the Revolving Loans are to be LIBOR Loans, Base Rate Loans or a combination thereof and (iii) if the Revolving Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Revolving Loan and the respective lengths of the initial Interest Periods therefor. On receipt of such notice, the Agent shall promptly notify each Revolving Loan Lender thereof not later than 11:00 A.M., Los Angeles time, on the date of receipt of such notice. On the proposed borrowing date, not later than 12:00 noon, Los Angeles time, each Revolving Loan Lender shall make available to the Agent at its office specified in Section 9.2 the amount of such Revolving Loan Lender's pro rata share of the aggregate borrowing amount (as determined in accordance with the second paragraph of Section 2.1(a)) in immediately available funds. The Agent may, in the absence of notification from any Revolving Loan Lender that such Revolving Loan Lender has not made its pro rata share available to the Agent, on such date, credit the account of the Borrowers on the books of such office of the Agent with the aggregate amount of Revolving Loans. (e) On each date set forth below, the Aggregate Revolving Loan Commitment shall automatically reduce to the corresponding amount set forth below: Reduced Aggregate Effective Date of Reduction Revolving Loan Commitment --------------------------- ------------------------- December 31, 2000 $147,000,000 March 31, 2001 $145,500,000 June 30, 2001 $144,000,000 September 30, 2001 $139,500,000 December 31, 2001 $135,000,000 March 31, 2002 $131,250,000 June 30, 2002 $127,500,000 September 30, 2002 $123,750,000 December 31, 2002 $120,000,000 March 31, 2003 $114,750,000 June 30, 2003 $109,500,000 September 30, 2003 $104,250,000 December 31, 2003 $ 99,000,000 March 31, 2004 $ 92,250,000 June 30, 2004 $ 85,500,000 September 30, 2004 $ 78,750,000 December 31, 2004 $ 72,000,000 March 31, 2005 $ 64,500,000 -25- June 30, 2005 $ 57,000,000 September 30, 2005 $ 49,500,000 December 31, 2005 $ 42,000,000 March 31, 2006 $ 31,500,000 June 30, 2006 $ 21,000,000 September 30, 2006 $ 10,500,000 All outstanding Revolving Loans shall be due and payable, to the extent not previously paid in accordance with the terms hereof, on the Revolving Loan Commitment Expiration Date. (f) Reductions of the Aggregate Revolving Loan Commitment pursuant to this Section 2.1 or Section 2.5 shall automatically effect a reduction of the Revolving Loan Commitment of each Revolving Loan Lender to an amount equal to the product of (i) the Aggregate Revolving Loan Commitment of all Revolving Loan Lenders, as reduced pursuant to this Section 2.1 or Section 2.5 and (ii) the Revolving Loan Commitment Percentage of such Revolving Loan Lender, in each case determined immediately prior to such reduction of the Aggregate Revolving Loan Commitment on such date. (g) Upon each reduction of the Aggregate Revolving Loan Commitment, the Borrowers shall (i) pay the unused commitment fee, payable pursuant to Section 2.16, accrued on the amount of the Aggregate Revolving Loan Commitment so reduced through the date of such reduction, (ii) prepay the amount, if any, by which the sum of (A) the aggregate unpaid principal amount of the Revolving Loans, (B) the aggregate Letter of Credit Amount of all Letters of Credit outstanding and (C) the aggregate amount of unreimbursed drawings under all Letters of Credit exceeds the amount of the Aggregate Revolving Loan Commitment as so reduced, together with accrued interest on the amount being prepaid to the date of such prepayment (or, with respect to outstanding Letters of Credit, make a Cash Collateral Deposit in an amount equal to such excess to the extent such excess is not corrected by the foregoing prepayment) and (iii) compensate the Revolving Loan Lenders for their funding costs, if any, in accordance with Section 2.15. (h) Neither the Agent nor any Revolving Loan Lender shall be responsible for the obligation or Available Revolving Loan Commitment of any other Revolving Loan Lender hereunder, nor will the failure of any Revolving Loan Lender to comply with the terms of this Agreement relieve any other Revolving Loan Lender or the Borrowers of their obligations under this Agreement and the Revolving Notes. Nothing herein shall be deemed to relieve any Revolving Loan Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights which the Borrowers may have against any Revolving Loan Lender as a result of any default by such Revolving Loan Lender hereunder. (i) The Revolving Loan Commitment of each Revolving Loan Lender and the Aggregate Revolving Loan Commitment shall terminate on the Revolving Loan Commitment Expiration Date. 2.2 Incremental Loan Facility. ------------------------- -26- (a) The Borrowers, and all or certain of the Lenders who agree in writing to participate in such facility and who are selected by the Borrowers may, with the consent of the Agent, such consent not to be unreasonably withheld, at any one time during the period from and including the Closing Date to but excluding September 30, 2000, agree that such Lenders shall become Incremental Loan Lenders by executing and delivering to the Agent an Activation Notice specifying the respective Incremental Loan Commitments of the Incremental Loan Lenders and the Activation Date, and otherwise duly completed. Each Incremental Loan Lender severally agrees, on the terms and conditions of this Agreement, to make loans on a revolving credit basis through its Applicable Lending Office to the Borrowers from time to time from and including the Activation Date to but excluding the Incremental Loan Commitment Expiration Date (each an "Incremental Loan" and, collectively, the "Incremental Loans") in an aggregate principal amount up to but not exceeding its Incremental Loan Commitment. Within the limits of each Incremental Loan Lender's Incremental Loan Commitment, the Borrowers may borrow and prepay Incremental Loans and reborrow Incremental Loans hereunder. Only one Activation Notice may be given under this Agreement. Nothing in this Section 2.2(a) shall be construed to obligate any Lender to execute an Activation Notice. The principal amount of each Incremental Loan Lender's Incremental Loan shall be in an amount equal to the product of (i) such Incremental Loan Lender's Incremental Loan Commitment Percentage (expressed as a fraction) and (ii) the total amount of the Incremental Loan or Incremental Loans requested; provided that in no event shall any Incremental Loan Lender be obligated to make an Incremental Loan if after giving effect to such Incremental Loan such Incremental Loan Lender's Incremental Loans outstanding would exceed its Incremental Loan Commitment or if the amount of such requested Incremental Loan is in excess of such Incremental Loan Lender's Available Incremental Loan Commitment. (b) Subject to Sections 2.10 and 2.12, the Incremental Loans may from time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrowers and notified to the Agent in accordance with either Section 2.2(e) or 2.6. Each Incremental Loan Lender may make or maintain its Incremental Loans to the Borrowers by or through any Applicable Lending Office. (c) The Incremental Loans made by each Incremental Loan Lender to the Borrowers shall be evidenced by a promissory note of the Borrowers, substantially in the form of Exhibit B (an "Incremental Note"), with appropriate ---------------- insertions therein as to payee, date and principal amount, payable to the order of such Incremental Loan Lender and representing the obligations of the Borrowers to pay the aggregate unpaid principal amount of all Incremental Loans made by such Incremental Loan Lender to the Borrowers pursuant to Section 2.2(a), with interest thereon as prescribed in Sections 2.8 and 2.9. Each Incremental Loan Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Incremental Loans made to the Borrowers, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of LIBOR Loans, the length of each Interest Period with respect thereto, in the books and records of such Incremental Loan Lender, and any such recordation shall constitute prima facie ----- ----- evidence of the accuracy of the information so recorded. The failure of any Incremental Loan Lender to make any such recordation or notation in the books and records of the Incremental Loan Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrowers hereunder or under the Incremental -27- Notes. Each Incremental Note shall (i) be dated the date of issuance thereof, (ii) provide for the payment of interest in accordance with Sections 2.8 and 2.9 and (iii) be stated to be payable on the Incremental Loan Commitment Expiration Date. (d) The Borrowers shall give the Agent irrevocable written notice (which notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one Business Day prior each proposed borrowing date or, if all or any part of the Incremental Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to each proposed borrowing date) requesting that the Incremental Loan Lenders make the Incremental Loans on the proposed borrowing date and specifying (i) the aggregate amount of Incremental Loans requested to be made, (ii) subject to Section 2.2(b), whether the Incremental Loans are to be LIBOR Loans, Base Rate Loans or a combination thereof and (iii) if the Incremental Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Incremental Loan and the respective lengths of the initial Interest Periods therefor. Upon receipt of such notice the Agent shall promptly notify each Incremental Loan Lender thereof not later than 11:00 A.M., Los Angeles time, on the date of receipt of such notice. On the proposed borrowing date, not later than 12:00 noon, Los Angeles time, each Incremental Loan Lender shall make available to the Agent at its office specified in Section 9.2 the amount of such Incremental Loan Lender's pro rata share of the aggregate borrowing amount (as determined in accordance with the second paragraph of Section 2.2(a)) in immediately available funds. The Agent may, in the absence of notification from any Incremental Loan Lender that such Incremental Loan Lender has not made its pro rata share available to the Agent, on such date, credit the account of the Borrowers on the books of such office of the Agent with the aggregate Incremental Loans. (e) Neither the Agent nor any Incremental Loan Lender shall be responsible for the obligations or Available Incremental Loan Commitment of any other Incremental Loan Lender hereunder, nor will the failure of any Incremental Loan Lender to comply with the terms of this Agreement relieve any other Incremental Loan Lender or the Borrowers of their obligations under this Agreement and the Incremental Notes. Nothing herein shall be deemed to relieve any Incremental Loan Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights which the Borrowers may have against any Incremental Loan Lender as a result of any default by such Incremental Loan Lender hereunder. (f) On each date set forth below, the Aggregate Incremental Loan Commitment shall automatically reduce by that percentage of the initial Aggregate Incremental Loan Commitment (as in effect on the Activation Date) set forth below: -28- Percent Reduction in Aggregate Effective Date of Reduction Incremental Loan Commitment --------------------------- --------------------------- September 30, 2001 3.750% December 31, 2001 3.750% March 31, 2002 4.375% June 30, 2002 4.375% September 30, 2002 4.375% December 31, 2002 4.375% March 31, 2003 4.375% June 30, 2003 4.375% September 30, 2003 4.375% December 31, 2003 4.375% March 31, 2004 5.000% June 30, 2004 5.000% September 30, 2004 5.000% December 31, 2004 5.000% March 31, 2005 5.625% June 30, 2005 5.625% September 30, 2005 5.625% December 31, 2005 5.625% March 31, 2006 5.000% June 30, 2006 5.000% September 30, 2006 5.000% All outstanding Incremental Loans shall be due and payable, to the extent not previously paid in accordance with the terms hereof, on the Incremental Loan Commitment Expiration Date. (g) Reductions of the Aggregate Incremental Loan Commitment pursuant to this Section 2.2 or Section 2.5 shall automatically effect a reduction of the Incremental Loan Commitment of each Incremental Loan Lender to an amount equal to the product of (i) the Aggregate Incremental Loan Commitment of all Incremental Loan Lenders, as reduced pursuant to this Section 2.2 or Section 2.5 and (ii) the Incremental Loan Commitment Percentage of such Incremental Loan Lender, in each case determined immediately prior to such reduction of the Aggregate Incremental Loan Commitment on such date. (h) Upon each reduction of the Aggregate Incremental Loan Commitment, the Borrowers shall (i) pay the unused commitment fee, payable pursuant to Section 2.16, accrued on the amount of the Aggregate Incremental Loan Commitment so reduced through the date of such reduction, (ii) prepay the amount, if any, by which the aggregate unpaid principal amount of the Incremental Loans exceeds the amount of the Aggregate Incremental Loan Commitment as so reduced, together with accrued interest on the amount being prepaid to the date of such -29- prepayment and (iii) compensate the Incremental Loan Lenders for their funding costs, if any, in accordance with Section 2.15. (i) The Incremental Loan Commitment of each Lender and the Aggregate Incremental Loan Commitment shall terminate on the Incremental Loan Commitment Expiration Date. 2.3 Issuance of Letters of Credit. ----------------------------- (a) The Borrowers shall be entitled to request the issuance of Letters of Credit from time to time from and including the Closing Date to but excluding the date which is two Business Days prior to the Revolving Loan Commitment Expiration Date, by giving the Agent a Letter of Credit Request at least three (3) Business Days before the requested date of issuance of such Letter of Credit (which shall be a Business Day). Any Letter of Credit Request received by the Agent later than 10:00 a.m., Los Angeles time, shall be deemed to have been received on the next Business Day. Each Letter of Credit Request shall be made in writing, shall be signed by a Responsible Officer, shall be irrevocable and shall be effective upon receipt by the Agent. Provided that a valid Letter of Credit Request has been received by the Agent and upon fulfillment of the other applicable conditions set forth in Section 4.3, the Agent will issue the requested Letter of Credit from its office specified in Section 9.2. No Letter of Credit shall have an expiration date later than two Business Days prior to the Revolving Loan Commitment Expiration Date. (b) Immediately upon the issuance of each Letter of Credit, the Agent shall be deemed to have sold and transferred to each Revolving Loan Lender, and each Revolving Loan Lender shall be deemed to have purchased and received from the Agent, in each case irrevocably and without any further action by any party, an undivided interest and participation in such Letter of Credit, each drawing thereunder and the obligations of the Borrowers under this Agreement in respect thereof in an amount equal to the product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage and (ii) the maximum amount available to be drawn under such Letter of Credit (assuming compliance with all conditions to drawing). The Agent shall promptly advise each Revolving Loan Lender of the issuance of each Letter of Credit, the Letter of Credit Amount of such Letter of Credit, any change in the face amount or expiration date of such Letter of Credit, the cancellation or other termination of such Letter of Credit and any drawing under such Letter of Credit. (c) The payment by the Agent of a draft drawn under any Letter of Credit shall first be made from any Cash Collateral Deposit held by the Agent with respect to such Letter of Credit. After any such Cash Collateral Deposit has been applied, the payment by the Agent of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by the Agent in its individual capacity as a Lender hereunder (in such capacity, the "Drawing Lender") of a Base Rate Loan in the amount of such payment (but -------------- without any requirement of compliance with the conditions set forth in Section 4.3). In the event that any such Loan by the Drawing Lender resulting from a drawing under any Letter of Credit is not repaid by the Borrowers by 12:00 noon, Los Angeles time, on the day of payment of such drawing, the Agent shall promptly notify each other Revolving Loan Lender. Each Revolving Loan Lender shall, on the day of such notification (or if such notification is not given by 3:00 p.m., Los Angeles time, on such day, then on the next succeeding Business Day), make a Base Rate Loan, which shall be used to repay the applicable portion of the Base Rate Loan of the Drawing Lender with respect to such Letter of Credit drawing, in an amount equal to the amount of such Revolving Loan Lender's participation in such drawing for application to repay the Drawing Lender (but without any requirement of compliance with the applicable conditions set forth in Section 4.3) and shall deliver to the Agent for the account of the Drawing Lender, on the day of such notification (or if such notification is not given by -30- 3:00 p.m., Los Angeles time, on such day, then on the next succeeding Business Day) and in immediately available funds, the amount of such Base Rate Loan. In the event that any Revolving Loan Lender fails to make available to the Agent for the account of the Drawing Lender the amount of such Base Rate Loan, the Drawing Lender shall be entitled to recover such amount on demand from such Revolving Loan Lender together with interest thereon at the Federal Funds Effective Rate for each day such amount remains outstanding. (d) The obligations of the Borrowers with respect to any Letter of Credit, any Letter of Credit Request and any other agreement or instrument relating to any Letter of Credit and any Base Rate Loan made under Section 2.3(c) shall be absolute, unconditional and irrevocable and shall be paid strictly in accordance with the terms of the aforementioned documents under all circumstances, including the following: (i) any lack of validity or enforceability of any Letter of Credit, this Agreement or any other Loan Document; (ii) the existence of any claim, setoff, defense or other right that the Borrowers may have at any time against any beneficiary or transferee of any Letter of Credit (or any Person for whom any such beneficiary or transferee may be acting), the Agent, any Lender (other than the defense of payment to a Lender in accordance with the terms of this Agreement) or any other Person, whether in connection with this Agreement, any other Loan Document, the transactions contemplated hereby or thereby or any unrelated transaction; (iii) any statement or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect, or any statement therein being untrue or inaccurate in any respect whatsoever; and (iv) any exchange, release or nonperfection of any Collateral or other collateral, or any release, amendment or waiver of or consent to departure from any Guarantee, other Loan Document or other guaranty, for any of the Obligations of the Borrowers in respect of the Letters of Credit. (e) The Borrowers shall pay to the Agent for the account of the Revolving Loan Lenders with respect to each Letter of Credit issued hereunder, for the period from and including the day such Letter of Credit is issued to but excluding the day such Letter of Credit expires, a letter of credit fee equal to the product of (i) the Applicable Revolving Loan Margin for LIBOR Loans per --- annum and (ii) the Letter of Credit Amount of such Letter of Credit from time - ----- to time, such letter of credit fee to be payable quarterly in arrears on the last day of each March, June, September and December and on the expiration date of such Letter of Credit. -31- (f) The Borrowers shall pay to the Agent for its own account, with respect to each Letter of Credit issued hereunder, from time to time such additional fees and charges (including cable charges) as are generally associated with letters of credit, in accordance with the Agent's standard internal charge guidelines and the related Letter of Credit Request. (g) The Borrowers agree to the provisions in the Letter of Credit Request form; provided, however, that the terms of the Loan Documents shall take -------- ------- precedence if there is any inconsistency between the terms of the Loan Documents and the terms of said form. (h) The Borrowers assume all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Agent nor any Lender nor any of their respective officers or directors shall be liable or responsible for (i) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; or (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereof, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged. In furtherance and not in limitation of the foregoing, the Agent may accept any document that appears on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. 2.4 Optional Prepayments. The Borrowers may on the last day of any -------------------- Interest Period with respect thereto, in the case of LIBOR Loans, or at any time and from time to time, in the case of Base Rate Loans, prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable written notice, in the case of LIBOR Loans, and upon at least one Business Day's irrevocable written notice, in the case of Base Rate Loans, from the Borrowers to the Agent, specifying the date and amount of prepayment and whether the prepayment is of LIBOR Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each and whether the prepayment is of Incremental Loans or Revolving Loans, or a combination thereof, and, if a combination thereof, the amount allocable to each. Upon receipt of any such notice from the Borrowers, the Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable by the Borrowers on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Loans shall be in an aggregate principal amount of $1,000,000 and integral multiples of $250,000 in excess thereof. 2.5 Mandatory Prepayments. (a) On the day of receipt by the Borrowers or --------------------- any of their Subsidiaries of any Net Proceeds with respect to an Asset Disposition, the Borrowers shall prepay the Loans (and such prepayment shall be applied as set forth in Section 2.5(e)) and, after all Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to 100% of such Net Proceeds; provided that no prepayment shall be required with respect to an Asset - -------- ---- Disposition if (i) the consummation of such Asset Disposition would not result in (x) the Operating Cash Flow attributable to the assets subject to such Asset Disposition (based on the most recent financial statements received by the Agent under Section 5.1(a) or (b) at the time of such Asset Disposition) plus (y) the ---- Operating Cash Flow attributable to the assets subject to all prior Asset Dispositions consummated since the Closing Date (based, respectively, on the most recent financial statements received by the Agent under Section 5.1(a) or (b) at the time of such Asset Disposition) exceeding 15% of the Operating Cash Flow of the Borrowers as of the date of -32- such Asset Disposition and (ii) the Net Proceeds of any such Asset Dispositions are used, within one year of such disposition, to invest in assets of the same type and use as those disposed and with respect to which the Lenders shall have a first-priority perfected Lien (subject to Section 6.3). On or prior to the date of any Asset Disposition, the Borrowers agree to provide the Agent with calculations used by the Borrowers in determining the amount of any such prepayment (or in determining that a prepayment is not required) under this Section 2.5(a). (b) In the event that at the end of any fiscal year of the Borrowers ending on and after December 31, 1999 there shall exist Excess Cash Flow with respect to such fiscal year, then on the date which is ten Business Days after the earlier to occur of (i) the date upon which the audited financial statements of the Borrowers with respect to such fiscal year become available and (ii) the 120th day after the end of such fiscal year, the Borrowers shall prepay the Loans (and such prepayment shall be applied as set forth in Section 2.5(e)) and, after all Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to 50% of such Excess Cash Flow; provided that no such prepayment shall -------- ---- be required if the Maximum Total Debt Ratio as of the end of such fiscal year is less than 4.50:1. On or prior to the date of any prepayment required by this Section 2.5(b), the Borrowers agree to provide the Agent with the calculations, substantially in the form of Exhibit H hereto, used by the Borrowers in determining the amount of any such prepayment. (c) If the Borrowers or any of their Subsidiaries receive insurance proceeds or condemnation proceeds with respect to any of their Properties which are not fully applied (or contractually committed pursuant to contract(s) approved by the Agent in its reasonable discretion) toward the repair or replacement of such damaged or condemned Property within 90 days of the receipt thereof, the Borrowers shall, on such 90th day prepay the Loans and, after all Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to the amount of such proceeds not so applied (and such prepayment shall be applied as set forth in Section 2.5(e)). (d) In the event that the Borrowers or any of their Subsidiaries makes an Equity Offering during any period in which a Default has occurred and is continuing, the Borrowers shall immediately prepay the Loans and, after all Loans have been prepaid, make a Cash Collateral Deposit, in an amount equal to the Net Proceeds of such Equity Offering (and such prepayment shall be applied as the Agent shall elect in its sole discretion). No such prepayment shall limit or restrict the rights and remedies of the Lenders under the Loan Documents upon the occurrence and during the continuance of a Default. (e) (i) Each prepayment of the Loans pursuant to this Section 2.5 shall be applied to the outstanding amounts of Incremental Loans and Revolving Loans on a pro rata basis determined on the basis of the amount of Incremental Loans, on the one hand, and Revolving Loans, on the other hand, outstanding at the time of such prepayment. Each prepayment shall be accompanied by payment in full of all accrued interest and accrued commitment fees thereon to and including the date of such prepayment, together with any additional amounts owing pursuant to Section 2.15. (i) If, at any time, the Revolving Loans are repaid in full, additional prepayments hereunder shall be applied first, to make a Cash ----- Collateral Deposit and -33- thereafter, to permanently reduce the Aggregate Revolving Loan Commitment ---------- by an amount equal to what such prepayment would have been under this Section 2.5 if Revolving Loans had been outstanding against which to apply such prepayment. Each prepayment of the Revolving Loans and each Cash Collateral Deposit under this Section 2.5 shall be applied to permanently reduce the Aggregate Revolving Loan Commitment pro rata with respect to each of the scheduled reduction dates set forth in Section 2.1(e) remaining at such time. (ii) Each prepayment of the Incremental Loans under this Section 2.5 shall be applied to permanently reduce the Aggregate Incremental Loan Commitment pro rata with respect to each of the scheduled reduction dates set forth in Section 2.2(f) remaining at such time. (iii) Cash Collateral Deposits held by the Agent shall be applied to reimburse drawings on Letters of Credit in the order in which such drawings are presented to the Agent. Upon written request of the Borrowers with regard to any Letter of Credit for which the Agent is holding a Cash Collateral Deposit, the Agent shall release to the Borrowers any portion of such Deposit not applied to reimburse drawings thereunder upon the earliest of (i) fourteen days following expiration of such Letter of Credit according to its terms, (ii) receipt by the Agent of written acknowledgement from the beneficiary of such Letter of Credit (a "Beneficiary Acknowledgement") requesting the cancellation thereof and --------------------------- relinquishing all its rights thereunder, which Beneficiary Acknowledgement shall be accompanied by the original of such Letter of Credit and (iii) receipt by the Agent of a Beneficiary Acknowledgement and a certificate of a Responsible Officer of the Borrowers stating that thirty days have elapsed since the beneficiary of such Letter of Credit received a written request from the Borrowers to cancel and return the original of such Letter of Credit, and such beneficiary has failed to respond to such request (provided that, with respect to the preceding clause (iii), the Agent shall -------- ---- not be required to release such Deposit if the Letter of Credit to which it relates by its terms permits the transfer thereof to a successive beneficiary without the prior written consent of the Agent); provided that, -------- ---- in any case, no Default has occurred and is continuing. 2.6 Conversion and Continuation Options ----------------------------------- (a) The Borrowers may elect from time to time to convert LIBOR Loans to Base Rate Loans, by the Borrowers giving the Agent at least two Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice, provided that any such conversion of LIBOR Loans may only be made on the last day of an Interest Period with respect thereto. The Borrowers may elect from time to time to convert Base Rate Loans to LIBOR Loans by the Borrowers giving the Agent at least three Eurodollar Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice. Any such notice of conversion to LIBOR Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Agent shall promptly notify each Lender thereof. All or any part of outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein, provided that (i) any such conversion may only be made if, after giving effect thereto, Section 2.7 shall not have been contravened, (ii) no Incremental Loan may be converted into a LIBOR -34- Loan after the date that is one month prior to the Incremental Loan Commitment Expiration Date, (iii) no Revolving Loan may be converted into a LIBOR Loan after the date that is one month prior to the Revolving Loan Commitment Expiration Date and (iv) the Borrowers shall not have the right to elect to continue at the end of the applicable Interest Period, or to convert to, a LIBOR Loan if a Default shall have occurred and be continuing. (b) Any LIBOR Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrowers giving notice to the Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such LIBOR Loan, provided that no LIBOR Loan may be continued -------- as such (i) if, after giving effect thereto, Section 2.7 would be contravened, (ii) after the date that is one month prior to the Incremental Loan Commitment Expiration Date, (iii) after the date that is one month prior to the Revolving Loan Commitment Expiration Date or (iv) if a Default shall have occurred and be continuing and provided, further, that if the Borrowers shall fail to give any -------- ------- required notice as described above in this Section or if such continuation is not permitted pursuant to the preceding proviso, such Loans shall be automatically converted to Base Rate Loans on the last day of such then-expiring Interest Period. 2.7 Minimum Amounts of Tranches. All borrowings, conversions and --------------------------- continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Tranche (except Loans made pursuant to Section 2.3(c)) shall be equal to $1,000,000 or a whole multiple of $100,000 in excess thereof and, in any case, there shall not be more than 12 Tranches. 2.8 Interest Rates and Payment Dates. -------------------------------- (a) Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Adjusted Rate plus the Applicable Revolving Loan Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Revolving Loan Margin. (c) If any Default shall have occurred and be continuing, all amounts outstanding shall bear interest at a rate per annum which is the rate described in paragraph (b) of this Section plus 2% from the date of the occurrence of such Default until such Default is no longer continuing (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable on demand. (e) For purposes of determining (i) the Applicable Margin for all Loans, (ii) the Applicable Margin for the letter of credit fees referred to in Section 2.3(e) and (iii) the Maximum Total Debt Ratio for the commitment fees referred to in Section 2.16, interest rates on the Loans and such fees shall be calculated on the basis of the Maximum Total Debt Ratio set forth in the most recent Covenant Compliance Certificate received by the Agent in accordance with Section 5.1(b). For accrued and unpaid interest and fees only (no changes being made for interest or fee -35- payments previously made), changes in interest rates on the Loans, or in such fees, attributable to changes in the Applicable Margin (with respect to Loans and letter of credit fees) and changes in the Maximum Total Debt Ratio (with respect to commitment fees) caused by changes in the applicable Covenant Compliance shall be calculated upon the delivery of a Covenant Compliance Certificate and such change shall be effective (y) in the case of a Base Rate Loan or such fees, from the first day subsequent to the last day covered by the Covenant Compliance Certificate and (z) in the case of a LIBOR Loan , from the first day of the Interest Period applicable to such LIBOR Loan subsequent to the last day covered by the Covenant Compliance Certificate. If, for any reason, Entravision shall fail to deliver a Covenant Compliance Certificate when due in accordance with Section 5.1(b), and such failure shall continue for a period of ten days, the Revolving Loan Leverage Level shall be deemed to be Revolving Loan Leverage Level 1 (for purposes of determining the Applicable Margin on Loans or letter of credit fees) and the applicable rate shall be deemed to be the highest rate set forth in Section 2.16 (for purposes of determining commitment fees), as applicable, in each case retroactive to the date on which Entravision should have delivered such Covenant Compliance Certificate and shall continue until a Covenant Compliance Certificate indicating a different Revolving Loan Leverage Level is delivered to the Agent. 2.9 Computation of Interest and Fees. -------------------------------- (a) Interest on Base Rate Loans (other than Base Rate Loans based on the Federal Funds Effective Rate) shall be calculated on the basis of a 365- (or 366-, as the case may be), day year for the actual days elapsed and interest on LIBOR Loans, unused commitment fees and all other Obligations of the Borrowers shall be calculated on the basis of a 360-day year for the actual days elapsed. The Agent shall as soon as practicable notify the Borrowers and the Lenders of each determination of a LIBOR Adjusted Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the LIBOR Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Base Rate is announced or such change in the LIBOR Reserve Requirements becomes effective, as the case may be. The Agent shall as soon as practicable notify the Borrowers and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrowers and the Lenders in the absence of manifest error. 2.10 Inability to Determine Interest Rate. In the event that prior to the ------------------------------------ first day of any Interest Period: (a) the Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Adjusted Rate for such Interest Period, or (b) the Agent shall have received notice from the Majority Lenders acting in good faith that the LIBOR Adjusted Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such -36- Lenders) of making or maintaining their affected Loans during such Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Borrowers and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall accrue interest at the Base Rate, (y) Loans that were to have been converted on the first day of such Interest Period to LIBOR Loans shall be continued as Base Rate Loans and (z) any outstanding LIBOR Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Agent, no further LIBOR Loans shall be made or continued as such, nor shall the Borrowers have the right to convert Base Rate Loans to LIBOR Loans. 2.11 Pro Rata Treatment and Payments. Each borrowing by the Borrowers ------------------------------- from the Lenders hereunder, and any reduction of the Aggregate Revolving Loan Commitment or the Aggregate Incremental Loan Commitment, shall be made pro rata according to the respective Commitment Percentages of the applicable Lenders. Each payment (including each prepayment) by the Borrowers on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal and interest amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrowers hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, Los Angeles time, on the due date thereof to the Agent, for the account of the applicable Lenders, at the Agent's office specified in Section 9.2, in Dollars and in immediately available funds. The Agent shall distribute such payments to the applicable Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Loan becomes due and payable on a day other than a Eurodollar Business Day, the maturity thereof shall be extended to the next succeeding Eurodollar Business Day (and interest shall continue to accrue thereon at the applicable rate) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Eurodollar Business Day. 2.12 Illegality. Notwithstanding any other provision herein, if any ---------- change after the Closing Date in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender or Applicable Lending Office to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Base Rate Loans to LIBOR Loans shall forthwith be suspended during such period of illegality and (b) the Loans of such Lender or Applicable Lending Office then outstanding as LIBOR Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrowers shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.15. To the extent that a Lender's LIBOR Loans have been converted to Base Rate Loans pursuant to this Section 2.12, all payments and prepayments of principal that otherwise would be applied to such Lender's LIBOR Loans shall be applied instead to its Base Rate Loans. -37- 2.13 Increased Costs. --------------- (a) In the event that any change after the Closing Date in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law but, if not having the force of law, generally applicable to and complied with by banks and financial institutions of the same general type as such Lender in the relevant jurisdiction) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirements against assets held by, letters of credit or guarantees issued by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender or Applicable Lending Office which is not otherwise included in the determination of the LIBOR Adjusted Rate hereunder; or (ii) shall impose on such Lender or Applicable Lending Office any other condition; and the result of any of the foregoing is to increase the cost to the Agent of issuing or maintaining any Letter of Credit by an amount which the Agent deems to be material, or to such Lender or Applicable Lending Office, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans, or purchasing or maintaining any participation in a Letter of Credit, or to reduce any amount receivable hereunder in respect thereof then, in any such case, the Borrowers shall immediately pay to the Agent, for its own account or on behalf of such Lender or Applicable Lending Office, as applicable, upon the demand of the Agent for itself or at the request of such Lender, as applicable, any additional amounts necessary to compensate such Lender or the Agent, as applicable, for such increased cost or reduced amount receivable. If the Agent, any Lender or any Applicable Lending Office becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrowers, through the Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by the Agent or such Lender or Applicable Lending Office, through the Agent, to the Borrowers shall be conclusive evidence of the accuracy of the information so recorded, absent manifest error. This covenant shall survive the termination of this Agreement, expiration of the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. (b) If, after the date of this Agreement, the introduction of or any change in any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, affects the amount of capital required or expected to be maintained by any Lender or any corporation controlling any Lender, and such Lender (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) determines that the amount of capital maintained by such Lender or such corporation which is attributable to or based upon the Loans, the Letters of Credit, the Commitments or this Agreement must be increased as a consequence of such introduction or change by an amount deemed by such Lender to be material, then, upon demand of the Agent at the request of such -38- Lender, the Borrowers shall immediately pay to the Agent on behalf of such Lender, additional amounts sufficient to compensate such Lender or such corporation for the increased costs to such Lender or corporation of such increased capital. Any such demand shall be accompanied by a certificate of such Lender setting forth in reasonable detail the computation of any such increased costs, which certificate shall be conclusive, absent manifest error. This obligation of the Borrowers under this Section 2.13(b) shall survive repayment of the Loans, expiration of the Letters of Credit and all other amounts hereunder in full and the termination of this Agreement. 2.14 Taxes. ----- (a) All payments made by the Borrowers in respect of the Obligations shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority or any political subdivision or taxing authority thereof or therein, other than Excluded Taxes (all such non-Excluded Taxes being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Agent or any Lender in respect of the Obligations, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. The Agent or a Lender, as the case may be, shall deliver to the Borrowers a certificate in good faith setting forth the amount of such Taxes, the calculation of such Taxes and an explanation of the requirement therefor, all in reasonable detail and such certificate shall be conclusive, absent manifest error. Whenever any Taxes are payable by the Borrowers, as promptly as possible thereafter, the Borrowers shall send to the Agent, for its own account or for the account of such Lender, as the case may be, a copy of an original official receipt received by the Borrowers showing payment thereof or such other evidence of payment reasonably satisfactory to the Agent. If the Borrowers fail to pay any Taxes when due to the appropriate taxing authority or fail to remit to the Agent the required receipts or other required documentary evidence, the Borrowers shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties (and related reasonable fees and expenses of counsel) that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement, the expiration of the Letters of Credit and the payment of the Notes and all other amounts payable hereunder. (b) Each Lender that is not organized under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrowers and the Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each such Lender also agrees to deliver to the Borrowers and the Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or other manner or certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrowers and the Agent, and such extensions or renewals thereof as may reasonably be requested by the Borrowers or the Agent, unless in any such case an event beyond the control of such Lender (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any -39- such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advised the Borrowers and the Agent. Each such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. 2.15 Indemnity. The Borrowers agree to indemnify each Lender and to hold --------- each Lender harmless from and to pay each Lender within 5 Business Days of such Lender's demand the amount of any liability, loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained (including reasonable fees and expenses of counsel) which such Lender may sustain or incur as a consequence of (a) default by the Borrowers in payment when due of the principal amount of or interest on any LIBOR Loan, (b) default by the Borrowers in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrowers have given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by the Borrowers in making any prepayment after the Borrowers have given a notice thereof in accordance with the provisions of this Agreement or (d) the making by the Borrowers of a prepayment or conversion of LIBOR Loans on a day which is not the last day of an Interest Period with respect thereto. A Lender's certificate as to such liability, loss or expense shall be deemed conclusive, absent manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 2.16 Unused Commitment Fees. ---------------------- (a) The Borrowers agree to pay to the Revolving Loan Lenders an unused commitment fee to be shared pro rata among the Revolving Loan Lenders with respect to the Revolving Loan Commitments for the period from and including the Closing Date to but excluding the Revolving Loan Commitment Expiration Date, based on the average daily aggregate amount of the unused Aggregate Revolving Loan Commitment from time to time in effect and computed at the applicable per annum rate set forth below: -40- Maximum Total Commitment Debt Ratio Fee ------------ ---------- *6.00:1 0.500% **6.00:1 - *5.00:1 0.375% **5.00:1 0.250% Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Loan Commitment Expiration Date, commencing on the first such date to occur after the Closing Date. (b) The Borrowers agree to pay to the Incremental Loan Lenders following activation of the Aggregate Incremental Loan Commitment, an unused commitment fee to be shared pro rata among the Incremental Loan Lenders with respect to the Incremental Loan Commitments for the period from and including the Activation Date to but excluding the Incremental Loan Commitment Expiration Date, based on the average daily aggregate amount of the unused Aggregate Incremental Loan Commitment from time to time in effect and computed at the applicable per annum rate set forth below: Maximum Total Commitment Debt Ratio Fee ------------- ----------- *6.00:1 0.500% **6.00:1 - *5.00:1 0.375% **5.00:1 0.250% Such fee shall be payable quarterly in arrears on the last day of each March, June, September and December and the Incremental Loan Commitment Expiration Date, commencing on the first such date to occur after the Activation Date. 2.17 Mitigation of Costs. If any Lender, by changing its Applicable ------------------- Lending Office or taking any other reasonable action, so long as making such change or taking such other action is not disadvantageous to it in any financial, regulatory or other respect, can mitigate any adverse effect on the Borrowers under Section 2.10, 2.12, 2.13, or 2.14, such Lender shall take such action. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Loans and participate in the Letters of Credit, and to induce the Agent to issue the Letters of Credit, each Borrower hereby represents and warrants to the Agent and each Lender that: 3.1 Organization and Good Standing. Each Borrower and each Subsidiary (a) ------------------------------ is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has all requisite power and authority (corporate, partnership, limited liability company and otherwise) to own its properties and to conduct its business as now conducted and as currently proposed to be conducted and (c) is duly qualified to conduct business as a foreign organization and is currently in good standing in each state and jurisdiction in which it conducts business. * greater than or equal to. ** less than. -41- Each state and jurisdiction in which any Borrower or any Subsidiary is organized or is (or should be) qualified to conduct business is listed on Schedule 3.1 hereto. 3.2 Power and Authority. Each Borrower has all requisite power and ------------------- authority under applicable law and under its Organic Documents to borrow hereunder. Each Borrower and each Subsidiary has all requisite power and authority under applicable law and under its Organic Documents to execute, deliver and perform the obligations under the Loan Documents to which it is a party. Except as disclosed on Schedule 3.2 hereto, all actions, waivers and consents (corporate, regulatory and otherwise) necessary or appropriate for each Borrower and each Subsidiary to execute, deliver and perform the Loan Documents to which it is a party have been taken and/or received. 3.3 Validity and Legal Effect. This Agreement constitutes, and the other ------------------------- Loan Documents to which any Borrower or any Subsidiary is a party constitute (or will constitute when executed and delivered), the legal, valid and binding obligations of each Borrower (jointly and severally) and each Subsidiary enforceable against it in accordance with the terms thereof. 3.4 No Violation of Laws or Agreements. The execution, delivery and ---------------------------------- performance of the Loan Documents, (a) will not violate or contravene any Requirement of Law, (b) will not result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which any Borrower, any Subsidiary or any of its respective property may be bound, and (c) will not result in or require the creation of any Lien (other than pursuant to the Loan Documents ) upon or with respect to any properties of any Borrower or any Subsidiary, whether such properties are now owned or hereafter acquired. 3.5 Title to Assets; Existing Encumbrances; Intellectual and Real ------------------------------------------------------------- Property. Each Borrower and each Subsidiary has good and marketable title to all - -------- of its real and personal properties and assets, free and clear of any Liens, except the security interests granted to the Agent for the benefit of the Lenders under the Loan Documents. Schedule 3.5A hereto lists each trademark, service mark, copyright, patent, database, customized application software and systems integration software, trade secret and other intellectual property owned, licensed, leased, controlled or applied for by any Borrower or any Subsidiary (the "Intellectual Property"). To the Borrowers' knowledge, no claim --------------------- has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor do the Borrowers know of any valid basis for any such claim. To each Borrower's knowledge, the use of such Intellectual Property by the Borrowers and their Subsidiaries does not infringe on the rights of any Person, nor, to the Borrowers' knowledge, do the use by other Persons of such Intellectual Property infringe on the rights of the Borrowers and their Subsidiaries. Schedule 3.5B hereto lists each real property interest and license owned, leased or otherwise used by any Borrower or any Subsidiary, together with relevant identifying information describing, among other things, the location and use of each such real property interest or license, whether such interest is owned or leased. Each such property and asset is in good order and repair (ordinary wear and tear excepted) and is fully covered by the insurance required under the Loan Documents. Each such property and asset owned by any Borrower is titled in the current legal name of such Borrower. Each such property and asset owned by any Subsidiary is titled in the current legal name of such Subsidiary. No Borrower and no Subsidiary has used (or permitted the filing of any financing statement under) any legal or operating name at -42- any time during the twelve consecutive calendar months immediately preceding the execution of this Agreement, except as identified on Schedule 3.5C hereto. 3.6 Capital Structure and Equity Ownership. Schedule 3.6 hereto -------------------------------------- accurately and completely discloses (a) the number of shares and classes of equity ownership rights and interests of each Borrower (whether existing as common or preferred stock, general or limited partnership interests, or limited liability company membership interests, or warrants, options or other instruments convertible into such equity) and (b) the ownership thereof. All such shares and interests are validly existing, fully paid and non-assessable. In addition to the equity interests in the Borrowers set forth on Schedule 3.6, Univision is entitled to purchase Class A Membership Interests in Entravision by exercising the Univision Option. If the Univision Option were exercised on the Closing Date, Univision would be entitled to purchase an approximately 25.86% interest in Entravision. Pursuant to the terms of the Univision Investment Documents and the Operating Agreement, such interest may increase or decrease over time. 3.7 Subsidiaries, Affiliates and Investments. Schedule 3.7 hereto ---------------------------------------- accurately and completely discloses (a) each Subsidiary and Affiliate of each Borrower (other than its officers and directors) and (b) each investment in or loan to any other Person by any Borrower. 3.8 Material Contracts. Schedule 3.8 hereto accurately and completely ------------------ discloses each contract and agreement material to the financial condition or operation of any Borrower or any Subsidiary (each, a "Material Contract," and ----------------- collectively, the "Material Contracts"). No Borrower and no Subsidiary has ------------------ committed any unwaived breach or default under any Material Contract, and no Borrower has any knowledge or reason to believe that any other party to any Material Contract has or might have committed any unwaived breach or default thereof. For purposes of this Section 3.8, Program Contracts, Affiliation Agreements, Option Agreements, Material Leases and Program Services Agreements are "Material Contracts" and each Program Contract, Affiliation Agreement, Option Agreement, Material Lease and Program Services Agreement to which any Borrower or any Subsidiary is a party is described on Schedule 1.1 or 3.8, as applicable. Each of the Material Contracts is a legal, valid and binding obligation of each Borrower and Subsidiary party thereto, enforceable in accordance with its terms. The Agent has received a complete and correct copy of each of the Material Contracts (including in each case all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto and other side letters or agreements affecting the terms thereof. The Borrowers represent that the expiration dates for the Material Leases set forth on Schedule 1.1 are accurate as of the Closing Date. 3.9 Media Licenses. Each Borrower and each Subsidiary possesses all Media -------------- Licenses necessary or required in the conduct of its businesses and/or the operation of its properties. Each Media License is valid, binding and enforceable on, against and by such Borrower or such Subsidiary, as applicable. Each Media License is subsisting without any defaults thereunder or enforceable adverse limitations thereon, and no Media License is subject to any proceedings or claims opposing the issuance, renewal, development or use thereof or contesting the validity thereof. Schedule 3.9 hereto accurately and completely lists each material Media License directly or indirectly owned by each Borrower (including, whether or not otherwise "material", each Media License issued by the FCC, and further including all pending applications and renewals therefor), together with relevant identifying information describing -43- such Media License. With respect to each FCC license listed on Schedule 3.9 hereto, the description includes, among other things, the call sign, frequency, location, file number, issuance date (original or most recent renewal), and expiration date. 3.10 Taxes and Assessments. Except as disclosed on Schedule 3.10 hereto, --------------------- each Borrower and each Subsidiary has timely filed all required tax returns and reports (federal, state and local) or has properly filed for extensions of the time for the filing thereof. No Borrower has knowledge of any deficiency, penalty or additional assessment due or appropriate in connection with any such taxes. All taxes (federal, state and local) imposed upon any Borrower or any Subsidiary or any of its properties, operations or income have been paid and discharged prior to the date when any interest or penalty would accrue for the nonpayment thereof, except for those taxes being contested in good faith by appropriate proceedings diligently prosecuted and with adequate reserves reflected on the financial statements in accordance with GAAP (all as also disclosed on Schedule 3.10 hereto). There are no taxes imposed on the Borrowers or their Subsidiaries by any political subdivision or taxing authority due or payable either on or by virtue of the execution and delivery by the Borrowers, the Agent, or the Lenders of this Agreement or any other Loan Document to which the Borrowers or the Subsidiaries are party, or on any payment to be made by the Borrowers pursuant hereto or thereto. 3.11 Litigation and Legal Proceedings. Except as disclosed on Schedule -------------------------------- 3.11 hereto, there is no litigation, claim, investigation, administrative proceeding, labor controversy or similar action that is pending or, to the best of each Borrower's knowledge and information after due inquiry, threatened (i) with respect to any Loan Document or the transactions contemplated thereby or (ii) against any Borrower, any Subsidiary or any Property that, if adversely resolved, could have a Material Adverse Effect. 3.12 Accuracy of Financial Information. --------------------------------- (a) All information previously furnished to the Agent and the Lenders that was prepared by or on behalf of any Borrower concerning the financial condition and operations of any one or more Borrowers, including (i) the unaudited combined and combining financial statements of the Borrowers as of June 30, 1998 for the quarter then ended as well as for the 12 months ended as of the end of such quarter and (ii) the audited combined and combining financial statements of each Borrower as of December 31, 1997, (A) have been prepared in accordance with GAAP consistently applied (except as described in Schedule 3.12 hereto), (B) are true, accurate and complete in all material respects, (C) fairly present the financial condition of the organizations covered thereby as of the dates and for the periods covered thereby and (D) disclose all material liabilities (contingent and otherwise) of each Borrower; provided, that, with -------- ---- regard to clause (i), to the extent such financial statements relate to an Acquisition (and to periods prior to the date such Acquisition was consummated by Entravision), the foregoing representations shall be given to the best of each Borrower's knowledge. (b) Since December 31, 1997 there has been no event or condition resulting in a Material Adverse Effect. 3.13 Accuracy of Other Information. All information contained in any material application, schedule, report, certificate, or any other document given to the Agent or any Lender -44- by any Borrower or any other Person in connection with the Loan Documents is in all material respects true, accurate and complete, and no such Person has omitted to state therein (or failed to include in any such document) any material fact or any fact necessary to make such information not misleading. All projections given to the Agent or any Lender by any Borrower or any other Person on behalf of any Borrower have been prepared with a reasonable basis and in good faith making use of such information as was available at the date such projection was made. The projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the Borrowers to be reasonable at the time made and as of the Closing Date, it being recognized that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. 3.14 Compliance with Laws Generally. Each Borrower and each Subsidiary is ------------------------------ in compliance in all material respects with all Requirements of Law applicable to it, its operations and its properties. 3.15 ERISA Compliance. ----------------- (a) Each Borrower and each Subsidiary is in compliance in all material respects with all applicable provisions of ERISA, and all rules, regulations and orders implementing ERISA. (b) None of the Borrowers, any Subsidiary or any ERISA Affiliate thereof maintains or contributes to (or has maintained or contributed to) any Multiemployer Plan under which any Borrower, any Subsidiary or any ERISA Affiliate thereof could have any withdrawal liability. (c) None of the Borrowers, any Subsidiary or any ERISA Affiliate thereof sponsors or maintains any defined benefit pension plan under which there is an accumulated funding deficiency within the meaning of Section 412 of the Code, whether or not waived. (d) The liability for accrued benefits under each defined benefit pension plan that will be sponsored or maintained by any Borrower, any Subsidiary or any ERISA Affiliate thereof (determined on the basis of the actuarial assumptions utilized by the PBGC) does not exceed the aggregate fair market value of the assets under each such defined benefit pension plan. (e) The aggregate liability of each Borrower, each Subsidiary and each ERISA Affiliate thereof arising out of or relating to a failure of any employee benefit plan within the meaning of Section 3(2) of ERISA to comply with provisions of ERISA or the Code will not have a Material Adverse Effect. (f) There does not exist any unfunded liability (determined on the basis of actuarial assumptions utilized by the actuary for the plan in preparing the most recent annual report) of any Borrower, any Subsidiary or any ERISA Affiliate thereof under any plan, program or arrangement providing post- retirement, life or health benefits. (g) No Reportable Event and no Prohibited Transaction (as defined in ERISA) has occurred or is occurring with respect to any plan with which any Borrower or any Subsidiary is associated. -45- 3.16 Environmental Compliance. ------------------------ (a) Each Borrower and each Subsidiary has received all permits and filed all notifications necessary under and is otherwise in compliance in all material respects with all federal, state and local laws, rules and regulations governing the control, removal, storage, transportation, spill, release or discharge of hazardous or toxic wastes, substances and petroleum products, including, without limitation, as provided in the provisions of and the regulations under (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, (ii) the Solid Waste Disposal Act, (iii) the Clean Water Act and the Clean Air Act, (iv) the Hazardous Materials Transportation Act, (v) the Resource Conservation and Recovery Act of 1976 and (vi) the Federal Water Pollution Control Act Amendments of 1972 (all of the foregoing enumerated and non-enumerated statutes, including without limitation any applicable state or local statutes, all as amended, collectively, the "Environmental Control Statutes"). ------------------------------ (b) No Borrower or Subsidiary has given any written or oral notice to the Environmental Protection Agency ("EPA") or any state or local agency with regard --- to any actual or imminently threatened removal, storage, transportation, spill, release or discharge of hazardous or toxic wastes, substances or petroleum products either (i) on properties owned or leased by such Borrower or such Subsidiary or (ii) otherwise in connection with the conduct of its business and operations. (c) No Borrower or Subsidiary has received notice that it is potentially responsible for costs of clean-up of any actual or imminently threatened spill, release or discharge of hazardous or toxic wastes or substances or petroleum products pursuant to any Environmental Control Statute. (d) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrowers, threatened, under any Environmental Control Statute to which the Borrowers or any of their Subsidiaries is named as a party with respect to the Properties or the business conducted at the Properties, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Control Statute with respect to the Properties or such business. 3.17 Federal Regulations. No Letter of Credit and no part of the proceeds ------------------- of any Loans are intended to be or will be used, directly or indirectly for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System. If requested by any Lender or the Agent, and in any event upon consummation of any acquisition involving the purchase of stock by the Borrowers or any Subsidiary, the Borrowers will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of Form U-1 referred to in Regulation U. 3.18 Fees and Commissions. Except as disclosed on Schedule 3.18 hereto or -------------------- as required by Section 2.16 hereof or the letter referred to in Section 4.1(f), no Borrower or Subsidiary owes or will owe any fees or commissions of any kind in connection with this Agreement or the transactions contemplated hereby (including any acquisition consummated -46- under Section 6.7(e)), and no Borrower knows of any claim (or any basis for any claim) for any fees or commissions in connection with this Agreement or such transactions. 3.19 [Intentionally Omitted]. ----------------------- 3.20 Solvency. Immediately prior to and upon the execution of this -------- Agreement and the funding of the Loans and the issuance of any Letters of Credit to be funded or issued on the Closing Date, each Borrower and each Guarantor not an individual was, is and will be Solvent. 3.21 FCC-Related Representations. Without limiting the generality of the --------------------------- foregoing representations and warranties, each Borrower further represents and warrants as follows: (a) Except as described on Schedule 3.21 hereto, there is no outstanding or unresolved (i) application by any Borrower or any Subsidiary for any Media License (except for those applications described on Schedule 3.9, if any, for modifications of facilities or licenses to cover construction permits), including any renewal of any Media License, (ii) to the best of such Borrower's knowledge, material complaint to the FCC regarding any Borrower or any Subsidiary or any Media License, (iii) litigation, investigation or other inquiry by or before the FCC involving any Borrower, any Subsidiary or any Media Licenses, or (iv) FCC enforcement proceeding against any Borrower, any Subsidiary or any Media License, including without limitation, any notice of violation, any notice of apparent liability for forfeiture, or any forfeiture. (b) The Media Licenses identified on Schedule 3.9 hereto constitute all of the Media Licenses required by the Communications Act for the operation of each Borrower's and each Subsidiary's business as it is currently being operated. Each such Media License is validly outstanding and effective and has been renewed by the FCC without condition for a full term in accordance with the Communications Act. There are no modifications, amendments or revocations (pending or, to the best knowledge of each Borrower after due inquiry, threatened) that could materially and adversely affect the operations or financial condition of any Borrower, any Subsidiary or any Station. After due inquiry, no Borrower knows of any reason why the FCC would not routinely grant, for a full term and without condition, the application by such Borrower or such Subsidiary, as applicable, for the renewal of each such Media License over which the FCC has jurisdiction, when and as such application shall become due to be filed with the FCC. (c) Except as described on Schedule 3.21 hereto, after due inquiry, no Borrower knows of any application currently pending before, or to be filed with, the FCC, the grant of which application would result in the authorization of a new or modified station whose authorized transmissions would materially and impermissibly interfere with any of the operations, signals, transmission or receptions of such Borrower or its Subsidiaries (as such impermissible interference is described in the FCC's rules, regulations and policies, including, without limitation, the FCC's rules relating to Receiver Induced Third Order Intermodulation Effect, Blanketing, Antenna Separation, Desired-to- Undesired Signal Ratios, and Prohibited Contour Overlap). (d) The execution, delivery and performance of the Univision Investment Documents, including the exercise of the Univision Option in accordance with the terms thereof, do not and -47- will not result in a violation of the Communications Act or any rule, regulation or policy of the FCC; provided that a waiver of the FCC will be -------- ---- required, prior to exercise of the Univision Option, with regard to the Grade B contour overlap between KSMS and KDTV(TV) Channel 14, San Francisco, California ("KDTV"), owned and operated by Univision. No Grade A contour overlap exists ---- between KSMS and KDTV and KSMS and KDTV are located in different "Nielsen DMA's," as defined by the FCC in the Second Further Notice of Proposed Rule -------------------------------------- Making Docket No. 91-221 et al., FCC 96-438 (released November 7, 1996) (the - ------ "Second Further Notice") at Paragraph 4, so as to be eligible for waiver --------------------- pursuant to paragraphs 56-57 of the Second Further Notice. 3.22 Investment Company Act; Other Regulations. None of the Borrowers or ----------------------------------------- the Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"). ---------------------- 3.23 Copyright Act Requirements. Each Borrower and each Subsidiary has -------------------------- recorded or deposited with and paid to the United States Copyright Office, the Registrar of Copyrights, the Patent and Trademark Office, the American Society of Composers, Authors and Publishers, Broadcast Music, Inc. and/or any other licensors of copyrighted materials, all notices, statements of account, royalty fees and other documents and instruments required under the terms and conditions of any patent, trademark, service mark, trade name and copyright used in the operation of a Station and/or the Copyright Act of 1976, as amended from time to time, and the rules and regulations promulgated thereunder and, except as disclosed in writing to the Agent, is not liable in a material amount to any Person for copyright infringement under any law, rule, regulation, contract or license as a result of its business operation. 3.24 Nature of Business. Neither the Borrowers nor any of their ------------------ Subsidiaries is engaged in any material business other than (i) the ownership and operation of primarily Spanish-language television and radio stations and translators, (ii) the outdoor advertising business, (iii) the acquisition, financing, production and exploitation of programming and (iv) the ownership of stock of or other interests in companies that own and operate such facilities and businesses. 3.25 Ranking of Loans. This Agreement and the other Loan Documents to ---------------- which the Borrowers are party, when executed, and the Loans, when borrowed are and will be the direct and general obligations of the Borrowers. The Borrowers obligations hereunder and thereunder rank and will rank at least pari passu in ---- ----- priority of payment to all other Senior Debt. 3.26 Condemnation. To the Borrowers knowledge, no taking of any of the ------------ Properties or any part thereof through eminent domain, conveyance in lieu thereof, condemnation or similar proceeding is pending or, to the knowledge of the Borrowers, threatened by any Governmental Authority. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions to Closing Date. The agreement of each Lender to make the -------------------------- Loans requested to be made by it on the Closing Date and participate in any Letters of Credit issued on -48- the Closing Date and the agreement of the Agent to issue any Letters of Credit requested to be issued on the Closing Date are subject to the satisfaction, immediately prior to or concurrently with the making of such Loans and/or the issuance of and participation in such Letters of Credit on the Closing Date, of the following conditions precedent: (a) Credit Agreement. The Agent shall have received this Agreement, ---------------- executed and delivered by an officer of each of the Borrowers as of the Closing Date. (b) Other Loan Documents. The Agent shall have received the Revolving -------------------- Notes, the Guarantees, the Guarantor Security Agreements, the Mortgage Modifications, the Security Agreement, the Univision Subordination Agreement, such spousal consents as the Agent shall require and all UCC-1 Financing Statements, amendments to UCC-1 Financing Statements, and other agreements or instruments required to create or perfect a security interest in the Collateral executed in connection herewith, in each case executed and delivered by an officer of the relevant Obligor. (c) Incumbency Certificates. The Agent shall have received an incumbency ----------------------- certificate of each Borrower, each corporate or limited liability company Guarantor and Univision, in each case dated the Closing Date, executed by one of its Responsible Officers or its Secretary or Assistant Secretary. (d) Corporate/Limited Liability Company Proceedings. The Agent shall have ----------------------------------------------- received a copy of the resolutions of the Board of Directors of each of the corporate Borrowers and Guarantors, and a copy of the resolutions of the Executive Committee of each limited liability company Borrower and Guarantor, each dated as of the Closing Date authorizing (i) the execution, delivery and performance of the Loan Documents to which it is or will be a party, (ii) the borrowings contemplated hereunder (in the case of the Borrowers), and (iii) the execution and delivery by the Managing Members on behalf of each Borrower of all notices, certificates and other documents to be delivered under the Loan Documents from time to time, in each case certified by the Secretary or an Assistant Secretary of such Obligor or the Managing Members of such Obligor, as applicable, as of the Closing Date, which certificate states that such resolutions thereby certified have not been amended, modified, revoked or rescinded and are in full force and effect. (e) Organic Documents. The Agent shall have received copies of the ----------------- Organic Documents of each Borrower and each corporate or limited liability company Guarantor, certified as of the Closing Date as complete and correct copies thereof (or, with respect to copies of Organic Documents which have not been amended since their delivery to the Agent under the Original Credit Agreement, a certificate stating that such copies remain complete and correct and such documents have not been amended) by the Secretary or an Assistant Secretary of such Obligor. (f) Fees and Costs. The Agent shall have received payment of all fees, -------------- costs and expenses, including legal fees (if requested by the Agent) and the fees set forth in the fee side letter executed by the Borrowers and the Agent in connection herewith, accrued and unpaid and otherwise due and payable on or before the Closing Date by the Borrowers in connection with this Agreement. -49- (g) Legal Opinions. The Agent shall have received, with a counterpart for -------------- each Lender, the following executed legal opinions: (i) the executed legal opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel to the Borrowers and the Guarantors, in form and substance satisfactory to the Agent; (ii) the executed legal opinion of Thompson, Hine & Flory, LLP, FCC counsel to the Borrowers and the Guarantors, in form and substance satisfactory to the Agent; and (iii) such other legal opinions as the Agent may reasonably request. (h) Material Contracts. The Agent shall have received, with a counterpart ------------------ for each Lender, copies of (i) each Affiliation Agreement, each Program Services Agreement and each Option Agreement, each of which shall have been duly assigned to the Agent, (ii) each other Material Contract, (iii) each Equityholder Agreement, (iv) each employment agreement and non-compete agreement between any Borrower and any director, officer or employee of any Borrower, (v) each written agreement between any Borrower and any Affiliate of any Borrower and (vi) the Univision Investment Documents, all of the foregoing in form and substance satisfactory to the Agent and all as certified as true and correct by a Responsible Officer of the Borrowers (or, with respect to copies of such documents which have not been amended since their delivery to the Agent under the Original Credit Agreement, a certificate stating that such copies remain complete and correct and such documents have not been amended). (i) Recording. The Agent shall have received as of the Closing Date --------- evidence of the recording, or of the provision acceptable to the Agent for the recording, of each Mortgage Modification and any other documents reasonably necessary to be recorded in such office or offices as may be necessary or, in the reasonable opinion of the Agent, desirable to perfect each Lien purported to be created thereby or to otherwise protect the rights of the Agent and the Lenders thereunder and evidence of the filing, or of provision acceptable to the Agent for the filing, of appropriate financing statements on Form UCC-1 naming the Agent, for the benefit of the Lenders, as secured party, in such office or offices as may be necessary or, in the reasonable opinion of the Agent, desirable to perfect the security interests purported to be created by any of the Collateral Documents or the Guarantor Collateral Documents. (j) Lien Searches. The Agent shall have received such UCC searches as it ------------- shall deem necessary. (k) Stock Certificates; Etc. The Agent shall have received, to the extent ------------------------ not previously delivered to the Agent under the Original Credit Agreement, (i) original stock certificates representing all outstanding shares of stock of each corporate Borrower (other than the shares of the Minority Shareholders) and each corporate Subsidiary, together with an undated stock power for each of such certificates, duly executed in blank by an authorized officer of the pledgor and (ii) such Limited Liability Company Notices and Limited Liability Company Acknowledgments as are required by the Security Agreement. (l) Good Standing Certificates. With respect to each Borrower and each -------------------------- corporate and limited liability company Guarantor, the Agent shall have received a certificate, dated a -50- recent date, of the Secretary of State of the state of formation of such Obligor and each other jurisdiction where such Obligor is required to be qualified to do business under such jurisdiction's law, certifying as to the existence and good standing of, and the payment of taxes by, each Obligor in such state. (m) Univision Affiliation Agreements. A consent and acknowledgment, in -------------------------------- form and substance acceptable to the Agent, executed by Univision with regard to each of its Consents to Assign and Encumber. (n) No Default/Representations. No Default shall have occurred and be -------------------------- continuing on the Closing Date or would occur after giving effect to the Loans requested to be made, or Letters of Credit requested to be issued, on the Closing Date, and the representations and warranties contained in this Agreement and each other Loan Document and certificate or other writing delivered to the Lenders in satisfaction of the conditions set forth in this Section 4.1 prior to or on the Closing Date shall be correct in all material respects on and as of the Closing Date, and the Agent shall have received a certificate of the Borrowers to such effect in the form of Exhibit D, dated as of the Closing Date and executed by a Responsible Officer of each Borrower. (o) No Prohibitions. No statute, rule, regulation, order, decree or --------------- preliminary or permanent injunction of any court or administrative agency or, to the best knowledge of the Borrowers, any such action threatened by any Person, shall be in effect that prohibits the Lenders from consummating the transactions contemplated by this Agreement or any other Loan Document, and the Agent shall have received a certificate of a Responsible Officer of the Borrowers to such effect. (p) Solvency Certificate. The Agent shall have received (i) a certificate -------------------- of the Chief Financial Officer of each Borrower and each Guarantor not an individual, to the effect that each Borrower and each such Guarantor is Solvent after giving effect to the funding of the Loans and the issuance of any Letters of Credit to be made or issued on the Closing Date, the execution and delivery of the Guarantees, and the payment of all estimated legal, investment banking, accounting, and other fees related hereto and thereto and (ii) a certificate of each individual Guarantor to the effect that such Guarantor is Solvent after giving effect to the execution and delivery of such Guarantor's Guarantee. (q) Flood Plain. The Agent shall have received and approved, with respect ----------- to each Property referred to on Schedule 1.1, evidence whether such Property is located in an area identified as a flood plain area as defined by the U.S. Department of Housing and Urban Development pursuant to the Flood Disaster Protection Act of 1973. (r) Abstractor's Certificate. The Agent shall have received as of the ------------------------ Closing Date, with respect to the El Paso Headquarters Deed of Trust, an abstractor's certificate evidencing the continued first-priority Lien of the El Paso Headquarters Deed of Trust, subject only those exceptions reasonably acceptable to the Agent. (s) Insurance Policies. The Agent shall have received evidence that the ------------------ insurance policies provided for in Section 5.5 and in the other Loan Documents are in full force and effect, certified by the insurance broker therefor, together with appropriate evidence showing the Agent -51- as an additional named insured or loss payee, as appropriate, for the benefit of the Lenders, all in form and substance reasonably satisfactory to the Agent. (t) Operational Consents; FCC Matters. The Agent shall have received --------------------------------- evidence, in form and substance reasonably satisfactory to the Agent that (i) the Borrowers and their Subsidiaries have obtained all FCC consents and licenses required by law or necessary for the operation of the Borrowers and their Subsidiaries and (ii) the Borrowers and their Subsidiaries have obtained all other consents and licenses required by law or necessary for the operation of the Borrowers and their Subsidiaries. (u) Additional Proceedings. The Agent shall have received such other ---------------------- approvals, opinions and documents as any Lender, through the Agent, may reasonably request and all legal matters incident to the making of such Loans and issuance of such Letters of Credit shall be reasonably satisfactory to the Agent. 4.2 Conditions to Incremental Loans. The agreement of each Incremental ------------------------------- Loan Lender to make the initial Incremental Loans on or after the Activation Date shall be subject to the satisfaction, immediately prior to or concurrently with the making of such Loans of the following conditions precedent (in addition to such other conditions precedent, including the payment of facility fees, as shall be mutually agreed to by the Borrowers and the Incremental Loan Lenders prior to the Activation Date), in each case to the satisfaction of the Agent and the Majority Incremental Loan Lenders: (a) Closing Date. The Closing Date shall have occurred. ------------ (b) Incremental Notes. The Agent shall have received, for each Incremental ----------------- Loan Lender, an Incremental Note duly executed by the Borrowers in favor of such Lender in a principal amount equal to such Incremental Loan Lender's Incremental Loan Commitment. (c) Corporate/Limited Liability Proceedings. The Agent shall have received --------------------------------------- a copy of the resolutions of the Board of Directors of each of the corporate or Borrowers and Guarantors and a copy of the resolutions of the Executive Committee of each of the limited liability company Borrowers and Guarantors, each dated as of the date of such initial borrowing authorizing the borrowing of Incremental Loans pursuant to the Incremental Loan Commitments and certified by the Secretary or an Assistant Secretary, or the Managing Members, of such Obligor, which certificate states that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect. (d) Omnibus Certificate. The Agent shall have received an Omnibus ------------------- Certificate of each Borrower and each corporate or limited liability company Guarantor, dated the date of such borrowing, stating that (i) the Organic Documents and Incumbency Certificate of such Borrower or Guarantor delivered to the Agent on the Closing Date remain true and correct and in full force and effect with no amendments thereto (or, if amended, attaching copies of such amendments not previously delivered to the Agent), (ii) the copies of the Material Contracts delivered to the Agent on the Closing Date remain true and correct and in full force and effect with no amendments thereto (or, if amended, attaching copies of such amendments not previously delivered to the Agent) and such Material Contracts, together with the contracts and agreements delivered on the Closing Date, constitute all contracts and agreements -52- delivered on the Closing Date, constitute all contracts and agreements material to the financial condition or operation of each Borrower and each Subsidiary and (iii) no change in such Borrower's financial condition or otherwise has occurred which would make any financial certificate delivered to the Agent in connection with the Closing Date incorrect or misleading. (e) Fees and Costs. The Agent shall have received payment of all fees, -------------- costs and expenses, including legal fees, accrued and unpaid and otherwise due and payable on or before such date by the Borrowers in connection with this Agreement. (f) Pro Forma Covenant Compliance Certificate. The Agent shall have ----------------------------------------- received a Covenant Compliance Certificate showing compliance with the covenants referred to therein, on a pro forma basis, as of such date. --- ----- (g) No Default/Representations. No Default shall have occurred and be -------------------------- continuing on such borrowing date or would occur after giving effect to the Loans requested to be made on such borrowing date and the representations and warranties contained in this Agreement and each other Loan Document and certificate or other writing delivered to the Lenders in satisfaction of the conditions set forth in this Section 4.2 prior to or on such borrowing date shall be correct in all material respects on and as of such borrowing date, and the Agent shall have received a certificate of the Borrowers to such effect in the form of Exhibit D, dated as of such borrowing date and executed by a Responsible Officer of each Borrower. (h) Additional Proceedings. The Agent shall have received such other ---------------------- approvals, opinions and documents as any Incremental Loan Lender, through the Agent, may reasonably request and all legal matters incident to the making of such Incremental Loans shall be reasonably satisfactory to the Agent. 4.3 Conditions to Each Loan or Letter of Credit. The agreement of each ------------------------------------------- Lender to make each Loan and to participate in each Letter of Credit, and the agreement of the Agent to issue each Letter of Credit, requested to be made, issued or participated in by it is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan or the issuance or participation in such Letter of Credit, of the following conditions precedent: (a) Representations and Warranties; No Default. The following statements ------------------------------------------ shall be true and the Borrowers' acceptance of the proceeds of such Loan or their delivery of an executed Letter of Credit Request shall be deemed to be a representation and warranty of each Borrower on the date of such Loan or as of the date of issuance of such Letter of Credit, as applicable, that: (i) The representations and warranties contained in this Agreement and in each other Loan Document and certificate or other writing delivered to the Lenders prior to, on or after the Closing Date pursuant hereto and on or prior to the date for such Loan or the issuance of such Letter of Credit are correct on and as of such date in all material respects as though made on and as of such date except to the extent that such representations and warranties expressly relate to an earlier date; and (ii) No Default has occurred and is continuing or would result from the making of the Loan to be made on such date or the issuance of such Letter of Credit as of such date. -53- (b) Legality. The making of such Loan or the issuance of such Letter of -------- Credit, as applicable, shall not contravene any law, rule or regulation applicable to any Lender or the Borrowers or any other Obligor. (c) Borrowing Notice/Letter of Credit Request. The Agent shall have ----------------------------------------- received a borrowing notice or Letter of Credit Request, as applicable, pursuant to the provisions of this Agreement from the Borrowers. (d) Approvals. With respect to a borrowing in connection with an --------- Acquisition, the Agent shall have received copies of all FCC and regulatory approvals and licenses necessary in connection with any such Acquisition (if such Acquisition shall be of a radio or television station), and all shareholder approvals necessary in connection with any such acquisition. (e) Collateral Documentation. With respect to a borrowing in connection ------------------------ with an Acquisition, the Agent shall have received, reviewed and approved all documents reasonably necessary to insure that the Lenders have a first priority security interest in, and assignment of, all assets and interests acquired, unless the Majority Lenders shall otherwise consent with respect to any real property interests acquired, including consents of third parties if reasonably requested by the Agent. 4.4 Conditions Subsequent --------------------- (a) Within 30 days after the Closing Date, the Borrowers shall deliver to the Agent the following, in each case in form and substance satisfactory to the Agent: (i) an executed copy of a Shareholders Agreement among the Telecorpus shareholders; (ii) with respect to the Telecorpus stock pledged by Walter F. Ulloa, an original undated stock power (executed in blank); (iii) an executed copy of the Univision Affiliation Agreement for Station KORO, Corpus Chrisi, Texas; and (iv) UCC Financing Statement amendments executed by the following entities for filing in the jurisdictions indicated: Cabrillo (California), Golden Hills (California, Colorado), KSMS (California), Las Tres Palmas (California), Tierra Alta (California, Nevada) and Entravision Holdings, L.L.C. (California). (b) Within 45 days after the Closing Date, the Borrowers shall use best efforts to deliver to the Agent the following, in each case in form and substance satisfactory to the Agent: (i) with respect to The Zevnik-Harvard Fund, a trust formed under the laws of the State of California, with respect to all membership interests owed by such trust in Entravision, the documents described in clauses (A)-(C) of the first sentence of Section 6.14; and -54- (ii) with respect to the Luery Trust, (A) original undated stock power (executed in blank) with regard to the stock in Telecorpus pledged by the Luery Trust, (B) original undated stock power (executed in blank) with regard to the stock in Valley Channel 48 pledged by the Luery Trust, (C) a UCC Financing Statement amendment for filing in the State of California and (D) a Solvency Certificate. SECTION 5. AFFIRMATIVE COVENANTS Each Borrower hereby agrees that from and after the Closing Date, so long as any Commitment remains in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder, or any Letter of Credit remains outstanding: 5.1 Financial Statements -------------------- (a) Within 120 days after the close of each fiscal year, the Borrowers shall deliver to the Agent, for distribution to the Lenders, a complete set of audited annual combined and combining financial statements of the Borrowers, including a balance sheet, an income statement, a cash flow statement and a reconciliation of consolidated net worth (with accompanying notes and schedules). Such financial statements (i) must be prepared in accordance with GAAP consistently applied and (ii) must be certified without qualification by the Accountants. Together with the audited financial statements, the Agent must also receive a certificate signed by such Accountants, at the time of the completion of the annual audit, (A) stating that the financial statements fairly present the combined and combining financial condition of the Borrowers as of the date thereof and for the periods covered thereby and (B) that, to the knowledge of such Accountants, no Default exists under Section 6.1, to the extent such Section relates to accounting matters. In addition, such financial statements shall be accompanied by a certificate of a Responsible Officer of Entravision substantially in the form of Exhibit H hereto setting forth the calculation of Excess Cash Flow for such fiscal year; (b) Within 45 days of the end of each fiscal quarter, the Borrowers shall deliver to the Agent, for distribution to the Lenders, (x) unaudited combined and combining financial statements of the Borrowers for such quarter and (y) unaudited combined and combining financial statements for the Borrowers for the twelve months ended as of the end of such quarter, in each case in form and substance acceptable to the Agent. Such financial statements shall include, without limitation, a balance sheet, income statement and operating cash flow statement (with appropriate notes and schedules). In the case of the financial statements referred to in clause (x), such financial statements shall include a comparison of the results of such period with the budgeted results set forth in the budget referred to in Section 5.2(c)(or, prior to delivery of such budget, the budget delivered under the Original Credit Agreement), and must be prepared in accordance with GAAP consistently applied. In the case of the financial statements referred to in clause (y), such financial statements shall be prepared in accordance with GAAP consistently applied (except as required by Section 1.2(e)). Together with the quarterly financial statements, the Agent must also receive (i) a certificate executed by the Chief Financial Officer of each Borrower (A) stating that the financial statements fairly present the financial condition of each Borrower as of the date thereof and for the periods covered thereby, (B) certifying that as of the date of such certificate such officer has obtained no knowledge of any Default except as specified in such certificate and (C) certifying that to the best of such officer's knowledge, no -55- Default has occurred and the Borrowers are in compliance with their respective covenants in the Loan Documents to which they are party and (ii) a Covenant Compliance Certificate. (c) Within 30 days of the end of each month, the Borrowers shall deliver to the Agent, for distribution to the Lenders, an unaudited monthly combined and combining income statement, along with a comparison of the results of such month with the budgeted results set forth in the budget referred to in Section 5.2(c)(or, prior to delivery of such budget, the budget delivered under the Original Credit Agreement), in each case in form and substance acceptable to the Agent, certified by a Responsible Officer of each Borrower as fairly presenting the financial condition of each Borrower as of the date thereof and for the period covered thereby. (d) Within 45 days of the end of each fiscal quarter, the Borrowers shall deliver to the Agent, for distribution to the Lenders, a financial report, in form and substance acceptable to the Agent, relating to the operations of each Station (and to the outdoor advertising business, if any, operated by Entravision or any Subsidiary) as at the end of such quarter and the portion of the fiscal year through the end of such quarter, certified by a Responsible Officer of each Borrower as fairly presenting the financial condition of each Station (or such outdoor advertising business) as of the end of such quarter. 5.2 Certificates; Other Information. The Borrowers shall furnish to the ------------------------------- Agent, for distribution to the Lenders: (a) within five Business Days after the same are filed, copies of all financial statements and reports which the Borrowers or any Subsidiary may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (b) promptly but, in any event, within five Business Days after receipt thereof, copies of all financial reports (including, without limitation, management letters), if any, submitted to the Borrowers or any Subsidiary by the Accountants in connection with any annual or interim audit of the books thereof; (c) (i) by January 31 of each year, commencing with the fiscal year ending on December 31, 1999, a copy of the annual operating budget for Entravision and its Subsidiaries for such fiscal year, in form satisfactory to the Agent (notwithstanding the foregoing, Entravision shall have until March 31 of such year to amend the annual operating budget for such year to include the effect of any Acquisition consummated during the fourth quarter of the prior year); and (ii), upon the consummation of any Acquisition having a purchase price equal to or greater than $15,000,000, a summary financial forecast for Entravision (which forecast shall be based on the budget figures delivered under clause (i), with such changes as are necessary to reflect such Acquisition on a pro forma basis) covering the period from consummation of said Acquisition to the Revolving Loan Commitment Expiration Date; (d) as soon as possible and in any event within five Business Days after the occurrence of a Default or, in the good faith determination of a Responsible Officer of Entravision, a Material Adverse Effect, the written statement by a Responsible Officer of Entravision, setting forth the details of such Default or Material Adverse Effect and the action which Entravision proposes to take with respect thereto; -56- (e) promptly, but in any event within 30 days after any change in the senior management personnel of Entravision (including any change in the title or status of Walter F. Ulloa, Philip C. Wilkinson or Jeanette Tully), written notice of such change; (f) promptly but, in any event, within five Business Days after the same become available, copies of all statements, reports and other information which any Borrower sends to any holder of an equity interest therein; (g) (A) as soon as possible and in any event within 30 days after any Borrower knows or has reason to know that any Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of such Borrower describing such Termination Event and the action, if any, which such Borrower proposes to take with respect thereto, (B) promptly and in any event within ten days after receipt thereof by any Borrower or any ERISA Affiliate of any Borrower from the PBGC, copies of each notice received by such Borrower or such ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan, (C) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan maintained for or covering employees of the Borrowers or any Subsidiary if the present value of the accrued benefits under the Plan exceeds its assets by an amount in excess of $500,000 and (D) promptly and in any event within ten days after receipt thereof by any Borrower or any ERISA Affiliate of any Borrower from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by such Borrower or such ERISA Affiliates concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA; (h) promptly after the commencement thereof, but in any event not later than five Business Days after service of process with respect thereto on, or the obtaining of knowledge by, any Borrower or any Subsidiary, notice of each material action, suit or proceeding before any Governmental Authority; (i) promptly after the sending or filing thereof, but in any event not later than ten Business Days following such sending or filing, copies of (A) all Ownership Reports on FCC Form 323 (or any similar form which may be adopted by the FCC from time to time) and any supplements thereto, and (B) all statements, reports and other information filed by or on behalf of the Borrowers or any Subsidiary with the FCC; (j) promptly, but in any event within one Business Day after any period during which the transmission at any Station or transmission site is interrupted or curtailed for an aggregate of 12 hours or more (whether or not consecutive), written notice thereof; (k) promptly upon receipt thereof, but in any event not later than five Business Days following such receipt, copies of all notices and other communications that any Borrower or any Subsidiary shall have received from the FCC with respect to any FCC hearing, order or dispute (A) directly concerning the Borrowers, any Subsidiary, any Station or any Media License or (B) that may have a Material Adverse Effect; -57- (l) promptly upon receipt thereof, but in any event not later than ten Business Days following such receipt, copies of all Nielsen or Arbitron rating period reports; and (m) promptly, such additional financial and other information as any Lender, through the Agent, may from time to time reasonably request. 5.3 Payment of Obligations. Each Borrower shall, and shall cause each of ---------------------- its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the failure to so satisfy such obligations would not have a Material Adverse Effect or except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Borrower or its Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence. Each Borrower shall, ------------------------------------------------ and shall cause each of its Subsidiaries to, continue to engage in business of the same general type as conducted by such Borrower and its Subsidiaries as of the Closing Date and preserve, renew and keep in full force and effect its corporate or limited liability company existence, as applicable, and take all reasonable action to maintain all rights, registrations, licenses, privileges and franchises necessary or desirable in the normal conduct of its business, and comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect. 5.5 Maintenance of Property; Insurance. Each Borrower shall, and shall ---------------------------------- cause each of its Subsidiaries to, keep all property useful or necessary in its business in good working order and condition (ordinary wear and tear excepted); maintain with financially sound and reputable insurance companies or associations insurance on such of its property in at least such amounts and against such risks as are usually insured against in the same general area by companies engaged in the same or a similar business (including casualty, liability, fire, flood, business interruption, earthquake and workers' compensation); and furnish to the Agent, upon written request, full information as to the insurance carried. All such policies of insurance on the property of the Borrowers and the Subsidiaries shall contain an endorsement, in form and substance reasonably satisfactory to the Agent in its sole discretion, showing the Agent, on behalf of the Lenders, as additional insured or loss payee, as appropriate, or as its interests appear. Such endorsement, or an independent instrument furnished to the Agent, shall provide that the insurance companies will give the Agent at least 25 days' prior written notice before any such policy or policies of insurance shall be altered or canceled. All policies of insurance required to be maintained under this Agreement shall be in customary form and with insurers reasonably acceptable to the Agent and all such policies shall be in such amounts as shall be customary for similar companies in the same or similar business in the same geographical area. Each Borrower shall deliver to the Agent insurance certificates certified by such Borrower's insurance brokers, as to the existence and effectiveness of each policy of insurance and evidence of payment of all premiums then due and payable therefor. In addition, the Borrowers shall notify the Agent promptly of any occurrence causing a material loss of any insured Property and the estimated (or actual, if available) amount of such loss. Further, the Borrowers and their Subsidiaries shall maintain all insurance required under the other Loan Documents. -58- (i) Each policy for liability insurance shall provide for all losses to be paid on behalf of the Agent and such Borrower or Subsidiary (as the case may be), as their respective interests may appear, and each policy for property damage insurance shall, to the extent applicable to equipment and inventory, provide for all losses (except for losses of less than $500,000 per occurrence, which may be paid directly to such Borrower or such Subsidiary, as applicable) to be paid directly to the Agent. (ii) Reimbursement under any liability insurance maintained by the Borrowers or their Subsidiaries pursuant to this Section 5.5 may be paid directly to the Person who shall have incurred liability covered by such insurance. In the case of any loss involving damage to equipment or inventory as to which clause (iii) of this Section 5.5 is not applicable, the Borrowers will make or cause to be made the necessary repairs to or replacements of such equipment or inventory, and any proceeds of insurance maintained by the Borrowers or their Subsidiaries pursuant to this Section 5.5 shall be paid by the Agent to the Borrowers or such Subsidiaries, upon presentation of invoices and other evidence of obligations, as reimbursement for the costs of such repairs or replacements. (iii) Upon the occurrence and during the continuance of a Default, all insurance proceeds in respect of such equipment or inventory shall be paid to the Agent and applied in repayment of the Loans, as set forth in Section 2.5. 5.6 Inspection of Property; Books and Records; Discussions. Each Borrower ------------------------------------------------------ shall, and shall cause each of its Subsidiaries to, keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all material dealings and transactions in relation to its business and activities; and upon reasonable notice and at such reasonable times during usual business hours, permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of such Borrower and its Subsidiaries with officers and employees of such Borrower and its Subsidiaries and with its Accountants. 5.7 Environmental Laws. Each Borrower shall, and shall cause each of its ------------------ Subsidiaries to: (a) Comply in all material respects with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Control Statutes and obtain and comply in all material respects with any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Control Statutes; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Control Statutes and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Control Statutes except to the extent that the same are being contested in good faith by appropriate proceedings; and -59- (c) Defend, indemnify and hold harmless the Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Control Statutes applicable to the operations of the Borrowers or any of their Subsidiaries, or the Borrowers' or any of their Subsidiaries' interest in Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorneys' and consultants' fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. This indemnity shall continue in full force and effect regardless of the termination of this Agreement. 5.8 Use of Proceeds. The Borrowers will use the proceeds of the Loans, and --------------- any Letters of Credit issued hereunder, as follows: (i) the Revolving Loans shall be used (A) to finance the El Centro Radio Stations Acquisition, and other Acquisitions in accordance with Sections 6.7(e) and 4.3, and expenses associated therewith; (B) to redeem shareholder interests of Minority Shareholders, (C) for the payment of fees and expenses associated with the closing of the transaction set forth in this Agreement, (D) to refinance Indebtedness under the Original Credit Agreement, (E) for capital expenditures and general corporate purposes, including the payment of fees and expenses due hereunder from time to time and (F) to fund Escrow Deposits; (ii) the Incremental Loans shall be used (A) to finance Acquisitions in accordance with Sections 6.7(e) and 4.3 and (B) for capital expenditures and general corporate purposes; and (iii) any Letters of Credit shall be used for general corporate purposes and for Escrow Deposits. Notwithstanding anything herein to the contrary, no Loan or Letter of Credit will be used for the purchasing or carrying of any Margin Stock. 5.9 Compliance With Laws, Etc. Each Borrower shall comply, and shall cause ------------------------- each of its Subsidiaries to comply, in all material respects with all applicable Requirements of Law, such compliance to include, without limitation (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its Properties and (ii) paying all lawful claims which if unpaid might become a Lien upon any of its Properties; provided, however, that neither such Borrower -------- ------- nor any of such Subsidiaries shall be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as (A) the validity or applicability thereof is being contested in good faith by appropriate proceedings or the failure to pay such tax, assessment, charge, levy or claim would not (in the reasonable judgment of the Majority Lenders) have a Material Adverse Effect and (B) such Borrower or such Subsidiary shall, to the extent required by GAAP, have set aside on its books adequate reserves with respect thereto. -60- 5.10 Media Licenses. Each Borrower will obtain, maintain and preserve, and -------------- cause each of its Subsidiaries to obtain, maintain and preserve, all Media Licenses, including without limitation, by filing with the FCC (i) those of the Loan Documents required to be filed under the FCC's rules and regulations within 30 days after the Closing Date and (ii) all reports (including Ownership Reports on FCC Form 323) and other documents required to be filed by the Communications Act in connection with the transactions contemplated hereby and maintaining public records and files in accordance with Communications Act and the rules and regulations of the FCC. 5.11 Guarantees, Etc. Each Borrower will cause each of its Subsidiaries --------------- hereafter formed or acquired to execute and deliver to the Agent promptly upon the formation or acquisition thereof (i) a Guarantee in form and substance satisfactory to the Agent, guaranteeing the Obligations, (ii) a Guarantor Security Agreement, in form and substance satisfactory to the Agent, granting to the Agent, for the benefit of the Lenders, a security interest in the tangible and intangible personal property of such Subsidiary, together with appropriate Lien searches requested by the Agent indicating the Lenders' first priority Lien on such personal property and (iii) UCC-1 Financing Statements, duly executed by such Subsidiary, in form and substance satisfactory to the Agent and, in connection with such deliveries, cause to be delivered to the Agent (A) the stock certificates representing the issued and outstanding shares of stock of such Subsidiaries, together with undated stock powers executed in blank, (B) a favorable written opinion of counsel satisfactory to the Agent as to such matters relating thereto as any Lender through the Agent may reasonably request, in form and substance satisfactory to the Agent and (C) such other agreements, instruments, approvals or other documents as any Lender through the Agent may reasonably request. 5.12 License Subsidiaries. Each Borrower will cause each Media License -------------------- owned by it to be held in the Entravision License Subsidiary at all times until the Obligations have been paid in full and all Commitments and Letters of Credit have expired. The Borrowers will not permit the Entravision License Subsidiary to (i) own any right, franchise or other asset except for Media Licenses (and FCC files and records with respect thereto) or (ii) engage in any business other than holding such Media License, files and records. 5.13 Interest Rate Protection. Within 30 days after the Closing Date, the ------------------------ Borrowers will enter into and maintain, for at least a two-year period ending on the second anniversary of the Closing Date, at any time during which the Maximum Total Debt Ratio is greater than or equal to 4.50 to 1, Interest Rate Agreements, each in form and substance reasonably satisfactory to the Agent, covering a minimum of 50% of the outstanding Loans from time to time (including Incremental Loans). 5.14 Acquisition of Real Property in Fee Simple. ------------------------------------------ (a) The Borrowers and their Subsidiaries shall submit to the Agent for its prior approval any documents relating to any fee simple real property interest to be acquired by the Borrowers or any of their Subsidiaries having a purchase price (together with the assumption of Indebtedness or purchase money Indebtedness relating thereto) in excess of $2,000,000. Each such acquisition, and the documents governing such acquisition, shall be subject to the approval of the Agent. The Agent may require that any such fee simple property interest become part of -61- the Collateral or the Guarantor Collateral and the Borrowers and their Subsidiaries shall provide or cause to be provided any and all information relating to such real property interest and any and all Collateral Documents or Guarantor Collateral Documents and other documents to be executed in connection therewith requested by the Agent and provide the Agent with title insurance as a condition to approval. (b) Notwithstanding the foregoing, Entravision shall be entitled to acquire the KNVO Real Property without complying with Section 5.14(a). 5.15 Leases and Licenses. The Borrowers shall or shall cause their ------------------- Subsidiaries to perform and carry out, in all material respects, all of the provisions of all of the leases, licenses, permits and any other occupancy agreements relating to real property or real property interests (the "Occupancy --------- Agreements") to be performed by the Borrowers or any of their Subsidiaries and - ---------- shall appear in and defend any action in which the validity of any of the Occupancy Agreements relating to any real property or real property interests is at issue and shall commence and maintain any action or proceeding necessary to establish or maintain the validity of any of such Occupancy Agreements and to enforce the provisions thereof. 5.16 Lease and License Approvals. The Borrowers and their Subsidiaries --------------------------- shall submit to the Agent for its prior approval any leases, licenses, permits or other Occupancy Agreements relating to real property or real property interests that the Borrowers or any of their Subsidiaries may desire to execute or obtain which provide for the payment of rent or license fees in excess of $100,000 in any fiscal year. Each such agreement shall be subject to the approval of the Agent, such approval not to be unreasonably withheld. The Agent may require that any lease, license or other similar agreement become part of the Collateral or the Guarantor Collateral and the Borrowers and their Subsidiaries shall provide or cause to be provided any and all Collateral Documents or Guarantor Collateral Documents or other documents to be executed in connection therewith requested by the Agent and provide the Agent with title insurance (to the extent applicable) as a condition to approval. 5.17 Notices. The Borrowers will provide, and will cause their Subsidiaries ------- to provide to the Agent, within 5 Business Days following receipt by any Borrower or Subsidiary, copies of all notices received by such Borrower or Subsidiary (i) under any Material Contract or any instrument, document or agreement relating to any Subordinated Indebtedness, relating to any material default, any claimed force majeure or any other material provision thereof and (ii) from the Internal Revenue Service or other taxing authority relating to any material dispute regarding deductions, audits or any other material matter which, if adversely determined against the Borrowers or such Subsidiary, would have a Material Adverse Effect. 5.18 Additional Material Contracts and Media Licenses. Each Borrower (a) ------------------------------------------------ will notify the Agent in writing within 90 calendar days after executing, entering into, becoming bound by or subject to or otherwise obtaining any contract, agreement or Media License that should have been listed on Schedule 3.8 hereto or Schedule 3.9 hereto if it had existed as of the Closing Date, (b) will concurrently update Schedule 3.8 hereto or Schedule 3.9 hereto (as appropriate) and (c) will, with respect to any replacement or additional Affiliation Agreements entered into with Univision, cause Univision to execute and deliver a Consent to Assign, in substantially the form previously delivered by Univision under the Original Credit Agreement. -62- 5.19 Status of Certain Borrowers. Each Borrower agrees that (i) each --------------------------- Borrower (other than Entravision) shall have no assets other than its ownership interest in Entravision (provided that and (ii) each Borrower (other than -------- ---- Entravision) shall conduct no operations or business other than the holding of its ownership interest in Entravision. 5.20 Las Tres Campanas Acquisition. In the event that Entravision (or any ----------------------------- other Borrower) acquires any stock or assets of Las Tres Campanas Television, Inc., pursuant to Section 7(e) of the Operating Agreement for Entravision or otherwise, Entravision (or such other Borrower) will (i) promptly notify the Agent thereof and (ii) execute all documents reasonably requested by the Agent to grant to the Agent a perfected security interest in, and pledge of, all such stock and personal property assets. 5.21 Year 2000. The Borrowers will take, and will cause their Subsidiaries --------- to take, all those actions reasonably necessary to assure that each Borrower's and each Subsidiary's computer-based systems are able to operate effectively and process data effectively, including data composed of or including dates on and after January 1, 2000. At the request of any Lender, the Borrowers will provide the Lenders assurances reasonably acceptable to the Agent of the Borrowers' and each Subsidiary's capacity to deal with the foregoing. SECTION 6. NEGATIVE COVENANTS Each Borrower hereby agrees that from and after the Closing Date, so long as any Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder, or any Letter of Credit remains outstanding: 6.1 Financial Condition Covenants. The Borrowers shall not: ----------------------------- (a) Maximum Total Debt Ratio. Permit the Maximum Total Debt Ratio as of the ------------------------ end of any fiscal quarter of the Borrowers and their Subsidiaries on a consolidated basis to exceed the following levels for the periods indicated:
Period Ratio ----- ----- Closing Date to and including September 30, 1999 7.00:1 October 1, 1999 to and including March 31, 2000 6.50:1 April 1, 2000 to and including September 30, 2000 6.00:1 October 1, 2000 to and including March 31, 2001 5.50:1
-63- April 1, 2001 to and including September 30, 2001 5.00:1 October 1, 2001 and thereafter 4.50:1
(b) Total Interest Coverage Ratio. Permit the Total Interest Coverage Ratio ----------------------------- as of the end of any fiscal quarter of the Borrowers and their Subsidiaries on a consolidated basis to be less than the following levels for the periods indicated: Period Ratio ------------ Closing Date to and including December 31, 1999 1.75:1 January 1, 2000 to and including December 31, 2000 2.00:1 January 1, 2001 and thereafter 2.25:1 (c) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as --------------------------- of the end of any fiscal quarter of the Borrowers and their Subsidiaries on a consolidated basis to be less than 1.05:1. (d) Maximum Capital Expenditures. Permit Capital Expenditures of the ---------------------------- Borrowers and their Subsidiaries on a consolidated basis for any fiscal year of the Borrowers to be more than the following levels for the periods indicated: Period Maximum Amount ------ -------------- Fiscal Year Ending December 31, 1998 $4,000,000 Fiscal Year Ending December 31, 1999 $7,500,000 Fiscal Years Ending December 31, 2000 and thereafter $3,000,000 ; provided that, in the event the Borrowers and the Subsidiaries do not, in any -------- ---- fiscal year, exhaust such amount with respect to such fiscal year, such excess amount may be used to make, or commit to make, Capital Expenditures in the immediately following fiscal year (provided no Default has occurred and is continuing), but not thereafter. Notwithstanding the foregoing, -64- expenditures made by Entravision for the purchase of the KNVO Real Property shall not be included as Capital Expenditures for determining compliance with this Section 6.1(d). 6.2 Limitation on Indebtedness. The Borrowers shall not create, incur, -------------------------- assume or suffer to exist any Indebtedness, and shall not permit any of their Subsidiaries to create, incur, assume or suffer to exist any Indebtedness, except for: (a) Indebtedness created hereunder and under the Notes; (b) Indebtedness of the Borrowers or any of their Subsidiaries secured by Liens permitted with respect to the Borrowers or their Subsidiaries by Section 6.3; (c) Indebtedness of Golden Hills and Entravision, in an aggregate principal amount not exceeding $500,000, to make payments to Teresa E. Romero under that certain Stock Purchase Agreement dated as of September 30, 1998 among Entravision, Golden Hills and Teresa E. Romero; (d) Indebtedness of the Borrowers outstanding on the Closing Date and listed on Schedule 6.2; (e) the Subordinated Indebtedness; (f) Indebtedness (i) under any Interest Rate Agreement required pursuant to Section 5.13, (ii) evidenced by performance bonds or letters of credit issued in the ordinary course of business or reimbursement obligations in respect thereof, (iii) evidenced by a letter of credit facility related to insurance associated with claims for work-related injuries or (iv) for bank overdrafts incurred in the ordinary course of business that are promptly repaid; (g) trade credit incurred to acquire goods, supplies, services and incurred in the ordinary and normal course of business; (h) Lease Expenses; (i) the KNVO Mortgage Indebtedness; (j) Indebtedness of any Borrower to the Luery Trust, Richard Norton and/or Irma Rico in connection with the purchase by such Borrower of such minority shareholder's interests in the Borrowers, provided that (i) the Majority Lenders ------------- have given their prior written consent (such consent not to be unreasonably withheld) to such Indebtedness (including, without limitation the principal, interest, repayment terms and other terms of such Indebtedness) and (ii) such Indebtedness shall, if requested by the Majority Lenders, be fully subordinated to the prior payment in full of the Obligations pursuant to a subordination agreement in form and substance satisfactory to the Majority Lenders; and (k) other Indebtedness in an amount not exceeding $7,500,000 at any time outstanding (less the amount of Escrow Deposits under Section 6.7(f)). -65- Notwithstanding the foregoing, the License Subsidiaries shall not be permitted, under any circumstances, to create, incur, assume or suffer to exist any Indebtedness, other than the Indebtedness created under the Loan Documents. 6.3 Limitation on Liens. The Borrowers shall not, and shall not permit any ------------------- of their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens created hereunder or under any of the other Loan Documents; (b) Liens existing on any Property at the time of its acquisition and not created in anticipation of such acquisition; (c) Liens arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as the execution or other enforcement thereof is effectively stayed and claims secured thereby are being contested in good faith by appropriate proceedings; (d) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto -------- are maintained on the books of the Borrowers or their Subsidiaries, as the case may be, in conformity with GAAP; (e) Liens created by operation of law not securing the payment of Indebtedness for money borrowed or guaranteed, including carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 45 days or which are being contested in good faith by appropriate proceedings; (f) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (g) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (h) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, would not cause a Material Adverse Effect; (i) the KNVO Purchase Money Mortgage, provided that (x) it shall secure only the KNVO Mortgage Indebtedness and (y) it shall not be spread to cover any other property; and (j) Liens on Property or assets securing leases referred to in Section 3.5A. Notwithstanding the foregoing, the License Subsidiaries shall not be permitted, under any circumstances, to incur any consensual Liens or Liens securing the payment of Indebtedness for money borrowed or guaranteed, other than Liens created by the Loan Documents. -66- 6.4 Limitation on Fundamental Changes. The Borrowers shall not, and shall --------------------------------- not permit any of their Subsidiaries to, enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or create or acquire any Subsidiary or Affiliate (unless the documents required by Section 5.11 are executed and delivered) or convey, sell, lease, assign, transfer or otherwise dispose of (including by making any Station subject to any local marketing or similar agreement) all or substantially all of its property, business or assets, except that, so long as no Default has occurred and is continuing or would result therefrom, (i) the Borrowers may consummate the Acquisitions permitted by Section 6.7 and (ii) one or more Borrowers may merge with one or more other Borrowers (provided that the -------- ---- Agent receives at least twenty Business Days' prior written notice thereof and the Borrowers execute and deliver to the Agent such documents as the Agent shall reasonably request in connection therewith, including but not limited to UCC-1 Financing Statements). Notwithstanding the foregoing, the License Subsidiaries shall not merge, consolidate, amalgamate or liquidate, wind up or dissolve or convey, sell, lease, assign (except pursuant to the Loan Documents), transfer or otherwise dispose of, all or substantially all of their respective property or assets. 6.5 Limitation on Sale of Assets. The Borrowers shall not, and shall not ---------------------------- permit any of their Subsidiaries to, make any Asset Disposition, unless (i) the Borrowers make the mandatory prepayment, if any, required in connection therewith pursuant to Section 2.5(a) and (ii) no Default has occurred and is continuing or would result from such Asset Disposition. In any case, the Borrowers may not sell, and will not permit any of their Subsidiaries to sell, any Station or the ownership interests of any License Subsidiary without the prior written consent of the Majority Lenders, such consent not to be unreasonably withheld. 6.6 Limitation on Dividends. No Borrower shall, or shall permit any of its ----------------------- Subsidiaries to (a) if a corporation, declare or pay any dividend (other than dividends payable solely in common stock of such Borrower or its Subsidiaries) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of such Borrower or its Subsidiaries or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, and (b) if a partnership or a limited liability company, make any distribution with respect to the ownership interests therein, or, in either case, any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrowers or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasance, retirements, acquisitions and distributions being herein called "Restricted Payments"), except for Restricted ------------------- Payments by Entravision to its members, and by each corporate Borrower to its shareholders, in each case to permit such members and shareholders to pay their respective income tax liabilities attributable to the income of Entravision or such corporate Borrower, respectively (provided that no Default has occurred and -------- ---- is continuing or would result from the making of such Restricted Payment). 6.7 Limitation on Investments, Loans and Advances. The Borrowers shall --------------------------------------------- not, and shall not permit any of their Subsidiaries to, make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or -67- any assets constituting a business unit of, or make any other investment in (any of the foregoing, an "investment"), any Person, except for: ---------- (a) each of the following Acquisitions, provided that (i) no Default has -------- ---- occurred and is continuing or would result from the consummation of such Acquisition (and Entravision shall have delivered to the Agent a Covenant Compliance Certificate showing pro forma calculations assuming such Acquisition had been consummated), (ii) the Borrowers shall have delivered to the Agent a certificate of an Authorized Officer of Entravision stating that such investment does not violate the Univision Investment Documents and (iii) the Agent shall have received, reviewed and reasonably approved all material documents reasonably requested by the Agent to insure that the Lenders have a first priority security interest in, and assignment of, all personal property assets and interests acquired, including consents of third parties if reasonably requested: (A) the El Centro Radio Stations Acquisition (provided that the -------- ---- Consideration therefor does not exceed $2,900,000), (B) the Tecate Acquisition (provided that the Consideration therefor (including investments therein made -------- ---- prior to the Closing Date and referred to on Schedule 6.7) does not exceed an aggregate of $20,500,000), (C) the purchase by Entravision of television station WBSV, Channel 62, Venice, Florida (provided that the Consideration therefor does -------- ---- not exceed $17,500,000), (D) the purchase by Entravision of television station KPMR, Channel 38, Santa Barbara, California (provided that the Consideration -------- ---- therefor does not exceed $5,250,000) and (E) the purchase by Entravision of television station KLUZ, Channel 41, Albuquerque, New Mexico (provided that the -------- ---- Consideration therefor does not exceed $1,000,000 plus the Additional Equity Rights); (b) the Borrowers' ownership interest in their Subsidiaries; (c) investments in marketable securities, liquid investments and other financial instruments that are acquired for investment purposes and may be readily sold or otherwise liquidated, that have a value which may be readily established and which are investment grade; (d) extensions of trade credit in the ordinary course of business; (e) Acquisitions (other than those referred to in clause (a) above) having a maximum Consideration in an aggregate amount during the term of this Agreement not to exceed the greater of (A) $5,000,000 and (B) ten percent of Net Asset Value as of the date of consummation of the proposed Acquisition (or such greater amount as the Majority Lenders may agree to in writing, in their sole discretion, and provided that such amount is authorized by the Univision Investment Documents); provided that (i) no Default has occurred and is -------- ---- continuing or would result from the consummation of such Acquisition (and Entravision shall have delivered to the Agent a Covenant Compliance Certificate showing pro forma calculations assuming such Acquisition had been consummated); --- ----- and (ii) the Agent shall have received, reviewed and approved all documents reasonably requested by the Agent to insure that the Lenders have a first priority security interest in, and assignment of, all personal property assets and interests acquired, including consents of third parties if reasonably requested; (f) Escrow Deposits in an aggregate amount not to exceed $7,500,000 during the term of this Agreement (less Indebtedness outstanding under Section 6.2(k)), provided that no Default has occurred and is continuing or would result from the - -------- ---- making of such investment; and -68- (g) investments existing on the Closing Date and listed on Schedule 6.7; Notwithstanding the foregoing, the License Subsidiaries shall not be permitted, under any circumstances, to make any investments. 6.8 Limitation on Modifications of Certain Documents and Instruments ---------------------------------------------------------------- (a) No Borrower shall, and no Borrower shall permit its Subsidiaries to, (i) terminate, amend or modify any provision of any document, instrument or agreement relating to the Subordinated Indebtedness (provided that the Borrowers may, (A) with the prior written consent of the Majority Lenders, amend the Tecate Letter Agreement and (B) amend the Univision Investment Documents to permit the Additional Equity Rights), any Material Contract, any Equityholder Agreement or any Organic Document or (ii) change its official name, its operating names or the names under which it executes contracts and conducts business, in each case without the prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld. (b) In furtherance of Section 6.8(a)(i), Entravision will not consent to any assignment of the Univision Option pursuant to the Note Purchase Agreement, or consent to any assignment of the Univision Subordinated Note, without the prior written consent of the Majority Lenders. 6.9 Transactions with Affiliates. The Borrowers shall not, and shall not ---------------------------- permit any of their Subsidiaries to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate or any Subsidiary less than wholly- owned, directly or indirectly, by the Borrowers, unless such transaction (i) is otherwise permitted under this Agreement or (ii) is in the ordinary course of the Borrowers' or such Subsidiary's business and is upon terms no less favorable to the Borrowers or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. 6.10 Fiscal Year. No Borrower shall permit its fiscal year or the fiscal ----------- year of any of its Subsidiaries to end on a day other than December 31. 6.11 Lease Obligations. The Borrowers shall not, and shall not permit any ----------------- of its Subsidiaries to, sell, assign or otherwise transfer any of its Properties, rights or assets (whether now owned or hereafter acquired) to any Person and thereafter directly or indirectly lease back the same or similar property. 6.12 Unfunded Liabilities. The Borrowers shall not permit unfunded -------------------- liabilities for any and all Plans maintained for or covering employees of the Borrowers or any Subsidiary to exceed $500,000 in the aggregate at any time. 6.13 Management Fees. The Borrowers shall not, and shall not permit any of --------------- their Subsidiaries to, incur any management fees for services rendered; provided -------- that, if no Default has occurred and is continuing or would result therefrom, - ---- Entravision may pay management fees (the "Management Fees") to Walter F. Ulloa --------------- and Philip C. Wilkinson for services rendered to Entravision (which Management Fees may be paid in the form of bonuses under employment agreements to which Walter F. Ulloa and Philip C. Wilkinson are party), on an annual basis, in -69- an aggregate amount not to exceed 2% of Net Operating Revenue of Entravision for such fiscal year. The Management Fees shall accrue quarterly but be payable annually, following the Lenders' receipt of the financial statements (which must be unqualified) and Covenant Compliance Certificate referred to in Section 5.1(b). 6.14 Equity Offerings. No Borrower shall, or shall permit any of their ---------------- Subsidiaries to, consummate or agree to consummate any Equity Offering unless (i) such Borrower has given the Agent (who shall promptly give copies of such notice to the Lenders) 30 days prior written notice thereof and (ii) except as set forth in the proviso below, each Person becoming an equityholder as a result of such Equity Offering shall have executed (A) a Nonrecourse Guarantee in form and substance satisfactory to the Agent, guaranteeing the Obligations, (B) a Pledge Agreement, in form and substance satisfactory to the Agent, granting to the Agent, for the benefit of the Lenders, a security interest in such equity interest and all rights associated therewith, together with appropriate Lien searches requested by the Agent indicating the Lenders' first priority Lien on such interests and rights and (C) UCC-1 Financing Statements, duly executed by such equityholder, in form and substance satisfactory to the Agent and, in connection with such deliveries, cause to be delivered to the Agent (1) such stock certificates or limited liability company interest certificates as may exist with regard to such equity interest, together with undated stock powers executed in blank, (2) a favorable written opinion of counsel satisfactory to the Agent as to such matters relating thereto as any Lender through the Agent may reasonably request, in form and substance satisfactory to the Agent and (3) such other agreements, instruments, approvals or other documents as any Lender through the Agent may reasonably request; provided that compliance with the -------- ---- foregoing clause (ii) shall not be required with regard to an initial public offering of equity interests, the issuance of membership interests in Entravision having no voting power or the Equity Offering to Univision contemplated by the Univision Option. Notwithstanding any provision in this Agreement to the contrary, (a) there shall at all times be pledged to the Agent, for the benefit of the Lenders, pursuant to Nonrecourse Guarantees, Pledge Agreements and related documentation required by this Agreement, direct or indirect Voting Control of each Borrower. In addition, the Borrowers shall not permit the aggregate equity interest of any Minority Shareholder in any Borrower or any Guarantor to increase, whether through the purchase of shares of stock, the receipt of shares of stock as dividends, or otherwise, unless such Minority Shareholder has executed and delivered to the Agent a Nonrecourse Guarantee, Pledge Agreement and such other documents as the Agent shall reasonably request in connection therewith; provided that nothing in this sentence shall be construed to prohibit the exercise of the Univision Option or any increase in Univision's equity interest in Entravision in accordance with the Univision Investment Documents and the Operating Agreement. SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrowers shall fail to pay any principal on any Note when due or the Borrowers shall fail to pay any interest on any Note, any fee referred to in Section 2.3(e), Section 2.16 or the letter referred to in Section 4.1(f) within two Business Days after any such interest or fee becomes due in accordance with the terms thereof and hereof or the Borrowers shall fail to -70- pay any other amount payable hereunder within five Business Days after written notice that such other amount is due; or (b) Any representation or warranty made or deemed made by any Obligor herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made; provided that -------- ---- representations and warranties of any Pledgor and any Borrower other than Entravision shall be limited to those the incorrectness of which could reasonably be expected to have a Material Adverse Effect; or (c) The Borrowers shall default in the observance or performance of any agreement contained in Section 4.4, 5.2(d), 5.3, 5.4, 5.8, 5.9, 5.10, 5.12, 5.13, or any provision of Section 6; or (d) (i) Any Obligor shall default in the observance or performance of any other material agreement contained in this Agreement or the other Loan Documents (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (y) notice thereof from the Agent to the Borrowers and (z) actual knowledge thereof by a senior officer of such Obligor (unless such default is of such a nature that it cannot reasonably be cured within 30 days after the date described in clause (y) or (z), as applicable, in which case the defaulting Obligor has not commenced the cure thereof within such 30 day period and/or has not thereafter diligently pursued the completion of the same), provided that any -------- ---- default referred to in this clause (i) by a Borrower other than Entravision shall be limited to those which could reasonably be expected to have a Material Adverse Effect; or (ii) any material provision of any Loan Document shall at any time for any reason be declared null and void, or the validity or enforceability of any Loan Document shall at any time be contested by any Obligor, or a proceeding shall be commenced by any Obligor, or by any Governmental Authority or other Person having jurisdiction over any Obligor, seeking to establish the invalidity or unenforceability thereof, or any Obligor shall deny that it has any liability or obligation purported to be created under any Loan Document; or (e) Any Guarantee shall cease, for any reason, to be in full force and effect, and such occurrence shall have a Material Adverse Effect; or (f) The Borrowers or any other Obligor shall (i) default in any payment of principal or interest, regardless of the amount, due in respect of any (A) Indebtedness (other than the Notes), issued under the same indenture or other agreement, if the original principal amount of Indebtedness covered by such indenture or agreement is $500,000 or greater or (B) any Guarantee Obligation with respect to an amount of $500,000 or greater, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created, whether or not such default has been waived by the holders of such Indebtedness or Guarantee Obligation; or (ii) default in the observance or performance of any other material agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or -71- beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable or such Indebtedness to be required to be defeased or purchased; provided that, any -------- ---- default referred to in this Section 7(f) by a Pledgor or any Borrower other than Entravision, shall be limited to those which could reasonably be expected to have a Material Adverse Effect; or (g) (i) Any Borrower or any other Obligor (other than a Pledgor) shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or any Borrower or any other Obligor (other than a Pledgor) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Borrower or any other Obligor (other than a Pledgor) any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a period of 60 days; or (iii) there shall be commenced against any Borrower or any other Obligor (other than a Pledgor) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Borrower or any other Obligor (other than a Pledgor) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Borrower or any other Obligor (other than a Pledgor) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due or there shall be a general assignment for the benefit of creditors; or (h) (i) Any Person shall engage in any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee would reasonably be expected to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA (other than a standard termination) or (v) any Borrower or any Commonly Controlled Entity would reasonably be expected to incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan; and in each case regarding clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to subject such Borrower or any other Obligor to any tax, penalty or other liabilities in the aggregate to exceed $500,000; or -72- (i) One or more judgments or decrees shall be entered against the Borrowers or any other Obligor (other than a Pledgor) involving in the aggregate a liability (not paid or fully covered by insurance) of $250,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof or in any event five days before the date of any sale pursuant to such judgment or decree or any non- monetary judgment or order shall be entered against the Borrowers or any other Obligor (other than a Pledgor) that is reasonably likely to have a Material Adverse Effect and either (i) enforcement proceedings shall have been commenced by any Person upon such judgment which has not been stayed pending appeal or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided that, judgments and decrees referred -------- ---- to in this Section 7(i) entered against any Borrower other than Entravision shall be limited to those which could reasonably be expected to have a Material Adverse Effect; or (j) There shall occur any default in the material observance or material performance of any Material Contract (other than those referred to in Section 7(p)) or any such Material Contract shall terminate or otherwise no longer be in full force and effect, in each case to the extent such default or termination could reasonably be expected to have a Material Adverse Effect; or (k) (A) any designation by any Governmental Authority (including the FCC) of an evidentiary hearing with regard to any application of any Borrower (or any Affiliate thereof) requesting any authorization from such Governmental Authority shall fail to be dismissed within 120 days after such designation and the Agent, in its reasonable judgment after consultation with its FCC counsel, believes that it is more likely than not that the result thereof will be the termination, revocation, suspension, non-renewal or material (and adverse) modification of any material Media License held by any Borrower (or any Affiliate thereof), or (B) any Governmental Authority (including the FCC) shall terminate, revoke or substantially and adversely modify any material Media License of any Borrower (or any Affiliate thereof), or (C) any action or proceeding commenced by any Governmental Authority (including the FCC) seeking the termination, suspension, revocation, non-renewal or substantial and adverse modification of any material Media License shall fail to be dismissed within 120 days after such commencement and the Agent, in its reasonable judgment after consultation with its FCC counsel, believes that such proceeding will more likely than not result in such termination, suspension, revocation, non-renewal or substantial and adverse modification, or (D) any material Media License shall expire by its terms and is not renewed in a timely manner, or any material agreement which is necessary to the operation of any broadcast facility or transmission site shall expire or is revoked or terminated and is not replaced by a comparable substitute or a substitute reasonably acceptable to the Agent. (For purposes of this Section 7(k), a "material" Media License is (1) any Media License (other than a Media License issued by the FCC), alone or in conjunction with other Media Licenses then subject to any of the circumstances described in this Section, the loss of which (in the Agent's reasonable judgment) could have a Material Adverse Effect and (2) any Media License issued by the FCC. Notwithstanding the foregoing, with respect to the type of event described in clause (A) or clause (C) above, the occurrence of such event will not constitute an Event of Default under and for purposes of clause (A) or clause (C) of this Section 7(k) only, provided that -------- ---- (and so long as) each of the following conditions is satisfied to the Agent's satisfaction: -73- (i) the Borrowers provide the Agent with written notice of such event within five Business Days after being notified by the FCC of such designation (and also provide a copy of any such notice received from the FCC), and (ii) the notice of designation affirmatively indicates that it relates only to the licenses or applications of a single Station rather than to the licenses and/or applications of more than one Station, and (iii) if an adverse ruling in the proceeding would threaten Entravision's ability to continue providing the same level of underlying service by such Station as theretofore provided, then (A) the Borrowers shall make a prepayment of the Loans (within 30 Business Days after receiving notice of such designation from the FCC) in an amount sufficient for Borrowers to remain in compliance with each of the financial covenants under Section 6.1 hereof without including any of the Operating Cash Flow attributable to such Station and (B) the Borrowers shall thereafter exclude the Operating Cash Flow attributable to such Station from the calculation of the Borrowers' consolidated Operating Cash Flow. Any such prepayment and exclusion from Operating Cash Flow will be permanent unless and until the FCC proceeding regarding such license or application is finally resolved to the Agent's satisfaction in a manner favorable to Entravision and without any divestiture of assets required by the FCC or otherwise voluntarily accomplished by the Borrowers pursuant to the next sentence. Once the Borrowers have made such prepayment and exclusion from Operating Cash Flow under the circumstances contemplated by this clause (iii), then Entravision may thereafter sell the assets relating to such Station (and only such Station) pursuant to a transaction with an unrelated third party (i.e., a ---- non-Affiliate) for value received provided that (1) Entravision gives the -------- ---- Agent written notice of such transaction at least 30 days (but not more than 60 days) prior to consummation of such transaction, (2) the representation under Section 3.20 regarding solvency of the Borrowers is true immediately prior to and following any such disposition, (3) such transaction does not cause a Material Adverse Effect or otherwise violate any covenant hereunder or otherwise cause a Default hereunder, (4) Entravision provides the Agent with a certificate renewing the representations and warranties in the Loan Documents and (if and to the extent appropriate) updating the various schedules to the Loan Documents to make the representations and warranties therein true, accurate and complete following such transaction and (5) the proceeds of such transaction are promptly used to prepay the Loans in accordance with the terms of Section 2.5(e); or (l) Any material provision of any Loan Document, after delivery thereof pursuant to the provisions hereof, shall, for any reason other than an act or omission by the Agent, cease to be valid or enforceable in accordance with its terms and such cessation shall have a Material Adverse Effect, or any security interest created under any Loan Document shall for any reason other than an act or omission by the Agent, cease to be a valid and perfected first priority security interest or Lien (except as otherwise stated or permitted herein or therein) in any material portion of the Collateral, the Guarantor Collateral or the property purported to be covered thereby; or (m) A Change in Control shall have occurred; provided that, the occurrence -------- ---- of any event which would constitute a Change in Control shall not constitute an Event of Default under -74- this Section 7(m) if such event is by reason of the death or disability of either or both of Walter F. Ulloa and Philip C. Wilkinson and (i) no other Default has occurred and is continuing and (ii) there has been presented to the Lenders within 120 days of such death or disability a plan for reorganization of, and operation of the business of, the Borrowers (which plan shall include compliance with the terms of this Agreement) in the absence of such individual or individuals (as applicable) which is satisfactory to the Majority Lenders in their reasonable discretion; or (n) The operations of any Station shall be interrupted or curtailed at any time for a period in excess of 96 hours (whether or not consecutive) during any period of seven consecutive days; or (o) (i) Any Borrower that is organized as a limited liability company shall lose its qualification for treatment as a partnership for income tax purposes (i.e., its right to utilize pass-through taxation) or if the Internal ---- Revenue Service or any state revenue service with taxing jurisdiction over such Borrower otherwise shall make a determination (which is no longer being diligently contested in good faith) that such Borrower no longer qualifies for treatment as a partnership for income tax purposes, in each case to the extent such loss or determination could reasonably be expected to have a Material Adverse Effect; (ii) With respect to any Borrower or any other Obligor that is organized as a limited liability company, any member thereof (A) experiences an event described in Section 7(g) hereof, (B) dies, dissolves or otherwise terminates its existence, or (C) withdraws from membership in such limited liability company. Notwithstanding the foregoing, such event will not constitute an Event of Default hereunder if (1) within 15 Business Days of the occurrence such event, the Agent is notified thereof in writing and (2) within 30 days of the occurrence of such event (or within such shorter period as may be required by applicable law or the applicable Organic Documents for such limited liability company), the remaining members of such limited liability company take all action necessary, if any (in a manner reasonably acceptable to the Agent) to continue the existence of such limited liability company as an operating organization liable to the Agent for its obligations under the Loan Documents; or (p) (i) Any Univision Affiliation Agreement with respect to any broadcast facility of any Borrower or any Subsidiary, or any broadcast facility subject to a Program Services Agreement, is at any time terminated, revoked or not renewed upon expiration; or (ii) any Affiliation Agreement with a network or programmer other than Univision which relates to any broadcast facility of any Borrower or any Subsidiary, or any broadcast facility subject to a Program Services Agreement, is at any time terminated, revoked or not renewed upon expiration (and not replaced, within 30 days of such termination, revocation or expiration, with a new Affiliation Agreement reasonably acceptable to the Majority Lenders), in either case in this clause (ii) relating to a broadcast facility accounting for more than 5% of the Borrowers' combined Operating Cash Flow as of the quarter ending immediately prior to such termination, revocation or non-renewal; then, and in any such event, (A) if such event is an Event of Default specified in paragraph (g) above, automatically the Commitments to the Borrowers and the commitment to issue Letters of Credit shall immediately terminate and the Loans made to the Borrowers hereunder (with -75- accrued interest thereon) and all other Obligations shall immediately become due and payable, and (B) if such event is any other Event of Default, with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, take any or all of the following actions: (i) by notice to the Borrowers declare the Commitments to the Borrowers and the commitment to issue Letters of Credit to be terminated forthwith, whereupon such Commitments and the commitment to issue Letters of Credit shall immediately terminate; and (ii) by notice of default to the Borrowers, declare the Loans (with accrued interest thereon) and all other Obligations under this Agreement and the Notes to be due and payable forthwith, whereupon (x) the same shall immediately become due and payable and (y) to the extent any Letters of Credit are then outstanding, the Borrowers shall make a Cash Collateral Deposit in an amount equal to the aggregate Letter of Credit Amount. In all cases, with the consent of the Majority Lenders, the Agent may enforce any or all of the Liens and security interests and other rights and remedies created pursuant to any Loan Document or available at law or in equity. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrowers. SECTION 8. THE AGENT 8.1 Appointment. Each Lender hereby irrevocably designates and appoints ----------- Union Bank of California, N.A. as Agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes Union Bank of California, N.A., as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 8.2 Delegation of Duties. The Agent may execute any of its duties under -------------------- this Agreement and the other Loan Documents by or through agents or attorneys- in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 8.3 Exculpatory Provisions. Neither the Agent nor any of its officers, ---------------------- directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrowers, any Subsidiary or any other Obligor or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or any -76- other Loan Document or for any failure of the Borrowers, any Subsidiary or any other Obligor to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrowers, any Subsidiary or any other Obligor. 8.4 Reliance by the Agent. The Agent shall be entitled to rely, and shall --------------------- be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), the Accountants and independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders or all Lenders, as it deems appropriate, or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense (except to the extent incurred as a result of the Agent's gross negligence or willful misconduct) which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes and the other Loan Documents in accordance with a request of the Majority Lenders or all Lenders, as may be required, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. 8.5 Notice of Default. The Agent shall not be deemed to have knowledge or ----------------- notice of the occurrence of any Default hereunder unless the Agent has received notice from a Lender or the Borrowers referring to this Agreement, describing such Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default as shall be reasonably directed by the Majority Lenders or all Lenders as appropriate; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders or as the Agent shall believe necessary to protect the Lenders' interests in the Collateral or the Guarantor Collateral. 8.6 Non-Reliance on the Agent and Other Lenders. Each Lender expressly ------------------------------------------- acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Borrowers, any Subsidiary or any other Obligor, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrowers, any Subsidiary and the other Obligors and made its own decision to make its Loans, and participate -77- in Letters of Credit, hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrowers, their Subsidiaries and the other Obligors. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrowers, any Subsidiary or any other Obligor which may come into the possession of the Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. 8.7 Indemnification. The Lenders agree to indemnify the Agent in its --------------- capacity as such (to the extent not reimbursed by the Borrowers, their Subsidiaries or the other Obligors and without limiting the obligation of such Persons to do so), ratably according to the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs (including, without limitation, the allocated cost of internal counsel), expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent, in its capacity as Agent, but not as a Lender hereunder, in any way relating to or arising out of this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Notes and all other amounts payable hereunder and the expiration of the Letters of Credit. 8.8 The Agent in Its Individual Capacity. The Agent and its Affiliates ------------------------------------ may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers, any Subsidiary and the other Obligors as though the Agent were not the Agent hereunder and under the other Loan Documents. With respect to the Agent, the Loans made or renewed and the Letters of Credit issued or participated in by the Agent, and any Note issued to the Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 8.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice --------------- to the Lenders. If the Agent shall resign as Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be approved by the Borrowers (which consent shall not be unreasonably withheld), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be -78- terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's resignation as Agent, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. Further, if the Agent no longer has any Loans, Letter of Credit participations or Commitments hereunder, the Agent shall immediately resign and shall be replaced, and have the benefits, as set forth in this Section 8.9. In addition, after the replacement of an Agent hereunder, the retiring Agent shall remain a party hereto and shall continue to have all the rights and obligations of an Agent under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. Neither this Agreement, any Note, any other ---------------------- Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section. With the prior written consent of the Majority Lenders and the Borrowers (and, in the case of any Loan Document other than this Agreement, the relevant Obligor), the Borrowers may, from time to time, enter into written amendments, supplements or modifications hereto and to the Notes and the other Loan Documents for the purposes of adding any provisions to this Agreement or the Notes or the other Loan Documents or changing in any manner the rights of the Lenders, the Borrowers or any other Obligor hereunder or thereunder or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement or the Notes or the other Loan Documents or any Default and its consequences; provided, however, that no such waiver and no such amendment, -------- ------- supplement or modification shall (i) (a) reduce the amount or extend the maturity of any Note or any installment due thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce the amount or extend the time of payment of any fee, indemnity or reimbursement payable to any Lender hereunder, or change the amount of any Lender's Commitment, or amend, modify or waive any provision of Section 2.4 or 2.5(e), in each case without the written consent of the Lender affected thereby; or (b) amend, modify or waive any provision of this Section 9.1 or reduce the percentage specified in or otherwise modify the definition of Majority Lenders, or consent to the assignment or transfer by any Obligor of any of its rights and obligations under this Agreement and the other Loan Documents (except as permitted under Section 6.4); or (c) release any Obligor from any liability under its respective Loan Documents; or (d) release any material portion of the Collateral or any material portion of the Guarantor Collateral, except for any Asset Disposition or release of Lien permitted by this Agreement or any other Loan Document; or (e) amend, modify or waive, directly or indirectly, any of the provisions of Section 2.1(h), 2.2(e) or 2.11; or (f) amend, modify or waive any provision of this Agreement requiring the consent or approval of all Lenders; or (g) increase the amount of the Aggregate Commitment, in each case set forth in clauses (i)(b) through (i)(g) above without the written consent of all the Lenders; or (ii) amend, modify or waive any provision of Section 4.3 with respect to the making of a Revolving Loan, or reduce the percentage specified in, or otherwise modify the definition of, Majority Revolving Loan Lenders, without the written consent of the Majority Revolving Loan Lenders; or (iii) amend, modify or waive any provision of Section 4.2 or 4.3 with respect to the making of an Incremental Loan, or reduce the percentage specified in, or otherwise modify the determination of, Majority Incremental Loan Lenders, without the written consent of the Majority Incremental Loan -79- Lenders; or (iv) amend, modify or waive any provision of Section 8 without the written consent of the then Agent, or any provision affecting the rights and duties of the Agent as the issuer of Letters of Credit without the consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrowers, the other Obligors, the Lenders, the Agent and all future holders of the Notes. In the case of any waiver, the Borrowers, the other Obligors, the Lenders and the Agent shall be restored to their former position and rights hereunder and under the outstanding Notes and any other Loan Documents, and any Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default, or impair any right consequent thereon. 9.2 Notices. All notices, requests and demands or other communications to ------- or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or 3 days after being deposited in the United States mail, certified and postage prepaid and return receipt requested, or, in the case of telecopy notice, when received, in each case addressed as follows in the case of the Borrowers and the Agent, and as set forth on the signature page hereto, or in the Assignment and Acceptance pursuant to which a Person becomes a party hereto, in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrowers: Entravision Communications Company, L.L.C. 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Attention: Walter F. Ulloa Philip C. Wilkinson Jeanette Tully Telecopy: (310) 820-2445 With a Copy to (which shall not constitute notice to the Borrowers): (i) Thompson Hine & Flory, LLP 1920 N Street, N.W. Washington, DC 20036-1601 Attention: Barry A. Friedman, Esq. Telecopy: (202) 331-8330, and (ii) Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 101 West Broadway, 17th Floor San Diego, California 92101 Attention: Kenneth D. Polin, Esq. Telecopy: (619) 515-9628 -80- The Agent: Union Bank of California, N.A 445 South Figueroa Street Los Angeles, California 90071 Attention: Lena M. Bryant Telecopy: (213) 236-5747 provided that any notice, request or demand to or upon the Agent or the Lenders - -------- pursuant to Section 2.1, 2.2, 2.3, 2.4 or 2.6 shall not be effective until received. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in ------------------------------ exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Survival of Representations and Warranties. All representations and ------------------------------------------ warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes. 9.5 Payment of Expenses and Taxes. The Borrowers agree (a) to pay or ----------------------------- reimburse the Agent for all its reasonable costs and out-of-pocket expenses (including travel and other expenses incurred by it or its agents in connection with performing due diligence with regard hereto) incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the Notes and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby (including those contemplated to occur on the Closing Date), including, without limitation, syndication efforts in connection with this Agreement and the reasonable fees and disbursements of counsel to the Agent (including special counsel with regard to FCC matters, special counsel with regard to Collateral or Guarantor Collateral located outside of California and the allocated costs of internal counsel to the Agent) and the Agent agrees to provide the Borrowers with a good faith estimate of such counsel fees, which counsel fees shall be subject to the approval of the Borrowers, such approval not to be unreasonably withheld or delayed, (b) after the occurrence and during the continuance of a Default, to pay or reimburse the Agent and each Lender for all its reasonable costs and out-of-pocket expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Loan Documents and any such other documents or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceeding, including, without limitation, reasonable legal fees and disbursements of counsel to the Agent and each Lender (including the allocated costs of internal counsel to the Agent), (c) to pay, and indemnify and hold harmless each Lender and the Agent from any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or -81- modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Loan Documents and any such other documents and (d) to pay, and indemnify and hold harmless each Lender and the Agent from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs (including the allocated cost of internal counsel and the reasonable legal fees and disbursements of outside counsel to the Lenders and the Agent), expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes and the other Loan Documents, the Acquisitions or the use of the proceeds of the Loans or the Letters of Credit and any such other documents (all the foregoing, collectively, the "indemnified liabilities"), provided, that the Borrowers shall have no obligation hereunder -------- to the Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Agent or such Lender or their agents or attorneys-in-fact. The agreements in this Section shall survive repayment of the Notes and all other amounts payable hereunder. The Agent and the Lenders agree to provide reasonable details and supporting information concerning any costs and expenses required to be paid by the Borrowers pursuant to the terms hereof. 9.6 Successors and Assigns; Participations; Purchasing Lenders. ---------------------------------------------------------- (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrowers may not assign, transfer or delegate any of their rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking or finance business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any ------------ Loan owing to such Lender, any Letter of Credit participated in by such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents; provided -------- that the holder of any such participation, other than an Affiliate of such Lender, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting the extension of the maturity of any portion of the principal amount of a Loan or Commitment, the expiration of a Letter of Credit or any portion of interest or fees related thereto allocated to such participation or a reduction of the principal amount or principal payment amount of or the rate of interest payable on the Loans or any fees related thereto or reduction of the amount to be reimbursed under any Letter of Credit, or a release of any Obligor or any substantial portion of the Collateral or the Guarantor Collateral or any increase in participation amounts. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note and the participant in any such Letter of Credit for all purposes under this Agreement and the other Loan Documents, and the Borrowers and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. The Borrowers agree that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of -82- setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount continuing of its participating interest were owing directly to it as a Lender under this Agreement or any Note, provided that such Participant shall only be entitled to -------- such right of setoff if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with the Lenders the proceeds thereof as provided in Section 9.7. The Borrowers also agree that each -------- Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 with respect to its participation in the Commitments and the Loans and the Letters of Credit outstanding from time to time; provided, that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to any of its Affiliates or to any Lender, any Affiliate thereof or to one or more additional lenders or financial institutions, which additional lenders shall be subject to the consent of the Borrowers, such consent not to be unreasonably withheld and not to be required if a Default has occurred and is continuing ("Purchasing ---------- Lenders") all or any part of its rights and obligations under this Agreement, - ------- the Notes and the other Loan Documents pursuant to an Assignment and Acceptance substantially in the form of Exhibit C, executed by such Purchasing Lender and such transferor Lender and delivered to the Agent for its acceptance and recording in the Register (as defined in (d) below), provided, that any such -------- sale must result in the Purchasing Lender having at least $5,000,000 in aggregate amount of obligations under this Agreement, the Notes and the other Loan Documents. Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent of such assigned portion and as provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Assignment and Acceptance shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement, the Notes and the other Loan Documents. On or prior to the transfer effective date determined pursuant to such Assignment and Acceptance, the Borrowers, at their own expense, shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such Purchasing Lender in an amount equal to the Commitments assumed by it pursuant to such Assignment and Acceptance, and if the transferor Lender has retained a Commitment hereunder, new Notes to the order of the transferor Lender in an amount equal to the Commitments retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Notes surrendered by the transferor Lender shall be returned by the Agent to the Borrowers marked "canceled." -83- (d) The Agent shall maintain at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and -------- the Commitments of, and principal amount of the Loans owing to, and, if applicable, the Letters of Credit participated in by, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans and the participant in the Letters of Credit, if applicable, recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by a transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender that is not then a Lender or an Affiliate thereof, by the Borrowers and the Agent) together with payment to the Agent (except in the case of a Lender assigning to its Affiliate) of a registration and processing fee of $2,500, the Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrowers. (f) The Borrowers authorize each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and ---------- all financial information in such Lender's possession concerning the Borrowers and their Subsidiaries and Affiliates which has been delivered to such Lender by or on behalf of the Borrowers pursuant to this Agreement or any other Loan Document or which has been delivered to such Lender by or on behalf of the Borrowers in connection with such Lender's credit evaluation of the Borrowers and their Subsidiaries and Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this Section, any interest in this Agreement, any Letter of Credit or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Lender and the Agent (for the benefit of the transferor Lender, the Agent and the Borrowers) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Borrowers or the transferor Lender with respect to any payments to be made to such Transferee in respect of the Loans or the Letters of Credit, (ii) to furnish to the transferor Lender, the Agent and the Borrowers either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Lender, the Agent and the Borrowers) to provide the transferor Lender, the Agent and the Borrowers a new Form 4224 or Form 1001 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. -84- (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under its Notes, or, if applicable, its participation in any Letter of Credit, to any Federal Reserve Bank in accordance with applicable law. 9.7 Adjustments; Set-Off. -------------------- (a) If any Lender (a "benefitted Lender") shall at any time receive any ----------------- payment of all or part of its Loans, its participations in Letters of Credit, or interest thereon, or fees, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, its participations in Letters of Credit, or interest thereon, or fees, such benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loans, participations in Letters of Credit, or fees, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits - -------- ------- is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrowers agree that each Lender so purchasing a portion of another Lender's Loan or its participations in Letters of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law, with the prior consent of the Majority Lenders, each Lender shall have the right, exercisable upon the occurrence and during the continuance of an Event of Default and acceleration of the Obligations pursuant to Section 7, without prior notice to the Borrowers, any such notice being expressly waived by the Borrowers to the extent permitted by applicable law, to set-off and appropriate and apply against any such Obligations any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof or bank controlling such Lender to or for the credit or the account of the Borrowers. Each Lender agrees promptly to notify the Borrowers after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of - -------- such set-off and application. 9.8 Counterparts. This Agreement may be executed by one or more of the ------------ parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 9.9 Severability. Any provision of this Agreement which is prohibited or ------------ unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any -85- such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.10 Integration. This Agreement represents the entire agreement of the ----------- Borrowers, the Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND ------------- OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES). 9.12 Alternative Dispute Resolution. ------------------------------ (a) Claims or Controversies Subject to Arbitration or Judicial Reference. (i) Any Claim other than a Claim that arises out of or relates to any obligation under any Loan Document that is secured, in whole or in part, by an interest in real property shall, at the written request of any Party, be determined by Arbitration. (ii) Any Claim that arises out of or relates to any obligation under any Loan Document that is secured, in whole or in part, by an interest in real property shall be determined by Arbitration only with the consent of both, (A) the Obligor party to the Loan Document under which such Claim arises and (B) the Majority Lenders. If both such Parties do not consent to the determination of any such Claim by Arbitration, then such Claim shall, at the written request of either of such Parties, be determined by Reference. (iii) The determination as to whether or not a Claim arises out of or relates to any obligation under any Loan Document that is secured, in whole or in part, by an interest in real property shall be made at the time the arbitrator or referee is selected pursuant to Section 9.12(b). (b) Selection of Arbitrator or Referee. Within thirty (30) days after ---------------------------------- written demand, or within thirty (30) days after commencement by any Party of any lawsuit subject to this Agreement, the parties shall select a single neutral arbitrator pursuant to the Commercial Arbitration Rules of the AAA or a single neutral referee pursuant to the Judicial Reference Procedures of the AAA. However, the arbitrator or referee selected must be a retired state or federal court judge with at least five years of judicial experience in civil matters. In the event that the selection pursuant to such Commercial Arbitration Rules or Judicial Reference Procedures does not result in the appointment of a single neutral arbitrator or a single neutral referee within such thirty (30) day period, any Party may petition the court to appoint a single neutral arbitrator or a single neutral referee having such qualifications. The Parties shall equally bear the fees and expenses of the arbitrator or referee unless the arbitrator or referee otherwise provides in the award or statement of decision. -86- (c) Conduct of Arbitration or Reference. The arbitrator shall have the ----------------------------------- powers provided under Applicable State Law and the Commercial Arbitration Rules of the AAA, and the referee shall have the powers provided under Applicable State Law and the Judicial Reference Procedures of the AAA except as provided in this Agreement, including without limitation the following: (1) The arbitrator or referee shall determine all challenges to the legality and/or enforceability of this Agreement. (2) The arbitrator or referee shall apply the rules of evidence to the same extent as they would be applied in a court of law. (3) Subject to the provisions of this Agreement, the arbitrator may award or the referee may report, a statement of decision providing for any remedy or relief, including without limitation judicial foreclosure, a deficiency judgment or equitable relief, and give effect to all legal and equitable defenses, including without limitation statutes of limitation, the statute of frauds, waiver and estoppel. (4) A Party may not conduct discovery unless the arbitrator or referee grants such party leave to do so upon a showing of good cause. All discovery shall be completed within 90 days after the appointment of the arbitrator or referee, except upon a showing of good cause by any Party. The arbitrator or referee shall limit discovery to non-privileged material that is relevant to the issues to be determined by the arbitrator or referee. (5) The referee shall determine the time of the hearing. The hearing shall take place in Los Angeles, California. The hearing must be commenced within sixty (60) days after completion of discovery, unless the arbitrator or referee grants a continuance upon a showing of good cause by any Party. At least fourteen (14) days before the date set for hearing, the Parties shall exchange copies of exhibits to be offered as evidence, and lists of witnesses who will testify, at such hearing. Once commenced, the hearing shall proceed day to day until completed, unless the arbitrator or the referee grants a continuance upon a showing of good cause by any Party. Any Party may cause to be prepared, at its expense, a written transcription or electronic recordation of such hearing. (6) Any award of the arbitrator or the statement of decision of the referee shall be supported by written findings of fact and conclusions of law which the arbitrator or the referee shall concurrently deliver to the Parties. (7) The arbitrator shall have the power to award or the referee shall have the power to report a statement of decision providing for reasonable attorneys' fees and costs (including a reasonable allocation for the costs of in-house counsel) to the prevailing party. (8) In the event that punitive damages are permitted under Applicable State Law, the award of the arbitrator or the statement of decision of the referee may provide for recovery of punitive damages provided that the arbitrator or referee first makes written findings of fact that would satisfy the requirements for recovery of punitive damages under Applicable State Law. Any such punitive damages shall not exceed a sum equal to three times the amount of actual damages as determined by the arbitrator or referee. -87- (9) In the event that Applicable State Law provides that publications or communications made in a judicial proceeding are subject to a litigation privilege, such litigation privilege shall apply to the same extent to publications or communications made in the Arbitration or Reference. (d) Provisional Remedies, Self-Help and Foreclosure. No provision of this ----------------------------------------------- Section 9.12 shall limit the right of any Party (i) to exercise any self-help remedies or seek specific performance, (ii) to foreclose upon or sell any collateral, by power of sale or otherwise, or (iii) to obtain or oppose provisional remedies or necessary procedural orders from a court of competent jurisdiction, including without limitation appointment of a receiver, before, after or during the pendency of the Arbitration or Reference. The exercise of, or opposition to, any such remedy does not waive the right of any Party to Arbitration or Reference pursuant to this Agreement. (e) Miscellaneous. Any court of competent jurisdiction shall, upon the ------------- petition of any Party, confirm the award of the arbitrator and enter judgment in conformity therewith. Any court of competent jurisdiction shall, upon the filing of the statement of decision of the referee, enter judgment thereon. Any such judgment shall be final, binding and non-appealable (subject to vacation or correction in the amounts set forth, respectively, in California Code of Civil Procedure Sections 1286.2, 1286.4, 1286.6 and 1286.8). No party shall take any action to contest such award or judgment except as set forth above. In the event that multiple claims are asserted, some of which are found not subject to this Agreement, the Parties agree to stay the proceedings of the claims not subject to this Agreement until all other claims are resolved in accordance with this Agreement. In the event that claims are asserted against multiple parties, some of whom are not subject to this Agreement, the Parties agree to sever the claims subject to this Agreement and resolve them in accordance with this Agreement. In the event that any provision of this Section 9.12 is found to be illegal or unenforceable, the remainder of this Section 9.12 shall remain in full force and effect. In the event of any challenge to the legality or enforceability of this Section 9.12, the prevailing Party shall be entitled to recover the costs and expenses, including reasonable attorneys' fees, incurred by it in connection therewith. Applicable State Law shall govern the interpretation of this Section 9.12. (f) Waiver of Right to Trial by Jury. IN CONNECTION WITH ANY ARBITRATION, -------------------------------- ANY REFERENCE OR ANY OTHER ACTION, PROCEEDING OR COUNTERCLAIM, THE BORROWERS, THE LENDERS AND THE AGENT HEREBY EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY RIGHT THEY MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM. (g) Defined Terms. As used in this Section 9.12, the following terms ------------- shall have the respective meanings set forth below: (i) "AAA" shall mean the American Arbitration Association. --- (ii) "Applicable State Law" shall mean the law of the State of -------------------- California; provided, however, that if any Party seeks (A) to exercise self-help remedies, including without limitation set-off, (B) to foreclose against or sell any collateral, by power of sale or otherwise or (iii) to obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Arbitration or -88- Reference, the law of the state where such collateral is located shall govern the exercise of or opposition to such rights and remedies. (iii) "Arbitration" shall mean an arbitration conducted pursuant to ----------- this Agreement in accordance with Applicable State Law, and under the Commercial Arbitration Rules of the AAA, as in effect at the time the arbitrator is selected pursuant to Section 9.12(b). (iv) "Claim" shall mean any claim, cause of action, action, dispute ----- or controversy between or among the Parties, including any claim, cause of action, action, dispute or controversy alleged in or subject to a lawsuit between or among the Parties, which arises out of or relates to: (1) any of the Loan Documents, (2) any negotiations, correspondence or communications relating to any of the Loan Documents, whether or not incorporated into the Loan Documents or any indebtedness evidenced thereby, (3) the administration or management of the Loan Documents or any indebtedness evidenced thereby or (4) any alleged agreements, promises, representations or transactions in connection therewith, including but not limited to any claim, cause of action, action, dispute or controversy which arises out of or is based upon an alleged tort or other breach of legal duty. (v) "Party" shall mean any Obligor, any Lender or the Agent. ----- (vi) "Reference" shall mean a judicial reference conducted pursuant --------- to this Agreement in accordance with Applicable State Law and under the Judicial Reference Procedures of the AAA, as in effect at the time the referee is selected pursuant to Section 9.12(b) of this Agreement. 9.13 Acknowledgements. The Borrowers hereby acknowledge that: ---------------- (a) they have been advised by counsel in the negotiation, execution and delivery of this Agreement and the Notes and the other Loan Documents; (b) neither the Agent nor any Lender has any fiduciary relationship to the Borrowers solely by virtue of any of the Loan Documents, and the relationship pursuant to the Loan Documents between the Agent and the Lenders, on one hand, and the Borrowers on the other hand, is solely that of creditor and debtor; and (c) no joint venture exists among the Lenders or among the Borrowers, on one hand and the Lenders, on the other hand. -89- 9.14 Obligations Absolute. The obligations of each Borrower hereunder -------------------- (which are joint and several) shall remain in full force and effect without regard to, and shall not be affected or impaired by the following, any of which may be taken without the consent of, or notice to, such Borrower (except as otherwise required by this Agreement), nor shall any of the following give such Borrower any recourse or right of action against the Agent or any Lender: (a) Any express or implied amendment, modification, renewal, addition, supplement, extension (including, without limitation, extensions beyond the original term) or acceleration of or to any of the Loan Documents; (b) Any exercise or non-exercise by any Lender of any right or privilege under any of the Loan Documents; (c) Any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Borrower, any Obligor or any other guarantor of the Obligations (which term shall include any other party at any time directly or contingently liable for any Borrower's obligations under the Loan Documents) or any Affiliate of any Borrower, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Borrower shall have had notice or knowledge of any of the foregoing; (d) Any release or discharge of any Borrower from its liability under any of the Loan Documents or any release or discharge of any endorser or guarantor or of any other party at any time directly or contingently liable for the Obligations; (e) Any subordination, compromise, release (by operation of law or otherwise), discharge, compound, collection or liquidation of any or all of the Collateral or the Guarantor Collateral described in any of the Loan Documents or otherwise in any manner, or any substitution with respect thereto; (f) Any assignment or other transfer of this Agreement in whole or in part or of any of the Loan Documents; (g) Any acceptance of partial performance of the Obligations by any Obligor (and such Borrower waives any and all of its rights under California Civil Code Section 2822(a)); (h) Any consent to the transfer of the Collateral or the Guarantor Collateral or any portion thereof; and (i) Any bid or purchase at any sale of the Collateral or the Guarantor Collateral. 9.15 Waivers. Each Borrower unconditionally waives any defense to the ------- enforcement of this Agreement and the other Loan Documents, including, without limitation: (a) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Agreement and the other Loan Documents; -90- (b) Any right to require the Agent and the Lenders to proceed against any other Borrower or any guarantor at any time, or to proceed against or exhaust any security held by the Agent and the Lenders at any time, or to pursue any other remedy whatsoever at any time; (c) The defense of any statute of limitations affecting the liability of such Borrower hereunder, the liability of any other Borrower or any guarantor under the Loan Documents, or the enforcement thereof, to the extent permitted by law; (d) Any defense arising by reason of any invalidity or unenforceability of any of the Loan Documents or any provision thereof, or any disability of any other Borrower or any guarantor or of any manner in which the Agent and the Lenders have exercised their rights and remedies under the Loan Documents, or by any cessation from any cause whatsoever of the liability of any other Borrower or any guarantor; (e) Any defense based upon an election of remedies by the Agent and the Lenders, including, without limitation, any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including but not limited to, remedies relating to real property or personal property security, which destroys or otherwise impairs the subrogation rights of such Borrower or the rights of such Borrower to proceed against any other Borrower or any guarantor for reimbursement, or both (including, without limitation, Code of Civil Procedure Sections 580a, 580b, 580d and 726); (f) Any right such Borrower may have under Code of Civil Procedure Section 580a including, without limitation, a right to a hearing with respect to the fair market value of any Collateral or Guarantor Collateral, either before or after foreclosure, and any right such Borrower may have to require the Agent and the Lenders to proceed against any Collateral or Guarantor Collateral before seeking to obtain a judgment against such Borrower hereunder; (g) Any duty of the Agent or the Lenders to advise such Borrower of any information known to the Agent or the Lenders regarding the financial condition of any other Borrower and all other circumstances affecting any other Borrower's ability to perform its obligations to the Agent and the Lenders, it being agreed that such Borrower assumes the responsibility for being and keeping informed regarding such condition or any such circumstances; (h) Any rights of subrogation, reimbursement, exoneration, contribution and indemnity, and any rights or claims of any kind or nature against any other Borrower which arise out of or are caused by this Agreement, and any rights to enforce any remedy which the Agent or the Lenders now have or may hereafter have against any other Borrower, and any benefit of, and any right to participate in, any security now or hereafter held by the Agent or the Lenders; (i) Any right such Borrower might have, under Section 2815 of the California Civil Code or otherwise, to revoke its obligations under this Agreement as to any advances made by the Lenders to or on behalf of any other Borrower or pursuant to the terms of any of the Loan Documents, it being the intention of such Borrower that its Obligations under this Agreement remain in full force and effect and apply to all Obligations whenever incurred; and -91- (j) Without limiting the generality of the foregoing or any other provision hereof, any rights and benefits which might otherwise be available to such Borrower under California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 3433, or any successor sections. 9.16 Headings. Section headings herein are included for convenience of -------- reference only and shall not constitute a part of this Agreement for any other purpose. 9.17 Copies of Certificates, Etc. Whenever the Borrowers are required to --------------------------- deliver notices, certificates, opinions, statements or other information hereunder to the Agent for delivery to any Lender (including under Article 4), it shall do so in such number of copies as the Agent shall reasonably specify. 9.18 Publicity. The Agent shall have the right to review and approve, in --------- advance, any public announcements (in any form) and any filings describing or quoting from the credit arrangements reflected in this Agreement and the other Loan Documents, provided, however, that the Borrowers (i) shall be permitted to -------- ------- file copies of any Loan Document with the FCC or any other governmental agency as required by law and (ii) shall also be permitted to disclose information concerning the Loan Documents if the Borrowers' attorneys reasonably believe that such disclosure is required by law. 9.19 Confidentiality. The Lenders shall take normal and reasonable --------------- precautions to maintain the confidentiality of all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by the Borrowers, but may, in any event, make disclosures (i) reasonably required by any bona fide transferee, assignee or participant in connection with the contemplated transfer or assignment of any of the Commitments or Loans or participations therein or participations in Letters of Credit or (ii) as required or requested by any governmental agency or representative thereof or as required pursuant to legal process or (iii) to its attorneys and accountants or (iv) as required by law or (v) in connection with litigation involving any Lender; provided that (a) such transferee, assignee or participant agrees to comply with the provisions of this Section 9.19 unless specifically prohibited by applicable law or court order and (b) in no event shall any Lender be obligated or required to return any materials furnished by any Borrower or any Subsidiary. 9.20 Certain Powers of Managing Members. Notwithstanding any provision of ---------------------------------- this Agreement to the contrary, each Borrower hereby agrees that (i) at any time, any notice (including borrowing notices, Letter of Credit Requests, notices of prepayment and Continuation Notices) to be given by such Borrower, or an officer of such Borrower (including a Responsible Officer or the Chief Financial Officer of such Borrower) hereunder or under any other Loan Document may be executed on behalf of such Borrower or such officer by the Managing Members and such notice shall have the same force and effect, and be binding on such Borrower, as if it were executed by an officer of such Borrower; (ii) any consent, approval or agreement by such Borrower, or any certificate to be given by such Borrower or by an officer of such Borrower (including a Covenant Compliance Certificate but excluding a Solvency Certificate), required under the terms of this Agreement (including pursuant to Sections 8.9, 9.1 and 9.6(c)) or under any other Loan Document shall be deemed given if executed on behalf of such Borrower by the Managing Members and such consent, approval, agreement or certificate shall have the same -92- force and effect, and be binding on such Borrower, as if it had been executed by an officer of such Borrower; and (iii) at any time, any notice or certificate to be given by the Agent or the Lenders hereunder (including notices of changes in Applicable Lending Offices and notices under Sections 2.9, 2.10, 2.13 and 2.14) or under any other Loan Document may be given by the Agent or the Lenders to Entravision only (such Borrower hereby appointing Entravision to accept and receive all notices hereunder on its behalf) and the Agent and the Lenders shall have no obligation to give such notice to any other Borrower hereunder. 9.21 Relationship with Prior Agreements. This Agreement amends and restates ---------------------------------- in its entirety the Original Credit Agreement. This Agreement renews and continues the Original Credit Agreement without any novation, discharge or satisfaction of the underlying obligations or indebtedness (or any guaranty or collateral security therefor), all of which obligations, indebtedness and security remain outstanding under the Credit Agreement and the Notes. Notwithstanding anything herein to the contrary, (a) interest and other obligations under the Original Credit Agreement accrued and payable prior to the date of amendment and restatement hereof but remaining unpaid shall not be discharged and shall be due and payable in accordance with the terms of the Original Credit Agreement, (b) interest and other obligations under the Original Credit Agreement accrued and payable on or after the date of amendment and restatement hereof shall be due and payable in accordance with the terms of this Agreement and (c) Letters of Credit outstanding under the Original Credit Agreement shall be deemed, on and after the Closing Date, to be outstanding under this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Los Angeles, California by their proper and duly authorized officers as of the day and year first above written. BORROWERS --------- KSMS-TV, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President & Treasurer TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Vice President & Treasurer -93- CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President & Chief Financial Officer GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President & Treasurer LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President & Treasurer VALLEY CHANNEL 48, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman & Chief Executive Officer TELECORPUS, INC. By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson Name: Walter F. Ulloa Philip C. Wilkinson Title: Chairman & Chief President & Chief Executive Officer Operating Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa Walter F. Ulloa Managing Member By: /s/ Philip C. Wilkinson Philip C. Wilkinson Managing Member AGENT ----- UNION BANK OF CALIFORNIA, N.A., as Agent By: /s/ Jenny Dongo Name: Jenny Dongo Title: Assistant Vice President LENDERS ------- UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Jenny Dongo Name: Jenny Dongo Title: Assistant Vice President Revolving Loan Commitment: $27,000,000 Address for Notices ------------------- (a) For Credit: ---------- 445 South Figueroa Street Los Angeles, California 90071 Attention: Lena M. Bryant Telephone: (213) 236-7535 Facsimile: (213) 236-5747 (b) For Operations: -------------- 445 South Figueroa Street Los Angeles, California 90071 Attention: Liliane Biermann Telephone: (213) 236-4054 Facsimile: (213) 236-5276 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 445 South Figueroa Street Los Angeles, California 90071 Applicable Lending Office for LIBOR Loans: 445 South Figueroa Street Los Angeles, California 90071 Applicable Lending Office for Participations in Letters of Credit: 445 South Figueroa Street Los Angeles, California 90071 CIBC INC., as a Lender By: /s/ Harold Birk Name: Harold Birk Title: Executive Director CIBC Oppenheimer Corp., as Agent Revolving Loan Commitment: $22,000,000 Address for Notices ------------------- (a) For Credit: ---------- 425 Lexington Avenue New York, New York 10017 Attention: Pamela Heyer Poutre Telephone: (212) 856-3536 Facsimile: (212) 856-3991 (b) For Operations/Administration: ----------------------------- 2727 Paces Ferry Road, Suite 1200 2 Paces West, Building 2 Atlanta, Georgia 30339 Attention: Kelly Swift (Operations) Telephone: (770) 319-4874 (K. Swift) Facsimile: (770) 319-4950 (K. Swift) Attention: Bonnie Harris (Admin.) Telephone: (770) 319-4850 Facsimile: (770) 319-4950 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 2727 Paces Ferry Road, Suite 1200 2 Paces West, Building 2 Atlanta, Georgia 30339 Applicable Lending Office for LIBOR Loans: 2727 Paces Ferry Road, Suite 1200 2 Paces West, Building 2 Atlanta, Georgia 30339 Applicable Lending Office for Participations in Letters of Credit: 2727 Paces Ferry Road, Suite 1200 2 Paces West, Building 2 Atlanta, Georgia 30339 ABN-AMRO BANK N.V., as a Lender By: /s/ David C. Carrington Name: David C. Carrington Title: Vice President By: /s/ James Dunleavy Name: James Dunleavy Title: Sr. Vice President Revolving Loan Commitment: $17,000,000 Address for Notices: ------------------- 500 Park Avenue New York, New York 10022 Attention: David Carrington Telephone: (212) 446-4382 Facsimile: (212) 446-4203 with a copy to: -------------- 135 South LaSalle Street, Suite 2805 Chicago, Illinois 60603 Attention: Credit Administration Telephone: (312) 904-8835 Facsimile: (312) 904-8840 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 135 South LaSalle Street, Suite 625 Chicago, Illinois 60603 Attention: Loan Administration Applicable Lending Office for LIBOR Loans: 135 South LaSalle Street, Suite 625 Chicago, Illinois 60603 Attention: Loan Administration Applicable Lending Office for Participations in Letters of Credit: 135 South LaSalle Street, Suite 625 Chicago, Illinois 60603 Attention: Loan Administration THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Ian A. Hodgart Name: Ian A Hodgart Title: Authorized Signature Revolving Loan Commitment: $9,000,000 Address for Notices ------------------- (a) For Credit: ---------- One Liberty Plaza New York, New York 10006 Attention: Ian Hodgart Telephone: (212) 225-5079 Facsimile: (212) 225-5090 (b) For Operations: -------------- One Liberty Plaza New York, New York 10006 Attention: Adriene Mays Telephone: (212) 225-5047 Facsimile: (212) 225-5145 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: One Liberty Plaza New York, New York 10006 Applicable Lending Office for LIBOR Loans: One Liberty Plaza New York, New York 10006 Applicable Lending Office for Participations in Letters of Credit: One Liberty Plaza New York, New York 10006 THE CIT GROUP/EQUIPMENT FINANCING, INC., as a Lender By: /s/ J.E. Palmer Name: J.E. Palmer Title: Assistant Vice President Revolving Loan Commitment: $12,000,000 Address for Notices ------------------- (a) For Credit: ---------- 900 Ashwood Parkway, 6th Floor Atlanta, Georgia 30338 Attention: John Palmer Telephone: (770) 551-7827 Facsimile: (770) 206-9295 (b) For Operations: -------------- 900 Ashwood Parkway, 6th Floor Atlanta, Georgia 30338 Attention: Joe O'Laughlin Telephone: (770) 677-3471 Facsimile: (770) 551-7867 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 900 Ashwood Parkway, 6th Floor Atlanta, Georgia 30338 Applicable Lending Office for LIBOR Loans: 900 Ashwood Parkway, 6th Floor Atlanta, Georgia 30338 Applicable Lending Office for Participations in Letters of Credit: 900 Ashwood Parkway, 6th Floor Atlanta, Georgia 30338 CITY NATIONAL BANK, as a Lender By: /s/ David C. Burdge Name: David C. Burdge Title: Senior Vice President Revolving Loan Commitment: $12,000,000 Address for Notices ------------------- (a) For Credit: ---------- 400 North Roxbury Drive Beverly Hills, California 90210 Attention: David Burdge Telephone: (310) 888-6154 Facsimile: (310) 888-6564 (b) For Operations: -------------- 831 South Douglas Street, Suite 100 El Segundo, California 90245 Attention: Lenora Williams Telephone: (310) 297-8075 Facsimile: (310) 297-8171 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 400 North Roxbury Drive Beverly Hills, California 90210 Applicable Lending Office for LIBOR Loans: 400 North Roxbury Drive Beverly Hills, California 90210 Applicable Lending Office for Participations in Letters of Credit: 400 North Roxbury Drive Beverly Hills, California 90210 FIRST UNION NATIONAL BANK, as a Lender By: /s/ Jim F. Redman Name: Jim F. Redman Title: Senior Vice President Revolving Loan Commitment: $22,000,000 Address for Notices ------------------- (a) For Credit: ---------- One First Union Place 301 South College Street, DC-5 Charlotte, North Carolina 28288-0735 Attention: Wendy Klepper Telephone: (704) 383-4746 Facsimile: (704) 374-4092 (b) For Operations: -------------- One First Union Place 301 South College Street, DC-5 Charlotte, North Carolina 28288-0735 Attention: Hilda F. Weathers Telephone: (704) 374-4897 Facsimile: (704) 383-7201 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: One First Union Place 301 South College Street, DC-5 Charlotte, North Carolina 28288-0735 Applicable Lending Office for LIBOR Loans: One First Union Place 301 South College Street, DC-5 Charlotte, North Carolina 28288-0735 Applicable Lending Office for Participations in Letters of Credit: One First Union Place 301 South College Street, DC-5 Charlotte, North Carolina 28288-0735 FLEET BANK, N.A., as a Lender By: /s/ Garret Komjathy Name: Garret Komjathy Title: Vice President Revolving Loan Commitment: $17,000,000 Address for Notices ------------------- (a) For Credit: ---------- 1185 Avenue of the Americas, 16th Fl. Media & Communications Group New York, New York 10036 Attention: Garret Komjathy Telephone: (212) 819-6043 Facsimile: (212) 819-6202 819-6203 (b) For Operations: -------------- 1185 Avenue of the Americas, 16th Fl. Media & Communications Group New York, New York 10036 Attention: Yin Kuen Lee Telephone: (212) 819-6052 Facsimile: (212) 819-6204 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 1185 Avenue of the Americas, 16th Fl. Media & Communications Group New York, New York 10036 Applicable Lending Office for LIBOR Loans: 1185 Avenue of the Americas, 16th Fl. Media & Communications Group New York, New York 10036 Applicable Lending Office for Participations in Letters of Credit: 1185 Avenue of the Americas, 16th Fl. Media & Communications Group New York, New York 10036 PARIBAS, as a Lender By: /s/ Thomas G. Brandt /s/ Todd Rodgers Name: Thomas G. Brandt/Todd Rodgers Title: Director/Assistant Vice President Revolving Loan Commitment: $12,000,000 Address for Notices ------------------- (a) For Credit: ---------- 2029 Century Park East, Suite 3900 Los Angeles, California 90067 Attention: Todd Rodgers Telephone: (310) 551-7370 Facsimile: (310) 556-3762 (b) For Operations: -------------- 2029 Century Park East, Suite 3900 Los Angeles, California 90067 Attention: Shirley Williams Telephone: (310) 551-7360 Facsimile: (310) 553-1504 Approved Lending Offices ------------------------ Applicable Lending Office for Base Rate Loans: 2029 Century Park East, Suite 3900 Los Angeles, California 90067 Applicable Lending Office for LIBOR Loans: 2029 Century Park East, Suite 3900 Los Angeles, California 90067 Applicable Lending Office for Participations in Letters of Credit: 2029 Century Park East, Suite 3900 Los Angeles, California 90067 SCHEDULE 1.1 Existing Mortgages ------------------
Lease Encumbered (If Expiration Date of Lease --------------------- ------------------------ Instrument General Description Applicable) (If Applicable) - ---------- ------------------- ----------- --------------- 1. Leasehold Deed of Transmitter site for Palm Lease dated 10/1/95 between September 30, 2000 Trust, Assignment of Springs/Indio Stations The Michael & Linda Nichols Rents and Fixture Trust, Ronald & Pamela Filing dated as of Nichols, and the Bender Moore 12/31/96, as amended Trust, collectively, as landlord, and KVER-TV, as tenant (the tenant's interest under which was assigned to Entravision) 2. Leasehold Deed of Transmitter site for Las Lease dated 12/20/94 between March 19, 2005 Trust, Assignment of Vegas Station Tower Management, Inc. (as Rents and Fixture successor in interest to Oak Filing dated as of Hill Enterprises), as 12/26/96, as amended landlord, and Tierra Alta Broadcasting, Inc. KZIR, Ch. 15, as tenant (the tenant's interest under which was assigned to Entravision)
3. Leasehold Deed of Transmitter site for Denver Lease and License Agreement October 31, 1999 Trust, Assignment of Station (WGN 10/1/89 Lease) dated 10/1/89 between WGN of Rents and Fixture Colorado, Inc., as landlord, Filing dated as of and Golden Hills Broadcasting 12/26/96, as amended Corporation, as tenant (the tenant's interest under which was assigned to Entravision) 4. Leasehold Deed of Transmitter site for San Industrial Lease dated 10/1/95 September 30, 2000 Trust, Assignment of Diego Station between Palomar Repeater, Rents and Fixture Inc., as landlord, and Filing dated as of Cabrillo Broadcasting 12/31/96, as amended Corporation, as tenant (the tenant's interest under which was assigned to Entravision) 5. Leasehold Deed of Hidalgo Lease Lease dated 2/89 between February 28, 1999 Trust, Security Sunland Farms, Inc., as Agreement, Assignment landlord, and Mundo Vision of Rents and Fixture Broadcasting Company, as Filing dated as of tenant (the tenant's interest 1/24/97, as amended under which was assigned to Valley Channel 48, Inc., then to Entravision)
6. Deed of Trust, Security El Paso headquarters N/A N/A Agreement, Assignment of Rents and Fixture Filing dated as of 6/4/97, as amended 7. Leasehold Deed of KINT-TV Tower Site Sublease Agreement dated August 31, 2007 Trust, Security 3/31/82, between KDBC-TV, Agreement, Assignment Ltd., as sublessor, and Paso of Rents and Fixture del Norte Broadcasting Filing dated as of Corporation, as sublessee (the 6/4/97, as amended sublessee's interest under which was assigned to Entravision) 8. Leasehold Deed of KINT-FM Radio Station Sublease Sublease Agreement dated March 22, 2003, with one Trust, Security 9/22/92, between KDBC-TV, 5 1/2 year optional extension Agreement, Assignment Ltd., as sublessor, and Paso of Rents and Fixture del Norte Broadcasting Filing dated as of Corporation, as sublessee (the 9/25/97, as amended sublessee's interest under which was assigned to Entravision)
9. Leasehold Deed of KINT-AM Radio Station Lease Lease Agreement dated 5/26/87, May 26, 2017, with one Trust, Security between City of El Paso, as 10-year extension Agreement, Assignment lessor, and Paso del Norte of Rents and Fixture Communications, Incorporated, Filing dated as of as lessee (the lessee's 9/25/97, as amended interest under which was assigned to Entravision)
================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT among KSMS-TV, INC. TIERRA ALTA BROADCASTING, INC. CABRILLO BROADCASTING CORPORATION GOLDEN HILLS BROADCASTING CORPORATION LAS TRES PALMAS CORPORATION VALLEY CHANNEL 48, INC. TELECORPUS, INC. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. THE LENDERS PARTIES HERETO, and UNION BANK OF CALIFORNIA, N.A. as Agent Dated as of November 10, 1998 ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS.......................................................... 2 1.1 Defined Terms........................................................ 2 1.2 Other Definitional Provisions........................................ 23 SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT AMOUNTS.. 23 2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment Amounts................................................... 23 2.2 Incremental Loan Facility............................................ 26 2.3 Issuance of Letters of Credit........................................ 30 2.4 Optional Prepayments................................................. 32 2.5 Mandatory Prepayments................................................ 32 2.6 Conversion and Continuation Options.................................. 34 2.7 Minimum Amounts of Tranches.......................................... 35 2.8 Interest Rates and Payment Dates..................................... 35 2.9 Computation of Interest and Fees..................................... 36 2.10 Inability to Determine Interest Rate................................. 36 2.11 Pro Rata Treatment and Payments...................................... 37 2.12 Illegality........................................................... 37 2.13 Increased Costs...................................................... 38 2.14 Taxes................................................................ 39 2.15 Indemnity............................................................ 40 2.16 Unused Commitment Fees............................................... 40 2.17 Mitigation of Costs.................................................. 41 SECTION 3. REPRESENTATIONS AND WARRANTIES....................................... 41 3.1 Organization and Good Standing....................................... 41 3.2 Power and Authority.................................................. 42 3.3 Validity and Legal Effect............................................ 42 3.4 No Violation of Laws or Agreements................................... 42 3.5 Title to Assets; Existing Encumbrances; Intellectual and Real Property............................................................. 42 3.6 Capital Structure and Equity Ownership............................... 43 3.7 Subsidiaries, Affiliates and Investments............................. 43 3.8 Material Contracts................................................... 43 3.9 Media Licenses....................................................... 43 3.10 Taxes and Assessments................................................ 44 3.11 Litigation and Legal Proceedings..................................... 44 3.12 Accuracy of Financial Information.................................... 44 3.13 Accuracy of Other Information........................................ 44 3.14 Compliance with Laws Generally....................................... 45 3.15 ERISA Compliance..................................................... 45 3.16 Environmental Compliance............................................. 46 3.17 Federal Regulations.................................................. 46 3.18 Fees and Commissions................................................. 46
-i- 3.19 [Intentionally Omitted].............................................. 47 3.20 Solvency............................................................. 47 3.21 FCC-Related Representations.......................................... 47 3.22 Investment Company Act; Other Regulations............................ 48 3.23 Copyright Act Requirements........................................... 48 3.24 Nature of Business................................................... 48 3.25 Ranking of Loans..................................................... 48 3.26 Condemnation......................................................... 48 SECTION 4. CONDITIONS PRECEDENT................................................. 48 4.1 Conditions to Closing Date........................................... 48 4.2 Conditions to Incremental Loans...................................... 52 4.3 Conditions to Each Loan or Letter of Credit.......................... 53 4.4 Conditions Subsequent................................................ 54 SECTION 5. AFFIRMATIVE COVENANTS................................................ 55 5.1 Financial Statements................................................. 55 5.2 Certificates; Other Information...................................... 56 5.3 Payment of Obligations............................................... 58 5.4 Conduct of Business and Maintenance of Existence..................... 58 5.5 Maintenance of Property; Insurance................................... 58 5.6 Inspection of Property; Books and Records; Discussions............... 59 5.7 Environmental Laws................................................... 59 5.8 Use of Proceeds...................................................... 60 5.9 Compliance With Laws, Etc............................................ 60 5.10 Media Licenses....................................................... 61 5.11 Guarantees, Etc...................................................... 61 5.12 License Subsidiaries................................................. 61 5.13 Interest Rate Protection............................................. 61 5.14 Acquisition of Real Property in Fee Simple........................... 61 5.15 Leases and Licenses.................................................. 62 5.16 Lease and License Approvals.......................................... 62 5.17 Notices.............................................................. 62 5.18 Additional Material Contracts and Media Licenses..................... 62 5.19 Status of Certain Borrowers.......................................... 63 5.20 Las Tres Campanas Acquisition........................................ 63 5.21 Year 2000............................................................ 63 SECTION 6. NEGATIVE COVENANTS................................................... 63 6.1 Financial Condition Covenants........................................ 63 6.2 Limitation on Indebtedness........................................... 65 6.3 Limitation on Liens.................................................. 66 6.4 Limitation on Fundamental Changes.................................... 67 6.5 Limitation on Sale of Assets......................................... 67 6.6 Limitation on Dividends.............................................. 67 6.7 Limitation on Investments, Loans and Advances........................ 67 6.8 Limitation on Modifications of Certain Documents and Instruments..... 69 6.9 Transactions with Affiliates......................................... 69
-ii- 6.10 Fiscal Year.......................................................... 69 6.11 Lease Obligations.................................................... 69 6.12 Unfunded Liabilities................................................. 69 6.13 Management Fees...................................................... 69 6.14 Equity Offerings..................................................... 70 SECTION 7. EVENTS OF DEFAULT.................................................... 70 SECTION 8. THE AGENT............................................................ 76 8.1 Appointment.......................................................... 76 8.2 Delegation of Duties................................................. 76 8.3 Exculpatory Provisions............................................... 76 8.4 Reliance by the Agent................................................ 77 8.5 Notice of Default.................................................... 77 8.6 Non-Reliance on the Agent and Other Lenders.......................... 77 8.7 Indemnification...................................................... 78 8.8 The Agent in Its Individual Capacity................................. 78 8.9 Successor Agent...................................................... 78 SECTION 9. MISCELLANEOUS........................................................ 79 9.1 Amendments and Waivers............................................... 79 9.2 Notices.............................................................. 80 9.3 No Waiver; Cumulative Remedies....................................... 81 9.4 Survival of Representations and Warranties........................... 81 9.5 Payment of Expenses and Taxes........................................ 81 9.6 Successors and Assigns; Participations; Purchasing Lenders........... 82 9.7 Adjustments; Set-Off................................................. 85 9.8 Counterparts......................................................... 85 9.9 Severability......................................................... 85 9.10 Integration.......................................................... 86 9.11 GOVERNING LAW........................................................ 86 9.12 Alternative Dispute Resolution....................................... 86 9.13 Acknowledgements..................................................... 89 9.14 Obligations Absolute................................................. 90 9.15 Waivers.............................................................. 90 9.16 Headings............................................................. 92 9.17 Copies of Certificates, Etc.......................................... 92 9.18 Publicity............................................................ 92 9.19 Confidentiality...................................................... 92 9.20 Certain Powers of Managing Members................................... 92 9.21 Relationship with Prior Agreements................................... 93
-iii- Exhibits A Form of Revolving Note B Form of Incremental Note C Form of Assignment and Acceptance D Form of No Default/Representation Certificate E Form of Covenant Compliance Certificate F Form of Continuation Notice G Form of Letter of Credit Request H Form of Excess Cash Flow Certificate I Form of Activation Notice Schedules 1.1 Existing Mortgages 3.1 Good Standing/Foreign Qualification Jurisdictions 3.2 Missing Consents 3.5A Intellectual Property 3.5B Real Property Interests 3.5C Operating Names/Trade Names 3.6 Capital Structure/Equity Ownership 3.7 Subsidiaries, Affiliates and Investments 3.8 Material Contracts 3.9 Media Licenses 3.10 Taxes and Assessments 3.11 Material Litigation 3.12 Deviations from GAAP 3.18 Fees and Commissions 3.21 Pending FCC Matters 6.2 Permitted Additional Indebtedness 6.7 Permitted Additional Investments The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. -iv- EX-10.4 9 AMENDED AND RESTATED CREDIT AGREEMENT (12/29/99) EXHIBIT 10.4 FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT -------------------------------------------------------- This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") dated as of December 29, 1999, is entered into among (1) KSMS-TV, --------- INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a Delaware corporation, CABRILLO BROADCASTING CORPORATION, a California corporation, GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS TRES PALMAS CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a Texas corporation, and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ("Entravision"), a ----------- Delaware limited liability company (each a "Borrower," and collectively, the -------- "Borrowers"), (2) the several banks and other financial institutions from time --------- to time parties to the Credit Agreement referred to below (the "Lenders") and ------- (3) UNION BANK OF CALIFORNIA, N.A., as agent for the Lenders (in such capacity, the "Agent"). ----- RECITALS -------- A. The Borrowers, the Lenders and the Agent previously entered into that certain Amended and Restated Credit Agreement dated as of November 10, 1998 (the "Credit Agreement"). Capitalized terms used herein and not defined shall have ---------------- the meanings assigned to them in the Credit Agreement. B. The Borrowers have requested that the Agent and the Lenders agree to certain amendments and waivers under the Credit Agreement and the Agent and the Lenders have agreed, in each case subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, ------------------------------ effective as of the date first set forth above, hereby amended as follows: (a) The following new definitions are added to Section 1.1 in appropriate alphabetical order: "Laredo Mortgage Indebtedness": that certain debt of Entravision to ---------------------------- the Laredo Mortgage Lender, in a principal amount not exceeding $2,000,000, secured by the Laredo Purchase Money Mortgage. "Laredo Mortgage Lender": the commercial mortgage lender extending the ---------------------- Laredo Mortgage Indebtedness to Entravision. "Laredo Purchase Money Mortgage": that certain first-priority mortgage ------------------------------ executed by Entravision in favor of the Laredo Mortgage Lender, encumbering the Laredo Real Property. "Laredo Real Property": that certain real property to be owned by -------------------- Entravision and located in Laredo, Texas for use in connection with the operation of KLDO-TV, Laredo, Texas. (b) Section 5.14(b) is amended in its entirety to read as follows: "(b) Notwithstanding the foregoing, Entravision shall be entitled to acquire the KNVO Real Property and the Laredo Real Property without complying with Section 5.14(a)." (c) The last sentence of Section 6.1(d) is amended in its entirety to read as follows: "Notwithstanding the foregoing, expenditures made by Entravision for the purchase of the KNVO Real Property and the Laredo Real Property shall not be included as Capital Expenditures for determining compliance with this Section 6.1(d)." (d) Section 6.2(i) is amended in its entirety to read as follows: "(i) the KNVO Mortgage Indebtedness and the Laredo Mortgage Indebtedness;" (e) Section (i) is amended in its entirety to read as follows: (i) the KNVO Purchase Money Mortgage and the Laredo Purchase Money Mortgage, provided that each (x) shall secure only the KNVO Mortgage Indebtedness and the Laredo Mortgage Indebtedness, respectively, and (y) shall not be spread to cover any other property; and (f) Section 6.7(a) is amended by deleting the word "and" before clause (E), substituting a "," therefor and inserting the following at the end of clause (E): "and (F) the purchase by Entravision of Stations KATH(FM) and KOFX(FM), El Paso, Texas from Magic Media, Inc. (provided that the Consideration does -------- ---- not exceed an aggregate of $14,000,000, plus closing costs and proration expenses)" (g) Section 6.7(f) is amended by deleting "$7,500,000" and substituting "$15,000,000" therefor. -2- SECTION 2. Waiver. (a) The Borrowers have informed the Agent and the ------ Lenders that they anticipate that the Maximum Total Debt Ratio for the fiscal quarter ending December 31, 1999 will be exceeded, and have requested that the Agent and the Lenders waive such requirement. Subject to the fulfillment of the conditions set forth below, the Agent and the Lenders agree to waive, as of the date first set forth above, the requirement under Section 6.1(a) that the Borrowers maintain a Maximum Total Debt Ratio as of the end of the fiscal quarter ending December 31, 1999 of not more than 6.50:1; provided, however, -------- ------- that the Borrowers shall not permit the Maximum Total Debt Ratio as of the end of such fiscal quarter to exceed 7.50:1. (b) On December 22, 1999 the Borrowers borrowed $7,000,000 in Revolving Loans for the purpose of making an Escrow Deposit. Such Escrow Deposit was made by the Borrowers in connection with the anticipated purchase by Entravision of ten FM radio stations, seven AM radio stations, three FM translator stations, a Hispanic newspaper and a Hispanic radio network from Latin Communications Group Inc. (the "LCG Acquisition"). The borrowing of such Revolving Loans caused the --------------- Borrowers to be in Default of Section 6.1(a), as a result of their representation upon such borrowing deemed made pursuant to Section 4.3(a). Subject to the fulfillment of the conditions set forth below, the Agent and the Lenders agree to waive such Default as of the date first set forth above; provided, however, that the Borrowers shall not permit the Maximum Total Debt - -------- ------- Ratio as of the end of the fiscal quarter ending December 31, 1999 to exceed 7.50:1. (c) The foregoing waivers are given in this instance only. The foregoing waivers shall not be construed as a waiver of or consent to any violation of, or deviation from, any other term or condition of the Credit Agreement or any other Loan Document, nor shall they be construed to evidence the willingness of the Agent or the Lenders to give any other or additional waiver or consent, whether in similar or different circumstances. In addition, nothing in this Amendment shall be construed to constitute the consent by the Agent or the Lenders to the consummation by the Borrowers of the LCG Acquisition, it being understood by the Borrowers that such transaction may not be consummated without prior consent in accordance with the terms of the Credit Agreement. SECTION 3. Conditions to Effectiveness. This Amendment shall become --------------------------- effective as of the date first set forth above upon receipt by the Agent of the following, in each case in form and substance satisfactory to the Agent: (a) this Amendment, duly executed by the parties hereto; and (b) evidence of the Guarantors' consent (provided that delivery of the consent of the Luery Trust shall be on a best efforts basis) to this Amendment on the signature pages hereto. SECTION 4. Representations and Warranties. Each Borrower hereby ------------------------------ represents and warrants, for the benefit of the Lenders and the Agent, as follows: (a) such Borrower has all requisite power and authority to execute, deliver and perform its obligations under this Amendment, and to perform its obligations under the Credit Agreement, as -3- amended by this Amendment; (b) all actions, waivers and consents necessary or appropriate for such Borrower to execute, deliver and perform this Amendment, and to perform the Credit Agreement, as amended by this Amendment, have been taken and/or received; (c) this Amendment, and the Credit Agreement as amended by this Amendment, constitute the legal, valid and binding obligation of such Borrower (jointly and severally with the other Borrowers) enforceable against it in accordance with the terms hereof; and (d) the execution, delivery and performance of this Amendment, and the performance of the Credit Agreement as amended by this Amendment, will not (i) violate or contravene any material Requirement of Law, (ii) result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which such Borrower or any of its property may be bound, or (iii) result in or require the creation of any Lien upon or with respect to any properties of such Borrower, whether such properties are now owned or hereafter acquired. SECTION 5. Reference to and Effect on the Credit Agreement and the Other ------------------------------------------------------------- Loan Documents. - -------------- (a) Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement," "thereunder," "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended hereby. (b) Except as specifically amended herein, the Credit Agreement and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders under the Credit Agreement or any other Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any other Loan Documents, except as specifically set forth herein. SECTION 6. Execution in Counterparts. This Amendment may be executed in ------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 7. Governing Law. This Amendment shall be governed by, and ------------- construed and interpreted in accordance with, the laws of the State of California (without reference to its choice of law rules). -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BORROWERS --------- KSMS-TV, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President TIERRA ALTA BROADCASTING, INC. By: /s/ Yrma G. Rico Name: Yrma G. Rico Title: President CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President VALLEY CHANNEL 48, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman, Chief Executive Officer and Managing Member By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President, Chief Operating Officer and Managing Member AGENT ----- UNION BANK OF CALIFORNIA, N.A., as Agent By: /s/ Lena M. Bryant Name: Lena M. Bryant Title: Vice President LENDERS ------- UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Lena M. Bryant Name: Lena M. Bryant Title: Vice President CIBC INC., as a Lender By: /s/ Harold Birk Name: Harold Birk Title: Executive Director CIBC World Markets Corp. As Agent FIRST UNION NATIONAL BANK, as a Lender By: /s/ Wendy E. Klepper Name: Wendy E. Klepper Title: VP ABN-AMRO BANK N.V., as a Lender By: /s/ David C. Carrington Name: David C. Carrington Title: Vice President By: /s/ Frances O'R. Logan Name: Frances O'R. Logan Title: Senior Vice President FLEET BANK, N.A., as a Lender By: /s/ Sharon Hawkins Name: Sharon Hawkins Title: Assistant Vice President CITY NATIONAL BANK, as a Lender By: /s/ David C. Burdge Name: David C. Burdge Title: Senior Vice President THE CIT GROUP/EQUIPMENT FINANCING, INC., as a Lender By: /s/ J.E. Palmer Name: J.E. Palmer Title: Assistant Vice President PARIBAS, as a Lender By:________________________________________ Name:______________________________________ Title:_____________________________________ THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Ian A. Hodgart Name: Ian A. Hodgart Title: Authorized Signatory Each of the undersigned, as a "Guarantor" under the aforementioned Credit Agreement hereby consents to the foregoing First Amendment to Credit Agreement, and hereby confirms and agrees that the Loan Documents executed by him, her or it are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects except that, on and after the date first set forth above, each reference in such Loan Documents to "the Credit Agreement," "thereunder," "thereof," "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by said First Amendment to Credit Agreement. /s/ Walter F. Ulloa - ------------------------------ WALTER F. ULLOA /s/ Philip C. Wilkinson - ------------------------------ PHILIP C. WILKINSON /s/ Paul A. Zevnik - --------------------- PAUL A. ZEVNIK /s/ Richard D. Norton - --------------------- RICHARD D. NORTON /s/ Yrma G. Rico - --------------------- IRMA RICO KEVIN GRENHAM and STEVE G. ROWLES, Co-Trustees of THE PAUL A. ZEVNIK TRUST dated November 2, 1996, a trust formed under the laws of the District of Columbia By: /s/ Kevin Grenham Kevin Grenham, Co-Trustee By: /s/ Steven G. Rowles Steve G. Rowles, Co-Trustee EDITH SEROS, as Trustee of THE WALTER F. ULLOA TRUST OF 1996, a trust formed under the laws of the State of California By: /s/ Edith Seros, Trustee Edith Seros, Trustee PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustees of THE 1994 WILKINSON CHILDREN'S GIFT TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson Philip C. Wilkinson, Trustee By: /s/ Wendy K. Wilkinson, Trustee Wendy K. Wilkinson, Trustee PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustees of THE WILKINSON FAMILY TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson Philip C. Wilkinson, Trustee By: /s/ Wendy K. Wilkinson, Trustee Wendy K. Wilkinson, Trustee CAROL KRUIDENIER LUERY TTE, CAROL K. LUERY REVOCABLE TRUST UA DATED 7/27/98 By: ________________________ Carol Luery, Trustee ENTRAVISION HOLDINGS, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION-EL PASO, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS OF MIDLAND, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION MIDLAND HOLDINGS, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer LOS CEREZOS TELEVISION COMPANY By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer COMERCIALIZADORA FRONTERA NORTE, S.A. DE C.V. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer EX-10.5 10 AMENDED AND RESTATED CREDIT AGREEMENT (01/14/00) EXHIBIT 10.5 SECOND AMENDMENT TO -------------------- AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") dated as of January 14, 2000, is entered into among (1) KSMS-TV, --------- INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a Delaware corporation, CABRILLO BROADCASTING CORPORATION, a California corporation, GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS TRES PALMAS CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a Texas corporation, TELECORPUS, INC., a Texas corporation, and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ("Entravision"), a Delaware limited liability ----------- company (each a "Borrower," and collectively, the "Borrowers"), (2) the several -------- --------- banks and other financial institutions from time to time parties to the Credit Agreement referred to below (the "Lenders") and (3) UNION BANK OF CALIFORNIA, ------- N.A., as agent for the Lenders (in such capacity, the "Agent"). ----- RECITALS -------- A. The Borrowers, the Lenders and the Agent previously entered into that certain Amended and Restated Credit Agreement dated as of November 10, 1998 (as amended by the First Amendment to Amended and Restated Credit Agreement dated as of December 29, 1999, the "Credit Agreement"). Capitalized terms used herein ---------------- and not defined shall have the meanings assigned to them in the Credit Agreement. B. The Borrowers have informed the Agent that they desire to (i) activate the Incremental Loan facility with an Aggregate Incremental Loan Commitment of $8,000,000 (such Incremental Loan Commitment to be made available by Union Bank of California, N.A.), (ii) consummate the purchase of Stations KATH(FM) and KOFX(FM), El Paso, Texas, from Magic Media, Inc. (the "Magic Media Acquisition") ----------------------- for a purchase price of $13,500,000 (net of a previously paid escrow deposit) and (iii) borrow both Revolving Loans and Incremental Loans for the purpose of consummating the Magic Media Acquisition. In addition, the Borrowers have requested that the Incremental Loan facility be amended to permit multiple Activation Notices to be presented thereunder (provided that the Maximum Incremental Loan Facility Amount of $100,000,000 shall not be exceeded). C. In connection therewith, the Borrowers have requested that the Agent and the Lenders agree to certain amendments and waivers under the Credit Agreement and the Agent and the Lenders have agreed, in each case subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, ------------------------------ effective as of the date first set forth above, hereby amended as follows: (a) The following definitions in Section 1.1 are amended in the following manner: (i) the definition of "Activation Date" is amended is its entirety to read as follows: "Activation Date": with respect to any Activation Notice presented --------------- hereunder, the date set forth therein as the effective date of the portion of the Aggregate Incremental Loan Commitment to be activated pursuant thereto, which date must be during the period from and including the Closing Date to but excluding September 30, 2000. (ii) the definition of "Aggregate Incremental Loan Commitment" is amended by deleting the reference to "the Activation Notice" and inserting the following in its place: "the Activation Notices"; and (iii) the definition of "Incremental Loan Commitment" is amended by deleting the reference to "the Activation Notice" and inserting the following in its place: "the Activation Notices". (b) Section 2.2 is amended in the following manner: (i) The first sentence of subsection (a) is amended in its entirety to read as follows: "From time to time, the Borrowers, and all or certain of the Lenders who agree in writing to participate in such facility and who are selected by the Borrowers may, with the consent of the Agent, such consent not to be unreasonably withheld, during the period from and including the Closing Date to but excluding September 30, 2000, agree that such Lenders shall become Incremental Loan Lenders (or, with respect to any Lender already an Incremental Loan Lender, increase its Incremental Loan Commitment) by executing and delivering to the Agent an Activation Notice specifying the respective Incremental Loan Commitments (or additional Incremental Loan Commitment, as applicable) of the Incremental Loan Lenders and the Activation Date, and otherwise duly completed. Notwithstanding any provision in this Agreement to the contrary, the Aggregate Incremental Loan Commitment shall not exceed the Maximum Incremental Loan Facility. Each activation of all or a portion of the Aggregate Incremental Loan Commitment shall be subject to the prior satisfaction of the conditions precedent set forth in Section 4.2." (ii) The following sentence contained in subsection (a) shall be deleted: "Only one Activation Notice may be given under this Agreement."; (iii) in subsection (f), the parenthetical phrase shall be amended in its entirety to read "(as in effect immediately following the final Activation Date)"; -2- (iv) a new subsection (j) is inserted at the end of subsection (i) to read as follows: "(j) Upon the effectiveness of each portion of the Aggregate Incremental Loan Commitment activated hereunder, each Incremental Loan Lender shall permit an adjustment (either through prepayment of a portion of its outstanding Incremental Loans or by allocation of borrowings of new Incremental Loans) by the Agent of its outstanding Incremental Loans such that upon such effectiveness, its Incremental Loans outstanding shall equal its Incremental Loan Commitment Percentage (as adjusted to reflect the new Aggregate Incremental Loan Commitment)." (c) Section 2.16(b) is amended in the following manner: (i) the reference to "following activation" shall be deleted and the following inserted in its place: "following initial activation"; and (ii) each reference to "the Activation Date" shall be deleted and the following inserted in its place: "the initial Activation Date". (d) Section 4.2 is amended in the following manner: (i) the first reference to "the Activation Date" shall be deleted and the following inserted in its place: "each Activation Date"; and (ii) the second reference to "the Activation Date" shall be deleted and the following inserted in its place: "such Activation Date". (e) Section 5.8 is amended by inserting the following before each reference to "6.7(e)": "6.7(a),". SECTION 2. Waiver and Consents. ------------------- (a) Concurrently herewith Entravision intends to (i) activate the Incremental Loan facility with an Aggregate Incremental Loan Commitment of $8,000,000, (ii) consummate the purchase of Stations KATH(FM) and KOFX(FM), El Paso, Texas, from Magic Media, Inc. (the "Magic Media Acquisition") for a ----------------------- purchase price of $14,000,000 (net of a previously paid escrow deposit) and (iii) borrow both Revolving Loans and Incremental Loans for the purpose of consummating the Magic Media Acquisition. Each of the foregoing actions requires (pursuant to Sections 4.2(f), 4.2(g), 4.3(a) and 6.7(a)(i)), as a condition precedent, that no Default exist on a pro forma basis assuming such activation, consummation or borrowing. The Borrowers have informed the Lenders that upon making the borrowings necessary to consummate the Magic Media Acquisition, the Borrowers' Maximum Total Debt Ratio will be 7.10: 1, which is in excess of the Maximum Total Debt Ratio of 6.50:1 required by Section 6.1(a) of the Credit Agreement (such Default, the "Leverage Default"). The Borrowers have requested ---------------- that the Lenders waive the Leverage Default for the purpose of permitting such activation, consummation and borrowing. -3- (b) The Borrowers are requesting that the Lenders agree to waive their right under Section 4.3 of the Credit Agreement to require the real property assets (if any) acquired in connection with the Magic Media Acquisition to be pledged to the Lenders as collateral. (c) Subject to the fulfillment of the conditions set forth below, the Agent and the Lenders agree to (i) waive the Leverage Default under Sections 4.2(f), 4.2(g), 4.3(a) and 6.7(a)(i), solely for the purpose of allowing such activation, consummation and borrowing, it being understood that nothing in this Amendment shall be construed as waiving the Borrowers' compliance with Section 6.1(a) at any other time, including upon each quarterly testing date therefor, and (ii) grant a consent under 4.3(e) of the Credit Agreement with respect to refraining from perfection of the real property interests acquired in connection with the Magic Media Acquisition. The foregoing waiver and consent are given in this instance only. The foregoing waiver and consent shall not be construed as a waiver of or consent to any violation of, or deviation from, any other term or condition of the Credit Agreement or any other Loan Document, nor shall they be construed to evidence the willingness of the Agent or the Lenders to give any other or additional waiver or consent, whether in similar or different circumstances. SECTION 3. Conditions to Effectiveness. This Amendment shall become effective as of the date first set forth above upon receipt by the Agent of the following, in each case in form and substance satisfactory to the Agent: (a) this Amendment, duly executed by the parties hereto; and (b) evidence of the Guarantors' consent (provided that delivery of the consent of the Luery Trust shall be on a best efforts basis) to this Amendment on the signature pages hereto. SECTION 4. Representations and Warranties. Each Borrower hereby ------------------------------ represents and warrants, for the benefit of the Lenders and the Agent, as follows: (a) such Borrower has all requisite power and authority to execute, deliver and perform its obligations under this Amendment, and to perform its obligations under the Credit Agreement, as amended by this Amendment; (b) all actions, waivers and consents necessary or appropriate for such Borrower to execute, deliver and perform this Amendment, and to perform the Credit Agreement, as amended by this Amendment, have been taken and/or received; (c) this Amendment, and the Credit Agreement as amended by this Amendment, constitute the legal, valid and binding obligation of such Borrower (jointly and severally with the other Borrowers) enforceable against it in accordance with the terms hereof; and (d) the execution, delivery and performance of this Amendment, and the performance of the Credit Agreement as amended by this Amendment, will not (i) violate or contravene any material Requirement of Law, (ii) result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which such Borrower or any of its property may be bound, or (iii) result in or require the creation of any Lien upon or with respect to any properties of such Borrower, whether such properties are now owned or hereafter acquired. -4- SECTION 5. Reference to and Effect on the Credit Agreement and the Other ------------------------------------------------------------- Loan Documents. - -------------- (a) Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement," "thereunder," "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended hereby. (b) Except as specifically amended herein, the Credit Agreement and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders under the Credit Agreement or any other Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any other Loan Documents, except as specifically set forth herein. (d) By execution of this Amendment, Telecorpus, Inc. confirms and agrees that it shall be bound by the First Amendment to Amended and Restated Credit Agreement dated as of December 29, 1999 as if it had executed such Amendment. SECTION 6. Execution in Counterparts. This Amendment may be executed in ------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 7. Governing Law. This Amendment shall be governed by, and ------------- construed and interpreted in accordance with, the laws of the State of California (without reference to its choice of law rules). -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BORROWERS --------- KSMS-TV, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Vice President and Treasurer CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President TELECORPUS, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman/CEO VALLEY CHANNEL 48, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer and Managing Member By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President, Chief Operating Officer and Managing Member AGENT ----- UNION BANK OF CALIFORNIA, N.A., as Agent By: /s/ Jenny Dongo Name: Jenny Dongo Title: Vice President LENDERS ------- UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ Jenny Dongo Name: Jenny Dongo Title: Vice President CIBC INC., as a Lender By: /s/ Harold Birk Name: Harold Birk Title: Executive Director CIBC World Markets Corp. as Agent FIRST UNION NATIONAL BANK, as a Lender By: /s/ Bruce W. Loftin Name: Bruce W. Loftin Title: Senior Vice President ABN-AMRO BANK N.V., as a Lender By:____________________________________________ Name:__________________________________________ Title:_________________________________________ By:____________________________________________ Name:__________________________________________ Title:_________________________________________ FLEET BANK, N.A., as a Lender By: /s/ Sharon L. Hawkins Name: Sharon L. Hawkins Title: Vice President CITY NATIONAL BANK, as a Lender By: /s/ David C. Burdge Name: David C. Burdge Title: Senior Vice President THE CIT GROUP/EQUIPMENT FINANCING, INC., as a Lender By: /s/ J.E. Palmer Name: J.E. Palmer Title: Assistant Vice President PARIBAS, as a Lender By:__________________________________________ Name:________________________________________ Title:_______________________________________ THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Ian A. Hodgart Name: Ian A. Hodgart Title: Authorized Signatory Each of the undersigned, as a "Guarantor" under the aforementioned Credit Agreement hereby consents to the foregoing Second Amendment to Credit Agreement, and hereby confirms and agrees that the Loan Documents executed by him, her or it are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects except that, on and after the date first set forth above, each reference in such Loan Documents to "the Credit Agreement," "thereunder," "thereof," "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by said Second Amendment to Credit Agreement. /s/ Walter F. Ulloa - --------------------------- WALTER F. ULLOA /s/ Philip C. Wilkinson - --------------------------- PHILIP C. WILKINSON /s/ Paul A. Zevnik - --------------------------- PAUL A. ZEVNIK /s/ Richard D. Norton - --------------------------- RICHARD D. NORTON /s/ Yrma G. Rico - --------------------------- IRMA RICO KEVIN GRENHAM and STEVE G. ROWLES, Co-Trustees of THE PAUL A. ZEVNIK TRUST dated November 2, 1996, a trust formed under the laws of the District of Columbia By: /s/ Kevin Grenham Kevin Grenham, Co-Trustee By: /s/ Steven G. Rowles Steve G. Rowles, Co-Trustee EDITH SEROS, as Trustee of THE WALTER F. ULLOA TRUST OF 1996, a trust formed under the laws of the State of California By: /s/ Edith Seros, Trustee Edith Seros, Trustee PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustees of THE 1994 WILKINSON CHILDREN'S GIFT TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson Philip C. Wilkinson, Trustee By: /s/ Wendy K. Wilkinson, TTEE Wendy K. Wilkinson, Trustee PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustees of THE WILKINSON FAMILY TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson Philip C. Wilkinson, Trustee By: /s/ Wendy K. Wilkinson, TTEE Wendy K. Wilkinson, Trustee CAROL KRUIDENIER LUERY TTE, CAROL K. LUERY REVOCABLE TRUST UA DATED 7/27/98 By: _________________________ Carol Luery, Trustee ENTRAVISION HOLDINGS, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION-EL PASO, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS OF MIDLAND, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer ENTRAVISION MIDLAND HOLDINGS, LLC By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer LOS CEREZOS TELEVISION COMPANY By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer COMERCIALIZADORA FRONTERA NORTE, S.A. DE C.V. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman and Chief Executive Officer EX-10.7 11 AMENDED AND RESTATED SECURITY AGREEMENT (11/10/98) EXHIBIT 10.7 AMENDED AND RESTATED SECURITY AGREEMENT --------------------------------------- This SECURITY AGREEMENT, is dated as of November 10, 1998, and made by KSMS-TV, INC., a Delaware corporation, TIERRA ALTA BROADCASTING, INC., a Delaware corporation, CABRILLO BROADCASTING CORPORATION, a California corporation, GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation, LAS TRES PALMAS CORPORATION, a Delaware corporation, VALLEY CHANNEL 48, INC., a Texas corporation, TELECORPUS, INC., a Texas corporation, and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company (each a "Grantor", and collectively, the "Grantors"), whose obligations hereunder shall ------- -------- be joint and several, in favor of UNION BANK OF CALIFORNIA, N.A., a national banking association, as agent (the "Agent") for the Lenders (as defined in the ----- Credit Agreement referred to below, the "Lenders"). ------- RECITALS -------- A. Certain Grantors previously executed that certain Security Agreement dated as of December 31, 1996 in favor of Agent and the lenders referred to therein (the "Original Security Agreement"). The Original Security Agreement --------------------------- was executed in connection with that certain Credit Agreement dated as of December 31, 1996 among such Grantors, such lenders and the Agent, as amended (the "Original Credit Agreement"). ------------------------- B. In connection herewith, the Original Credit Agreement is being amended and restated pursuant to an Amended and Restated Credit Agreement dated as of even date herewith (said Agreement, as it may hereafter be amended, modified or restated from time to time, being called the "Credit Agreement") among the ---------------- Grantors, the Lenders and the Agent. C. It is a condition precedent to the extension of credit by the Lenders under the Credit Agreement that each Grantor shall have executed and delivered this Agreement. D. Terms defined in the Credit Agreement and not otherwise defined herein have the same respective meanings when used herein, and the rules of interpretation set forth in Section 1.2 of the Credit Agreement are incorporated herein by reference. Accordingly, each of the parties hereto agrees that the Original Security Agreement shall be amended, restated and continued on the following terms: AGREEMENT --------- NOW, THEREFORE, in order to induce the Lenders to enter into the Credit Agreement and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, each Grantor hereby represents, warrants, covenants, agrees, assigns and grants as follows: 1. Definitions. Unless the context otherwise requires, terms defined in ----------- the Uniform Commercial Code of the State of California (the "Uniform Commercial ------------------ Code") and not - ---- otherwise defined in this Agreement or in the Credit Agreement shall have the meanings defined for those terms in the Uniform Commercial Code. In addition, the following terms shall have the meanings respectively set forth after each: "Certificates" means all certificates, instruments and other documents now ------------ or hereafter representing or evidencing any Pledged Securities or any Pledged Limited Liability Company Interests. "Collateral" means and includes all present and future right, title and ---------- interest of each Grantor in or to any personal property or assets whatsoever, whether now owned or existing or hereafter arising or acquired and wheresoever located, and all rights and powers of each Grantor to transfer any interest in or to any personal property or assets whatsoever, including, without limitation, any and all of the following personal property: (a) All present and future accounts, accounts receivable, agreements, guarantees, contracts (including without limitation the Material Contracts), leases, licenses (including without limitation all licenses of transmitters, transmitter towers and related equipment), contract rights and rights to payment (collectively, the "Accounts"), together with all -------- instruments, documents, chattel paper, security agreements, guaranties, undertakings, surety bonds, insurance policies, notes and drafts, and all forms of obligations owing to any Grantor or in which any Grantor may have any interest, however created or arising; (b) All present and future general intangibles, including without limitation the proprietary rights of any Grantor in all Media Licenses (including without limitation the FCC licenses for the Stations described in Schedule 3.9 attached to the Credit Agreement and including, without ------------ limitation, goodwill, going concern value, all of any Grantor's rights under or relating to any Media License and the proceeds of any Media License and the right to receive money or other consideration upon the sale, assignment or transfer of any Media License; provided, however, that the Collateral does not include at any time any license granted by the FCC to the extent, but only to the extent, that a Grantor is prohibited at that time from granting a security interest therein pursuant to the Communications Act of 1934, as amended, and the policies and regulations promulgated thereunder, but includes, to the maximum extent permitted by law, all rights incident or appurtenant to such Media License and the rights to receive all proceeds derived from or in connection with the sale, assignment or transfer of such Media License), all tax refunds of every kind and nature to which any Grantor now or hereafter may become entitled, however arising, all other refunds, all commitments to extend financing to any Grantor, and all deposits, goodwill, choses in action, trade secrets, computer programs, software, customer lists, trademarks, trade names, patents, licenses, copyrights, technology, processes, proprietary information and insurance proceeds, including, without limitation, the Copyrights, the Patents, the Marks and the Programs, and the goodwill of each Grantor's business connected with and symbolized by the Marks; (c) All present and future demand, time, savings, passbook, deposit and like accounts (general or special) (collectively, the "Deposit ------- Accounts") in which any Grantor has any interest which are maintained with -------- any bank, savings and loan association, credit -2- union or like organization, including, without limitation, each account listed on Schedule D attached hereto and made a part hereof, and all money, ---------- cash and cash equivalents of any Grantor, whether or not deposited in any Deposit Account; (d) All present and future books and records, including, without limitation, books of account and ledgers of every kind and nature, all electronically recorded data relating to any Grantor or the business thereof, all receptacles and containers for such records, and all files and correspondence; (e) All present and future goods, including, without limitation, all equipment, machinery, cameras, recording equipment, transmitters, transmitting towers, broadcasting equipment, videotapes, audio tapes and other recorded media, tools, molds, dies, furniture, furnishings, fixtures, trade fixtures, motor vehicles and all other goods used in connection with or in the conduct of any Grantor's business, including, but not limited to, all goods as defined in Section 9-109(2) of the Uniform Commercial Code (collectively, the "Equipment"); --------- (f) All present and future inventory and merchandise, including, without limitation, all present and future goods held for sale or lease or to be furnished under a contract of service, all videotapes, audio tapes and other recorded media, all raw materials, work in process and finished goods, all packing materials, supplies and containers relating to or used in connection with any of the foregoing, and all bills of lading, warehouse receipts and documents of title relating to any of the foregoing (collectively, the "Inventory"); --------- (g) All present and future stocks, bonds, debentures, securities, subscription rights, options, warrants, puts, calls, certificates, partnership interests, limited liability company interests, joint venture interests and investment and/or brokerage accounts, including without limitation the Certificates, the Pledged Securities, the Pledged Partnership Interests and the Pledged Limited Liability Company Interests, and all rights, preferences, privileges, dividends, distributions (in cash or in kind), redemption payments or liquidation payments with respect thereto; (h) All present and future accessions, appurtenances, components, repairs, repair parts, spare parts, replacements, substitutions, additions, issue and/or improvements to or of or with respect to any of the foregoing; (i) All other tangible and intangible personal property of any Grantor; (j) All rights, remedies, powers and/or privileges of any Grantor with respect to any of the foregoing; and (k) Any and all proceeds and products of the foregoing, including without limitation, all money, accounts, general intangibles, deposit accounts, documents, instruments, chattel paper, goods, insurance proceeds and any other tangible or intangible property received upon the sale or disposition of any of the foregoing. "Copyrights" means all: ---------- -3- (i) copyrights, whether or not published or registered under the Copyright Act of 1976, 17 U.S.C. Section 101 et seq., as the same shall be amended from time to time, and any predecessor or successor statute thereto (the "Copyright Act"), and applications for registration of copyrights, and ------------- all works of authorship and other intellectual property rights therein, including, without limitation, copyrights for computer programs, source code and object code data bases and related materials and documentation and including, without limitation, the registered copyrights and copyright applications listed on Schedule 3.5A attached to the Credit Agreement (as ------------- such Schedule may be supplemented from time to time in accordance with the terms of the Credit Agreement), and (a) all renewals, revisions, derivative works, enhancements, modifications, updates, new releases and other revisions thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof and (d) all of each Grantor's rights corresponding thereto throughout the world; (ii) rights under or interests in any copyright license agreements with any other party, whether such Grantor is a licensee or licensor under any such license agreement, including, without limitation, the copyright license agreements listed on Schedule 3.5A attached to the Credit Agreement ------------- (as such Schedule may be supplemented from time to time in accordance with the terms of the Credit Agreement), and the right to use the foregoing in connection with the enforcement of the Lenders' rights under the Loan Documents; and (iii) copyrightable materials now or hereafter owned by any Grantor, including Programs not copyrighted, all tangible property embodying the copyrights described in clause (i) hereof or such copyrightable materials, and all tangible property covered by the licenses described in clause (ii) hereof. "Entravision" means Entravision Communications Company, L.L.C., a Delaware ----------- limited liability company. "Limited Liability Company Acknowledgement" shall have the meaning ascribed ----------------------------------------- to it in Section 4(b) of this Agreement. "Limited Liability Company Assets" means all assets, whether tangible or -------------------------------- intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interests in other limited liability companies), at any time owned or represented by any Limited Liability Company Interests. "Limited Liability Company Interests" means the entire limited liability ----------------------------------- company interest at any time owned by any Grantor in any Pledged Entity. "Limited Liability Company Notice" shall have the meaning ascribed to it in -------------------------------- Section 4(b) of this Agreement. -4- "Marks" means all (i) trademarks, trademark registrations, interests under ----- trademark license agreements, tradenames, trademark applications, service marks, business names, trade styles, designs, logos and other source or business identifiers for which registrations have been issued or applied for in the United States Patent and Trademark Office or in any other office or with any other official anywhere in the world or which are used in the United States or any state, territory or possession thereof, or in any other place, nation or jurisdiction anywhere in the world including, without limitation, the trademarks, trademark registrations, applications, service marks, business names, trade styles, design logos and other source or business identifiers listed on Schedule 3.5A attached to the Credit Agreement (as such Schedule may ------------- be supplemented from time to time in accordance with the terms of the Credit Agreement), (ii) licenses pertaining to any such mark whether a Grantor is licensor or licensee including, without limitation, the licenses listed on Schedule 3.5A to the Credit Agreement (as such Schedule may be supplemented from - ------------- time to time in accordance with the terms of the Credit Agreement), (iii) all income, royalties, damages and payments now and hereafter due and/or payable with respect to any such mark or any such license, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) rights to sue for past, present and future infringements thereof, (v) rights corresponding thereto throughout the world, (vi) all product specification documents and production and quality control manuals used in the manufacture of products sold under or in connection with such marks, (vii) all documents that reveal the name and address of all sources of supply of, and all terms of purchase and delivery for, all materials and components used in the production of products sold under or in connection with such marks, (viii) all documents constituting or concerning the then current or proposed advertising and promotion by any Grantor, its subsidiaries or licensees of products sold under or in connection with such marks, including, without limitation, all documents that reveal the media used or to be used and the cost for all such advertising conducted within the described period or planned for such products and (ix) renewals and proceeds of any of the foregoing. "Patents" means all (i) letters patent, design patents, utility patents, ------- inventions and trade secrets, all patents and patent applications in the United States Patent and Trademark Office, and interests under patent license agreements, including, without limitation, the inventions and improvements described and claimed therein, including, without limitation, those patents listed on Schedule 3.5A attached to the Credit Agreement (as such Schedule may ------------- be supplemented from time to time in accordance with the terms of the Credit Agreement), (ii) licenses pertaining to any patent whether a Grantor is licensor or licensee, (iii) income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) rights to sue for past, present and future infringements thereof, (v) rights corresponding thereto throughout the world in all jurisdictions in which such patents have been issued or applied for and (vi) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing. "Pledged Collateral" means the Certificates, the Pledged Securities, the ------------------ Pledged Partnership Interests and the Pledged Limited Liability Interests. "Pledged Entity" means each limited liability company set forth in Schedule -------------- -------- A attached hereto, together with any other limited liability company in which - - any Grantor may have an interest at any time. -5- "Pledged Limited Liability Company Interests" means all interests in any ------------------------------------------- Pledged Entities held by any Grantor, including, but not limited to, those Limited Liability Company Interests identified in Schedule A attached hereto, as ---------- such Schedule may be supplemented from time to time in accordance with the terms of this Agreement, including, but not limited to, (i) all the capital thereof and its interest in all profits, losses, Limited Liability Company Assets and other distributions in respect thereof; (ii) all other payments due or to become due to such Grantor in respect of such Limited Liability Company Interests; (iii) all of such Grantor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any in respect of such Limited Liability Company Interests; (iv) all of such Grantor's rights to exercise and enforce every right, power, remedy, authority, option and privilege relating to such Limited Liability Company Interests; and (v) all other property hereafter delivered in substitution for or in addition to any of the foregoing and all certificates and instruments representing or evidencing such other property received, receivable or otherwise distributed in respect of or in exchange for any or all thereof. "Pledged Partnership Interests" means all interests in any partnership or ----------------------------- joint venture held by any Grantor including but not limited to those partnerships and/or joint ventures identified in Schedule A attached hereto and ---------- made a part hereof, as such Schedule may be supplemented from time to time in accordance with the terms of this Agreement, and all dividends, cash, instruments and other properties from time to time received, to be received or otherwise distributed in respect of or in exchange for any or all of such interests. "Pledged Securities" means all shares of capital stock of any issuer in ------------------ which any Grantor has an interest, including but not limited to, those shares of stock identified in Schedule A attached hereto, as such Schedule may be ---------- supplemented from time to time in accordance with the terms of this Agreement, and all dividends, cash, instruments and other properties from time to time received, to be received or otherwise distributed in respect of or in exchange for any or all of such shares. "Programs" means all (a) media broadcasting programs originating from any -------- Grantor or any Affiliate of any Grantor, all other general intangibles of a like nature, and all recordings and renewals thereof; and (b) licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to produce, use, sell, broadcast or rebroadcast any media or broadcasting programs. "Secured Party" means, collectively, the Agent and the Lenders. ------------- 2. Creation of Security Interest. Each Grantor hereby pledges to the ----------------------------- Agent for the ratable benefit of the Lenders, and grants to the Agent for the ratable benefit of the Lenders a security interest in and to, all right, title and interest of each Grantor in and to all presently existing and hereafter acquired Collateral. The security interest and pledge created by this Section 2 shall continue in effect so long as any Obligation (as defined below) remains unpaid or any Commitment remains in effect or any Letter of Credit remains outstanding. 3. Security for Obligations. This Agreement and the security interests ------------------------ granted herein secure the prompt payment, in full in cash, and full performance of, all obligations of any Grantor now or hereafter existing under any Loan Document, whether for principal, interest, -6- fees, expenses or otherwise, including without limitation all obligations of any Grantor now or hereafter existing under this Agreement, and all interest that accrues (whether or not allowed) at the then applicable rate (including interest at the rate for overdue payments described in Section 2.8(c) of the Credit Agreement) specified in the Credit Agreement on all or any part of any of such obligations after the filing of any petition or pleading against any Grantor for a proceeding under any bankruptcy or related law (collectively, the "Obligations"). ----------- 4. Delivery of Pledged Collateral. ------------------------------ (a) Each Certificate shall, on (i) the Closing Date (with respect to Certificates existing on such date) and (ii) the day on which such Certificate shall be received or acquired by any Grantor (with respect to Certificates received or acquired after the Closing Date), be delivered to and held by the Agent on behalf of the Lenders and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated endorsements, instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Agent. (b) With respect to each Limited Liability Company Interest, on (i) the Closing Date (with respect to Limited Liability Company Interests existing on such date) and (ii) the day on which any Limited Liability Company Interest shall be acquired by any Grantor (with respect to Limited Liability Company Interests acquired after the Closing Date), a notice in the form set forth in Schedule F attached hereto (the "Limited Liability Company Notice") shall be - ---------- -------------------------------- appropriately completed and delivered to each Pledged Entity, notifying each Pledged Entity of the existence of this Agreement, a certified copy of this Agreement shall be delivered by each Grantor to the relevant Pledged Entity, and each such Grantor shall have received and delivered to the Agent a copy of such Limited Liability Company Notice, along with an acknowledgment in the form set forth in Schedule F attached hereto (the "Limited Liability Company ---------- ------------------------- Acknowledgment"), duly executed by the relevant Pledged Entity. - -------------- (c) Subject to any necessary prior approval of the FCC, the Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, without notice to any Grantor, to transfer to or to direct any Grantor or any nominee of any Grantor to register or cause to be registered in the name of the Agent or any of its nominees any or all of the Pledged Securities or Pledged Limited Liability Company Interests. In addition, the Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Securities or Pledged Limited Liability Company Interests for certificates or instruments of smaller or larger denominations. 5. Further Assurances. ------------------ (a) At any time and from time to time at the reasonable written request of the Agent, each Grantor shall execute and deliver to the Agent, at each Grantor's expense, all such financing statements and other instruments, certificates and documents (including notices to financial institutions holding deposit accounts of each Grantor as to the security interest granted hereby) in form and substance reasonably satisfactory to the Agent, and perform all such other acts as shall be necessary or reasonably desirable to fully perfect or protect or maintain, when filed, recorded, delivered or performed, the Secured Party's security interests granted pursuant to -7- this Agreement or to enable the Lenders to exercise and enforce their rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall: (i) at the request of the Agent, mark conspicuously each document included in the Inventory and each other contract relating to the Accounts, and all chattel paper, instruments and other documents and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Agent, indicating that such document, contract, chattel paper, instrument or Collateral is subject to the security interest granted hereby; (ii) at the request of the Agent, if any Account or contract or other writing relating thereto shall be evidenced by a promissory note or other instrument, deliver and pledge to the Agent, for the ratable benefit of the Lenders, such note or other instrument duly endorsed and accompanied by duly executed undated instruments of transfer or assignment, all in form and substance reasonably satisfactory to the Agent; (iii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Agent may reasonably request, in order to perfect and preserve, with the required priority, the security interests granted, or purported to be granted hereby; (iv) upon any Grantor's registration, or application therefor, of any copyright under the Copyright Act, at the Agent's request execute and deliver to the Agent for recordation and filing in the United States Copyright Office a copy of this Agreement or another appropriate copyright mortgage document in form and substance reasonably satisfactory to the Agent; (v) upon any Grantor's registration, or application therefor, of any Patent or Mark, execute and deliver to the Agent for recordation and filing in the United States Patent and Trademark Office a copy of this Agreement or another appropriate patent or trademark mortgage document, as applicable, in form and substance reasonably satisfactory to the Agent; and (vi) with respect to any Material Contract in which any Grantor now has or hereafter acquires an interest which by its terms prohibits assignment, each Grantor will use its best efforts to procure the consent of the counterparty to such contract (a "Consent") in form and substance ------- reasonably satisfactory to the Agent. (b) At any time and from time to time, the Agent shall be entitled to file and/or record any or all such financing statements, instruments and documents held by it, and any or all such further financing statements, documents and instruments, relative to the Collateral or any part thereof in each instance, and to take all such other actions as the Agent may reasonably deem appropriate to perfect and to maintain perfected the security interests granted herein. (c) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of any Grantor where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (d) Each Grantor shall furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request. Upon a Grantor's publication or registration, or application for registration, of any copyright under the Copyright Act, such Grantor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule 3.5A to the Credit Agreement to reflect the ------------- publication or registration of such copyright or application therefor. Upon a Grantor's obtaining any rights and interests in any additional Marks, such Grantor shall, in addition to all other acts required to be -8- performed in respect thereof pursuant to this Agreement, supplement Schedule -------- 3.5A to the Credit Agreement to reflect such additional Marks. Upon a Grantor's - ---- obtaining any rights and interests in any additional Patents, such Grantor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule 3.5A to the Credit Agreement to ------------- reflect such additional Patents. Upon a Grantor's receipt or acquisition of any additional shares of capital stock of any Person or any additional partnership interests in any partnership or joint venture, such Grantor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule A attached hereto to reflect such additional ---------- Pledged Collateral. Upon a Grantor's receipt or acquisition of any additional Limited Liability Company Interest, such Grantor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule A attached hereto to reflect such additional Pledged ---------- Collateral and, to the extent such Limited Liability Company Interest is certificated, deliver to the Agent the certificates therefor, accompanied by such instruments of transfer as are acceptable to the Agent. (e) With respect to any Collateral consisting of certificates of title or the like as to which Secured Party's security interest need be perfected by, or the priority thereof need be assured by, notation on the certificate of title pertaining to such Collateral, Grantors will upon demand of the Agent note the lien on such certificate of title in favor of the Lenders. (f) With respect to any Collateral consisting of securities, instruments, partnership or joint venture interests, interests in limited liability companies, or the like, each Grantor hereby consents and agrees that, upon the occurrence and during the continuance of an Event of Default, subject to any necessary prior approval of the FCC, the issuers of, or obligors on, any such Collateral, or any registrar or transfer agent or trustee for any such Collateral, shall be entitled to accept the provisions of this Agreement as conclusive evidence of the right of the Agent to effect any transfer or exercise any right hereunder or with respect to any such Collateral subject to the terms hereof, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other Person to such issuers or such obligors or to any such registrar or transfer agent or trustee. (g) With respect to any Media Licenses: (i) The parties acknowledge their intention that, upon the occurrence of an Event of Default, the Agent and the Lenders shall receive, to the fullest extent permitted by Requirements of Law (including, without limitation, the rules and policies of the FCC), all rights necessary or desirable to obtain, use or sell such Collateral or to have such Collateral or rights in connection therewith sold for the benefit of the Lenders and, in connection therewith, to assign the Media Licenses or to have the Media Licenses assigned, to such purchaser, and to exercise all remedies available to the Lenders under this Agreement, the other Loan Documents, the Uniform Commercial Code and other applicable law. (ii) The parties agree that, in the event of changes in the Requirement of Law occurring after the date hereof that affect in any manner the Lenders' rights of access to, or use or sale of, the Media Licenses, or the procedures necessary to enable the Lenders to obtain such rights of access, use or sale (including changes allowing greater access), -9- the Lenders and each Grantor, upon request of any of the Lenders or the Agent, shall amend this Agreement and the other Loan Documents in such manner as the Lenders or the Agent shall reasonably request, in order to provide the Lenders with such rights to the greatest extent possible consistent with then-applicable Requirements of Law. 6. Voting Rights; Dividends; etc. Subject to any necessary prior ----------------------------- approval from the FCC, so long as no Event of Default shall have occurred and be continuing: (a) Voting Rights. Each Grantor shall be entitled to exercise any and all ------------- voting and other consensual rights pertaining to the Pledged Securities, the Pledged Partnership Interests and the Pledged Limited Liability Company Interests (including, but not limited to, all voting, consent, administration, management and other rights and remedies under any partnership agreement or any limited liability company agreement or otherwise with respect to the Pledged Securities, the Pledged Partnership Interests or the Pledged Limited Liability Company Interests), or any part thereof, for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement or the other Loan Documents; provided, however, that no Grantor shall exercise any such right if it would - -------- ------- result in a Default. (b) Dividend and Distribution Rights. Subject to the terms of the Credit -------------------------------- Agreement, each Grantor shall be entitled to receive and to retain and use any and all dividends or distributions paid in respect of the Pledged Securities, the Pledged Partnership Interests or the Pledged Limited Liability Company Interests; provided, however, that any and all -------- ------- (i) non-cash dividends or distributions in the form of capital stock, certificated limited liability company interests, instruments or other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Securities, Pledged Partnership Interests or Pledged Limited Liability Company Interests, (ii) dividends and other distributions paid or payable in cash in respect of any Pledged Securities, Pledged Partnership Interests or Pledged Limited Liability Company Interests in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (iii) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Securities, Pledged Partnership Interests or Pledged Limited Liability Company Interests, shall, except as otherwise provided for in the Credit Agreement or the other Loan Documents, forthwith be delivered to the Agent, in the case of (i) above, to be held as Collateral and shall, if received by any Grantor, be received in trust for the benefit of Secured Party, be segregated from the other property of such Grantor and forthwith be delivered to the Agent as Collateral in the same form as so received (with any necessary endorsements), and in the case of (ii) and (iii) above, to be applied to the Obligations to the extent permitted by the Credit Agreement or otherwise to be held as Collateral. 7. Rights as to Pledged Collateral During Event of Default. When an ------------------------------------------------------- Event of Default has occurred and is continuing, subject to any necessary prior approval of the FCC: -10- (a) Voting, Dividend and Distribution Rights. At the option of the Agent, ---------------------------------------- all rights of any Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a) above, and to receive the dividends and distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(b) above, shall cease, and all such rights shall thereupon become vested in the Agent who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and to hold as Pledged Collateral such dividends and distributions during the continuance of such Event of Default. (b) Dividends and Distributions Held in Trust. All dividends and other ----------------------------------------- distributions which are received by any Grantor contrary to the provisions of Section 7(a) of this Agreement shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of such Grantor and forthwith shall be paid over to the Agent as Collateral in the same form as so received (with any necessary endorsements). 8. Irrevocable Proxy. Each Grantor hereby revokes all previous proxies ----------------- with regard to the Pledged Securities and the Pledged Limited Liability Company Interests and, subject to any necessary prior approval of the FCC, appoints the Agent as its proxyholder and attorney-in-fact to (i) attend and vote at any and all meetings of the shareholders of the corporation(s) which issued the Pledged Securities (whether or not transferred into the name of the Agent), and any adjournments thereof, held on or after the date of the giving of this proxy and prior to the termination of this proxy and to execute any and all written consents, waivers and ratifications of shareholders of such corporation(s) executed on or after the date of the giving of this proxy and prior to the termination of this proxy, with the same effect as if such Grantor had personally attended the meetings or had personally voted its shares or had personally signed the written consents, waivers or ratification, and (ii) to attend and vote at any and all meetings of the members of the Pledged Entities (whether or not such Pledged Limited Liability Company Interests are transferred into the name of the Agent), and any adjournments thereof, held on or after the date of the giving of this proxy and to execute any and all written consents, waivers and ratifications of the Pledged Entities executed on or after the date of the giving of this proxy and prior to the termination of this proxy with the same effect as if such Grantor had personally attended the meetings or had personally voted on its Limited Liability Company Interests or had personally signed the consents, waivers or ratifications; provided, however, that the Agent -------- ------- as proxyholder shall have rights hereunder only upon the occurrence and during the continuance of an Event of Default and subject to Section 16(j) hereof. Each Grantor hereby authorizes the Agent to substitute another Person (which Person shall be a successor to the rights of the Agent hereunder, a nominee appointed by the Agent to serve as proxyholder, or otherwise as approved by such Grantor in writing, such approval not to be unreasonably withheld) as the proxyholder and, upon the occurrence or during the continuance of any Event of Default, hereby authorizes and directs the proxyholder to file this proxy and the substitution instrument with the secretary of the appropriate corporation. This proxy is coupled with an interest and is irrevocable until such time as no part of any Commitment remains outstanding, all Obligations have been indefeasibly paid in full and no Letter of Credit remains outstanding. 9. Copyrights. ---------- -11- (a) Royalties. Each Grantor hereby agrees that the use by the Agent or --------- any Lender of the Copyrights as authorized hereunder in connection with the Agent's or the Lenders' exercise of their rights and remedies hereunder shall be without any liability for royalties or other related charges from the Agent or the Lenders to any Grantor. (b) Restrictions on Future Agreements. Subject to the terms hereof and of --------------------------------- the Credit Agreement, each Grantor shall be permitted to manage, license and administer its Copyrights, Patents and Marks in such manner as each Grantor in its reasonable business judgment deems desirable; provided, however, that no -------- ------- Grantor will, without the Agent's prior written consent, (a) enter into any copyright license agreements or (b) take any action, or permit any action to be taken by others, including, without limitation, licensees, or fail to take any action, which would customarily be taken by a Person in the same business and in similar circumstances as such Grantor. (c) Duties of Grantor. Each Grantor shall have the duty to: (i) prosecute ----------------- diligently any copyright application included in the Copyrights, (ii) at the request of the Agent, make application for registration of such uncopyrighted but copyrightable material owned by such Grantor as the Agent reasonably deems appropriate, (iii) place notices of copyright on all copyrightable property produced or owned by such Grantor embodying the Copyrights and use diligent reasonable efforts to have its licensees do the same and (iv) take all reasonable action necessary to preserve and maintain all of such Grantor's rights in the Copyrights that are or shall be necessary in the operation of such Grantor's business, including, without limitation, making timely filings for renewals and extensions of registered Copyrights and diligently monitoring unauthorized use thereof. Any expenses incurred in connection with the foregoing shall be borne by the Grantors. Neither the Agent nor the Lenders shall have any duty with respect to the Copyrights other than to act lawfully and without gross negligence or willful misconduct. Without limiting the generality of the foregoing, neither the Agent nor the Lenders shall be under any obligation to take any steps necessary to preserve rights in the Copyrights against any other parties, but the Agent may do so at its option upon the occurrence and during the continuance of an Event of Default, and all reasonable expenses incurred in connection therewith shall be for the account of the Grantors and shall be added to the Obligations. 10. Patents and Marks. ----------------- (a) Royalties. Each Grantor hereby agrees that any rights granted --------- hereunder to the Lenders with respect to Patents and Marks shall be applicable to all territories in which any Grantor has the right to use such Patents and Marks, from time to time, and without any liability for royalties or other related charges from the Lenders to any Grantor. (b) Restrictions on Future Agreements. No Grantor will, without the --------------------------------- Agent's prior written consent, abandon any Patent or Mark in which any Grantor now owns or hereafter acquires any rights or interests or enter into any agreement, including, without limitation, any license agreement, which is inconsistent with any Grantor's obligations under this Agreement, and each Grantor further agrees that it will not take any action, or permit any action to be taken by others subject to its control, including licensees, or fail to take any action which would customarily be taken by a Person in the same business and in similar circumstances as such Grantor. -12- (c) Duties of Grantors. Each Grantor shall have the duty to (i) prosecute ------------------ diligently any patent application or trademark application pending as of the date hereof or thereafter until the Obligations shall have been indefeasibly paid in full, no Commitment remains outstanding and no Letter of Credit remains outstanding, (ii) upon the occurrence and during the continuance of an Event of Default, make application on unpatented but patentable inventions owned by any Grantor and on Marks, as the case may be, as the Agent reasonably deem appropriate, (iii) file and prosecute opposition and cancellation proceedings and (iv) take all reasonable action necessary to preserve and maintain all rights in patent applications of the Patents and in applications for registrations of the Marks. Any expenses incurred in connection with such applications shall be borne by the Grantors. No Grantor shall abandon any right to file a Patent application or Mark application without the consent of the Agent. Each Grantor shall give proper statutory notice in connection with its use of each such Mark to the extent necessary for the protection of each of the Marks. Each Grantor shall notify the Agent of any suits it commences to enforce the Patents and Marks and shall provide the Agent with copies of any documents reasonably requested by the Agent relating to such suits. 11. Grantor's Representations and Warranties. Each Grantor represents and ---------------------------------------------------------------------- warrants as follows: - ------------------- (a) (i) The locations listed on Schedule B attached hereto and made a ---------- part hereof constitute all locations at which Inventory and/or Equipment are located; (ii) the chief executive office of each Grantor, where each Grantor keeps its records concerning the Collateral and the chattel paper evidencing the Collateral, is located at the address set forth for each Grantor on Schedule C attached hereto and made a part hereof; (iii) all ---------- records concerning any Account, any Material Contract and all originals of all contracts and other writings which evidence any Account are located at the addresses listed on Schedule C attached hereto; and (iv) the Grantors ---------- have exclusive possession and control of the Equipment and the Inventory. (b) Each Grantor is the legal and beneficial owner of the Collateral free and clear of all Liens except for Liens permitted by Section 6.3 of the Credit Agreement. Each Grantor has the power, authority and legal right to grant the security interests in the Collateral purported to be granted hereby, and to execute, deliver and perform this Agreement. The pledge of the Collateral pursuant to this Agreement creates a valid security interest in the Collateral. Upon the filing of appropriate financing statements in the filing offices set forth on Schedule E attached hereto, the recordation ---------- of appropriate documentation with the United States Copyright Office and the United States Patent and Trademark Office, as applicable, the giving of a Limited Liability Company Notice to the Pledged Entities and the delivery to the Agent of the Certificates, as the case may be, the Secured Parties will have a first-priority (except for any Liens or security interests permitted under Section 6.3 of the Credit Agreement which have priority by operation of law) perfected security interest in the Collateral. (c) The Pledged Securities and the Pledged Limited Liability Company Interests have been duly authorized and validly issued and are fully paid and nonassessable. -13- (d) No consent of any Person, including any partner in a partnership with respect to which any Grantor has pledged its interest as a Pledged Partnership Interest or any member in a Pledged Entity, is required for the pledge by any Grantor of the Collateral other than consents required under the agreements described on Schedule 3.2 to the Credit Agreement. ------------ (e) The Pledged Securities described on Schedule A attached hereto ---------- constitute (i) all of the shares of capital stock of any Person owned by any Grantor, (ii) that percentage of the issued and outstanding shares of the respective issuers thereof indicated on Schedule A attached hereto, and ---------- there is no other class of shares issued and outstanding of the respective issuers thereof except as set forth on Schedule A attached hereto, and ---------- (iii) 100% of the issued and outstanding shares of each corporate Borrower. The Pledged Partnership Interests described on Schedule A attached hereto ---------- constitute all of the partnerships or joint ventures in which any Grantor has an interest, and each Grantor's respective percentage interest in each such partnership or joint venture is as set forth on such Schedule A ---------- attached hereto. The Pledged Limited Liability Company Interests described on Schedule A attached hereto constitute all of the Limited Liability ---------- Company Interests of each Grantor and each Grantor's respective percentage interest in each such Pledged Entity is as set forth on Schedule A attached ---------- hereto. The Pledged Limited Liability Company Interests described on Schedule A constitute (i) 100% of the Limited Liability Company Interests ---------- owned by any Grantor, and (ii) 100% of the Limited Liability Company interests of each Subsidiary directly owned by any Grantor (other than Entravision Communications of Midland, LLC, with respect to which such Pledged Limited Liability Company Interests constitute 80% of the limited liability company interests thereof). (f) Subject to Section 16(j) hereof, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority (other than such authorizations, approvals and other actions as have already been taken and are in full force and effect) is required (A) for the pledge of the Collateral or the grant of the security interest in the Collateral by the Grantors hereby or for the execution, delivery or performance of this Agreement by the Grantors, or (B) for the exercise by the Agent of the voting rights in the Pledged Securities, the Pledged Partnership Interests and the Pledged Limited Liability Company Interests or of any other rights or remedies in respect of the Collateral hereunder except as may be required in connection with any disposition of Collateral consisting of securities by laws affecting the offering and sale of securities generally. (g) No Grantor now owns, is a licensee of, or has applied for any Patents. No Grantor owns, is a licensee of, or has applied for any Marks, other than those set forth on Schedule 3.5A to the Credit Agreement, none of which have been registered with, or for which an application for registration has been made with, any Governmental Authority. (h) No Grantor now owns, is a licensee of, or has applied for any Copyrights. (i) The deposit accounts listed on Schedule D attached hereto and ---------- made a part hereof constitute all deposit accounts maintained by any Grantor (other than any payroll -14- or other operating account having a balance not greater than $250,000 at any time (and provided that such excluded accounts shall not at any time have an aggregate balance in excess of $2,000,000). (j) None of the Material Contracts contains provisions prohibiting the assignment thereof by Grantor to Lenders which has not been waived by the counterparty thereto pursuant to a Consent. 12. Grantor's Covenants. In addition to the other covenants and ------------------- agreements set forth herein and in the other Loan Documents, each Grantor covenants and agrees as follows: (a) Each Grantor will pay, prior to delinquency, all taxes, charges, Liens and assessments against the Collateral owned by it, except those with respect to which the amount or validity is being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Grantor. (b) The Collateral will not be used in violation of any material law, regulation or ordinance or any Requirement of Law applicable to the Grantor owning it, nor used in any way that will void or impair any insurance required to be carried in connection therewith. (c) Each Grantor will keep the Collateral in reasonably good repair, working order and operating condition (normal wear and tear excluded), and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto and, as appropriate and applicable, will otherwise deal with the Collateral in all such ways as are considered customary practice by owners of like property. (d) Each Grantor will take all reasonable steps to preserve and protect the Collateral. (e) Each Grantor will maintain all insurance coverage required pursuant to the Loan Documents. (f) Each Grantor will promptly notify the Agent in writing in the event of any material damage to the Collateral from any source whatsoever. (g) None of the Grantors will (i) establish any location of Inventory or Equipment not listed on Schedule B hereto, (ii) move its principal place ---------- of business, chief executive offices or any other office listed on Schedule -------- C hereto or (iii) adopt, use or conduct business under any trade name or - other corporate or fictitious name not disclosed on Schedule 3.5C to the ------------- Credit Agreement hereto, except upon not less than 30 days prior notice to the Agent and each Grantor's prior compliance with all applicable requirements of Section 5 hereof necessary to perfect the Lender's security interest hereunder. (h) No Grantor shall withdraw as a member of any Pledged Entity, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or -15- liquidation of or with respect to any Pledged Entity or seek a partition of any property of any Pledged Entity. (i) Subject to the provisions of Section 16(j) hereof, each Grantor agrees to take any action which the Agent may reasonably request in order to obtain from the FCC such approval as may be necessary to enable the Lenders to exercise and enjoy the full rights and benefits granted to them by this Agreement, including the use of each Grantor's best efforts to assist in obtaining the approval of the FCC for any action or transaction contemplated by this Agreement for which such approval is required by law. 13. Agent's Rights Regarding Collateral. At any time and from time to ----------------------------------- time, the Agent (for the benefit of Secured Party) may, to the extent necessary or desirable to protect the security hereunder, but the Agent shall not be obligated to: (a) (whether or not a Default has occurred) itself or through its representatives, at its own expense, upon reasonable notice and at such reasonable times during usual business hours, visit and inspect any Grantor's properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and discuss the business, operations, properties and financial and other condition of any Grantor and its Subsidiaries with officers and employees of any Grantor and its Subsidiaries and with its Accountants or (b) if a Default has occurred and is continuing, at the expense of each Grantor, perform any obligation of such Grantor under this Agreement. At any time and from time to time, at the expense of each Grantor, the Agent (for the benefit of Secured Party) may, to the extent necessary or desirable to protect the security hereunder, but the Agent shall not be obligated to: (i) notify obligors on the Collateral that the Collateral has been assigned as security to the Agent for the benefit of Secured Party; (ii) at any time and from time to time request from obligors on the Collateral, in the name of each Grantor or in the name of each Secured Party, information concerning the Collateral and the amounts owing thereon; and (iii) after an Event of Default has occurred and is continuing, direct obligors under the contracts included in the Collateral to which any Grantor is party to direct their performance to the Agent or the Lenders. Each Grantor shall keep proper books and records and accounts in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all material dealings and transactions pertaining to the Collateral. The Agent shall at all reasonable times on reasonable notice have full access to and the right to audit any and all of any Grantor's books and records pertaining to the Collateral, and to confirm and verify the value of the Collateral. Neither the Agent nor the Lenders shall be under any duty or obligation whatsoever to take any action to preserve any rights of or against any prior or other parties in connection with the Collateral, to exercise any voting rights or managerial rights with respect to any Collateral or to make or give any presentments for payment, demands for performance, notices of non-performance, protests, notices of protest, notices of dishonor or notices of any other nature whatsoever in connection with the Collateral or the Obligations. Neither the Agent nor the Lenders shall be under any duty or obligation whatsoever to take any action to protect or preserve the Collateral or any rights of any Grantor therein, or to make collections or enforce payment thereon, or to participate in any foreclosure or other proceeding in connection therewith. Nothing contained herein or in any Consent shall constitute an assumption by the Lenders of any of Grantors' obligations under the contracts assigned hereunder unless the Agent shall have given written notice to the counterparty to such assigned contract of the Lenders' intention to assume such contract. Each Grantor shall continue to be liable for performance of its obligations under such contracts. -16- Nothing contained herein shall be construed to make the Agent or any Lender liable as a member of any Pledged Entity or partner in any partnership with respect to which any Grantor has pledged its interest as a Pledged Limited Liability Company Interest or a Pledged Partnership Interest, and the Agent or any Lenders by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall not have any of the duties, obligations or liabilities of a member of any Pledged Entity or partner in such partnership. The parties hereto expressly agree that, unless the Agent shall become the absolute owner of a Pledged Limited Liability Company Interest or Pledged Partnership Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Agent, any Lender and/or any Grantor. Except as provided in the immediately preceding sentence, the Agent, by accepting this Agreement, did not intend to become a member of any Pledged Entity or partner in any partnership with respect to which any Grantor has pledged its interest as a Pledged Limited Liability Company Interest or a Pledged Partnership Interest, or otherwise be deemed to be a co-venturer with respect to any Grantor or any Pledged Entity or partner in any such partnership, either before or after an Event of Default shall have occurred. 14. Collections on the Collateral. Except as provided to the contrary in ----------------------------- the Credit Agreement, each Grantor shall have the right to use and to continue to make collections on and receive dividends and other proceeds of all of the Collateral in the ordinary course of business so long as no Event of Default shall have occurred and be continuing. Upon the occurrence and during the continuance of an Event of Default, at the option of the Agent, each Grantor's right to make collections on and receive dividends and other proceeds of the Collateral and to use or dispose of such collections and proceeds shall terminate, and any and all dividends, proceeds and collections, including all partial or total prepayments, then held or thereafter received on or on account of the Collateral will be held or received by each such Grantor in trust for Secured Party and immediately delivered in kind to the Agent (duly endorsed to the Agent, if required), to be applied to the Obligations or held as Collateral, as the Agent shall elect. Upon the occurrence and during the continuance of an Event of Default, the Agent shall have the right at all times to receive, receipt for, endorse, assign, deposit and deliver, in the name of the Agent or the Lenders or in the name of any Grantor, any and all checks, notes, drafts and other instruments for the payment of money constituting proceeds of or otherwise relating to the Collateral; and each Grantor hereby authorizes the Agent to affix, by facsimile signature or otherwise, the general or special endorsement of any Grantor, in such manner as the Agent shall deem advisable, to any such instrument in the event the same has been delivered to or obtained by the Agent without appropriate endorsement, and the Agent and any collecting bank are hereby authorized to consider such endorsement to be a sufficient, valid and effective endorsement by such Grantor, to the same extent as though it were manually executed by the duly authorized representative of such Grantor, regardless of by whom or under what circumstances or by what authority such endorsement actually is affixed, without duty of inquiry or responsibility as to such matters, and each Grantor hereby expressly waives demand, presentment, protest and notice of protest or dishonor and all other notices of every kind and nature with respect to any such instrument. 15. Possession of Collateral by Agent. All the Collateral now, heretofore --------------------------------- or hereafter delivered to the Agent shall be held by the Agent in its possession, custody and control. Any or all of the Collateral delivered to the Agent constituting cash or cash equivalents shall, prior to the occurrence of any Event of Default, be held in an interest-bearing account with one or more of the Lenders, and shall be, upon request of the Grantor owning it, invested in investments -17- permitted by Section 6.7(c) of the Credit Agreement. Nothing herein shall obligate Agent to obtain any particular return thereon. Upon the occurrence and during the continuance of an Event of Default, whenever any of the Collateral is in the Agent's possession, custody or control, the Agent may use, operate and consume the Collateral, whether for the purpose of preserving and/or protecting the Collateral, or for the purpose of performing any of such Grantor's obligations with respect thereto, or otherwise, and, subject to the terms of Section 9.7 of the Credit Agreement, any or all of the Collateral delivered to the Agent constituting cash or cash equivalents shall be applied by the Agent to payment of the Obligations to the extent permitted by the terms of the Credit Agreement or otherwise held as Collateral as the Agent shall elect. The Agent may at any time deliver or redeliver the Collateral or any part thereof to such Grantor, and the receipt of any of the same by such Grantor shall be complete and full acquittance for the Collateral so delivered, and the Agent thereafter shall be discharged from any liability or responsibility arising after such delivery to such Grantor. So long as the Agent exercises reasonable care with respect to any Collateral in its possession, custody or control, neither the Agent nor the Lenders shall have any liability for any loss of or damage to any Collateral, and in no event shall the Agent or the Lenders have liability for any diminution in value of Collateral occasioned by economic or market conditions or events, absent the gross negligence or willful misconduct of the Agent or any of the Lenders. The Agent shall be deemed to have exercised reasonable care within the meaning of the preceding sentence if the Collateral in the possession, custody or control of the Agent is accorded treatment substantially equal to that which the Agent accords similar property for its own account, it being understood that neither the Agent nor the Lenders shall have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent or any Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any Person with respect to any Collateral. 16. Remedies. -------- (a) Rights Upon Event of Default. Upon the occurrence and during the ---------------------------- continuance of an Event of Default, each Grantor shall be in default hereunder and the Agent for the benefit of the Secured Party shall have, in any jurisdiction where enforcement is sought, in addition to all other rights and remedies that the Agent on behalf of Secured Party may have under this Agreement and under applicable laws or in equity, all rights and remedies of a secured party under the Uniform Commercial Code as enacted in any such jurisdiction in effect at that time, and in addition the following rights and remedies, all of which may be exercised with or without further notice to any Grantor except such notice as may be specifically required by applicable law: (a) to foreclose the Liens and security interests created hereunder or under any other Loan Document by any available judicial procedure or without judicial process; (b) to enter any premises where any Collateral may be located for the purpose of securing, protecting, inventorying, appraising, inspecting, repairing, preserving, storing, preparing, processing, taking possession of or removing the same; (c) to sell, assign, lease or otherwise dispose of any Collateral or any part thereof, either at public or private sale or at any broker's board, in lot or in bulk, for cash, on credit or otherwise, with or without representations or warranties and upon such terms as shall be commercially reasonable; (d) to notify obligors on the Collateral that the Collateral has been assigned to the Agent for the benefit of Secured Party and that all payments thereon, or performance with respect thereto, are to be made directly and exclusively to the Agent for the account of Secured Party; (e) to collect by legal proceedings or otherwise all -18- dividends, distributions, interest, principal or other sums now or hereafter payable upon or on account of the Collateral; (f) to enter into any extension, reorganization, disposition, merger or consolidation agreement, or any other agreement relating to or affecting the Collateral, and in connection therewith the Agent may deposit or surrender control of the Collateral and/or accept other property in exchange for the Collateral as the Agent reasonably deems appropriate and is commercially reasonable; (g) to settle, compromise or release, on terms acceptable to the Agent, in whole or in part, any amounts owing on the Collateral and/or any disputes with respect thereto; (h) to extend the time of payment, make allowances and adjustments and issue credits in connection with the Collateral in the name of the Agent for the benefit of Secured Party or in the name of any Grantor; (i) to enforce payment and prosecute any action or proceeding with respect to any or all of the Collateral and take or bring, in the name of Secured Party or in the name of any Grantor, any and all steps, actions, suits or proceedings deemed necessary or reasonably desirable by the Agent to effect collection of or to realize upon the Collateral, including any judicial or nonjudicial foreclosure thereof or thereon, and each Grantor specifically consents to any nonjudicial foreclosure of any or all of the Collateral or any other action taken by the Lenders which may release any obligor from personal liability on any of the Collateral, and each Grantor waives (such waiver not to affect the Agent's agreement to give notice of sale in certain circumstances pursuant to Section 16(d)), to the extent permitted by applicable law, any right to receive notice of any public or private judicial or nonjudicial sale or foreclosure of any security or any of the Collateral, and any money or other property received by the Agent in exchange for or on account of the Collateral, whether representing collections or proceeds of Collateral, and whether resulting from voluntary payments or foreclosure proceedings or other legal action taken by Agent or any Grantor may be applied by the Agent, without notice to any Grantor, to the Obligations in such order and manner as the Agent in its sole discretion shall determine; (j) to insure, protect and preserve the Collateral; (k) to exercise all rights, remedies, powers or privileges provided under any of the Loan Documents; and (l) to remove, from any premises where the same may be located, the Collateral and any and all documents, instruments, files and records, and any receptacles and cabinets containing the same, relating to the Collateral, and the Agent may, at the cost and expense of each Grantor, use such of its supplies, equipment, facilities and space at its places of business as may be necessary or appropriate to properly administer, process, store, control, prepare for sale or disposition and/or sell or dispose of the Collateral or to properly administer and control the handling of collections and realizations thereon, and the Agent shall be deemed to have a rent-free tenancy of any premises of each Grantor for such purposes and for such periods of time as reasonably required by the Agent. Each Grantor will, at the Agent's request, assemble the Collateral and make it available to the Agent at places which the Agent may designate, whether at the premises of any Grantor or elsewhere, and will make available to the Agent, free of cost, all premises, equipment and facilities of any Grantor for the purpose of the Agent's taking possession of the Collateral or storing the same or removing or putting the Collateral in salable form or selling or disposing of the same. Nothing herein contained shall be construed to give the Agent or the Lenders or any purchaser of the Collateral the right to operate any of the Stations without the prior consent of the FCC, to the extent required by law or the terms of any Media License. (b) Possession by Agent. Upon the occurrence and during the continuance ------------------- of an Event of Default, the Agent also shall have the right, without notice or demand (other than any -19- notice required by Section 7 of the Credit Agreement), either in person, by agent or by a receiver to be appointed by a court in accordance with the provisions of applicable law (and each Grantor hereby expressly consents, to the fullest extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default to the appointment of such a receiver), and, to the extent permitted by applicable law, without regard to the adequacy of any security for the Obligations, to take possession of the Collateral or any part thereof and to collect and receive the rents, issues, profits, income and proceeds thereof. The taking possession of the Collateral by the Agent shall not cure or waive any Event of Default or notice thereof or invalidate any act done pursuant to such notice. The rights, remedies and powers of any receiver appointed by a court shall be as ordered by said court. (c) Sale of Collateral. Any public or private sale or other disposition ------------------ of the Collateral may be held at any office of Agent, or at any Grantor's place of business, or at any other place permitted by applicable law, and without the necessity of the Collateral's being within the view of prospective purchasers. The Agent may direct the order and manner of sale of the Collateral, or portions thereof, as it in its sole and absolute discretion may determine provided such sale is commercially reasonable, and each Grantor expressly waives, to the extent permitted by applicable law, any right to direct the order and manner of sale of any Collateral. The Agent or any Person acting on the Agent's behalf may bid and purchase at any such sale or other disposition. In addition to the other rights of the Agent and the Lenders hereunder, each Grantor hereby grants to the Agent and the Lenders a license or other right to use, without charge, any Grantor's labels, copyrights, patents, rights of use of any name, trade names, trademarks and advertising matter, or any property of a similar nature, including, without limitation, the Copyrights, the Patents and the Marks in advertising for sale and selling any Collateral. (d) Notice of Sale. Unless the Collateral is perishable or threatens to -------------- decline speedily in value or is of a type customarily sold on a recognized market, the Agent will give each Grantor reasonable notice of the time and place of any public sale thereof or of the time on or after which any private sale thereof is to be made. The requirement of reasonable notice conclusively shall be met if such notice is mailed, certified mail, postage prepaid, to each Grantor at its address set forth on the signature page hereto or delivered or otherwise sent to each Grantor, at least five (5) Business Days before the date of the sale. Each Grantor expressly waives, to the fullest extent permitted by applicable law, any right to receive notice of any public or private sale of any Collateral or other security for the Obligations except as expressly provided for in this paragraph. The Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. The Agent may, without notice or publication, except as required by applicable law, adjourn the sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice (except as required by applicable law), be made at the time and place to which the same was so adjourned. (e) Private Sales. With respect to any Collateral consisting of ------------- securities, partnership interests, membership interests, joint venture interests or the like, and whether or not any of such Collateral has been effectively registered under the Securities Act of 1933, as amended, or other applicable laws, the Agent may, in its sole and absolute discretion, sell all or any part of such Collateral at private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that the sale may be lawfully conducted in a commercially -20- reasonable manner. Without limiting the foregoing, the Agent may (i) approach and negotiate with a limited number of potential purchasers, and (ii) restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing such Collateral for their own account for investment and not with a view to the distribution or resale thereof. In the event that any such Collateral is sold at private sale, each Grantor agrees to the extent permitted by applicable law that if such Collateral is sold for a price which is commercially reasonable, then (A) none of the Grantors shall be entitled to a credit against the Obligations in an amount in excess of the purchase price, and (B) the Lenders shall not incur any liability or responsibility to any Grantor in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale. Each Grantor recognizes that a ready market may not exist for such Collateral if it is not regularly traded on a recognized securities exchange, and that a sale by the Agent of any such Collateral for an amount less than a pro rata share of the fair market value of the issuer's assets minus liabilities may be commercially reasonable in view of the difficulties that may be encountered in attempting to sell a large amount of such Collateral or Collateral that is privately traded. (f) Title of Purchasers. Upon consummation of any sale of Collateral ------------------- hereunder, the Agent on behalf of Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral so sold absolutely free from any claim or right upon the part of any Grantor or any other Person claiming through any Grantor, and each Grantor hereby waives (to the extent permitted by applicable laws) all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. If the sale of all or any part of the Collateral is made on credit or for future delivery, the Agent shall not be required to apply any portion of the sale price to the Obligations until such amount actually is received by the Agent, and any Collateral so sold may be retained by the Agent until the sale price is paid in full by the purchaser or purchasers thereof. Secured Party shall not incur any liability in case any such purchaser or purchasers shall fail to pay for the Collateral so sold, and, in case of any such failure, the Collateral may be sold again. (g) Disposition of Proceeds of Sale. The proceeds resulting from the ------------------------------- collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the reasonable costs and expenses (including reasonable ----- attorneys' fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; second, ------ to the satisfaction of all Obligations; and third, any surplus remaining after ----- the satisfaction of all Obligations, provided no Commitment exists and no Letter of Credit remains outstanding, to be paid over to Grantors or to whomsoever may be lawfully entitled to receive such surplus. (h) Certain Waivers. To the extent permitted by applicable law, each --------------- Grantor waives all claims, damages and demands against the Agent and the Lenders arising out of the repossession, retention or sale of the Collateral, or any part or parts thereof, except to the extent any such claims, damages and awards arise out of the gross negligence or willful misconduct of the Agent or the Lenders. -21- (i) Remedies Cumulative. The rights and remedies provided under this ------------------- Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any other rights and remedies provided by law or equity. (j) Compliance with Communications Act and FCC Rules and Regulations. ---------------------------------------------------------------- (i) Notwithstanding any other provision of this Agreement, any foreclosure on, sale, transfer or other disposition of, or the exercise of any right to vote or consent with respect to, any of the Collateral as provided herein or any other action taken or proposed to be taken by the Agent hereunder which would affect the operational, voting or other control of any entity holding a Media License shall be made in accordance with the Communications Act of 1934, as amended, the terms of each Media License, and any applicable rules and regulations of the FCC, including, to the extent applicable under rules and regulations of the FCC in effect at the time of a Default, any requirement that there be a public or private sale. (ii) Notwithstanding anything to the contrary contained in this Agreement, or in the Credit Agreement or the other Loan Documents or in any other related instrument, the Agent shall not, without first obtaining any consent or approval of the FCC, take any action pursuant to this Agreement which would constitute or result in any change of control of a Subsidiary holding a Media License if any such change in control would require, under then existing law, the prior approval of the FCC. (iii) If an Event of Default shall have occurred and be continuing, each Grantor shall take any action which the Agent may reasonably request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to the Agent or to one or more third parties as the Agent may designate, or to a combination of the foregoing, the Collateral for the purposes of a public or private sale. To enforce the provisions of this Section 16, the Agent is empowered to request, and each Grantor agrees to authorize, the appointment of a receiver or trustee from any court of competent jurisdiction. Such receiver or trustee shall be instructed to seek from the FCC (and any other Governmental Authority, if required) its consent to an involuntary transfer of control or assignment of any Media License or of any entity whose stock, partnership interests or other securities are subject to this Agreement, for the purpose of seeking a bona fide purchaser to whom such Media License or control of such entity ultimately will be transferred or assigned in connection with a public or private sale. Each Grantor hereby agrees to authorize (including each Grantor's execution of any necessary or appropriate applications or other instruments) such an involuntary transfer of control or assignment upon the reasonable request of the receiver or trustee so appointed; and, if a Grantor's approval is required by the court and such Grantor shall refuse to authorize such transfer or assignment, then, to the extent permitted by the Communications Act and the rules and regulations of the FCC in effect at such time and provided that such Grantor has been given 5 Business Days' prior written notice telecopied to its telecopier number set forth on the signature page hereof and such Grantor has not responded by executing any such applications or other instruments, the clerk of the court may execute in the place of such Grantor any application or other instrument necessary or appropriate for the obtaining of such consent. Upon the occurrence and during the continuance of an Event of Default, each -22- Grantor shall further use its best efforts to assist in obtaining the approval of the FCC (and that required by any other Governmental Authority) for any action or transaction contemplated by this Agreement, including without limitation, the preparation, execution and filing with the FCC of the assignor's or transferor's portion of any application or applications for consent to the assignment of any Media License or transfer of control of any entity holding or controlling any Media License as may be necessary or appropriate under the FCC's rules and regulations for approval of the transfer or assignment of any portion of the Collateral or any Media License. Each Grantor further agrees that, because of the unique nature of its undertaking in this Section 16, the same may be specifically enforced, and it hereby waives, and agrees to waive, any claim or defense that the Agent or the Lenders would have an adequate remedy at law for the breach of this undertaking and any requirement for the posting of bond or other security. This Section 16 shall not be deemed to limit any other rights of the Agent and the Lenders available under applicable law and consistent with the Communications Act of 1934, as amended, and the applicable rules and regulations of the FCC. (k) Notice. The Agent shall use reasonable efforts to give each Grantor ------ prior written notice of the exercise of any remedy provided for herein, provided -------- that the failure to give such notice after reasonable efforts shall not subject the Agent or any Lender to liability and shall not affect the validity or exercise of any remedy hereunder. 17. Agent Appointed Attorney-in-Fact. To the full extent permitted by -------------------------------- applicable law, including the Communications Act and FCC regulations, and subject to Section 16(j) hereof, each Grantor hereby irrevocably appoints the Agent as such Grantor's attorney-in-fact, effective upon and during continuance of an Event of Default, with full authority in the place and stead of such Grantor, and in the name of such Grantor, or otherwise, from time to time, in the Agent's sole and absolute discretion to do any of the following acts or things: (a) to do all acts and things and to execute all documents necessary or advisable to perfect and continue perfected the security interests created by this Agreement and to preserve, maintain and protect the Collateral; (b) to do any and every act which such Grantor is obligated to do under this Agreement; (c) to prepare, sign, file and record, in such Grantor's name, any financing statement covering the Collateral; (d) to endorse and transfer the Collateral upon foreclosure by the Agent; (e) to grant or issue an exclusive or nonexclusive license under the Copyrights, the Programs, the Patents or the Marks to anyone upon foreclosure by the Agent; (f) to assign, pledge, convey or otherwise transfer title in or dispose of the Copyrights, the Programs, the Patents or the Marks to anyone upon foreclosure by the Agent; and (g) to file any claims or take any action or institute any proceedings which the Agent may reasonably deem necessary or desirable for the protection or enforcement of any of the rights of the Lenders with respect to any of the Copyrights, the Programs, the Patents and the Marks; provided, however, that the Agent shall be -------- ------- under no obligation whatsoever to take any of the foregoing actions, and neither the Agent nor the Lenders shall have any liability or responsibility for any act or omission (other than the Agent's or the Lenders' own gross negligence or willful misconduct) taken with respect thereto. Each Grantor hereby agrees to repay within 10 Business Days after demand all reasonable out-of-pocket costs and expenses (including attorneys' fees) incurred or expended by the Agent in exercising any right or taking any action under this Agreement. -23- 18. Costs and Expenses. Each Grantor agrees to pay to the Agent all ------------------ reasonable costs and out-of-pocket expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by the Agent in the enforcement or attempted enforcement of this Agreement, whether or not an action is filed in connection therewith, and in connection with any waiver or amendment of any term or provision hereof. All reasonable advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred or paid by the Agent in exercising any right, privilege, power or remedy conferred by this Agreement (including, without limitation, the right to perform any Obligation of any Grantor under the Loan Documents), or in the enforcement or attempted enforcement thereof, shall be secured hereby and shall become a part of the Obligations and shall be due and payable to the Agent by the Grantors on demand therefor. 19. Transfers and Other Liens. Each Grantor agrees that, except as ------------------------- specifically permitted under the Credit Agreement or any other Loan Document, it will not (i) sell, assign, exchange, transfer or otherwise dispose of, or contract to sell, assign, exchange, transfer or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral, except for Liens in favor of the Agent for the benefit of the Lenders or otherwise permitted under the Credit Agreement or any other Loan Document. 20. Understandings With Respect to Waivers and Consents. Each Grantor --------------------------------------------------- warrants and agrees that each of the waivers and consents set forth herein are made with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which a Grantor otherwise may have against Secured Party or others, or against any Collateral. If any of the waivers or consents herein are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law. 21. Indemnity. Each Grantor agrees to indemnify the Agent and the Lenders --------- from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses or liabilities result from the Agent's or the Lenders' gross negligence or willful misconduct. 22. Amendments, Etc. No amendment or waiver of any provision of this --------------- Agreement nor consent to any departure by any Grantor herefrom (other than supplements to the Schedules hereto in accordance with the terms of this Agreement) shall in any event be effective unless the same shall be in writing and made in accordance with Section 9.1 of the Credit Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 23. Notices. All notices and other communications provided for hereunder ------- shall be given in the manner set forth in Section 9.2 of the Credit Agreement, and if to the Agent, to the address set forth for it in Section 9.2 of the Credit Agreement and if to any Grantor, to the address set forth for it on the signature page hereof. -24- 24. Continuing Security Interest: Transfer of Notes; Termination. (a) ------------------------------------------------------------ This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until indefeasible payment in full in cash of the Obligations and the termination or expiration of the Commitments and the Letters of Credit, (ii) be binding upon each Grantor, its successors and assigns and (iii) inure, together with the rights and remedies of the Lenders hereunder, to the benefit of the Agent, any successor Agent and the Lenders, subject to the terms and conditions of the Credit Agreement. Subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Loans, Commitments, participations in Letters of Credit or any rights in Collateral held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Agent or Lender herein or otherwise. Nothing set forth herein or in any other Loan Document is intended or shall be construed to give to any other party any right, remedy or claim under, to or in respect of this Agreement or any other Loan Document or any Collateral. A Grantor's successors and assigns shall include, without limitation, a receiver, trustee or debtor-in-possession thereof or therefor, provided that, except as otherwise permitted under the Credit -------- ---- Agreement or any other Loan Document, none of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Lenders. 25. Release of Grantors. (a) This Agreement and all obligations of each ------------------- Grantor hereunder and all security interests granted hereby shall be released and terminated when all Obligations have been indefeasibly paid in full in cash and when all Commitments and all Letters of Credit have expired or have otherwise been terminated. Upon such release and termination of all Obligations and such expiration or termination of all Commitments and all Letters of Credit and the security interest hereunder, all rights in and to the Collateral pledged or assigned by each Grantor hereunder shall automatically revert to such Grantor, and the Agent and the Lenders shall return any pledged Collateral in their possession to such Grantor, or to the Person or Persons legally entitled thereto, and shall endorse, execute, deliver, record and file all instruments and documents, and do all other acts and things, reasonably required for the return of the Collateral to such Grantor, or to the Person or Persons legally entitled thereto, and to evidence or document the release of the interests of Secured Party arising under this Agreement, all as reasonably requested by, and at the sole expense of, each such Grantor. (b) The Agent agrees that if an Asset Disposition permitted under the Credit Agreement occurs, the Agent shall release the Collateral that is the subject of such Asset Disposition to the pledging Grantor free and clear of the Lien and security interest under this Agreement, provided that so long as any -------- Obligations remain outstanding under the Credit Agreement or any Commitment or Letter of Credit remains outstanding, the Agent shall have no obligation to make such release until arrangements reasonably satisfactory to it have been made for delivery to it of any Net Proceeds of any Asset Disposition required to be used to prepay the Loans pursuant to Section 2.5(a) of the Credit Agreement. 26. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW PROVISIONS), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF A -25- JURISDICTION OTHER THAN THE STATE OF CALIFORNIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION. 27. Covenant Not to Issue Uncertificated Securities. Each Grantor ----------------------------------------------- represents and warrants to the Lenders that all of the Pledged Securities are in certificated form (as contemplated by Article 8 of the Uniform Commercial Code), and covenants to the Lenders that it will not permit any of its Subsidiaries which are issuers of Pledged Securities to issue any securities in uncertificated form or seek to convert all or any part of any Pledged Securities into uncertificated form (as contemplated by Article 8 of the Uniform Commercial Code). 28. Covenant Not to Dilute Interests of Secured Party in Securities. Each --------------------------------------------------------------- Grantor represents, warrants and covenants to Secured Party that it will (i) not at any time cause or permit any Subsidiary that is an issuer of Pledged Securities to issue any additional capital stock or any warrant options or other rights to acquire any additional capital stock, other than to a Grantor or as otherwise permitted under the Credit Agreement and (ii) pledge to the Agent in accordance with the terms hereof, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of each issuer of the Pledged Securities. 29. Form of Pledged Limited Liability Interests/Covenant Not to Dilute. ------------------------------------------------------------------ Each Grantor represents, warrants and covenants to Secured Party that all of the Pledged Limited Liability Company Interests are in the form (certificated or uncertificated) indicated on Schedule A attached hereto (as contemplated by ---------- Article 8 of the Uniform Commercial Code), and covenants to the Lenders that it will (i) not at any time cause or permit any Pledged Entities to issue any additional membership interests or any other rights or options to acquire any additional limited liability company interests, other than to a Grantor or as otherwise permitted under the Credit Agreement, and (ii) pledge to the Agent in accordance with the terms hereof, immediately upon its acquisition (directly or indirectly) thereof, any and all additional Limited Liability Company Interests of each Pledged Entity. 30. Joint and Several Nature of Grantors' Obligations. Each Grantor ------------------------------------------------- acknowledges that its obligations hereunder are joint and several. Each Grantor further acknowledges that upon the occurrence and during the continuance of any Event of Default caused by any Grantor (including any other Grantor or Grantors), it will be in default hereunder, and the Agent for the benefit of the Secured Party will be entitled to exercise its remedies, rights and privileges set forth herein with respect to all or any part of any Collateral whether or not such Collateral was pledged hereunder by the Grantor or Grantors causing such Event of Default. Each Grantor further acknowledges that the Agent will be entitled to seek from any one or more Grantors or add on to the Obligations all or any part of the costs stated to be borne by any one or more Grantors hereunder whether or not such costs were caused to be incurred by such Grantor or Grantors from which reimbursement is sought. 31. Alternative Dispute Resolution. Section 9.12 of the Credit Agreement ------------------------------ is incorporated herein by this reference. 32. Counterparts. This Agreement may be executed in any number of ------------ counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. -26- 33. Copies of Certificates, Etc. Whenever a Grantor is required to --------------------------- deliver notices, certificates, opinions, statements or other information hereunder to the Agent for delivery to any Lender, it shall do so in such number of copies as the Agent shall reasonably specify. -27- IN WITNESS WHEREOF, each Grantor has executed this Agreement by its duly authorized representative(s) as of the date first written above. GRANTORS -------- KSMS-TV, INC. By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson Name: Walter F. Ulloa/Philip C. Wilkinson Title: President & Treasurer/Vice President TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F .Ulloa Name: Walter F. Ulloa Title: Vice President and Treasurer CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President & Chief Financial Officer GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President & Treasurer LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President & Treasurer -28- VALLEY CHANNEL 48, INC. By: /s/ Walter F. Ulloa Name: /s/ Walter F. Ulloa Title: Chairman & Chief Executive Officer TELECORPUS, INC. By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson Name: Walter F. Ulloa/Philip C. Wilkinson Title: Chairman & Chief Executive Officer/President & Chief Operating Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Managing Member By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: Managing Member Address for Notices: Entravision Communications Company, L.L.C. 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Attention Walter F. Ulloa Jeanette Tully Telecopy: (310) 820-2445 -29- STATE OF CALIFORNIA, ) ) ss. County of Los Angeles ) On October 30, 1998, before me, Elizabeth Sanchez, a Notary Public in and for the State of California, personally appeared Walter F. Ulloa, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged to me that he or she executed the within instrument in his or her authorized capacity and that, by his or her signature on the within instrument, the person or entity upon behalf of which he or she acted executed the within instrument. WITNESS my hand and official seal. ------- Signature /s/ Elizabeth Sanchez (Seal) STATE OF CALIFORNIA, ) ) ss. County of Los Angeles ) On October 30, 1998, before me, Elizabeth Sanchez, a Notary Public in and for the State of California, personally appeared Philip C. Wilkinson, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged to me that he or she executed the within instrument in his or her authorized capacity and that, by his or her signature on the within instrument, the person or entity upon behalf of which he or she acted executed the within instrument. WITNESS my hand and official seal. ------- Signature /s/ Elizabeth Sanchez (Seal) Schedule A Pledged Collateral Schedule B Locations of Equipment and Inventory Schedule C Locations of Books and Records of All Borrowers Schedule D Deposit Accounts Schedule E UCC Filing Offices Schedule F Form of Limited Liability Company Notice The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-10.8 12 AMENDED AND RESTATED PLEDGE AGREEMENT EXHIBIT 10.8 AMENDED AND RESTATED PLEDGE AGREEMENT ------------------------------------- This AMENDED AND RESTATED PLEDGE AGREEMENT, is dated as of November 10, 1998, and made by each individual and trust listed on the signature pages hereof (each a "Pledgor" and collectively, the "Pledgors"), whose obligations hereunder ------- -------- are joint and several, in favor of UNION BANK OF CALIFORNIA, N.A., a national banking association, as agent (the "Agent") for the Lenders (as defined in the ----- Credit Agreement referred to below, the "Lenders"). ------- RECITALS -------- A. Pursuant to a Credit Agreement dated as of December 31, 1996 (said Agreement, as amended or otherwise modified through the date hereof, herein referred to as the "Original Credit Agreement") among Entravision Communications ------------------------- Company, L.L.C., a Delaware limited liability company ("Entravision"), and ----------- certain other borrowers referred to therein, the Agent and the lenders referred to therein, each Pledgor has executed a Pledge Agreement as identified in Schedule D hereto, as amended (each an "Original Pledge Agreement"). ------------------------- B. Concurrently herewith, (a) the Agent, the Lenders and Entravision and certain other borrowers (the "Borrowers") are entering into an Amended and --------- Restated Credit Agreement dated as of even date herewith (said Agreement, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Credit Agreement"), which amends and restates the Original ---------------- Credit Agreement, and (b) the Pledgors are entering into an Amended and Restated Nonrecourse Guarantee dated as of even date herewith in favor of the Agent for the benefit of the Lenders (said Guarantee, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Guarantee"). --------- C. The Credit Agreement requires, and the Pledgors desire, that the Pledgors' obligations under the Guarantee be secured by this Agreement. D. Terms defined in the Credit Agreement and not otherwise defined herein have the same respective meanings when used herein, and the rules of interpretation set forth in Section 1.2 of the Credit Agreement are incorporated herein by reference. Accordingly, each of the parties hereto agrees that each Original Pledge Agreement shall be amended, restated and continued on the following terms: AGREEMENT --------- NOW, THEREFORE, in order to induce the Lenders to enter into the Credit Agreement and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, each Pledgor hereby represents, warrants, covenants, agrees, assigns and grants as follows: 1. Definitions. Unless the context otherwise requires, terms defined in ----------- the Uniform Commercial Code of the State of California (the "Uniform Commercial ------------------ Code") and not otherwise defined in this Agreement or in the Credit Agreement - ---- shall have the meanings defined for those terms in the Uniform Commercial Code. In addition, the following terms shall have the meanings respectively set forth after each: "Certificates" means all certificates, instruments and other documents now ------------ or hereafter representing or evidencing any Pledged Securities or any Pledged Limited Liability Company Interests. "Collateral" means and includes all present and future right, title and ---------- interest of each Pledgor in or to, and all rights and powers of each Pledgor to transfer any interest in or to, any and all of the following property, whether now owned or existing or hereafter arising or acquired and wheresoever located: (a) All Certificates, Pledged Securities and Pledged Limited Liability Company Interests, and all rights, preferences, privileges, dividends, distributions (in cash or in kind), redemption payments or liquidation payments with respect thereto (but excluding any dividends, distributions, redemption payments or liquidation payments to the extent (x) received by such Pledgor and (y) paid in accordance with the terms of the Credit Agreement); (b) All rights, remedies, powers and/or privileges of such Pledgor with respect to any of the foregoing; and (c) Any and all proceeds and products of the foregoing, including without limitation, all money, accounts, general intangibles, deposit accounts, documents, instruments, chattel paper, goods, insurance proceeds and any other tangible or intangible property received upon the sale or disposition of any of the foregoing. "Issuer" means the issuer of any Collateral, including without limitation, ------ any Pledged Company and Pledged Entity. "Limited Liability Company Acknowledgement" shall have the meaning ascribed ----------------------------------------- to it in Section 4(b) of this Agreement. "Limited Liability Company Assets" means all assets, whether tangible or -------------------------------- intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interests in other limited liability companies), at any time owned or represented by any Limited Liability Company Interests. -2- "Limited Liability Company Interests" means the entire limited liability ----------------------------------- company interest at any time owned by any Pledgor in any Pledged Entity. "Limited Liability Company Notice" shall have the meaning ascribed to it in -------------------------------- Section 4(b) of this Agreement. "Pledged Collateral" means the Certificates, the Pledged Securities and the ------------------ Pledged Limited Liability Interests. "Pledged Company" means each corporation set forth in Schedule A attached --------------- ---------- hereto, as such Schedule may be supplemented from time to time in accordance with the terms of this Agreement. "Pledged Entity" means each limited liability company set forth in Schedule -------------- -------- A attached hereto, as such Schedule may be supplemented from time to time in - - accordance with the terms of this Agreement. "Pledged Limited Liability Company Interests" means all interests in any ------------------------------------------- Pledged Entities held by any Pledgor, including, but not limited to, those Limited Liability Company Interests identified in Schedule A attached hereto, as ---------- such Schedule may be supplemented from time to time in accordance with the terms of this Agreement, including, but not limited to, (i) all the capital thereof and any Pledgor's interest in all profits, losses, Limited Liability Company Assets and other distributions in respect thereof; (ii) all other payments due or to become due to any Pledgor in respect of such Limited Liability Company Interests; (iii) all of any Pledgor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any in respect of such Limited Liability Company Interests; (iv) all of any Pledgor's rights to exercise and enforce every right, power, remedy, authority, option and privilege relating to such Limited Liability Company Interests; and (v) all other property hereafter delivered in substitution for or in addition to any of the foregoing and all certificates and instruments representing or evidencing such other property received, receivable or otherwise distributed in respect of or in exchange for any or all thereof. "Pledged Securities" means all interests in any Pledged Company held by any ------------------ Pledgor, including, but not limited to, those shares of capital stock identified in Schedule A attached hereto, as such Schedule may be supplemented from time to ---------- time in accordance with the terms of this Agreement, and all dividends, cash, instruments and other properties from time to time received, to be received or otherwise distributed in respect of or in exchange for any or all of such shares. "Secured Party" means, collectively, the Agent and the Lenders. ------------- -3- 2. Creation of Security Interest. Each Pledgor hereby assigns and ----------------------------- pledges to the Agent for the ratable benefit of the Lenders, and grants to the Agent for the ratable benefit of the Lenders a security interest in and to, all right, title and interest of such Pledgor in and to all presently existing and hereafter acquired Collateral. The security interest and pledge created by this Section 2 shall continue in effect so long as any Obligation (as defined below) remains unpaid or any Commitment remains in effect or any Letter of Credit remains outstanding. 3. Security for Obligations. This Agreement and the security interests ------------------------ granted herein secure the prompt payment, in full in cash, and full performance of, all obligations of each Pledgor now or hereafter existing under the Guarantee, and any documents executed by any Pledgor in connection therewith, whether for principal, interest, fees, expenses or otherwise, including without limitation all obligations of each Pledgor now or hereafter existing under this Agreement, and all interest that accrues (whether or not allowed) at the then applicable rate (including interest at the rate for overdue payments described in Section 2.8(c) of the Credit Agreement) specified in the Credit Agreement on all or any part of any of such obligations after the filing of any petition or pleading against any Borrower or any Pledgor for a proceeding under any bankruptcy or related law (collectively, the "Obligations"). ----------- 4. Delivery of Pledged Collateral. ------------------------------ (a) Each Certificate shall, on (i) the Closing Date (with respect to Certificates existing on such date) and (ii) the day on which such Certificate shall be received or acquired by any Pledgor (with respect to Certificates received or acquired after the Closing Date), be delivered to and held by the Agent on behalf of the Lenders and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated endorsements, instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Agent. (b) With respect to each Limited Liability Company Interest, on (i) the Closing Date (with respect to Limited Liability Company Interests existing on such date) and (ii) the day on which any Limited Liability Company Interest shall be acquired by any Pledgor (with respect to Limited Liability Company Interests acquired after the Closing Date), a notice in the form set forth in Schedule C attached hereto (the "Limited Liability Company Notice") shall be - ---------- -------------------------------- appropriately completed and delivered to each Pledged Entity, notifying each Pledged Entity of the existence of this Agreement, a certified copy of this Agreement shall be delivered by each Pledgor to the relevant Pledged Entity, and each Pledgor shall have received and delivered to the Agent a copy of such Limited Liability Company Notice, along with an acknowledgment in the form set forth in Schedule C attached hereto (the "Limited Liability Company ---------- ------------------------- Acknowledgment"), duly executed by the relevant Pledged Entity. - -------------- (c) Subject to any necessary prior approval of the FCC, the Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, without notice to any Pledgor, to transfer to or to direct any Pledgor or any nominee of any Pledgor to register or cause to be registered in the name of the Agent or any of its nominees any or all of the Pledged Securities or Pledged Limited Liability Company Interests. In addition, the Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged -4- Securities or Pledged Limited Liability Company Interests for certificates or instruments of smaller or larger denominations. 5. Further Assurances. ------------------ (a) At any time and from time to time at the reasonable written request of the Agent, each Pledgor shall execute and deliver to the Agent, at such Pledgor's expense, all such financing statements and other instruments, certificates and documents in form and substance reasonably satisfactory to the Agent, and perform all such other acts as shall be necessary or reasonably desirable to fully perfect or protect or maintain, when filed, recorded, delivered or performed, the Secured Party's security interests granted pursuant to this Agreement or to enable the Lenders to exercise and enforce their rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Pledgor shall execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Agent may reasonably request, in order to perfect and preserve, with the required priority, the security interests granted, or purported to be granted hereby. (b) At any time and from time to time, the Agent shall be entitled to file and/or record any or all such financing statements, instruments and documents held by it, and any or all such further financing statements, documents and instruments, relative to the Collateral or any part thereof in each instance, and to take all such other actions as the Agent may reasonably deem appropriate to perfect and to maintain perfected the security interests granted herein. (c) Each Pledgor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (d) Each Pledgor shall furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request. Upon any Pledgor's receipt or acquisition of any additional shares of capital stock of any Pledged Company and any shares of capital stock of any other corporate Person which becomes a Borrower under the Credit Agreement, such Pledgor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule A attached hereto to ---------- reflect such additional Pledged Collateral. Upon any Pledgor's receipt or acquisition of any additional Limited Liability Company Interest, such Pledgor shall, in addition to all other acts required to be performed in respect thereof pursuant to this Agreement, supplement Schedule A attached hereto to reflect ---------- such additional Pledged Collateral and, to the extent such Limited Liability Company Interest is certificated, deliver to the Agent the certificates therefor, accompanied by such instruments of transfer as are acceptable to the Agent. (e) With respect to any Collateral consisting of share certificates of stock, securities, instruments, interests in limited liability companies, or the like, each Pledgor hereby consents and agrees that, upon the occurrence and during the continuance of an Event of Default, subject -5- to any necessary prior approval of the FCC, the Issuers, or obligors on any such Collateral, or any registrar or transfer agent or trustee for any such Collateral, shall be entitled to accept the provisions of this Agreement as conclusive evidence of the right of the Agent to effect any transfer or exercise any right hereunder or with respect to any such Collateral subject to the terms hereof, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by such Pledgor or any other Person to the Issuers or such obligors or to any such registrar or transfer agent or trustee. 6. Voting Rights; Dividends; etc. Subject to any necessary prior ----------------------------- approval from the FCC, so long as no Event of Default shall have occurred and be continuing: (a) Voting Rights. Each Pledgor shall be entitled to exercise any and all ------------- voting and other consensual rights pertaining to the Pledged Securities and the Pledged Limited Liability Company Interests (including, but not limited to, all voting, consent, administration, management and other rights and remedies under any stockholder agreement or any limited liability company agreement or otherwise with respect to the Pledged Securities or the Pledged Limited Liability Company Interests), or any part thereof, for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement or the other Loan Documents; provided, however, that such Pledgor shall not exercise any such -------- ------- right if it would result in a Default. (b) Dividend and Distribution Rights. Subject to the terms of the Credit -------------------------------- Agreement, each Pledgor shall be entitled to receive and to retain and use (and the Agent and the Lenders shall have no security interest in) any and all dividends or distributions paid in respect of the Pledged Securities or the Pledged Limited Liability Company Interests in accordance with the terms of the Credit Agreement; provided, however, that any and all -------- ------- (i) non-cash dividends or distributions in the form of capital stock, certificated limited liability company interests, instruments or other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Securities or Pledged Limited Liability Company Interests, (ii) dividends and other distributions paid or payable in cash in respect of any Pledged Securities or Pledged Limited Liability Company Interests in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in- surplus, and (iii) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Securities or Pledged Limited Liability Company Interests, shall forthwith be delivered to the Agent, in the case of (i) above, to be held as Collateral and shall, if received by any Pledgor, be received in trust for the benefit of Secured Party, be segregated from the other property of such Pledgor and forthwith be delivered to the Agent as Collateral in the same form as so received (with any necessary endorsements), and in the case of (ii) and (iii) above, to be applied to the Obligations to the extent permitted by the Credit Agreement or otherwise to be held as Collateral. -6- 7. Rights as to Pledged Collateral During Event of Default. When an ------------------------------------------------------- Event of Default has occurred and is continuing, subject to any necessary prior approval of the FCC: (a) Voting, Dividend and Distribution Rights. At the option of the Agent, ---------------------------------------- all rights of each Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a) above, and to receive the dividends and distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(b) above, shall cease, and all such rights shall thereupon become vested in the Agent who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and to hold as Collateral such dividends and distributions during the continuance of such Event of Default. (b) Dividends and Distributions Held in Trust. All dividends and other ----------------------------------------- distributions which are received by any Pledgor contrary to the provisions of Section 7(a) of this Agreement shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of such Pledgor and forthwith shall be paid over to the Agent as Collateral in the same form as so received (with any necessary endorsements). -7- 8. Irrevocable Proxy. Each Pledgor hereby revokes all previous proxies ----------------- with regard to the Pledged Securities and the Pledged Limited Liability Company Interests and, subject to any necessary prior approval of the FCC, appoints the Agent as its proxy-holder and attorney-in-fact to (i) attend and vote at any and all meetings of the shareholders of the Pledged Company (whether or not such Pledged Securities are transferred into the name of the Agent), and any adjournments thereof, held on or after the date of the giving of this proxy and prior to the termination of this proxy and to execute any and all written consents, waivers and ratifications of shareholders of such corporation(s) executed on or after the date of the giving of this proxy and prior to the termination of this proxy, with the same effect as if such Pledgor had personally attended the meetings or had personally voted on the Pledged Securities or had personally signed the written consents, waivers or ratification, and (ii) to attend and vote at any and all meetings of the members of the Pledged Entities (whether or not such Pledged Limited Liability Company Interests are transferred into the name of the Agent), and any adjournments thereof, held on or after the date of the giving of this proxy and to execute any and all written consents, waivers and ratifications of the Pledged Entities executed on or after the date of the giving of this proxy and prior to the termination of this proxy with the same effect as if such Pledgor had personally attended the meetings or had personally voted on its Limited Liability Company Interests or had personally signed the consents, waivers or ratifications; provided, however, that the Agent as proxy-holder shall have rights hereunder - -------- ------- only upon the occurrence and during the continuance of an Event of Default and subject to Section 14(j) hereof. Each Pledgor hereby authorizes the Agent to substitute another Person (which Person shall be a successor to the rights of the Agent hereunder, a nominee appointed by the Agent to serve as proxy-holder, or otherwise as approved by such Pledgor in writing, such approval not to be unreasonably withheld) as the proxy-holder and, upon the occurrence or during the continuance of any Event of Default, hereby authorizes and directs the proxy-holder to file this proxy and the substitution instrument with the secretary of the appropriate Pledged Company or the appropriate officer of the Pledged Entity. This proxy is coupled with an interest and is irrevocable until such time as no part of any Commitment remains outstanding, all Obligations have been indefeasibly paid in full and no Letter of Credit remains outstanding. 9. Pledgors' Representations and Warranties. Each Pledgor represents and ---------------------------------------- warrants as follows: (a) Each Pledgor who is an individual and each trustee or co-trustee of a Pledgor which is a trust resides in the County and the State specified therefor on the signature pages hereof. (b) Each Pledgor is the legal and beneficial owner of the Collateral free and clear of all Liens (other than Liens permitted by Section 6.3 of the Credit Agreement or Section 17 of this Agreement). Each Pledgor has the legal right to grant the security interests in the Collateral purported to be granted hereby, and to execute, deliver and perform this Agreement. The pledge of the Collateral pursuant to this Agreement creates a valid security interest in the Collateral. Upon the filing of appropriate financing statements in the filing offices set forth on Schedule B attached hereto and the giving of a Limited Liability ---------- Company Notice to the Pledged Entities and the delivery to the Agent of the Certificates, the Secured Parties will have a first-priority perfected security interest in the Collateral. -8- (c) The Pledged Securities and the Pledged Limited Liability Company Interests have been duly authorized and validly issued and are fully paid and nonassessable. (d) No consent of any Person, including any member in a Pledged Entity or any Issuer of the Pledged Securities, is required for the pledge by any Pledgor of the Collateral. (e) The Pledged Securities described on Schedule A attached hereto ---------- constitute (i) all of the shares of capital stock issued by any Pledged Company owned by each Pledgor, and (ii) that percentage of the issued and outstanding shares of the respective Issuers thereof indicated on Schedule A attached ---------- hereto, and there is no other class of shares issued and outstanding of the respective Issuers thereof except as set forth on Schedule A attached hereto. ---------- The Pledged Limited Liability Company Interests described on Schedule A attached ---------- hereto constitute all of the Limited Liability Company Interests of each Pledgor and each Pledgor's respective percentage interest in each such Pledged Entity is as set forth on Schedule A attached hereto. ---------- (f) Subject to Section 14(j) hereof, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority (other than such authorizations, approvals and other actions as have already been taken and are in full force and effect) is required (A) for the pledge of the Collateral or the grant of the security interest in the Collateral by any Pledgor hereby or for the execution, delivery or performance of this Agreement by any Pledgor, or (B) for the exercise by the Agent of the voting rights in the Pledged Securities and the Pledged Limited Liability Company Interests or of any other rights or remedies in respect of the Collateral hereunder except as may be required in connection with any disposition of Collateral consisting of securities by laws affecting the offering and sale of securities generally. 10. Pledgors' Covenants. In addition to the other covenants and ------------------- agreements set forth herein and in the other Loan Documents, each Pledgor covenants and agrees as follows: (a) Each Pledgor will pay, prior to delinquency, all taxes, charges, Liens and assessments against the Collateral owned by it, except those with respect to which the amount or validity is being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Pledgor. (b) No Pledgor who is an individual, nor any trustee or co-trustee of any other Pledgor, will move his or her residence from the location set forth on the signature pages hereof except upon not less than 20 days' prior notice to the Agent and such Pledgor's prior compliance with all applicable requirements of Section 5 hereof necessary to perfect the Lenders' security interest hereunder. (c) No Pledgor shall withdraw as a member of any Pledged Entity, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or liquidation of or with respect to any Pledged Entity or seek a partition of any property of any Pledged Entity. (d) Subject to the provisions of Section 14(j) hereof, each Pledgor agrees to take any action which the Agent may reasonably request in order to obtain from the FCC such approval as may be necessary to enable the Lenders to exercise and enjoy the full rights and benefits granted to them by this Agreement, including the use of such Pledgor's best efforts to assist in obtaining -9- the approval of the FCC for any action or transaction contemplated by this Agreement for which such approval is required by law. 11. Agent's Rights Regarding Collateral. At any time and from time to ----------------------------------- time, the Agent (for the benefit of Secured Party) may, to the extent necessary or desirable to protect the security hereunder, but the Agent shall not be obligated to: (a) (whether or not a Default has occurred) itself or through its representatives, at its own expense, upon reasonable notice and at such reasonable times during usual business hours, visit and inspect the properties of the Issuers and examine and make abstracts from any of the books and records of those Issuers at any reasonable time and as often as may reasonably be desired and discuss the business, operations, properties and financial and other condition of any Issuer or (b) if a Default has occurred and is continuing, at the expense of the Pledgors, perform any obligation of any Pledgor under this Agreement. Neither the Agent nor the Lenders shall be under any duty or obligation whatsoever to take any action to preserve any rights of or against any prior or other parties in connection with the Collateral, to exercise any voting rights or managerial rights with respect to any Collateral or to make or give any presentments for payment, demands for performance, notices of non- performance, protests, notices of protest, notices of dishonor or notices of any other nature whatsoever in connection with the Collateral or the Obligations. Neither the Agent nor the Lenders shall be under any duty or obligation whatsoever to take any action to protect or preserve the Collateral or any rights of any Pledgor therein, or to make collections or enforce payment thereon, or to participate in any foreclosure or other proceeding in connection therewith. Nothing contained herein shall be construed to make the Agent or any Lender liable as a member of any Pledged Entity and the Agent or any Lenders by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall not have any of the duties, obligations or liabilities of a member of any Pledged Entity. The parties hereto expressly agree that, unless the Agent shall become the absolute owner of a Pledged Limited Liability Company Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Agent, any Lender, any Pledged Entity or Borrower and/or any Pledgor. Except as provided in the immediately preceding sentence, the Agent, by accepting this Agreement, did not intend to become a member of any Pledged Entity or otherwise be deemed to be a co-venturer with respect to any Pledgor or any Pledged Entity, either before or after an Event of Default shall have occurred. 12. Collections on the Collateral. Except as provided to the contrary in ----------------------------- the Credit Agreement, each Pledgor shall have the right to use and to continue to make collections on and receive dividends and other proceeds of all of the Collateral in the ordinary course of business so long as no Event of Default shall have occurred and be continuing. Upon the occurrence and during the continuance of an Event of Default, at the option of the Agent, each Pledgor's right to make collections on and receive dividends and other proceeds of the Collateral and to use or dispose of such collections and proceeds shall terminate, and any and all dividends, proceeds and collections, including all partial or total prepayments, then held or thereafter received on or on account of the Collateral will be held or received by such Pledgor in trust for Secured Party and immediately delivered in kind to the Agent (duly endorsed to the Agent, if required), to be applied to the Obligations or held as Collateral, as the Agent shall elect. Upon the occurrence and during the continuance of an Event of Default, the Agent shall have the right at all times to -10- receive, receipt for, endorse, assign, deposit and deliver, in the name of the Agent or the Lenders or in the name of any Pledgor, any and all checks, notes, drafts and other instruments for the payment of money constituting proceeds of or otherwise relating to the Collateral; and each Pledgor hereby authorizes the Agent to affix, by facsimile signature or otherwise, the general or special endorsement of such Pledgor, in such manner as the Agent shall deem advisable, to any such instrument in the event the same has been delivered to or obtained by the Agent without appropriate endorsement, and the Agent and any collecting bank are hereby authorized to consider such endorsement to be a sufficient, valid and effective endorsement by such Pledgor, to the same extent as though it were manually executed by the duly authorized representative of such Pledgor, regardless of by whom or under what circumstances or by what authority such endorsement actually is affixed, without duty of inquiry or responsibility as to such matters, and each Pledgor hereby expressly waives demand, presentment, protest and notice of protest or dishonor and all other notices of every kind and nature with respect to any such instrument. 13. Possession of Collateral by Agent. All the Collateral now, heretofore --------------------------------- or hereafter delivered to the Agent shall be held by the Agent in its possession, custody and control. Any or all of the Collateral delivered to the Agent constituting cash or cash equivalents shall, prior to the occurrence of any Event of Default, be held in an interest-bearing account with one or more of the Lenders, and shall be, upon request of the Pledgor that has delivered such Collateral, invested in investments permitted by Section 6.7(c) of the Credit Agreement. Nothing herein shall obligate Agent to obtain any particular return thereon. Upon the occurrence and during the continuance of an Event of Default, whenever any of the Collateral is in the Agent's possession, custody or control, the Agent may use and consume the Collateral, whether for the purpose of preserving and/or protecting the Collateral, or for the purpose of performing any of any Pledgor's obligations with respect thereto, or otherwise, and, subject to the terms of Section 9.7 of the Credit Agreement, any or all of the Collateral delivered to the Agent constituting cash or cash equivalents shall be applied by the Agent to payment of the Obligations to the extent permitted by the terms of the Credit Agreement or otherwise held as Collateral as the Agent shall elect. The Agent may at any time deliver or redeliver the Collateral or any part thereof to the Pledgor that has delivered such Collateral, and the receipt of any of the same by such Pledgor shall be complete and full acquittance for the Collateral so delivered, and the Agent thereafter shall be discharged from any liability or responsibility arising after such delivery to such Pledgor. So long as the Agent exercises reasonable care with respect to any Collateral in its possession, custody or control, neither the Agent nor the Lenders shall have any liability for any loss of or damage to any Collateral, and in no event shall the Agent or the Lenders have liability for any diminution in value of Collateral occasioned by economic or market conditions or events, absent the gross negligence or willful misconduct of the Agent or any of the Lenders. The Agent shall be deemed to have exercised reasonable care within the meaning of the preceding sentence if the Collateral in the possession, custody or control of the Agent is accorded treatment substantially equal to that which the Agent accords similar property for its own account, it being understood that neither the Agent nor the Lenders shall have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent or any Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any Person with respect to any Collateral. 14. Remedies. -------- -11- (a) Rights Upon Event of Default. Upon the occurrence and during the ---------------------------- continuance of an Event of Default, each Pledgor shall be in default hereunder and the Agent for the benefit of the Secured Party shall have, in any jurisdiction where enforcement is sought, in addition to all other rights and remedies that the Agent on behalf of Secured Party may have under this Agreement and under applicable laws or in equity, all rights and remedies of a secured party under the Uniform Commercial Code as enacted in any such jurisdiction in effect at that time, and in addition the following rights and remedies, all of which may be exercised with or without further notice to any Pledgor except such notice as may be specifically required by applicable law: (a) to foreclose the Liens and security interests created hereunder or under any other Loan Document by any available judicial procedure or without judicial process; (b) to sell, assign or otherwise dispose of any Collateral or any part thereof, either at public or private sale or at any broker's board, in lot or in bulk, for cash, on credit or otherwise, with or without representations or warranties and upon such terms as shall be commercially reasonable; (c) to collect by legal proceedings or otherwise all dividends, distributions, interest, principal or other sums now or hereafter payable upon or on account of the Collateral; (d) to enter into any extension, reorganization, disposition, merger or consolidation agreement, or any other agreement relating to or affecting the Collateral, and in connection therewith the Agent may deposit or surrender control of the Collateral and/or accept other property in exchange for the Collateral as the Agent reasonably deems appropriate and is commercially reasonable; (e) to settle, compromise or release, on terms acceptable to the Agent, in whole or in part, any amounts owing on the Collateral and/or any disputes with respect thereto; (f) to enforce payment and prosecute any action or proceeding with respect to any or all of the Collateral and take or bring, in the name of Secured Party or in the name of any Pledgor, any and all steps, actions, suits or proceedings deemed necessary or reasonably desirable by the Agent to effect collection of or to realize upon the Collateral, including any judicial or nonjudicial foreclosure thereof or thereon, and each Pledgor specifically consents to any nonjudicial foreclosure of any or all of the Collateral or any other action taken by the Lenders which may release any obligor from personal liability on any of the Collateral, and each Pledgor waives (such waiver not to affect the Agent's agreement to give notice of sale in certain circumstances pursuant to Section 14(d)), to the extent permitted by applicable law, any right to receive notice of any public or private judicial or nonjudicial sale or foreclosure of any security or any of the Collateral, and any money or other property received by the Agent in exchange for or on account of the Collateral, whether representing collections or proceeds of Collateral, and whether resulting from voluntary payments or foreclosure proceedings or other legal action taken by Agent or any Pledgor, may be applied by the Agent, without notice to any Pledgor, to the Obligations in such order and manner as the Agent in its sole discretion shall determine; (g) to insure, protect and preserve the Collateral; (h) to exercise all rights, remedies, powers or privileges provided under any of the Loan Documents; and (i) to remove, from any premises where the same may be located, the Collateral and any and all documents, instruments, files and records, and any receptacles and cabinets containing the same, relating to the Collateral, and the Agent may, at the cost and expense of the Pledgors, use such of its supplies, equipment, facilities and space at its places of business as may be necessary or appropriate to properly administer, process, store, control, prepare for sale or disposition and/or sell or dispose of the Collateral or to properly administer and control the handling of collections and realizations thereon, and the Agent shall be deemed to have a rent-free tenancy of any premises of the Pledgors for such purposes and for such periods of time as reasonably required by the Agent. -12- Nothing herein contained shall be construed to give the Agent or the Lenders or any purchaser of the Collateral the right to operate any of the Stations without the prior consent of the FCC, to the extent required by law or the terms of any Media License. (b) Possession by Agent. Upon the occurrence and during the continuance ------------------- of an Event of Default, the Agent also shall have the right, without notice or demand (other than any notice required by Section 7 of the Credit Agreement), either in person, by agent or by a receiver to be appointed by a court in accordance with the provisions of applicable law (and each Pledgor hereby expressly consents, to the fullest extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default to the appointment of such a receiver), and, to the extent permitted by applicable law, without regard to the adequacy of any security for the Obligations, to take possession of the Collateral or any part thereof and to collect and receive the rents, issues, profits, income and proceeds thereof. The taking possession of the Collateral by the Agent shall not cure or waive any Event of Default or notice thereof or invalidate any act done pursuant to such notice. The rights, remedies and powers of any receiver appointed by a court shall be as ordered by said court. (c) Sale of Collateral. Any public or private sale or other disposition ------------------ of the Collateral may be held at any office of Agent, or at any Pledgor's place of business, if any, or at any other place permitted by applicable law, and without the necessity of the Collateral's being within the view of prospective purchasers. The Agent may direct the order and manner of sale of the Collateral, or portions thereof, as it in its sole and absolute discretion may determine provided such sale is commercially reasonable, and each Pledgor expressly waives, to the extent permitted by applicable law, any right to direct the order and manner of sale of any Collateral. The Agent or any Person acting on the Agent's behalf may bid and purchase at any such sale or other disposition. (d) Notice of Sale. Unless the Collateral is perishable or threatens to -------------- decline speedily in value or is of a type customarily sold on a recognized market, the Agent will give the Pledgor that has pledged such Collateral reasonable notice of the time and place of any public sale thereof or of the time on or after which any private sale thereof is to be made. The requirement of reasonable notice conclusively shall be met if such notice is mailed, certified mail, postage prepaid, to such Pledgor at its address set forth on the signature page hereto or delivered or otherwise sent to such Pledgor, at least five (5) Business Days before the date of the sale. Each Pledgor expressly waives, to the fullest extent permitted by applicable law, any right to receive notice of any public or private sale of any Collateral or other security for the Obligations except as expressly provided for in this paragraph. The Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. The Agent may, without notice or publication, except as required by applicable law, adjourn the sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice (except as required by applicable law), be made at the time and place to which the same was so adjourned. (e) Private Sales. Whether or not any Collateral has been effectively ------------- registered under the Securities Act of 1933, as amended, or other applicable laws, the Agent may, in its sole and absolute discretion, sell all or any part of such Collateral at private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that the sale may be -13- lawfully conducted in a commercially reasonable manner. Without limiting the foregoing, the Agent may (i) approach and negotiate with a limited number of potential purchasers, and (ii) restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing such Collateral for their own account for investment and not with a view to the distribution or resale thereof. In the event that any such Collateral is sold at private sale, each Pledgor agrees to the extent permitted by applicable law that if such Collateral is sold for a price which is commercially reasonable, then (A) such Pledgor shall not be entitled to a credit against the Obligations in an amount in excess of the purchase price, and (B) the Lenders shall not incur any liability or responsibility to such Pledgor in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale. Each Pledgor recognizes that a ready market may not exist for such Collateral if it is not regularly traded on a recognized securities exchange, and that a sale by the Agent of any such Collateral for an amount less than a pro rata share of the fair market value of the Issuer's assets minus liabilities may be commercially reasonable in view of the difficulties that may be encountered in attempting to sell a large amount of such Collateral or Collateral that is privately traded. (f) Title of Purchasers. Upon consummation of any sale of Collateral ------------------- hereunder, the Agent on behalf of Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral so sold absolutely free from any claim or right upon the part of the Pledgor that has pledged such Collateral or any other Person claiming through such Pledgor, and each Pledgor hereby waives (to the extent permitted by applicable laws) all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. If the sale of all or any part of the Collateral is made on credit or for future delivery, the Agent shall not be required to apply any portion of the sale price to the Obligations until such amount actually is received by the Agent, and any Collateral so sold may be retained by the Agent until the sale price is paid in full by the purchaser or purchasers thereof. Secured Party shall not incur any liability in case any such purchaser or purchasers shall fail to pay for the Collateral so sold, and, in case of any such failure, the Collateral may be sold again. (g) Disposition of Proceeds of Sale. The proceeds resulting from the ------------------------------- collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the reasonable costs and expenses (including reasonable ----- attorneys' fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; second, ------ to the satisfaction of all Obligations; and third, any surplus remaining after ----- the satisfaction of all Obligations, provided no Commitment exists and no Letter of Credit remains outstanding, to be paid over to the Pledgor that has pledged such Collateral or to whomsoever may be lawfully entitled to receive such surplus. (h) Certain Waivers. To the extent permitted by applicable law, each --------------- Pledgor waives all claims, damages and demands against the Agent and the Lenders arising out of the repossession, retention or sale of the Collateral, or any part or parts thereof, except to the extent any such claims, damages and awards arise out of the gross negligence or willful misconduct of the Agent or the Lenders. -14- (i) Remedies Cumulative. The rights and remedies provided under this ------------------- Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any other rights and remedies provided by law or equity. (j) Compliance with Communications Act and FCC Rules and Regulations. ---------------------------------------------------------------- (i) Notwithstanding any other provision of this Agreement, any foreclosure on, sale, transfer or other disposition of, or the exercise of any right to vote or consent with respect to, any of the Collateral as provided herein or any other action taken or proposed to be taken by the Agent hereunder which would affect the operational, voting or other control of any entity holding a Media License shall be made in accordance with the Communications Act of 1934, as amended, the terms of each Media License, and any applicable rules and regulations of the FCC, including, to the extent applicable under rules and regulations of the FCC in effect at the time of a Default, any requirement that there be a public or private sale. (ii) Notwithstanding anything to the contrary contained in this Agreement, or in the Credit Agreement or the other Loan Documents or in any other related instrument, the Agent shall not, without first obtaining any consent or approval of the FCC, take any action pursuant to this Agreement which would constitute or result in any change of control of a Subsidiary holding a Media License if any such change in control would require, under then existing law, the prior approval of the FCC. (iii) If an Event of Default shall have occurred and be continuing, each Pledgor shall take any action which the Agent may reasonably request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to the Agent or to one or more third parties as the Agent may designate, or to a combination of the foregoing, the Collateral for the purposes of a public or private sale. To enforce the provisions of this Section 14, the Agent is empowered to request, and each the Pledgor agrees to authorize, the appointment of a receiver or trustee from any court of competent jurisdiction. Such receiver or trustee shall be instructed to seek from the FCC (and any other Governmental Authority, if required) its consent to an involuntary transfer of control or assignment of any Media License or of any entity whose stock, limited liability company interests or other securities are subject to this Agreement, for the purpose of seeking a bona fide purchaser to whom such Media License or control of such entity ultimately will be transferred or assigned in connection with a public or private sale. Each Pledgor hereby agrees to authorize (including such Pledgor's execution of any necessary or appropriate applications or other instruments) such an involuntary transfer of control or assignment upon the reasonable request of the receiver or trustee so appointed; and, if any Pledgor's approval is required by the court and such Pledgor shall refuse to authorize such transfer or assignment, then, to the extent permitted by the Communications Act and the rules and regulations of the FCC in effect at such time and provided that such Pledgor has been given 5 Business Days' prior written notice telecopied to its telecopier number set forth on the signature pages hereof and such Pledgor has not responded by executing any such applications or other instruments, the clerk of the court may execute in the place of such Pledgor any application or other instrument necessary or appropriate for the obtaining of such consent. Upon the -15- occurrence and during the continuance of an Event of Default, each Pledgor shall further use its best efforts to assist in obtaining the approval of the FCC (and that required by any other Governmental Authority) for any action or transaction contemplated by this Agreement, including without limitation, the preparation, execution and filing with the FCC of the assignor's or transferor's portion of any application or applications for consent to the assignment of any Media License or transfer of control of any entity holding or controlling any Media License as may be necessary or appropriate under the FCC's rules and regulations for approval of the transfer or assignment of any portion of the Collateral or any Media License. Each Pledgor further agrees that, because of the unique nature of its undertaking in this Section 14, the same may be specifically enforced, and it hereby waives, and agrees to waive, any claim or defense that the Agent or the Lenders would have an adequate remedy at law for the breach of this undertaking and any requirement for the posting of bond or other security. This Section 14 shall not be deemed to limit any other rights of the Agent and the Lenders available under applicable law and consistent with the Communications Act of 1934, as amended, and the applicable rules and regulations of the FCC. (k) Notice. The Agent shall use reasonable efforts to give the relevant ------ Pledgor prior written notice of the exercise of any remedy provided for herein, provided that the failure to give such notice after reasonable efforts shall not - -------- subject the Agent or any Lender to liability and shall not affect the validity or exercise of any remedy hereunder. 15. Agent Appointed Attorney-in-Fact. To the full extent permitted by -------------------------------- applicable law, including the Communications Act and FCC regulations, and subject to Section 14(j) hereof, each Pledgor hereby irrevocably appoints the Agent as such Pledgor's attorney-in-fact, effective upon and during continuance of an Event of Default, with full authority in the place and stead of such Pledgor, and in the name of such Pledgor, or otherwise, from time to time, in the Agent's sole and absolute discretion to do any of the following acts or things: (a) to do all acts and things and to execute all documents necessary or advisable to perfect and continue perfected the security interests created by this Agreement and to preserve, maintain and protect the Collateral; (b) to do any and every act which such Pledgor is obligated to do under this Agreement; (c) to prepare, sign, file and record, in such Pledgor's name, any financing statement covering the Collateral; (d) to endorse and transfer the Collateral upon foreclosure by the Agent; and (e) to file any claims or take any action or institute any proceedings which the Agent may reasonably deem necessary or desirable for the protection or enforcement of any of the rights of the Lenders with respect to any of the Collateral; provided, however, that the Agent shall -------- ------- be under no obligation whatsoever to take any of the foregoing actions, and neither the Agent nor the Lenders shall have any liability or responsibility for any act or omission (other than the Agent's or the Lenders' own gross negligence or willful misconduct) taken with respect thereto. Each Pledgor hereby agrees to repay within 10 Business Days after demand all reasonable out-of-pocket costs and expenses (including attorneys' fees) incurred or expended by the Agent in exercising any right or taking any action under this Agreement. 16. Costs and Expenses. Each Pledgor agrees to pay to the Agent all ------------------ reasonable costs and out-of-pocket expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by the Agent in the enforcement or attempted enforcement of this Agreement, whether or not an action is filed in connection therewith, and in connection with any -16- waiver or amendment of any term or provision hereof. All reasonable advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred or paid by the Agent in exercising any right, privilege, power or remedy conferred by this Agreement (including, without limitation, the right to perform any Obligation of any Pledgor), or in the enforcement or attempted enforcement thereof, shall be secured hereby and shall become a part of the Obligations and shall be due and payable to the Agent by each Pledgor on demand therefor. Notwithstanding the terms of this Section 16, no Pledgor shall be liable for any expenses or fees covered by this Section 16 unless such Pledgor has, through such Pledgor's own actions, prevented or attempted to prevent enforcement of the rights and remedies of the Agent and the Lenders under this Agreement. 17. Transfers and Other Liens. Each Pledgor agrees that, except as ------------------------- specifically permitted under the Credit Agreement or any other Loan Document, it will not (a) sell, assign, exchange, transfer or otherwise dispose of, or contract to sell, assign, exchange, transfer or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (b) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the following: (i) Liens in favor of the Agent for the benefit of the Lenders; and (ii) the Lien on certain Pledged Limited Liability Company Interests created by that certain Secured Promissory Note and Pledge Agreement (as it may be amended from time to time), dated October 16, 1996, made by Paul A. Zevnik in favor of Entravision in the principal amount of $360,366.38. 18. Understandings With Respect to Waivers and Consents. Each Pledgor --------------------------------------------------- warrants and agrees that each of the waivers and consents set forth herein are made with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which such Pledgor otherwise may have against Secured Party or others, or against any Collateral. If any of the waivers or consents herein are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law. 19. Amendments, Etc. No amendment or waiver of any provision of this --------------- Agreement nor consent to any departure by any Pledgor herefrom (other than supplements to the Schedules hereto in accordance with the terms of this Agreement) shall in any event be effective unless the same shall be in writing and made in accordance with Section 9.1 of the Credit Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 20. Notices. All notices and other communications provided for hereunder ------- shall be given in the manner set forth in Section 9.2 of the Credit Agreement, and if to the Agent, to the address set forth for it in Section 9.2 of the Credit Agreement and if to any Pledgor, to the address set forth for it on the signature pages hereof. 21. Continuing Security Interest: Transfer of Notes; Termination. ------------------------------------------------------------ (a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until indefeasible payment in full in cash of the Obligations and the termination or -17- expiration of the Commitments and the Letters of Credit, (ii) be binding upon each Pledgor, its successors and assigns and (iii) inure, together with the rights and remedies of the Lenders hereunder, to the benefit of the Agent, any successor Agent and the Lenders, subject to the terms and conditions of the Credit Agreement. Subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer the Guarantee, any Loans, Commitments, participations in Letters of Credit or any rights in Collateral held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Agent or Lender herein or otherwise. Nothing set forth herein or in any other Loan Document is intended or shall be construed to give to any other party any right, remedy or claim under, to or in respect of this Agreement or any other Loan Document or any Collateral. Each Pledgor's successors and assigns shall include, without limitation, a receiver, trustee or debtor-in-possession thereof or therefor, provided that, -------- ---- none of the rights or obligations of any Pledgor hereunder may be assigned or otherwise transferred without the prior written consent of the Lenders. 22. Release of Pledgors. This Agreement and all obligations of the ------------------- Pledgors hereunder and all security interests granted hereby shall be released and terminated when the following has occurred, as applicable, (i) all Obligations have been indefeasibly paid in full in cash and when all Commitments and all Letters of Credit have expired or have otherwise been terminated or (ii) if the Lenders shall give their prior written consent to the transfer of the Pledged Securities and Pledged Limited Liability Company Interests, upon the effectiveness of such consent. Upon such release and termination of all Obligations and such expiration or termination of all Commitments and all Letters of Credit and the security interest hereunder, all rights in and to the Collateral pledged or assigned by each Pledgor hereunder shall automatically revert to such Pledgor, and the Agent and the Lenders shall return any pledged Collateral in their possession to such Pledgor, or to the Person or Persons legally entitled thereto, and shall endorse, execute, deliver, record and file all instruments and documents, and do all other acts and things, reasonably required for the return of the Collateral to such Pledgor, or to the Person or Persons legally entitled thereto, and to evidence or document the release of the interests of Secured Party arising under this Agreement, all as reasonably requested by, and at the sole expense of, such Pledgor. 23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW PROVISIONS), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION. 24. Covenant Not to Issue Uncertificated Securities. Each Pledgor ----------------------------------------------- represents and warrants to the Lenders that all of the Pledged Securities are in certificated form (as contemplated by Article 8 of the Uniform Commercial Code), and covenants to the Lenders no Pledgor will permit any Pledged Company to issue any securities in uncertificated form or seek to convert all or any part of any Pledged Securities into uncertificated form (as contemplated by Article 8 of the Uniform Commercial Code). -18- 25. Covenant Not to Dilute Interests of Secured Party in Securities. Each --------------------------------------------------------------- Pledgor represents, warrants and covenants to Secured Party such Pledgor will (i) not at any time cause or permit any Pledged Company to issue any additional capital stock or any warrant options or other rights to acquire any additional capital stock, other than to a Pledgor or as otherwise permitted under the Credit Agreement and (ii) pledge to the Agent in accordance with the terms hereof, immediately upon and to the extent of such Pledgor's acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of each Pledged Company. 26. Form of Pledged Limited Liability Interests/Covenant Not to Dilute. ------------------------------------------------------------------ Each Pledgor represents, warrants and covenants to Secured Party that all of the Pledged Limited Liability Company Interests are in the form (certificated or uncertificated) indicated on Schedule A attached hereto (as contemplated by ---------- Article 8 of the Uniform Commercial Code), and covenants to the Lenders that it will (i) not at any time cause or permit any Pledged Entities to issue any additional membership interests or any other rights or options to acquire any additional limited liability company interests, other than to a Pledgor or as otherwise permitted under the Credit Agreement, and (ii) pledge to the Agent in accordance with the terms hereof, immediately upon and to the extent of such Pledgor's acquisition (directly or indirectly) thereof, any and all additional Limited Liability Company Interests of each Pledged Entity. 27. Alternative Dispute Resolution. ------------------------------ (a) Claims or Controversies Subject to Arbitration or Judicial Reference. -------------------------------------------------------------------- (i) Any Claim other than a Claim that arises out of or relates to any obligation under this Agreement or any other Loan Document that is secured, in whole or in part, by an interest in real property shall, at the written request of any Party, be determined by Arbitration. (ii) Any Claim that arises out of or relates to any obligation under this Agreement or any other Loan Document that is secured, in whole or in part, by an interest in real property shall be determined by Arbitration only with the consent of both (A) the Obligor party to this Agreement or such other Loan Document under which such Claim arises and (B) the Agent. If both such Parties do not consent to the determination of any such Claim by Arbitration, then such Claim shall, at the written request of either of such Parties, be determined by Reference. (iii) The determination as to whether or not a Claim arises out of or relates to any obligation under any Loan Document that is secured, in whole or in part, by an interest in real property shall be made at the time the arbitrator or referee is selected pursuant to Section 27(b). (b) Selection of Arbitrator or Referee. Within thirty (30) days after ---------------------------------- written demand, or within thirty (30) days after commencement by any Party of any lawsuit subject to this Agreement, the parties shall select a single neutral arbitrator pursuant to the Commercial Arbitration Rules of the AAA or a single neutral referee pursuant to the Judicial Reference Procedures of the AAA. However, the arbitrator or referee selected must be a retired state or federal court judge with at least five years of judicial experience in civil matters. In the event that the selection pursuant to such Commercial Arbitration Rules or Judicial Reference Procedures does not result in the appointment of a single neutral arbitrator or a single neutral -19- referee within such thirty (30) day period, any Party may petition the court to appoint a single neutral arbitrator or a single neutral referee having such qualifications. The Parties shall equally bear the fees and expenses of the arbitrator or referee unless the arbitrator or referee otherwise provides in the award or statement of decision. (c) Conduct of Arbitration or Reference. The arbitrator shall have the ----------------------------------- powers provided under Applicable State Law and the Commercial Arbitration Rules of the AAA, and the referee shall have the powers provided under Applicable State Law and the Judicial Reference Procedures of the AAA except as provided in this Agreement, including without limitation the following: (i) The arbitrator or referee shall determine all challenges to the legality and/or enforceability of this Agreement. (ii) The arbitrator or referee shall apply the rules of evidence to the same extent as they would be applied in a court of law. (iii) Subject to the provisions of this Agreement, the arbitrator may award or the referee may report, a statement of decision providing for any remedy or relief, including without limitation judicial foreclosure, a deficiency judgment or equitable relief, and give effect to all legal and equitable defenses, including without limitation statutes of limitation, the statute of frauds, waiver and estoppel. (iv) A Party may not conduct discovery unless the arbitrator or referee grants such party leave to do so upon a showing of good cause. All discovery shall be completed within 90 days after the appointment of the arbitrator or referee, except upon a showing of good cause by any Party. The arbitrator or referee shall limit discovery to non-privileged material that is relevant to the issues to be determined by the arbitrator or referee. (v) The referee shall determine the time of the hearing. The hearing shall take place in Los Angeles, California. The hearing must be commenced within sixty (60) days after completion of discovery, unless the arbitrator or referee grants a continuance upon a showing of good cause by any Party. At least fourteen (14) days before the date set for hearing, the Parties shall exchange copies of exhibits to be offered as evidence, and lists of witnesses who will testify, at such hearing. Once commenced, the hearing shall proceed day to day until completed, unless the arbitrator or the referee grants a continuance upon a showing of good cause by any Party. Any Party may cause to be prepared, at its expense, a written transcription or electronic recordation of such hearing. (vi) Any award of the arbitrator or the statement of decision of the referee shall be supported by written findings of fact and conclusions of law which the arbitrator or the referee shall concurrently deliver to the Parties. (vii) The arbitrator shall have the power to award or the referee shall have the power to report a statement of decision providing for reasonable attorneys' fees and costs (including a reasonable allocation for the costs of in house counsel) to the prevailing party. -20- (viii) In the event that punitive damages are permitted under Applicable State Law, the award of the arbitrator or the statement of decision of the referee may provide for recovery of punitive damages provided that the arbitrator or referee first makes written findings of fact that would satisfy the requirements for recovery of punitive damages under Applicable State Law. Any such punitive damages shall not exceed a sum equal to three times the amount of actual damages as determined by the arbitrator or referee. (ix) In the event that Applicable State Law provides that publications or communications made in a judicial proceeding are subject to a litigation privilege, such litigation privilege shall apply to the same extent to publications or communications made in the Arbitration or Reference. (d) Provisional Remedies, Self-Help and Foreclosure. No provision of this ----------------------------------------------- Section 27 shall limit the right of any Party (i) to exercise any self-help remedies or seek specific performance, (ii) to foreclose upon or sell any collateral, by power of sale or otherwise, or (iii) to obtain or oppose provisional remedies or necessary procedural orders from a court of competent jurisdiction, including without limitation appointment of a receiver, before, after or during the pendency of the Arbitration or Reference. The exercise of, or opposition to, any such remedy does not waive the right of any Party to Arbitration or Reference pursuant to this Agreement. (e) Miscellaneous. Any court of competent jurisdiction shall, upon the ------------- petition of any Party, confirm the award of the arbitrator and enter judgment in conformity therewith. Any court of competent jurisdiction shall, upon the filing of the statement of decision of the referee, enter judgment thereon. Any such judgment shall be final, binding and non-appealable (subject to vacation or correction in the amounts set forth, respectively, in California Code of Civil Procedure Sections 1286.2, 1286.4, 1286.6 and 1286.8). No Party shall take any action to contest such award or judgment except as set forth above. In the event that multiple claims are asserted, some of which are found not subject to this Agreement, the Parties agree to stay the proceedings of the claims not subject to this Agreement until all other claims are resolved in accordance with this Agreement. In the event that claims are asserted against multiple parties, some of whom are not subject to this Agreement, the Parties agree to sever the claims subject to this Agreement and resolve them in accordance with this Agreement. In the event that any provision of this Section 27 is found to be illegal or unenforceable, the remainder of this Section 27 shall remain in full force and effect. In the event of any challenge to the legality or enforceability of this Section 27, the prevailing Party shall be entitled to recover the costs and expenses, including reasonable attorneys' fees, incurred by it in connection therewith. Applicable State Law shall govern the interpretation of this Section 27. (f) Waiver of Right to Trial by Jury. IN CONNECTION WITH ANY ARBITRATION, -------------------------------- ANY REFERENCE OR ANY OTHER ACTION, PROCEEDING OR COUNTERCLAIM, THE PLEDGORS, THE LENDERS AND THE AGENT HEREBY EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY RIGHT THEY MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM. (g) Defined Terms. As used in this Section 27, the following terms shall ------------- have the respective meanings set forth below: -21- (i) "AAA" shall mean the American Arbitration Association. --- (ii) "Applicable State Law" shall mean the law of the State of -------------------- California; provided, however, that if any Party seeks (A) to exercise self ----------------- help remedies, including without limitation set-off, (B) to foreclose against or sell any collateral, by power of sale or otherwise or (iii) to obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Arbitration or Reference, the law of the state where such collateral is located shall govern the exercise of or opposition to such rights and remedies. (iii) "Arbitration" shall mean an arbitration conducted pursuant to ----------- this Agreement in accordance with Applicable State Law, and under the Commercial Arbitration Rules of the AAA, as in effect at the time the arbitrator is selected pursuant to Section 27(b). (iv) "Claim" shall mean any claim, cause of action, action, dispute ----- or controversy between or among the Parties, including any claim, cause of action, action, dispute or controversy alleged in or subject to a lawsuit between or among the Parties, which arises out of or relates to: (A) this Agreement or any of the other Loan Documents, (B) any negotiations, correspondence or communications relating to this Agreement or any of the other Loan Documents, whether or not incorporated into this Agreement or such other Loan Documents or any indebtedness evidenced thereby, (C) the administration or management of this Agreement or any other Loan Documents or any indebtedness evidenced thereby or (D) any alleged agreements, promises, representations or transactions in connection therewith, including but not limited to any claim, cause of action, action, dispute or controversy which arises out of or is based upon an alleged tort or other breach of legal duty. (v) "Party" shall mean any Pledgor, any other Obligor, any Lender ----- or the Agent. (vi) "Reference" shall mean a judicial reference conducted pursuant --------- to this Agreement in accordance with Applicable State Law and under the Judicial Reference Procedures of the AAA, as in effect at the time the referee is selected pursuant to Section 27(b) of this Agreement. 28. Counterparts. This Agreement may be executed in any number of ------------ counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. 29. Recourse. Notwithstanding any provision of this Agreement to the -------- contrary, the obligations and liabilities of each Pledgor hereunder shall be limited to the Collateral and, if an Event of Default and/or a default by any Pledgor hereunder or under the Guarantee shall occur -22- and be continuing, the Agent's and the Lenders' sole recourse against such Pledgor shall be to the Collateral. -23- IN WITNESS WHEREOF, each Pledgor has executed this Agreement as of the date first written above. PLEDGOR ------- /s/ Walter F. Ulloa ------------------- WALTER F. ULLOA, an individual Residence: Los Angeles County, California Address for Notices: 657 Amalfi Drive Pacific Palisades, CA 90272 Telecopier: 310-454-4983 -24- /s/ Philip C. Wilkinson ---------------------------------- PHILIP C. WILKINSON, an individual Residence: San Diego County, California Address for Notices: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 -B-1- /s/ Paul A. Zevnik --------------------------------- PAUL A. ZEVNIK, an individual Residence: County of District of Columbia, District of Columbia Address for Notices: 1299 Pennsylvania Avenue N.W. Ninth Floor Washington, D.C. 20004 Telecopier: 202-824-0954 /s/ Richard D. Norton --------------------------------- RICHARD D. NORTON, an individual Residence: Los Angeles County, California Address for Notices: 1620 26th Street, Suite 200 Santa Monica, CA 90404 Telecopier: 310-___-____ /s/ Yrma G. Rico --------------------------------- IRMA (YRMA) RICO, an individual Residence: Denver County, Colorado Address for Notices: 899 Pearl #15 Denver, CO 80203 Telecopier: 303-832-7325 KEVIN GRENHAM and STEVE G. ROWLES, Co-Trustees of THE PAUL A. ZEVNIK TRUST dated November 2, 1996, a trust formed under the laws of the District of Columbia By: /s/ Kevin Grenham KEVIN GRENHAM, Co-Trustee Residence: Hartford County, Connecticut Address for Notices as Co-Trustee: 27 Crestwood Rd. West Hartford, CT 06107 Telecopier: ___-___-____ By: /s/ Steven G. Rowles STEVE G. ROWLES, Co-Trustee Residence: San Diego County, California Address for Notices as Co-Trustee: 100 West Broadway, Suite 1750 San Diego, CA 92101 Telecopier: 619-515-9628 EDITH SEROS, as Trustee of THE WALTER F. ULLOA TRUST OF 1996, a trust formed under the laws of the State of California By: /s/ Edith Seros EDITH SEROS, Trustee Residence: Los Angeles County, California Address for Notices as Trustee: 432 16th Street Santa Monica, CA 90402 Telecopier: 310-___-____ PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustees of THE 1994 WILKINSON CHILDREN'S GIFT TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson, Trustee PHILIP C. WILKINSON, Trustee Residence: San Diego County, California Address for Notices as Trustee: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 By: /s/ Wendy K. Wilkinson, Trustee WENDY K. WILKINSON, Trustee Residence: San Diego County, California Address for Notices as Trustee: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustee of THE WILKINSON FAMILY TRUST, a trust formed under the laws of the State of California By: /s/ Philip C. Wilkinson, Trustee PHILIP C. WILKINSON, Trustee Residence: San Diego County, California Address for Notices as Trustee: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 By: /s/ Wendy K. Wilkinson, Trustee WENDY K. WILKINSON, Trustee Residence: San Diego County, California Address for Notices as Trustee: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 CAROL KRUIDENIER LUERY TTE, CAROL K. LUERY REVOCABLE TRUST UA DATED 7/27/98 By: /s/ Carol K. Luery CAROL LUERY, Trustee Residence: Sacramento County, California Address for Notices: 4139 Los Coches Way Sacramento, CA 95864 Telecopier: 916-446-1696 (Telecopier No. for Charles S. Farmon, Esq.) Acknowledged and agreed to as of this 10th day of November, 1998 KSMS-TV, INC. By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa Name: Philip C. Wilkinson/Walter F. Ulloa Title: Vice President/President and Treasurer TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Vice President and Treasurer CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: President and Chief Financial Officer GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President and Treasurer LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President and Treasurer VALLEY CHANNEL 48, INC. By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa Name: Philip C. Wilkinson/Walter F. Ulloa Title: President and Chief Operating Officer/ Chairman and Chief Executive Officer TELECORPUS, INC. By: /s/ Philip C. Wilkinson /s/ Walter F. Ulloa Name: Philip C. Wilkinson/Walter F. Ulloa Title: President and Chief Operating Officer/Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Managing Member By: /s/ Philip C. Wilkinson Name: Philip C. Wilkinson Title: Managing Member CONSENT OF SPOUSE ----------------- I, Alexandra Seros, am the spouse of WALTER F. ULLOA (the "Pledgor") ------- who is a party to the foregoing Amended and Restated Pledge Agreement (such Agreement, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Pledge Agreement") dated as of November 10, ---------------- 1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank of California, N.A., a national banking association, as Agent for the Lenders referred to therein. (Terms defined in the Pledge Agreement or the definitions of which are incorporated in the Pledge Agreement and not otherwise defined herein have the same respective meanings when used herein.) I acknowledge that I have read, know and understand the contents of the Pledge Agreement and the effects thereof. I hereby consent to the execution and delivery of, and approve of and agree to be bound by the terms, conditions and provisions of the Pledge Agreement, all Schedules attached thereto and all other agreements which are contemplated by or attached thereto as exhibits or schedules to the Pledge Agreement to which my spouse is or will become a party, whether entered into before or after the date of this Consent, to the same extent as if I were a party thereto, and consent to the performance by my spouse of his obligations thereunder. I agree that my interest, if any, in the Collateral (including any community property interest therein) will be irrevocably subject to and bound by the Pledge Agreement. I am aware that I have a right to seek independent professional guidance and independent legal counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Pledge Agreement carefully that I waive such right. Dated: November 1, 1998. /s/ Alexandra Seros ------------------------------- Print Name: Alexandra Seros CONSENT OF SPOUSE ----------------- I, Wendy K. Wilkinson, am the spouse of PHILIP C. WILKINSON (the "Pledgor") who is a party to the foregoing Amended and Restated Pledge Agreement - -------- (such Agreement, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Pledge Agreement") dated as of November 10, ---------------- 1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank of California, N.A., a national banking association, as Agent for the Lenders referred to therein. (Terms defined in the Pledge Agreement or the definitions of which are incorporated in the Pledge Agreement and not otherwise defined herein have the same respective meanings when used herein.) I acknowledge that I have read, know and understand the contents of the Pledge Agreement and the effects thereof. I hereby consent to the execution and delivery of, and approve of and agree to be bound by the terms, conditions and provisions of the Pledge Agreement, all Schedules attached thereto and all other agreements which are contemplated by or attached thereto as exhibits or schedules to the Pledge Agreement to which my spouse is or will become a party, whether entered into before or after the date of this Consent, to the same extent as if I were a party thereto, and consent to the performance by my spouse of his obligations thereunder. I agree that my interest, if any, in the Collateral (including any community property interest therein) will be irrevocably subject to and bound by the Pledge Agreement. I am aware that I have a right to seek independent professional guidance and independent legal counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Pledge Agreement carefully that I waive such right. Dated: November 10, 1998. /s/ Wendy K. Wilkinson ---------------------------------- Print Name: Wendy K. Wilkinson CONSENT OF SPOUSE ----------------- I, Stephanie P. Rasines, am the spouse of RICHARD D. NORTON (the "Pledgor") who is a party to the foregoing Amended and Restated Pledge Agreement - -------- (such Agreement, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Pledge Agreement") dated as of November 10, ---------------- 1998 by the Pledgor and the other pledgors party thereto in favor of Union Bank of California, N.A., a national banking association, as Agent for the Lenders referred to therein. (Terms defined in the Pledge Agreement or the definitions of which are incorporated in the Pledge Agreement and not otherwise defined herein have the same respective meanings when used herein.) I acknowledge that I have read, know and understand the contents of the Pledge Agreement and the effects thereof. I hereby consent to the execution and delivery of, and approve of and agree to be bound by the terms, conditions and provisions of the Pledge Agreement, all Schedules attached thereto and all other agreements which are contemplated by or attached thereto as exhibits or schedules to the Pledge Agreement to which my spouse is or will become a party, whether entered into before or after the date of this Consent, to the same extent as if I were a party thereto, and consent to the performance by my spouse of his obligations thereunder. I agree that my interest, if any, in the Collateral (including any community property interest therein) will be irrevocably subject to and bound by the Pledge Agreement. I am aware that I have a right to seek independent professional guidance and independent legal counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Pledge Agreement carefully that I waive such right. Dated: November 10, 1998. /s/ Stephanie P. Rasines -------------------------------- Print Name: Stephanie P. Rasines Schedule A Pledged Collateral Schedule B UCC Filing Offices Schedule C Form of Limited Liability Company Notice Schedule D Prior Pledge Agreements The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-10.12 13 UNIVISION ROLL-UP AGREEMENT - MARCH 2, 2000 EXHIBIT 10.12 UNIVISION ROLL-UP AGREEMENT --------------------------- This Univision Roll-Up Agreement (the "Agreement") is dated March 2, 2000 by and between Univision Communications Inc., a Delaware corporation ("Univision"), and Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), with respect to the following facts: WHEREAS, the Company has previously executed that certain Non-Negotiable Subordinated Note dated December 30, 1996 in the principal amount of $10,000,000 in favor of Univision, a copy of which is attached hereto as Exhibit "A" and ----------- incorporated herein by this reference (the "Original Note"). WHEREAS, the parties hereto have entered into that certain First Amended and Restated Non-Negotiable Promissory Note of even date herewith, a copy of which is attached hereto as Exhibit "B" and incorporated herein by this ----------- reference (the "First Amended Original Note"), in order to, among other things, increase the principal amount of the Original Note by $110,000,000, from $10,000,000 to $120,000,000. WHEREAS, the parties hereto have previously entered into that certain Amended and Restated Subordinated Note Purchase and Option Agreement dated as of December 30, 1996, a copy of which is attached hereto as Exhibit "C" and ----------- incorporated herein by this reference (the "Original Note Purchase Agreement"), pursuant to which, among other things, Univision was granted the Univision Option to acquire an equity interest in the Company (adjusted to 25.55%) for an aggregate exercise price of $10,000,000. WHEREAS, the parties hereto have previously entered into that certain First Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated as of March 31, 1999, a copy of which is attached hereto as Exhibit "D" and incorporated herein by this reference (the "First Amendment to - ----------- Original Note Purchase Agreement"), pursuant to which, among other things, the Univision Option was increased to an option to acquire a 27.90% equity interest in the Company for an aggregate exercise price of $10,000,000. WHEREAS, the parties hereto have entered into that certain Second Amendment to Amended and Restated Note Purchase Agreement of even date herewith, a copy of which is attached hereto as Exhibit "E" and incorporated herein by this ----------- reference (the "Second Amendment to Original Note Purchase Agreement"), in order to, among other things, increase the percentage of the Univision Option to 40% (as computed in Section 3 of the Second Amendment to Original Note Purchase Agreement), and as computed prior to any potential issuance of shares in the Z- Spanish Acquisition or the IPO (each as defined below). WHEREAS, the Company, in consultation with Univision, has negotiated a letter of intent by the Company to potentially acquire all of the outstanding capital stock of Z-Spanish Media Corporation, a Delaware corporation ("Z- Spanish"), and may potentially consummate a financing with TSG Capital Fund III, L.P., an affiliate of a stockholder of Z- Spanish, in the amount of $90,000,000 (the "Z-Spanish Acquisition"), substantially in accordance with the terms of the draft letter of intent attached hereto as Exhibit "F" and incorporated herein by this reference (the ----------- "Z-Spanish Letter of Intent"). WHEREAS, the Company has formed Entravision Communications Corporation, a Delaware corporation with no shares of capital stock issued and outstanding as of the date hereof ("Entravision"), for the purpose of effecting an exchange transaction contemplated by the Company in which (i) each of the individual and trust members in the Company (the "Exchanging Members") shall transfer to the Company his or its respective direct membership interests in the Company in exchange for newly-issued shares of Entravision Class A Common Stock and (ii) each of the individual and trust stockholders of the corporate members of the Company (the "Exchanging Stockholders") shall transfer his, her or its respective stockholdings in such corporate members in exchange for newly-issued shares of Entravision Class A Common Stock (collectively, the "Exchange"), all pursuant to the terms and conditions of an Exchange Agreement to be entered into by and among Entravision, the Company, the Exchanging Members, the Exchanging Stockholders and Univision (the "Exchange Agreement"). WHEREAS, Entravision is preparing to file with the Securities and Exchange Commission a Registration Statement with respect to an underwritten initial public offering of its Class A Common Stock (the "IPO"). WHEREAS, the parties hereto intend that Univision will contribute to the Company its entire interest in and to the Original Note, the First Amended Original Note, the Original Note Purchase Agreement, the First Amendment to Original Note Purchase Agreement and the Second Amendment to Original Note Purchase Agreement in exchange for newly-issued shares of the Entravision Class C Common Stock representing a 40% equity ownership interest in Entravision (as computed in Section 3 of the Second Amendment to Original Note Purchase Agreement) and as computed prior to the Z-Spanish Acquisition and IPO (the "Univision Conversion"), all in pursuant to the terms and conditions of the Exchange Agreement (the Exchange and the Univision Conversion are collectively referred to herein as the "Roll-Up Transaction"). NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each signatory hereto, it is agreed as follows: 1. First Amended Original Note. Concurrently with the execution of this --------------------------- Agreement, (i) Univision and the Company shall execute the First Amended Original Note, pursuant to which, among other things, the principal amount of the Original Note shall be increased by $110,000,000, from $10,000,000 to $120,000,000, (ii) the Company shall deliver to Univision the original of the First Amended Original Note and (iii) Univision shall deliver to the Company (a) the Original Note marked "cancelled" and (b) the sum of $110,000,000 via wire transfer pursuant to wire transfer instructions provided to Univision by the Company. -2- 2. Second Amendment to Note Purchase Agreement. Concurrently with the ------------------------------------------- execution of this Agreement, Univision and Entravision shall execute the Second Amendment to Note Purchase Agreement, pursuant to which, among other things, the percentage of the Univision Option shall be increased to 40% (as computed in Section 3 of the Second Amendment to Original Note Purchase Agreement) and as computed prior to the Z-Spanish Acquisition and the IPO. 3. Roll-Up Transaction. Upon consummation of the Roll-Up Transaction: ------------------- (a) the Restated Certificate of Incorporation of Entravision shall be substantially in the form attached hereto as Exhibit "G" and incorporated by ----------- this reference, subject to such other changes as are reasonably agreed to by the parties to accommodate any changes to the participants and/or ultimate structure of the Roll-Up Transaction, the Z-Spanish Acquisition and/or the IPO; (b) the Bylaws of Entravision shall be substantially in the form attached hereto as Exhibit "H" and incorporated herein by this reference, ----------- subject to such other changes as are reasonably agreed to by the parties hereto in order to accommodate any changes to the participants and/or ultimate structure of the Roll-Up Transaction, the Z-Spanish Acquisition and/or the IPO; and (c) each of Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik hereby covenant to, and agree to cause the Company to, execute and deliver that certain Voting Agreement, substantially in the form attached hereto as Exhibit ------- "I" and incorporated by this reference. - --- The parties acknowledge and agree that the Roll-Up Transaction shall be consummated upon the terms and conditions set forth in the Exchange Agreement, which Exchange Agreement shall be subject to the reasonable review and approval of Univision. 4. Z-Spanish Acquisition. Univision hereby acknowledges and agrees that --------------------- it is in the best interests of the Company and Entravision to pursue the Z- Spanish Acquisition and Univision hereby approves the potential consummation of the Z-Spanish Acquisition (and its related terms) in accordance with the terms of the Z-Spanish Letter of Intent, with such non-material changes as are reasonably approved in good faith by the officers of the Company and Entravision. 5. General Provisions. ------------------ (a) Entire Agreement. This Agreement, the exhibits and schedules ---------------- hereto and any other document to be furnished pursuant to the provisions hereof embody the entire agreement and full understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, inducements, representations, warranties, covenants -3- or undertakings other than those expressly set forth or referred to in such documents. This Agreement and such other documents supersede all prior negotiations, agreements and understandings, both written and oral, among the parties with respect to such subject matter. (b) Incorporation by Reference. The recitals set forth above, and all -------------------------- exhibits and schedules attached hereto, are hereby incorporated by reference into this Agreement. (c) Amendments. Subject to applicable law, this Agreement and any ---------- exhibit or schedule attached hereto may only be amended by the parties hereto pursuant to an amendment in writing executed by all parties hereto. (d) Successors and Assigns. Except as otherwise provided herein, the ---------------------- terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors, assigns, heirs, legatees, legal representatives, executors and administrators of all the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall be construed to confer upon or give to any person, entity or other party (other than the parties hereto or their respective successors and assigns) any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (e) Counterparts; Facsimile. This Agreement may be executed in any ----------------------- number of counterparts, each of which shall be an original and shall not need to contain the signature of more than one party, but all of which together when fully-executed and delivered by the parties hereto shall constitute one and the same instrument, binding on all of the parties. To the maximum extent permitted by applicable law or any applicable governmental authority, each counterpart signature page delivered to via facsimile shall be deemed to be an original and may be relied on by the parties hereto as such. (f) Assignment. No party hereto shall have the right to assign all or ---------- any portion of its rights and interests under this Agreement or to delegate all or any portion of its duties under this Agreement without the prior written consent of each other party hereto. (g) Notices. All notices, requests, demands, waivers and other ------- communications to be given by either party hereunder shall be in writing and shall be (i) mailed by first-class, registered or certified mail, postage prepaid, (ii) sent by hand delivery or reputable overnight delivery service or (iii) transmitted by facsimile or electronic mail (provided that a copy is also sent by reputable overnight delivery service) addressed to the parties at the respective addresses for such parties as reflected on the signature page hereto, or to such other address as may be specified in writing to the other parties hereto. All such notices, requests, demands, waivers and other communications shall be deemed to have been given and received (a) if by personal delivery, facsimile or electronic mail, on the day of such delivery, (b) if by first- class, registered or certified mail, on the fifth (5th) business day after the mailing thereof or (c) if by reputable overnight delivery service, on the day delivered. -4- (h) Governing Law; Venue. Notwithstanding the place where the -------------------- Agreement may be executed by any of the parties hereto, this Agreement, and the rights and obligations of the parties hereto, and any disputes relating thereto, shall in all respects be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of laws. The exclusive venue for any controversy arising out of the terms of this Agreement or the breach thereof shall be the Superior Court of California for the County of Los Angeles or the United States District Court for the Central District of California. (i) Capitalized Terms. All capitalized terms used in this Amendment ----------------- and not otherwise defined shall have the meaning assigned such term in the Original Note or the Original Note Purchase Agreement, as the case may be. [Remainder of Page Intentionally Left Blank] -5- IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. Univision UNIVISION COMMUNICATIONS INC., a Delaware corporation By: /s/ Andrew W. Hobson --------------------------------------------- Name: Andrew W. Hobson ------------------------------------------- Title:EVP ------------------------------------------- Address: 1999 Avenue of the Stars, Suite 3050 Los Angeles, California 90067 Company ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa --------------------------------------------- Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By: /s/ Philip C. Wilkinson --------------------------------------------- Philip C. Wilkinson, President, Chief Operating Officer and Managing Member Address: 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 /s/ Walter F. Ulloa ------------------------------------------------- Walter F. Ulloa, individually /s/ Philip C. Wilkinson ------------------------------------------------- Philip C. Wilkinson, individually /s/ Paul A. Zevnik ------------------------------------------------- Paul A. Zevnik, individually [Signature Page to Univision Roll-Up Agreement] Exhibit A Original Note Exhibit B First Amended Original Note Exhibit C Original Note Purchase Agreement Exhibit D First Amendment to Original Note Purchase Agreement Exhibit E Second Amendment to Original Note Purchase Agreement Exhibit F Z-Spanish Letter of Intent Exhibit G Form of Restated Certificate of Incorporation Exhibit H Form of Bylaws Exhibit I Form of Voting Agreement The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-10.13 14 FIRST AMENDED AND RESTATED SUBORDINATED NOTE EXHIBIT 10.13 FIRST AMENDED AND RESTATED NON-NEGOTIABLE SUBORDINATED NOTE -------------------------------- THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES ("STATE ACT"). THE SECURITIES EVIDENCED BY THIS NOTE MAY NOT BE OFFERED, SOLD OR TRANSFERRED FOR VALUE, DIRECTLY OR INDIRECTLY, IN THE ABSENCE OF SUCH REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE ACTS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE SATISFACTION OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. Subordinated Note Due December 30, 2021 $120,000,000 Los Angeles, California March 2, 2000 ------------------ Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), for value received, hereby promises to pay to Univision Communications Inc., a Delaware corporation ("Univision"), at 1999 Avenue of the Stars, Suite 3050, Los Angeles, California 90067, the principal sum of One Hundred Twenty Million Dollars ($120,000,000) together with interest (computed on the basis of a 360-day year) from the date of this Note, (the "Commencement Date") on the unpaid balance of such principal amount at 7.01% (the "Interest Rate"). Principal and interest under this Note shall be payable as follows: Interest on this Note shall be due and payable semi-annually, as it accrues, beginning six (6) months after the Commencement Date and continuing regularly and semi-annually thereafter each calendar year until December 30, 2021, when the outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable in full. Reference is made to the Company's First Amended and Restated Operating Agreement dated as of December 30, 1996 (as amended from time to time, the "Operating Agreement"). Capitalized terms not defined herein shall have the meaning given to such terms in the Operating Agreement. This Note amends, restates and supersedes that certain Non-Negotiable Subordinated Note dated December 30, 1996 in the principal amount of $10,000,000 executed by the Company in favor of Univision. 1. Subordination. ------------- a. Subordination to Senior Indebtedness. The indebtedness evidenced ------------------------------------ by this Note, and the payment of the principal hereof and any interest hereon, is wholly subordinated, junior and subject in right of payment, to the extent and in the manner hereinafter provided, to the prior payment of all Senior Indebtedness (as hereinafter defined) of the Company now outstanding or hereafter incurred. "Senior Indebtedness" means the principal of and interest on, together with all other payment obligations under (i) all indebtedness of the Company to banks, trust companies, insurance companies and other financial institutions, including commercial paper and accounts receivable sold or assigned by the Company to such institutions; (ii) obligations of the Company as lessee under leases of real or personal property; (iii) any indebtedness of the Company issued or incurred in connection with the acquisition of an equity interest in a business or with the assets of a business; (iv) shareholder and/or member loans, junk bond debt, trade debt incurred in the ordinary course of business and other unsecured debt; (v) deferrals, renewals, extensions and refunding of and modifications to any such indebtedness or obligations described in (i), (ii), (iii) and (iv) above; and (vi) any other indebtedness of the Company which the Company and Univision may hereafter from time to time expressly and specifically agree in writing. b. Payment Upon Dissolution, Etc. Upon payment or distribution of ------------------------------ assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or other proceedings, all principal and interest, together with all other payment obligations under, due upon any Senior Indebtedness shall first be paid in full, or payment thereof in full duly provided for, before Univision shall be entitled to receive or, if received, to retain any payment or distribution on account of this Note; and upon any such dissolution or winding-up or liquidation or reorganization, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which Univision would be entitled except for the provisions of this Section 1 shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by Univision if it shall have received such payment or distribution, directly to the holders of the Senior Indebtedness (pro rata to --- ---- each such holder on the basis of the respective amounts of such Senior Indebtedness held by such holder) or their representatives to the extent necessary to pay all such Senior Indebtedness in full after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to Univision. In the event of any such dissolution, winding-up, liquidation or reorganization of the Company, Univision shall be entitled to be paid one hundred percent (100%) of the outstanding principal amount hereof and accrued interest hereon before any distribution of assets shall be made among the holders of any class of Membership Units of the Company in their capacities as holders of such Membership Units. For purposes of this paragraph (b), the words "assets" and "cash, property or securities" shall not be deemed to include Membership Units of the Company as reorganized or readjusted, or Membership Units of the Company or any other person provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Section 1 with respect to this Note to the payment of all Senior Indebtedness which may at the time be outstanding; provided that (i) the Senior Indebtedness is -------- assumed by the new person, if any, resulting from any such reorganization or readjustment, and (ii) the rights -2- of the holders of Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. c. Subrogation. Subject to payment in full of all Senior ----------- Indebtedness, Univision shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of the assets of the Company made on such Senior Indebtedness until all principal and interest on this Note shall be paid in full; and, for purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which Univision would be entitled except for the subordination provisions of this Section 1 shall, as between Univision and the Company and/or its creditors other than the holders of the Senior Indebtedness, be deemed to be a payment on account of the Senior Indebtedness. d. Rights of Holder Unimpaired. The provisions of this Section 1 are --------------------------- and are intended solely for the purposes of defining the relative rights of Univision and the holders of Senior Indebtedness; and nothing in this Section 1 shall impair, as between the Company and Univision, the obligation of the Company, which is unconditional and absolute, to pay to Univision the principal hereof and interest hereon, in accordance with the terms of this Note; nor shall anything herein prevent Univision from exercising all remedies otherwise permitted by applicable law or hereunder upon default, subject to the rights set forth above of holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to Univision. e. Holders of Senior Indebtedness. These provisions regarding ------------------------------ subordination will constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness; such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees under such provisions to the same extent as if they were named herein, and they or any of them may proceed to enforce such subordination. Univision shall execute and deliver to any holder of Senior Indebtedness (i) any such instrument as such holder of Senior Indebtedness may request in order to confirm the subordination of this Note to such Senior Indebtedness upon the terms set forth in this Note, and (ii) any powers of attorney specifically confirming the rights of holders of Senior Indebtedness to enforce such subordination and all such proofs of claim, assignments of claim and other instruments as may be requested by the holders of Senior Indebtedness or their representatives to enforce all claims upon or in respect of this Note. f. Payments on Subordinated Note. Subject to the terms of this ----------------------------- Section 1, the Company may make payments of the principal of, and any interest on, this Note, if at the time of payment, and immediately after giving effect thereto, (i) there exists no default in any payment with respect to any Senior Indebtedness and (ii) there shall not have occurred an event of default (other than a default in the payment of amounts due thereon) with respect to any Senior Indebtedness, as defined in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof, other than an event of default which shall have been cured or waived or shall have ceased to exist. All payments of principal and interest with respect to this Note and all other Subordinated Notes of the Company due at the -3- time of said payment shall be made ratably in proportion to the aggregate amount outstanding with respect to each of the Notes. 2. Prepayment. The principal and interest indebtedness represented by ---------- this Note may be prepaid to Univision, in whole or in part, without penalty, any time upon thirty (30) days' prior written notice from Company to Univision. 3. Univision Rights. ---------------- a. Matters Requiring Univision Approval. The following matters ------------------------------------ shall require Univision's approval, which shall not be unreasonably withheld, except as otherwise specified: i. Acquisition of assets by the Company for a purchase price equal to or greater than the greater of (a) Five Million Dollars ($5,000,000) or (b) ten percent (10%) of the Company's "Net Asset Value." Net Asset Value shall be defined to mean the most recent four (4) quarters of EBITDA (excluding "Additional Compensation" as that term is defined in that certain Letter Agreement between Univision and the Company dated December 30, 1996), times eight (8), less outstanding indebtedness, other than the Subordinated Note. ii. Incurrence of debt (excluding the Subordinated Note and debt under the Credit Facility) if, on a pro forma basis, the debt to EBITDA ratio would exceed the ratio set forth below for the applicable EBITDA of the Company:
EBITDA LEVERAGE RATIO ------- -------------- Up to $5 million 4.00 : 1 $5.0 to less than $6.5 million 4.25 : 1 $6.5 to less than $8.0 million 4.50 : 1 $8.0 to less than $10.0 million 4.75 : 1 $10 million or greater 5.00 : 1
iii. Any transaction involving the direct or indirect transfer or sale of any FCC License, (including the sale of Membership Units) in which case, except as provided below, Univision's consent may be withheld in its sole discretion; provided, however, in connection with a transfer of Membership Interests subject to the provisions of Section 26(d) of the Operating Agreement, the Managing Members may submit to Univision a list of potential transferees prior to the right of first offer pursuant to said Section 26(d) of the Operating Agreement and such potential transferees may be approved by Univision, which approval shall not be unreasonably withheld. If such transferee is approved in such a manner, an indirect transfer of an FCC License as a result of such transfer of Membership Interests to such transferee that complies with Section 26(d) of the Operating Agreement, shall be deemed approved hereunder; provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d) of the Operating Agreement. -4- iv. Distributions to Members in excess of quarterly tax distributions (calculated at the highest applicable federal and state income tax rates, taking into account the deduction of state income taxes for federal income tax purposes). The Company shall be permitted to make additional distributions in amounts in excess of reasonable working capital and reserve requirements if concurrent with such distribution the Company makes a prepayment of principal on this Subordinated Note in an amount equal to the "Prepayment Amount" (as defined below). The "Prepayment Amount" shall be determined as follows: A = B (C + A) A equals the amount to be prepaid on this Subordinated Note; B equals Univision's then existing Option Percentage (as defined in Exhibit "D" to the Operating Agreement); C equals the total distributions proposed to be made to the Members of the Company; v. Transactions with any Member in excess of $50,000 or not at arm's length (except for existing management contracts, employment agreements, and loans existing at the date hereof and scheduled in the Credit Facility between the Company, among others, and Union Bank of California, N.A., as agent for various banks). vi. Amendments to the Operating Agreement that would adversely affect the Class A Non-Managing Membership Units or Univision with respect to its rights under the Operating Agreement. vii. The merger or consolidation of the Company with a third party or the sale of all, or substantially all, the assets of the Company, in which case Univision may withhold its consent, in its sole discretion. viii. The issuance of additional Membership Units in the Company pursuant to Section 7(c)(iii) of the Operating Agreement. ix. The dissolution and liquidation of the Company, in which case Univision may withhold its consent, in its sole discretion. x. Any other action by the Company that, assuming full exercise of the rights of Univision under that certain Amended and Restated Subordinated Note Purchase and Option Agreement dated December 30, 1996 between and among the Company, Univision, et al., as amended from time to time, would require Univision's approval under the Operating Agreement. The foregoing approval rights shall terminate upon repayment of the Note or upon the closing of Univision's sale of a majority of the principal amount of this Note to a third party. b. Inspection Rights; Reports. So long as this Note remains -------------------------- outstanding, Univision shall (i) have the inspection rights of a Member of the Company set forth in the -5- Operating Agreement and (ii) shall be entitled to receive all financial reports provided to the Members of the Company pursuant to the Operating Agreement. 4. [Intentionally omitted.] 5. No Assignment. This Note may be transferred, assigned or encumbered ------------- only with the consent of the Company which consent the Company may withhold in its sole discretion. 6. Default. Subject to the terms, provisions and conditions any time ------- contained in any Subordination Agreement by and between Univision and the holder(s) of any Senior Indebtedness, Univision can require that the entire unpaid principal of this Note and the interest then accrued on this Note shall become and be immediately due and payable upon written demand of Univision, without any other notice or demand of any kind or any presentment or protest, if any one of the following events (an "Event of Default") shall occur and be continuing at the time of such demand, whether voluntarily or involuntarily, or, without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any governmental body: a. The failure to pay any principal and/or interest amount when due hereunder; b. If the Company (i) makes a general assignment for the benefit of creditors; (ii) applies for, consents to, acquiesces in, files a petition or an answer seeking, or admits (by answer, default or otherwise) the material allegations of a petition filed against it seeking the appointment of a trustee, receiver, liquidator or assignee in bankruptcy or insolvency of itself or of all or a substantial portion of its assets, or a reorganization, arrangement with creditors or other remedy, relief or adjudication available to or against a bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law relating to relief of debtors; or (iii) admits in writing its inability to pay its debts generally as they become due; or c. If a decree, order or judgment shall have been entered adjudging the company a bankrupt or insolvent, or appointing a receiver, liquidator, trustee or assignee in bankruptcy or insolvency for it or for all or a substantial portion of its assets or approving a petition seeking a reorganization, arrangement or the winding-up or liquidation of its affairs on the grounds of insolvency or nonpayment of debts, and such decree, order or judgment shall remain undischarged and unstayed for a period of sixty (60) days; or if any substantial part of the property of the Company is sequestered or attached and shall not be returned to the possession of the Company or such subsidiary or released from such attachment within sixty (60) days. d. A material breach of the terms of this Note which goes uncured for a period of thirty (30) days from written notice from Univision to the Company; provided that if such breach is not curable within thirty (30) days, the Company shall have such longer period as may be reasonably necessary to cure such breach so long as it diligently continues to pursue such cure. -6- 7. General. ------- a. Successors and Assigns. Subject to the restrictions on ---------------------- assignment/transfer contained in Section 5 of this Note, this Note, and the obligations and rights of the Company hereunder, shall be binding upon and inure to the benefit of the Company, Univision and their respective heirs, successors and assigns. b. Recourse. This Note is unsecured. Recourse under this Note shall -------- be to the general unsecured assets of the Company only and in no event to the Managing Members, officers, or Members of the Company. c. Changes. Changes in or additions to this Note may be made or ------- compliance with any term, covenant, agreement, condition or provision set forth herein may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively), upon written consent of the Company and Univision. d. Currency. All payments shall be made in such coin or currency of -------- the United States of America as at the time of payment shall be legal tender therein for the payment of public and private debts. e. Notices. All notices, requests, consents and demands shall be ------- made in writing and shall be mailed postage prepaid, or delivered by hand at the addresses set forth below or to such other address as may be furnished in writing to the other party hereto: Univision: Univision Communications Inc. 1999 Avenue of the Stars, Suite 3050 Los Angeles, California 90067 Telephone No.: (310) 556-7600 The Company: Entravision Communications Company, L.L.C. Attention: Walter F. Ulloa and Philip C. Wilkinson 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Telephone No.: (310) 447-3870 Facsimile No.: (310) 447-3899 f. Saturdays, Sundays, Holidays. If any date that may at any time be ---------------------------- specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in the State of California shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday. -7- g. Governing Law. This Note shall be construed and enforced in ------------- accordance with, and the rights of the parties shall be governed by, the laws of the State of California, without giving effect to any conflicts of laws principles. h. Definitions. Any capitalized, but undefined, terms used in this ----------- Note shall have the same meaning set forth in the Operating Agreement. [Remainder of Page Intentionally Left Blank] -8- IN WITNESS WHEREOF, this Note has been executed and delivered on the date first above written by the Managing Members of the Company. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:/s/ Walter F. Ulloa ------------------- Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By:/s/ Philip C. Wilkinson ----------------------- Philip C. Wilkinson, President, Chief Operating Officer and Managing Member Acknowledged and Agreed: UNIVISION COMMUNICATIONS INC. By:/s/ Andrew W. Hobson -------------------- Name: Andrew W. Hobson ---------------- Title: EVP --- [Signature Page to First Amended and Restated Non-Negotiable Subordinated Note] -9- EX-10.14 15 SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT EXHIBIT 10.14 AMENDED AND RESTATED -------------------- SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT ----------------------------------------------- THIS AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT (this "Agreement") is made and entered as of December 30, 1996, by and among Univision Communications Inc., a Delaware corporation ("Univision"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), KSMS-TV, Inc. ("KSMS"), a Delaware corporation, Tierra Alta Broadcasting, Inc. ("Tierra Alta"), a Delaware corporation, Cabrillo Broadcasting Corporation ("Cabrillo"), a California corporation, Golden Hills Broadcasting Corporation ("Golden"), a Delaware corporation, Las Tres Palmas Corporation ("Las Tres"), a Delaware corporation, Entravision Merger Corp., ("Merger Corp."), a Delaware corporation (each of the Company, KSMS, Tierra Alta, Cabrillo, Golden, Las Tres and Merger Corp. a "Borrower", and collectively, the "Borrowers"), and Walter F. Ulloa, an individual and Philip C. Wilkinson, an individual, as the managing members (the "Managing Members"), and amends and restates in its entirety the SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT made and entered as of December 30, 1996 (the "Effective Date") among the parties hereto with reference to the following: RECITALS -------- A. Univision has made a Loan to the Company in the principal amount of $3,000,000 which is evidenced by a Subordinated Promissory Note due August 19, 1997 (the "Prior Note"). B. Univision is to purchase a Non-Negotiable Subordinated Note from the Company in the principal amount of $10,000,000. C. The Company desires to sell the Non-Negotiable Subordinated Note to Univision and grant to Univision an option to acquire an equity interest in the Company. D. In order to induce Univision to purchase the Non-Negotiable Subordinated Note, the Borrowers wish to make certain representations and warranties to Univision and agree to perform covenants for the benefit of Univision. E. In order to induce Univision to purchase the Subordinated Note, the Managing Members of the Company wish to grant to Univision an option to acquire an equity interest in the Borrowers. AGREEMENT --------- In consideration of the promises, the mutual covenants and the agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. Purchase of Subordinated Note. ----------------------------- 1.1 Authorization of Subordinated Note. Pursuant to the terms ---------------------------------- and conditions contained herein, the Company has authorized the issuance to Univision of a Non-Negotiable Subordinated Note in the form of Exhibit A attached hereto (the "Subordinated Note"). 1.2 Purchase and Sale. ----------------- (a) Subject to the terms and conditions hereof, the Company hereby issues and sells to Univision and Univision hereby purchases from the Company, the Subordinated Note for the Purchase Price described in Section 1.2(b). (b) The aggregate purchase price of the Subordinated Note shall equal $7,000,000 and the delivery to the Company for cancellation of the Prior Note (the "Purchase Price"). 2. Representations and Warranties. The Subordinated Note has ------------------------------ been authorized by all necessary actions on the part of the Company, and is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. This Agreement has been authorized by the Company and each of the Borrowers and is a valid and binding obligation of the Company, each of the Borrowers and each of the Managing Members enforceable against such party in accordance with its terms. As inducement for Univision entering into this agreement and purchasing the Subordinated Note each of the Company and the Borrowers hereby restates and adopt in favor of and for the benefit of Univision the representations and warranties set forth in Section 3 of the Credit Agreement among Union Bank of California, as agent for the Banks who are parties thereto, the Company and the Borrowers dated as of the date hereof, a copy of which is attached hereto as Exhibit B (the "Credit Agreement") and agrees that, until the closing of Reorganization (as hereinafter defined) to not engage in any of the acts or activities described in Section 3 of the Subordinated Note without the consent of Univision in accordance with the terms thereof. 3. Univision Option/Anti-Dilution Protection. ----------------------------------------- For the purposes of this Section 3 capitalized terms not defined herein shall have the meaning given to such terms in the Amended and Restated Operating Agreement of the Company, a copy of which is attached hereto as Exhibit C (the "Operating Agreement"). 3.1 Univision Option. Univision is hereby granted a right to ---------------- acquire an equity interest in the Company (as calculated in Section 3.2 below) through the acquisition of Class A Non-Managing Membership Units for a total exercise price of Ten Million Dollars ($10,000,000) reduced but not below $1, by the payment to Univision of any amounts distributed pursuant to Section 3(a)(iv) of the Subordinated Note as a Prepayment Amount (as defined in the Subordinated Note) (the "Univision Option"). The Univision Option is exercisable only in its entirety. In light of the unique relationship between Univision and the Company and the special nature of the Univision Option, the Univision Option is not assignable to any third party without 2 the consent of the Company, which the Company may withhold in its sole unqualified discretion. The Univision Option is exercisable for a period of twenty-five (25) years from the date hereof (i) at the sole option of Univision or (ii) automatically and mandatorily at any time upon a change of FCC's rules that would permit such conversion without attribution to Univision. Notwithstanding anything to the contrary herein, Univision shall not exercise any of its rights under this provision should such action constitute or result in a change of control of a broadcast station licensee, if such change of control would require, under then existing law, the prior approval of the Federal Communications Commission. In such event, Univision shall only exercise its rights upon the prior consent of the Federal Communications Commission to a request filed with it for transfer of control of the broadcast station licensee. The Option is exercisable only in its entirety, unless the then applicable FCC attribution rules and regulations permit Univision to acquire a lesser percent. Univision shall be permitted to credit the principal sum due under the Subordinated Note to pay the Purchase Price upon Univision's exercise of the Univision Option. This Univision Option shall expire upon the exercise of the Borrower Option, as defined below. 3.2 Option Percentage. Upon exercise, the Univision Option shall ----------------- entitle Univision to acquire 25.55% of the sum of (i) the Class A and Class C Non-Managing Membership Units currently issued plus (ii) the Class A and Class C Non-Managing Membership Units to be issued upon the Reorganization (as defined below) plus (iii) the Class A Non-Managing Membership Units to be issued to Univision on exercise of the Univision Option (the "Option Percentage"), including those to be issued to Valley Channel in accordance with the Operating Agreement. Univision's Option Percentage shall also proportionately increase upon purchase by the Company of any Class A Non-Managing Membership Units outstanding on the Effective Date or the non-issuance of any Class A Non- Managing Membership Units contemplated to be issued in the Reorganization which are not so issued. There shall be no adjustment related to the option to acquire 11,965 units held by Dr. Armando Navarro. 3.3 Anti-Dilution Protection. Univision shall have a right of first ------------------------ refusal to purchase any new issuance of Membership Units in the Company pursuant to Section 7(c)(iii) of the Operating Agreement in order to maintain its percentage interest in profits, losses and rights; except for the issuance of non-voting Class D Membership Units to certain managers and employees representing up to a five percent (5%) interest in profits and losses of the Company on a fully diluted basis. Any such additional issuances of equity shall be evidenced by Class B Membership Units pursuant to Section 7(c)(iii) of the Operating Agreement. In connection with any such additional issuance, so long as the Univision Option is outstanding, Univision shall have the right to make an additional long term loan to the Company (the "Additional Loan") in a Proportionate Amount (as hereinafter defined), which Additional Loan shall be on the same terms and conditions as the Subordinated Note and shall be accompanied by additional options to acquire Class B Membership Units (the "Additional Option"), in an amount sufficient to allow Univision to maintain an ownership interest in the Company equal to the then Option Percentage. For purposes of this Section 3.3, "Proportionate Amount" means a principal amount determined by multiplying (i) the amount to be raised by the Company by (ii) Univision's then existing Option Percentage. To the extent that Univision exercises its right to make an Additional Loan, the amount to be raised from the sale of Class B Membership Units shall be decreased by the amount of such Additional Loan. Such rights of first refusal and right to make Additional Loans shall terminate upon a public offering of the Company. 3 3.4 Manner of Exercising Option. Upon the exercise of the Univision --------------------------- Option pursuant to Section 3.1 above, Univision shall take the following actions: (a) Execute and deliver to the Company an agreement agreeing to be bound by all of the terms and provisions of the then Operating Agreement of the Company in a form reasonably satisfactory to the Company's attorneys; (b) Furnish to the Company appropriate documentation that the person or persons exercising the Univision Option on behalf of Univision have the authority to exercise the Univision Option; and (c) Deliver the original of the Note marked "cancelled" and "paid in full." As soon thereafter as practical, the Company shall mail or deliver to Univision, if the Company's membership units are then certificated, a certificate representing the Membership Units so purchased by Univision. 4. Borrower Option. --------------- 4.1 Borrower Option. As inducement for Univision entering into this --------------- agreement and purchasing the Subordinated Note each of the Managing Members hereby grant to Univision the right to purchase the same percentage of the Capital Stock of each of the Borrowers as Univision may from time to time be entitled to purchase from the Company pursuant to Section 3 above (the "Borrower Option"). The Borrower Option is exercisable only in its entirety. In light of the unique relationship between Univision and the Company and the special nature of the Borrower Option, the Borrower Option is not assignable to any third party without the consent of the Company, which the Company may withhold in its sole unqualified discretion. The Borrower Option is exercisable for a period of twenty-five (25) years from the Effective Date at the sole option of Univision and shall expire upon the earlier to occur of (i) the consummation of the transactions contemplated by the Amended and Restated Formation Agreement among the Company and the Borrowers dated as of December 30, 1996 (the "Reorganization") or (ii) the exercise of the Univision Option contained in Section 3 hereof. 4.2 Manner of Exercising Borrower Option. Upon the exercise of the ------------------------------------ Borrower Option pursuant to Section 4.1 above, Univision shall take the following actions: (a) Furnish to the Company appropriate documentation that the person or persons exercising the Borrower Option on behalf of Univision have the authority to exercise the Borrower Option; and (b) Deliver the original of the Subordinated Note. 4 As soon thereafter as practical, the Managing Members shall deliver to Univision securities representing the interests so purchased by Univision. Notwithstanding the generality of the foregoing, Univision agrees to cooperate with the Managing Members and the Borrowers in replacing the Borrower Option with options directly from the Borrowers for newly issued securities of Borrowers which would give Univision the same percentage interest in each of the Borrowers after giving effect to the exercise of such options as Univision would have if it exercised its option from the Borrower Option. 5. Miscellaneous. ------------- 5.1 Further Assurances. Each party agrees to cooperate fully with ------------------ the other parties and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by any other party to evidence and reflect the transactions described herein and contemplated hereby, and to carry into effect the intents and purposes of this Agreement. 5.2 Rights Cumulative. Each and all of the various rights, powers ----------------- and remedies of the parties hereto shall be considered to be cumulative with and in addition to any other rights, powers and remedies which such parties may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy shall neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such party. 5.3 Notices. All Notices, demands and requests required by this ------- Agreement shall be in writing and shall be deemed to have been given for all purposes (i) upon personal delivery, (ii) one day after being sent, when sent by professional overnight courier service from and to locations within the continental United States, (iii) five days after posting when sent by registered or certified mail, or (iv) on the date of transmission when sent by telegram, telegraph, telex or facsimile transmission, addressed to the parties hereto at the addresses set forth on the signature pages hereto. Any party hereto may from time to time by notice in writing served upon the others as provided herein, designate a different mailing address or a different person to which such notices or demands are thereafter to be address or delivered. 5.4 Captions. Captions are provided herein for convenience only and -------- they are not to serve as a basis for interpretation or construction of this Agreement, nor as evidence of the intention of the parties hereto. 5.5 Severability. If any clause, provision or section of this ------------ Agreement is ruled invalid by any court of competent jurisdiction, the invalidity of such clause, provision or section shall not affect any of the remaining provisions hereof. The parties further agree to replace such void or unenforceable provisions of this Agreement with valid and enforceable provisions which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provisions. 5 5.6 Governing Law. This Agreement shall be governed, interpreted, ------------- construed and enforced in accordance with the laws of the State of California. 5.7 Entire Agreement. This writing is the complete and exclusive ---------------- statement of the agreement between the parties with respect to the transactions contemplated hereby and supersedes any prior proposal, agreement or communication relating to the subject matter of this Agreement, and may not be modified except by writing signed by all of the parties hereto. 5.8 Waiver of Breach. The failure of any party hereto at any time to ---------------- require performance by the other shall in no way affect their right thereafter to enforce the same, nor shall the waiver by either party hereto of any breach of any provision(s) hereof be taken or held to be a waiver of any succeeding breach or as a waiver of the provision itself. 5.9 Successors and Assigns. Except as otherwise provided herein, the ---------------------- provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. Except as provided in Section 3.1 herein and above, which shall be controlling, Univision may transfer or assign its rights and obligations hereunder. 5.10 Attorneys' Fees. If any action is brought to enforce the terms --------------- of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and disbursements in addition to any other relief to which the party may be entitled. 5.11 Survival. Except as otherwise provided in this Agreement, none -------- of the terms, provisions, agreements or representations contained in this Agreement shall survive the termination of this Agreement. 5.12 Counterparts. This Agreement may be executed simultaneously in ------------ multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 6 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date and, as applicable in their respective corporate names by their duly authorized officers. UNIVISION COMMUNICATIONS INC., a Delaware corporation By: /s/ Andrew W. Hobson Name:___________________________ Title:__________________________ ________________________________ ________________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson Name:___________________________ Title:__________________________ ________________________________ ________________________________ BORROWERS KSMS-TV, INC. By: /s/ Walter F. Ulloa Name: __________________________ Title: _________________________ 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F. Ulloa Name: __________________________ Title: _________________________ 22 Commerce Center Way Henderson, Nevada 89015 Fax No.: (702) _____________ 7 CABRILLO BROADCASTING CORPORATION By: /s/ Philip C. Wilkinson Name: ____________________________________ Title: ___________________________________ KBNT-TV, Channel 19 5764 Pacific Center Boulevard, Suite 110 San Diego, California 92121 Fax No.: (619) 597-1909 GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: ____________________________________ Title: ___________________________________ KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Fax No.: (303) 832-3410 LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: ____________________________________ Title: ___________________________________ KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Fax No.: (619) 341-0951 MANAGING MEMBERS WALTER E. ULLOA /s/ Walter F. Ulloa PHILIP C. WILKINSON /s/ Philip C. Wilkinson 8 EXHIBITS Exhibit A Non-Negotiable Subordinated Note and Option Agreement Exhibit B Credit Agreement Exhibit C Operating Agreement The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. 9 EX-10.15 16 SUBORDINATED NOTE PURCHASE & OPTION AGMT (3/31/99) EXHIBIT 10.15 FIRST AMENDMENT TO AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT (this "Amendment") is made and entered as of March 31, 1999 (the "Effective Date"), by and among Univision Communications Inc., a Delaware corporation ("Univision"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), KSMS-TV, Inc. ("KSMS"), a Delaware corporation, Tierra Alta Broadcasting, Inc. ("Tierra Alta"), a Delaware corporation, Cabrillo Broadcasting Corporation ("Cabrillo"), a California corporation, Golden Hills Broadcasting Corporation ("Golden"), a Delaware corporation, Las Tres Palmas Corporation ("Las Tres"), a Delaware corporation, Valley Channel 48, Inc., a Texas corporation ("Valley Channel") and successor-in-interest by merger to Entravision Merger Corp. (each of the Company, KSMS, Tierra Alta, Cabrillo, Golden, Las Tres and Valley Channel a "Borrower", and collectively, the "Borrowers"), and Walter F. Ulloa, an individual and Philip C. Wilkinson, an individual, as the managing members (the "Managing Members"), and amends the AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT made and entered as of December 30, 1996 (the "Subordinated Note Purchase Agreement") among the parties hereto with reference to the following: RECITALS -------- A. Univision has made a Loan to the Company in the principal amount of $3,000,000 which is evidenced by a Subordinated Promissory Note due August 19, 1997. B. Univision has purchased a Non-Negotiable Subordinated Note from the Company in the principal amount of $10,000,000. C. The Company has sold the Non-Negotiable Subordinated Note to Univision and has granted to Univision an option to acquire 25.55% fully diluted ownership interest in the Company. D. Univision Television Group, Inc. ("UTG"), an indirect wholly owned subsidiary of Univision, KLUZ License Partnership ("License Partnership") and the Company have entered into an Asset Purchase Agreement pursuant to which UTG and License Partnership have agreed to sell to the Company certain assets used in connection with the operation of the television broadcast station KLUZ (TV), Channel 41 in Albuquerque, New Mexico. E. In partial consideration of the Asset Purchase Agreement, the Managing Members of the Company hereby grant to Univision an option to acquire an additional 2% fully diluted ownership interest in the Company. AGREEMENT --------- In consideration of the promises, the mutual covenants and the agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: Section 1. AMENDMENTS TO THE SUBORDINATED NOTE PURCHASE AGREEMENT Section 3.2 of the Subordinated Note Purchase Agreement is hereby deleted and a new Section 3.2 is substituted therefor reading in its entirety as follows: "3.2 Option Percentage. Upon exercise, the Univision Option ----------------- shall entitle Univision to acquire [27.55%] of the sum of (i) the Class A and Class C Non-Managing Membership Units currently issued plus (ii) the Class A and Class C Non-Managing Membership Units to be issued upon the Reorganization (as defined below) plus (iii) the Class A Non-Managing Membership Units to be issued to Univision on exercise of the Univision Option (the "Option Percentage"), including those to be issued to Valley Channel in accordance with the Operating Agreement. Univision's Option Percentage shall also proportionately increase upon purchase by the Company of any Class A Non-Managing Membership Units outstanding on the Effective Date or the non-issuance of any Class A Non-Managing Membership Units contemplated to be issued in the Reorganization which are not so issued. There shall be no adjustment related to the option to acquire 11,965 units held by Dr. Armando Navarro." Section 2. CONDITIONS TO EFFECTIVENESS Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent: A. On or before the Effective Date, the Company and Univision shall deliver to one another, executed copies of this Amendment. B. On or before the Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby shall be completed by the parties hereto. Section 3. REPRESENTATIONS AND WARRANTIES The Subordinated Note Purchase Agreement as amended by this Amendment (the "Amended Agreement") has been authorized by the Company and each of the Borrowers and is a valid and binding obligation of the Company, each of the Borrowers and each of the Managing Members enforceable against such party in accordance with its terms. 2 Section 4. MISCELLANEOUS A. On and after the Effective Date, each reference in the Subordinated Note Purchase Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Subordinated Note Purchase Agreement, shall mean and be a reference to the Amended Agreement. B. Except as specifically amended by this Amendment, the Subordinated Note Purchase Agreement shall remain in full force and effect and are hereby ratified and confirmed. C. Without limiting the generality of the provisions in the Subordinated Note Purchase Agreement, and nothing in this Amendment shall be deemed to constitute a waiver of any other provision of, or operate as a waiver of any right, power or remedy of Univision or the Company under any other provision of Subordinated the Note Purchase Agreement. 3 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the Effective Date and, as applicable in their respective corporate names by their duly authorized officers. UNIVISION COMMUNICATIONS INC., a Delaware corporation By:/s/ Robert V. Cahill Name: Robert V. Cahill Title: Secretary/V.P. ________________________________ ________________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa Walter F. Ulloa, Managing Member By: /s/ Philip Wilkinson Philip Wilkinson, Managing Member 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 BORROWERS KSMS-TV, INC. By: /s/ Walter F. Ulloa /s/ Philip C. Wilkinson Name: Walter F. Ulloa Title: President 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 S-1 TIERRA ALTA BROADCASTING, INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Vice President 22 Commerce Center Way Henderson, Nevada 89015 Fax No.: (702) _____________ CABRILLO BROADCASTING CORPORATION By: /s/ Philip Wilkinson Name: Philip C. Wilkinson Title: President KBNT-TV, Channel 19 5764 Pacific Center Boulevard, Suite 110 San Diego, California 92121 Fax No.: (619) 597-1909 GOLDEN HILLS BROADCASTING CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Fax No.: (303) 832-3410 LAS TRES PALMAS CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: President KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Fax No.: (619) 341-0951 S-2 MANAGING MEMBERS WALTER E. ULLOA /s/ Walter F. Ulloa PHILIP C. WILKINSON /s/ Philip Wilkinson S-3 EX-10.16 17 SUBORDINATED NOTE PURCHASE & OPTION AGMT (3/2/00) EXHIBIT 10.16 SECOND AMENDMENT TO AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AND OPTION AGREEMENT ----------------------------------------------- This Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement (the "Second Amendment") is dated March 2, 2000 by and among Univision Communications Inc., a Delaware corporation ("Univision"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), KSMS-TV, Inc., a Delaware corporation, Tierra Alta Broadcasting, Inc., a Delaware corporation, Cabrillo Broadcasting Corporation, a California corporation, Golden Hills Broadcasting Corporation, a Delaware corporation, Las Tres Palmas Corporation, a Delaware corporation, Valley Channel 48, Inc., a Texas corporation and successor-in-interest to Entravision Merger Corp., Walter F. Ulloa, an individual, and Philip C. Wilkinson, an individual, with respect to the following facts: WHEREAS, the parties hereto have previously entered into that certain Amended and Restated Subordinated Note Purchase and Option Agreement dated as of December 30, 1996 (the "Original Agreement"), pursuant to which, among other things, Univision was granted the Univision Option to acquire an equity interest in the Company (adjusted to 25.55%) for an aggregate exercise price of $10,000,000. WHEREAS, the parties hereto have previously entered into that certain First Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement dated as of March 31, 1999 (the "First Amendment"), pursuant to which, among other things, the Univision Option was increased to an option to acquire a 27.90% equity interest in the Company for an aggregate exercise price of $10,000,000. WHEREAS, in connection with the Original Agreement, the Company has previously executed that certain Non-Negotiable Subordinated Note dated December 30, 1996 in the principal amount of $10,000,000 in favor of Univision (the "Original Note"). WHEREAS, Univision and the Company are entering into that certain First Amended and Restated Non-Negotiable Promissory Note of even date herewith, in order to, among other things, increase the principal amount of the Original Note by $110,000,000, from $10,000,000 to $120,000,000. WHEREAS, the parties hereto now desire to amend the Original Agreement, as amended by the First Amendment, as set forth herein in order to, among other things, increase the percentage of the Univision Option to 40% (as computed in Section 3 of this Second Amendment). NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each signatory hereto, it is agreed as follows: 1. The reference in the Section 3 of the Original Agreement to the defined term "Operating Agreement" shall refer to the First Amended and Restated Operating Agreement of the Company dated effective December 30, 1996, as amended through the date hereof. 2. The first sentence of Section 3.1 of the Original Agreement shall be amended and restated in its entirety to read as follows: "Univision is hereby granted a right to acquire an equity interest in the Company (as calculated in Section 3.2 below) through the acquisition of Class A Non-Managing Membership Units for a total exercise price of One Hundred Twenty Million Dollars ($120,000,000) reduced but not below $1, by the payment to Univision of any amounts distributed pursuant to Section 3(a)(iv) of the Subordinated Note as a Prepayment Amount (as defined in the Subordinated Note) (the "Univision Option")." 3. The first sentence of Section 3.2 of the Original Agreement shall be amended and restated in its entirety to read as follows: "Upon exercise, the Univision Option shall entitle Univision to acquire 40% of the sum of (i) the Class A, Class C, Class E and Class F Non- Managing Membership Units currently issued plus (ii) the Class D Units issued or promised to be issued as of the date hereof (but expressly excluding any future issuances of Class D Units by the Company up to an aggregate maximum for all Class D Units equal to five percent (5%) of the fully diluted interests in the Company assuming the exercise of the Univision Option) plus (iii) the Class A Non-Managing Membership Units to be issued to Univision on exercise of the Univision Option (the "Option Percentage"). The parties hereto acknowledge and agree that the pro forma capitalization table of the Company attached hereto as Schedule "A" and incorporated herein by this reference is true and correct as of - ------------ the date hereof." 4. Section 3.4(c) of the Original Agreement is hereby amended and restated in its entirety to read as follows: "(c) Deliver the original of the Subordinated Note (and any amendments thereto) marked "cancelled" and "paid in full."" 5. The parties hereto acknowledge and agree that the address, telephone number and facsimile number of the Company, each Borrower and each Managing Member for purposes of Section 5.3 shall be: 2425 Olympic Boulevard, Suite 6000 West, Santa Monica, California 90404, telephone number (310) 447-3870, facsimile number (310) 447-3899. 6. All capitalized terms used in this Second Amendment and not otherwise defined shall have the meaning assigned such term in the Original Agreement and the First Amendment. Except as expressly amended hereby, all other terms and conditions of the Original Agreement and the First Amendment shall remain in full force and effect. -2- 7. This Second Amendment may be executed in one or more counterparts, all of which when fully executed and delivered by all parties hereto and taken together shall constitute a single agreement, binding against each of the parties. To the maximum extent permitted by law or by any applicable governmental authority, any document may be signed and transmitted by facsimile with the same validity as if it were an ink-signed document. Each signatory below represents and warrants by his or her signature that he or she is duly authorized (on behalf of the respective entity for which such signatory has acted) to execute and deliver this instrument and any other document related to this transaction, thereby fully binding each such respective entity. [Remainder of Page Intentionally Left Blank] -3- IN WITNESS WHEREOF, the parties have duly executed this Second Amendment as of the date first written above. Univision UNIVISION COMMUNICATIONS INC., a Delaware corporation By: /s/ Andrew W. Hobson ------------------------------------------------------------ Name: Andrew W. Hobson ---------------------------------------------------------- Title: EVP -------------------------------------------------------- Entravision ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa ------------------------------------------------------------ Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By: /s/ Philip C. Wilkinson ------------------------------------------------------------ Philip C. Wilkinson, President, Chief Operating Officer and Managing Member KSMS-TV, INC., a Delaware corporation By: /s/ Walter F. Ulloa ------------------------------------------------------------ Walter F. Ulloa, Chief Executive Officer TIERRA ALTA BROADCASTING, INC., a Delaware corporation By: /s/ Walter F. Ulloa ------------------------------------------------------------ Walter F. Ulloa, Chief Executive Officer [Signature Page No. 1 to Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement] CABRILLO BROADCASTING CORPORATION, a California corporation By: /s/ Philip C. Wilkinson ---------------------------------------------------------- Philip C. Wilkinson, President GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation By: /s/ Walter F. Ulloa ---------------------------------------------------------- Walter F. Ulloa, President LAS TRES PALMAS CORPORATION, a Delaware corporation By: /s/ Walter F. Ulloa ---------------------------------------------------------- Walter F. Ulloa, President VALLEY CHANNEL 48, INC., a Texas corporation and successor-in-interest to Entravision Merger Corp. By: /s/ Walter F. Ulloa ---------------------------------------------------------- Walter F. Ulloa, Chief Executive Officer /s/ Walter F. Ulloa ------------------------------------------------------------- Walter F. Ulloa, an individual /s/ Philip C. Wilkinson ------------------------------------------------------------- Philip C. Wilkinson, an individual [Signature Page No. 2 to Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement] Schedule "A" Pro Forma Capitalization Table The registrant hereby agrees to furnish a copy of any omitted schedule or exhibit upon request. EX-10.17 18 SECURED PROMISSORY NOTE AND PLEDGE AGREEMENT EXHIBIT 10.17 SECURED PROMISSORY NOTE AND PLEDGE AGREEMENT -------------------------------------------- $360,366.38 October 16, 1996 Los Angeles, California FOR VALUE RECEIVED, the undersigned Paul A. Zevnik (the "Maker") promises to pay to the order of Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Holder"), or order, at 11900 Olympic Boulevard, Suite 590, Los Angeles, California 90064, or at such other place as may be designated in writing by the Holder of this Promissory Note and Pledge Agreement (the "Note and Pledge Agreement"), the principal sum of Three Hundred Sixty Thousand Three Hundred Sixty-Six and 38/100 Dollars ($360,366.38), together with interest on the unpaid balance at the rate of 5.625% per annum commencing on the date first set forth above. Interest payable hereunder shall be calculated on the basis of a three hundred and sixty-five (365) day year. Subject to the provisions for acceleration herein, all principal and interest due hereunder shall be due and payable in one (1) installment of principal and all accrued interest on October 16, 2001. The foregoing sentence notwithstanding, in the event that (i) Holder sells all or substantially all of its assets and elects to liquidate and dissolve in connection with such sale or (ii) Maker sells all or substantially all of its interest in Holder, then all outstanding principal and all accrued but unpaid interest at such time shall be immediately due and payable to Holder. Maker may prepay, at any time, all or part of the principal balance due under this Note and Pledge Agreement, without premium or penalty; provided, however, that with each prepayment, Maker shall also pay the interest accrued on the principal amount, to and including the date of such prepayment. All principal and interest due hereunder is payable in lawful money of the United States of America. Interest not paid when due shall bear interest at the same rate as unpaid principal, provided that in no event shall such interest exceed the maximum rate permitted by law. This Note and Pledge Agreement and all transactions hereunder shall be governed by, construed under and enforced in accordance with the laws of the State of Delaware as applied without reference to the principles of conflicts of law. Maker hereby delivers, pledges and grants a first priority security interest to Holder in 18,029 Class A Units of the Holder (the "Units") and in all rights or other distributions issued as an addition to, in substitution or in exchange for, or on account of, the Units (collectively the "Rights"), and all proceeds of the foregoing, now or hereafter acquired by Maker. Maker hereby gives Holder the right to file financing statements in the State of California and the District of Columbia and to perform any other action necessary to perfect or protect such security interest. The Units and the Rights and the proceeds of each of the foregoing, are hereinafter collectively referred to as the "Collateral." The security interest pursuant to this Note and Pledge Agreement is given as security for the full and timely payment, performance and satisfaction of any and all of Maker's obligations and liabilities owing to Holder pursuant to this Note and Pledge Agreement, including all interest due under this Note and Pledge Agreement and extensions, modifications and renewals hereof. All such obligations and liabilities of Maker are hereafter collectively referred to as the "Obligations." The Obligations shall include, without limitation, any and all amounts expended by Holder in accordance with the terms of this Note and Pledge Agreement, including reasonable attorneys' fees and costs. Maker hereby appoints Holder as its attorney-in-fact to arrange, at any time during the existence of, or after the occurrence of, a Default, and pursuant to the exercise of Holder's remedies under the California Uniform Commercial Code for the transfer of the Collateral on the books of Entravision Communications Company, L.L.C., a Delaware limited liability company, to the name of Holder or to the name of Holder's nominee. In the event Maker shall become entitled to receive, or shall receive, in connection with any of the Collateral, (i) any membership unit certificate, including any certificate representing a membership unit dividend or any certificate in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of membership unit, membership unit split or spin-off, (ii) any option, warrant or right, whether as an addition to or in substitution of any of the Collateral, or otherwise, (iii) any dividend or distribution payable in property, including securities issued as a dividend on the Collateral, or (iv) any other distributions of any kind whatsoever, Maker shall accept same as encumbered by the security interest created hereby, and shall deliver same forthwith to Holder in the exact form received, including as appropriate, Maker's endorsement of appropriate membership unit powers duly executed in blank, to be held as a part of the Collateral, subject to the terms hereof, or, in the case of a cash dividend payable with respect to the Units, to be applied as a payment of principal due under this Note and Pledge Agreement; provided, however, that for so long as no Default (defined below) is in existence and there is no condition or event in existence which, with notice or lapse of time, or both, would become a Default, Maker shall have sole voting rights with respect to the Collateral. Maker warrants and represents to Holder that (a) Maker has power and authority to enter into this Note and Pledge Agreement and to pledge the Units for the purposes described herein, (b) Maker is the legal record and beneficial owner of all of the Units, (c) except as set forth in that certain Pledge Agreement dated as of December 31, 1996 between Maker and Union Bank of California, N.A. ("Union Bank") (the "Union Bank Pledge Agreement"), all of the Units are owned by Maker free of any pledge, mortgage, lien or security interest of any kind, except as created hereby or other junior liens consented to in writing by Holder, (d) the execution and delivery by Maker of this Note and Pledge Agreement, and subject to the Union Bank Pledge -2- Agreement, the performance of its terms, will not result in any violation or default under the terms of any agreement or instrument, or any law or governmental rule or regulation applicable to Maker or the Units, including, without limitation, securities registration, securities disclosure or similar laws, (e) upon execution and delivery by Maker of this Note and Pledge Agreement and upon the filing of financing statements in the State of California and the District of Columbia (which financing statements may be filed only after Union Bank files its financing statements pursuant to the Union Bank Pledge Agreement), this Note and Pledge Agreement shall create a valid and perfected first priority security interest (subject to the rights of Union Bank under the Union Bank Pledge Agreement) in the Units and the proceeds thereof, subject to no other prior or subordinate security interest and (f) there are no restrictions upon the rights or affecting the transfer of any of the Collateral except for junior liens consented to in writing by Holder and the rights of Union Bank under the Union Bank Pledge Agreement. Maker hereby covenants that, until such time as the Obligations have been fully paid, performed and satisfied: (a) except as set forth in the Union Bank Pledge Agreement, Maker will not sell, convey or otherwise dispose of any of the Collateral or any interest therein, or create, incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever in or with respect to any of the Collateral, or the proceeds thereof, other than the security interest created hereby and junior liens consented to in writing by Holder; (b) Maker will defend Holder's right, title and security interest in and to the Collateral (subject to the rights of Union Bank under the Union Bank Pledge Agreement) against the claims of any person or entity; (c) Maker will promptly deliver to Holder a copy of all written notices or correspondence received by Maker with respect to the Collateral; and (d) Maker shall, at Maker's own expense, promptly execute, acknowledge and deliver all such instruments and take all such actions as Holder from time to time may reasonably request in order to ensure to Holder the benefits of the lien in and to the Units intended to be created by this Note and Pledge Agreement. As used herein, the term "Default" shall mean the occurrence of any one or more of the following events or conditions: (a) the failure of full and timely payment, or full and timely performance and satisfaction, whether by acceleration or otherwise, of any of the Obligations in accordance with their terms; (b) Maker admits in writing its inability to pay its debts as they become due or makes a general assignment for the benefit of creditors or files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or (c) an involuntary petition is filed against Maker under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors unless such petition shall be dismissed or vacated within sixty (60) days of the date thereof. Upon the occurrence or existence of a Default, Holder shall have, in addition to any other rights given by law or the rights hereunder (subject to the rights of Union Bank under the Union Bank Pledge Agreement) (a) the right to declare immediately due and payable the entire unpaid principal amount of this Note and Pledge Agreement, together with all interest thereon, plus any other amounts payable at the time of such declaration pursuant to this Note and Pledge Agreement, -3- and (b) all of the rights and remedies with respect to the Collateral of a secured party under the California Uniform Commercial Code. Holder's rights shall include, without limitation, the right to proceed immediately to have any or all of the Collateral registered in Holder's name or in the name of a nominee, to exercise all voting rights with respect to the Collateral and all other corporate rights, privileges or options pertaining thereto as if Holder were the absolute owner thereof, and to receive any, and to continue to apply, all cash dividends against the Obligations. In addition, with respect to the Collateral, or any part thereof, which shall then be or shall thereafter come into the possession or custody of Holder, Holder may sell or cause the same to be sold at any broker's board or at public or private sale, in one or more sales or lots, at such price as Holder may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, and the purchaser of any or all of the Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever. Unless the Collateral threatens to decline speedily in value or becomes of a type sold on a recognized market, Holder will give Maker reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies or other financial institutions disposing of property similar to the Collateral, whether conducted solely by Holder or in concert with other creditors of Maker, shall be deemed to be commercially reasonable. Any requirements of reasonable notice shall be met if such notice is mailed to Maker, at 1299 Pennsylvania Ave. N.W., Suite 990, Washington, D.C. 20004, at least ten (10) days before the time of the sale or disposition. Any other requirement of notice, demand or advertisement for sale, is, to the extent permitted by law, hereby waived by Maker. Holder may, in its own name, or in the name of a designee or nominee, buy the Collateral at any public sale of the Collateral. Maker will pay to Holder all expenses (including court costs and reasonable attorneys' fees and expenses) of, or incident to, the enforcement of any of the provisions hereof. In connection with any sale of Collateral by Holder, Holder shall have the right to execute any document or form, in its name or the name of Maker, which may be necessary or desirable in connection with such sale. Upon the occurrence or existence of any event of Default and all times thereafter, Holder shall be entitled to receive and retain for its own account any and all dividends at any time declared upon any of the Collateral. In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of the Collateral may be effected after an event of Default and prohibit or prevent the advertising for sale of all or any part of the Collateral as required by the California Uniform Commercial Code, Maker agrees that upon the occurrence or existence of a Default, Holder may, from time to time, attempt to sell all or any part of the Collateral by one or more private placements or sales restricting the bidder and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution or resale. In so doing, Holder may solicit offers to buy the Collateral, or any part of it for cash, from a limited number of investors deemed by Holder, in its reasonable judgment, to be respectable parties who might be interested in purchasing the Collateral, and if Holder solicits such offers from not less than four (4) such investors, then the acceptance by Holder of the highest offer -4- obtained therefrom shall be deemed to be a commercially reasonable method of disposition of such Collateral. The proceeds of any disposition of all or any part of the Collateral, as provided above, shall be applied as follows: (i) first, to the costs and expenses incurred in connection therewith or incidental thereto, including reasonable attorneys' fees and legal expenses; (ii) second, to the satisfaction of the Obligations; (iii) third, to the payment of any other amounts required by applicable law; (iv) fourth, to satisfy any amounts owing which are secured by junior liens consented to in writing by Holder; and (v) fifth, to Maker to the extent of any surplus remaining. Upon full payment and performance of all of the Obligations by Maker and upon payment of all additional costs and expenses provided herein, this Note and Pledge Agreement shall terminate and Holder shall deliver to Maker, at Maker's expense, such of the Units as shall not have been sold, or otherwise disposed of pursuant to this Note and Pledge Agreement. If an action is instituted for collection of this Note and Pledge Agreement, the Maker agrees to pay court costs and reasonable attorneys' fees incurred by the Holder. This Note and Pledge Agreement may be changed, modified, amended or terminated only by a written instrument duly executed by Holder and Maker, except as expressly provided to the contrary herein. Except as expressly provided herein, Maker of this Promissory Note and Pledge Agreement waive diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayment of this Promissory Note and Pledge Agreement, and expressly agree that this Promissory Note and Pledge Agreement, or any payment hereunder, may be extended from time to time and consent to the acceptance of security, if any, or the release of security, if any, from this Promissory Note and Pledge Agreement, all without in any way affecting the liability of the Maker and endorsers or guarantors hereof, if any. -5- IN WITNESS WHEREOF, the undersigned has caused this Note and Pledge Agreement to be duly executed, effective the day and year first above written. "MAKER" /s/ Paul A. Zevnik ---------------------------------- Paul A. Zevnik ACKNOWLEDGED AND AGREED TO: Entravision Communications Company, L.L.C., a Delaware limited liability company By:/s/ Walter F. Ulloa ------------------------------------ Print Name:____________________________ Title:_________________________________ -6- EX-10.24 19 FORM OF NETWORK AFFILIATION AGREEMENT EXHIBIT 10.24 NETWORK AFFILIATION AGREEMENT ----------------------------- This Network Affiliation Agreement is entered into this ____ day of _______________, 2000, by and between [____________________________________] and UNIVISION NETWORK LIMITED PARTNERSHIP. WHEREAS, AFFILIATE, as licensee of the Station pursuant to an authorization issued by the FCC, intends to offer a full time Spanish language television program service using the facilities of the Station; WHEREAS, UNIVISION operates the UNIVISION Network, which provides Spanish language television programming on a national, interconnected basis; and WHEREAS, AFFILIATE desires to affiliate with the UNIVISION Network, and to appoint UNIVISION as the Station's exclusive national and regional sales representative. NOW, THEREFORE, in consideration of the mutual covenants, undertakings, agreements, and representations herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, it is hereby agreed as follows: 1. Definitions. In computing compliance with time periods specified ----------- in this Agreement, calendar days shall be utilized rather than business days. For the purposes of this Agreement, the following terms shall have the following meanings: AFFILIATE, first used in the preamble to this Agreement, means [________________________________________]. Agreement, first used in Section 1 hereof, means the instant Network Affiliation Agreement. Authorized Preemption, first used in Section 23(y) below, means a failure by AFFILIATE to broadcast any UNIVISION Program (i) pursuant to Section 5(a) of this Agreement, (ii) due to force majeure as provided for in Section 11 of this Agreement, or (iii) for which AFFILIATE has obtained the written consent of UNIVISION. Commencement Date has the meaning established in Section 2 hereof. 1 Commercial Availability, first used in Section 23(q) hereof, means a unit of time of whatever length available for the broadcast of commercial advertising announcements, promotional announcements, and/or station identification announcements. FCC, first used in the preamble to this Agreement, means the Federal Communications Commission or any successor agency. Force Majeure Event, first used in Section 11 hereof, means any act of God, labor dispute, non-delivery by program suppliers or others, failure or breakdown of satellite or other facilities, legal enactment, governmental order or regulation or any other similar or dissimilar cause beyond the control of UNIVISION or AFFILIATE, as the case may be. Nothwithstanding the foregoing, with regard to AFFILIATE, Force Majeure Event shall not include Year 2000 Failure. Local Availability, first used in Section 6(b) hereof, means a Commercial Availability designated by UNIVISION pursuant to this Agreement for broadcast of a commercial advertisement by the Station and not by other UNIVISION affiliates on an interconnected or delayed telecast basis. Local Programming first used in Section 5(b) hereof, means collectively, all local and syndicated programs, public service announcements, promotional announcements, station identifications and other interstitial material which are originated and broadcast by Station. Local Programming Window, first used in Section 4(b) hereof, means a time period indicated on the attached Schedule A as being occupied by Local Programming. Local Sale, first used in Section 6(f) hereof, means a Sale of advertising for broadcast on AFFILIATE's Station, and not for broadcast on the UNIVISION Network generally, made by the local sales staff of AFFILIATE. National Sale, first used in Section 6(f) hereof, means a Sale of advertising for broadcast on AFFILIATE's Station, and not for broadcast on the UNIVISION Network generally, made by UNIVISION as the national and regional sales representative of AFFILIATE, and any other Sale which is of a type normally considered within the broadcast industry to be a national or a regional advertising sale. Net Allocated Network Sales, first used in Section 7(c) hereof, means that portion of all Net Network Sales computed by multiplying the total amount of Net Network Sales by the Net Allocated Network Sales Percentage. Net Allocated Network Sales Percentage, first used in Section 24(m) hereof, means [___]%. 2 Net National Sale, first used in Section 7(a) hereof, means a National Sale of advertising net only of agency commission. Net Network Sale, first used in Section 6(h) hereof, means a Network Sale of advertising net only of agency commission. Network Availability, first used in Section 4(b)(ii) hereof, means a Commercial Availability designated by UNIVISION pursuant to this Agreement for the simultaneous broadcast of a commercial announcement by multiple UNIVISION affiliates on an interconnected basis, including delayed telecasts pursuant to Section 10 of this Agreement. Network Exclusivity Zone, first used in Section 4(k) hereof, means the applicable area as set forth in by Section 76.92 through 76.97 of the FCC's rules. Network Sale, first used in Section 6(e) hereof, means a Sale of advertising for broadcast on the UNIVISION Network. Network Time, first used in Section 6 hereof, means the entire clock hour or half-hour during which a UNIVISION Program is broadcast including Station breaks and adjacencies. (E.g., for a one-hour UNIVISION Program broadcast during the 7:00 and 8:00 time period, all commercials sold between 7:00 and 8:00 are within Network Time, even if the program actually began a minute or two after 7:00 and ended a minute or two before 8:00.) Non-Network Programming, first used in Section 8 hereof, means programs, program series, and programming of any nature or kind, including, but not limited to, special sports programs and special events programs, such as political conventions, election coverage, presidential inaugurations, parades, and pageants, and other programs and program series, which are not then regularly scheduled by UNIVISION for broadcast on an interconnected basis by affiliates of the UNIVISION Network during those hours that then comprise the UNIVISION Network Programming Schedule. Sale, first used in Section 6(f) hereof, means a sale of advertising. Station, first used in the preamble to this Agreement, means television Station [_________, _________,___________]. Terms Sheet, first used in Section 8 hereof, means a writing setting forth the principal terms and conditions on which UNIVISION offers a non-network program or program series to AFFILIATE, including, but not limited to, the time permitted for acceptance of said offer by AFFILIATE. Unauthorized Preemption, first used in Section 9 hereof, means any preemption or failure to broadcast any UNIVISION Program, in whole or in part, other than an Authorized Preemption. 3 UNIVISION, first used in the preamble to this Agreement, means UNIVISION NETWORK LIMITED PARTNERSHIP. UNIVISION Network, first used in the preamble to this Agreement, means a program service distributed by or on behalf of UNIVISION on an interconnected basis to affiliates for broadcast to the public. UNIVISION Network Program Schedule, first used in Section 4(b) hereof, means the programming provided by UNIVISION to its affiliates on a regular basis for broadcast during a UNIVISION Network Time Period, including, but not limited to, all UNIVISION Network Programming, commercial announcements, UNIVISION identification announcements, UNIVISION promotional announcements, public service announcements, credits and cross promotional announcements for any of UNIVISION's other networks, or any other network or program service owned or operated by, or under common ownership or control with, UNIVISION, including but not limited to cable programming networks such as Galavision and Telehit, and other interstitial material distributed by UNIVISION to AFFILIATE. UNIVISION Network Programming, first used in Section 1 hereof, means, collectively, all UNIVISION Programs, public service announcements, promotional announcements, network identifications and other interstitial material which are distributed to affiliates of the UNIVISION Network. UNIVISION Network Time Period, first used in Section 24(bb) hereof, means the time periods indicated on the attached Schedule A as being occupied by Univision Network Programming. UNIVISION Program, first used in Section 4 hereof, means a television program distributed by or on behalf of UNIVISION for broadcast on an interconnected basis by affiliates of the UNIVISION Network. 2. Programming. UNIVISION shall deliver to Station for free over the air ----------- television broadcasting on Station, all UNIVISION Network Programming which UNIVISION makes available to be broadcast on the UNIVISION Network on a television network basis in the community in which the Station is located, except as hereinafter provided. Subject to the limitations set forth in this Agreement, AFFILIATE is hereby authorized to broadcast during the term of this Agreement the UNIVISION Network Programming over the facilities of the Station. AFFILIATE shall not and shall not authorize others to broadcast, rebroadcast, or otherwise use any program (or part thereof) or other material supplied by UNIVISION except as specified in this Agreement or specifically authorized in writing by UNIVISION. 3. Term. The initial term of this Agreement shall commence on ---- [________________ ___, 199__] (the "Commencement Date"), and, subject to the early termination provisions set forth herein, shall terminate at 11:59 p.m. on _______________ ___, 4 _____ ("Initial Term"). After the Initial Term, the term of this Agreement may be extended for additional successive terms of two (2) years each by UNIVISION, in its sole discretion, giving written notice of such extension and the terms and conditions upon which such extension is offered to AFFILIATE at least ninety (90) days prior to the expiration of the then current term; provided, however, that if, within thirty (30) days of the AFFILIATE's receipt of an extension notice from UNIVISION, AFFILIATE, in its sole discretion, gives UNIVISION written notice that AFFILIATE rejects such extension on such terms and conditions, then the extension notice shall not be effective and this Agreement shall terminate upon expiration of the then-current period. UNIVISION shall have no obligation, whether express or implied, to extend this Agreement beyond its initial term or to continue the affiliation of the Station with UNIVISION or the UNIVISION Network, whether or not on terms or conditions equivalent to those set forth in this Agreement, beyond the termination hereof. Any presently existing Network Affiliation Agreements between UNIVISION and AFFILIATE shall be deemed terminated as of the commencement of this Agreement. Upon the termination or expiration of the term of this Agreement, all of AFFILIATE's and Station's rights to broadcast or otherwise use any UNIVISION Network Programming or any trademark, logo, or other material or item hereunder shall immediately cease and neither AFFILIATE nor Station shall have any further rights whatsoever with respect to such program, material, or item. 4. Distribution. UNIVISION shall transmit the UNIVISION Network ------------ Programming via satellite, and the UNIVISION Network Programming shall be deemed delivered to AFFILIATE when transmitted to the satellite. The choice of satellite to be used to transmit the UNIVISION Network Programming shall solely be within the discretion of UNIVISION, and UNIVISION may, from time to time, at its sole discretion, change the satellite being used for said transmissions, in which case it shall, to the extent feasible, give prior notice to AFFILIATE. All costs and expenses of transmitting the UNIVISION Network Programming by satellite, including the maintenance of a network operations center, satellite transmission facilities and satellite transponder time, shall be borne by UNIVISION. Any and all costs of whatever kind or nature incurred with respect to the reception or pickup of the UNIVISION Network Programming from the satellite, and its rebroadcast by the Station, shall be borne by and shall be the sole responsibility of AFFILIATE. Where, in the sole opinion of UNIVISION, it is impracticable or undesirable to furnish the UNIVISION Network Programming over satellite facilities, UNIVISION may deliver the program to Station by any other means, including, but not limited to private or common carrier microwave, fiber optic links, film, video tape or other form of recording in sufficient time for Station to broadcast the UNIVISION Network Programming at the time scheduled by UNIVISION. Prior to instituting a change in the method of program delivery to AFFILIATE, UNIVISION shall, if practicable, consult with AFFILIATE and give consideration to increased program delivery costs to be incurred by AFFILIATE as a result of such a change. If UNIVISION Network Programming is supplied via recordings of any kind, they shall be used by AFFILIATE only for a single television broadcast over the Station, and AFFILIATE shall comply with all UNIVISION instructions concerning the disposition to be made of each such recording received by Station hereunder. 5 5. Additional Terms and Conditions Regarding Programming. Except as ----------------------------------------------------- contemplated in Section 5, below, AFFILIATE's broadcast of UNIVISION Network Programming and UNIVISION Programs pursuant to this Agreement shall be subject to the following terms and conditions: (a) The selection, scheduling, substitution, cancellation and withdrawal of any UNIVISION Network Programming or portion thereof shall at all times remain within the sole discretion and control of UNIVISION. UNIVISION reserves the right to obtain programming from any source whatsoever, including but not limited to obtaining all or a portion of the UNIVISION Network Programming from one or more program suppliers. (b) Schedule A hereto sets forth the current schedule of hours which constitute the UNIVISION Network Program Schedule, as well as the current schedule of segments which constitute the Local Programming Windows. Local Programming Windows may be changed by UNIVISION, at any time in its sole discretion. UNIVISION will provide written notification of such change in the Local Programming Window at least ten (10) days prior to implementation, when such Local Programming Window change is permanent. However, where UNIVISION cannot provide ten days advance notice, UNIVISION will provide as much advance notice as practicable of such Local Programming Window. The selection, scheduling, substitution, cancellation, preemption and withdrawal of UNIVISION Network Programming scheduled for broadcast by affiliates of UNIVISION Network during those hours constituting the UNIVISION Network Program Schedule shall at all times remain within the sole discretion and control of UNIVISION. AFFILIATE agrees to broadcast over the facilities of the Station the complete UNIVISION Network Program Schedule in its entirety without unauthorized interruption, editing, modification, addition or deletion, on the dates and at the times scheduled by UNIVISION; provided, however, that AFFILIATE may delete: (i) such words, phrases or scenes as AFFILIATE, in the reasonable exercise of its judgment, determines it would not be in the public interest to broadcast over the AFFILIATE's Station; or (ii) any Network Availabilities released by UNIVISION to the Stations. (c) AFFILIATE agrees to carry network commercials at the time delivered by UNIVISION and in the same commercial positions as determined by UNIVISION. (d) AFFILIATE shall not broadcast any UNIVISION Network Programming except pursuant to the terms of this Agreement or pursuant to other written authorization from UNIVISION. (e) AFFILIATE shall not authorize, cause, or enable anything to be done whereby any UNIVISION Network Programming supplied herein is used for any purpose other than broadcasting by AFFILIATE in the geographic area that AFFILIATE's Station is authorized 6 to serve, which broadcast is intended for reception by the general public in places to which no admission is charged. (f) AFFILIATE shall not insert or superimpose any crawls, split screens, graphics, logos, trademarks, call letters, insignia, voice overs or other material over any portion of any UNIVISION Network Programming, or alter the length, size or aspect ratio or squeeze down any UNIVISION Network Programming, without the prior written consent of UNIVISION, except in the case of live coverage of fast-breaking news events. (g) AFFILIATE shall abide by any and all restrictions of which UNIVISION advises AFFILIATE pertaining to the promotion of UNIVISION Network Programming, including, but not limited to, on-the-air promotion, billboards, cable advertisements, and newspaper, shopper, or other printed advertisements, announcements or promotions. This provision shall not prohibit AFFILIATE from providing date and time information regarding UNIVISION Network Programming to newspapers, TV Guide, cable guides, and other program listing services. UNIVISION shall, from time to time, provide AFFILIATE with written guidelines regarding promotional restrictions, which, as amended or supplemented in writing from time to time, shall govern Station's promotional activities until superseded by replacement guidelines supplied by UNIVISION. (h) Except with UNIVISION's prior written consent and except upon such terms and conditions as UNIVISION may impose, AFFILIATE shall not authorize, cause, permit or enable anything to be done whereby a recording on film, tape or otherwise is made of UNIVISION Network Programming, provided, however, AFFILIATE may record UNIVISION Network Programming for: (i) delayed telecasts permitted by this Agreement; (ii) promotion of the UNIVISION Network, or UNIVISION Network Programming, in programs or promotional announcements broadcast on AFFILIATE's Station which UNIVISION has had the opportunity to preview and for which UNIVISION has given its prior written consent; or (iii) sales presentations. (i) AFFILIATE agrees that its local news sets, local promotional announcements, and local identifications will conform to the UNIVISION Network's graphic standards as established, and modified from time-to-time, by UNIVISION and provided in writing to AFFILIATE. (j) Subject to the provisions of this Agreement, with respect to any UNIVISION Program broadcast by Station and as to which UNIVISION controls the distribution rights with respect to the repeat broadcast of such program on United States broadcast television stations, UNIVISION agrees that, during the Exclusivity Period for such UNIVISION Program, 7 it shall not provide the same UNIVISION Program to any television station licensed to serve the community of license of the Station. As used herein, "Exclusivity Period" with respect to any UNIVISION Program shall mean a period commencing with UNIVISION's first broadcast of such UNIVISION Program and ending on the earlier of (i) the end of the broadcast season in which such UNIVISION Program is first provided to the Station or (ii) thirty (30) days after such UNIVISION'S broadcast of such UNIVISION Program. Nothwithstanding the foregoing, UNIVISION may make available to any other station any UNIVISION Program which (i) AFFILIATE has preempted, rejected or refused, or not taken for any reason whatsoever, or which UNIVISION has withdrawn from AFFILIATE pursuant to Section 9(b) hereof; (ii) UNIVISION may be legally required to make available; or (iii) which, in UNIVISION's sole discretion, is believed to be of overriding public importance. (k) AFFILIATE shall be entitled to exercise, within the Station's Network Exclusivity Zone, the protection against duplication of network programming, as provided by Sections 76.92 through 76.97 of the FCC's rules, with respect to a UNIVISION Program during the same broadcast day on which such UNIVISION Program is delivered by UNIVISION to Station, provided, however, (1) that such right shall extend only as to UNIVISION Programs broadcast over Station in accordance with this Agreement at the time scheduled for such broadcast by UNIVISION and that such protection shall not extend to any pre- empted programs or program series; (2) that nothing herein shall be deemed to preclude UNIVISION from granting to any other broadcast television station licensed to any other community similar non-duplication rights within that Station's Network Exclusivity Zone and AFFILIATE's right of network non- duplication shall not apply with respect to the transmission of the programs of another AFFILIATE of the UNIVISION Network (current or future) by a "community unit," as that term is defined by the rules of the FCC, located wholly or partially within the area in which the Station's Network Exclusivity Zone overlaps the Network Exclusivity Zone of such other UNIVISION affiliates; and (3) that AFFILIATE's network non-duplication rights pursuant to this Section shall be subject to cancellation by UNIVISION on six (6) months written notice to AFFILIATE, which cancellation shall not affect any of the other rights and obligations of the parties under this Agreement. Nothing contained in this Agreement shall limit UNIVISION'S right, at its sole discretion, to distribute the UNIVISION Network and/or UNIVISION Network Programming directly to, and to authorize the retransmission of the UNIVISION Network and/or UNIVISION Network Programming by, any other distribution form, methodology, or medium, including but not limited to broadcast, television, cable television, direct broadcast satellite (DBS), MDS, MMSA, or SMATV systems or facilities in any area. 6. Preemption and Substitution. --------------------------- (a) With respect to programs or commercial matter offered or already contracted for pursuant to this Agreement, nothing herein contained shall prevent or hinder AFFILIATE from: 8 (i) rejecting or refusing any UNIVISION Program or commercial matter which AFFILIATE reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest, or (ii) substituting a program which, in AFFILIATE's opinion, is of greater local or national importance. (b) AFFILIATE shall give UNIVISION written notice of each such rejection, refusal or substitution, the identity and length of the programming (the "Substitute Programming") to be substituted for a UNIVISION Program and the justification therefor, not later than seventy-two (72) hours after receiving notice of the UNIVISION Program, or as soon thereafter as possible (including an explanation of the cause for any lesser notice). In the case of proposed program substitution based on greater local or national importance, AFFILIATE shall also indicate why the programming could not reasonably be substituted for Local Programming or carried in a Local Programming Window. UNIVISION reserves the right to direct AFFILIATE to broadcast said UNIVISION Program in an alternate time period normally occupied by other UNIVISION Network Programming, or to provide such alternative UNIVISION Network Programming as may be appropriate in the circumstances (which, subject only to the terms of Sections 5 and 9 hereunder, shall be cleared in preference to the Substitute Programming). (c) AFFILIATE may deem UNIVISION Network Programming to be unsatisfactory or unsuitable only if such programming: (i) is delivered in a form which does not meet accepted standards of good engineering practice; (ii) does not comply with the rules and regulations of the FCC; or (iii) differs substantially in style or content from UNIVISION Network Programming which AFFILIATE has broadcast previously and which Affiliate reasonably believes would not meet prevailing contemporary standards of good taste in its community of license. (d) AFFILIATE confirms that no UNIVISION Network Programming shall be deemed to be unsatisfactory, unsuitable or contrary to the public interest based on programming performance or ratings, advertiser reactions or the availability of alternative programming (including but not limited to sporting events, program length commercials and infomercials) which AFFILIATE believes to be more profitable or more attractive. (e) Except in those circumstances requiring live coverage of fast- breaking news events, AFFILIATE shall make all reasonable efforts to substitute programming of high local or national importance for Local Programming or to carry such programming in time slots not scheduled to be occupied by UNIVISION Network Programming. 9 (f) AFFILIATE confirms that, in its judgment, the public interest is best served by carriage of Spanish language programming by the Station. Any programming substituted by AFFILIATE for UNIVISION Network Programming shall be exclusively in the Spanish language. 7. Commercial Scheduling in Network Time. ------------------------------------- (a) UNIVISION shall determine the number and length of Commercial Availabilities within Network Time.(b) Subject to the provisions of Sections 6(c) and (d) hereof, the time available within Network Time to AFFILIATE for the carriage of Local Availabilities during regularly scheduled programming only shall be: Program Daypart Time Period Time Available to AFFILIATE - --------------- ----------------- --------------------------- Children's Programming: Weekends, As Scheduled 5 Minutes per Hour (or 50% of all Commercial Availabilities should FCC regulations permit less than 10 1/2 minutes of Commercial Availabilities per hour) Children's Programming: Weekdays, As Scheduled 6 Minutes per Hour (or 50% of all Commercial Availabilities should FCC regulations permit less than 12 minutes of Commercial Availabilities per hour) Morning: 08:00 A.M.-12:00 Noon 6 Minutes per Hour Day Time: 12:00 Noon- 04:00 P.M. 6 Minutes per Hour Early Fringe: 04:00 P.M.-06:00 P.M. 6 Minutes per Hour Network News: 06:30 P.M.-07:00 P.M. 0 Minutes per Half Hour Prime Time: 07:00 P.M.-11: 00 P.M. 6 Minutes per Hour -All Other Network Time Periods: 6 Minutes per Hour (c) UNIVISION may, from time to time, and upon at least sixty (60) days notice to AFFILIATE, determine the exact schedule and number of minutes available within Network Time to AFFILIATE for the carriage of Commercial Availabilities during regularly scheduled programming; provided, however, that in no event shall less than four (4) minutes per hour be made available within Network Time to AFFILIATE for the carriage of Commercial 10 Availabilities during regularly scheduled programming (except for Children's Programming and Network News). (d) In the event that any UNIVISION Program contains less than twelve (12) minutes per hour of Commercial Availabilities, UNIVISION shall, within its sole discretion, determine the exact schedule and number of minutes of Commercial Availabilities within each hour of Network Time that shall be occupied by Local Availabilities. In no event, however, shall the number of minutes of Local Availabilities scheduled by UNIVISION within an hour containing less than twelve (12) minutes of Commercial Availabilities (except for Children's Programming and Network News) be less than twenty percent (20.0%) of the total number of Commercial Availabilities scheduled by UNIVISION within that hour, rounded to the next higher commercial unit. (e) All Commercial Availabilities not allocated to AFFILIATE may be used by UNIVISION for Network Availabilities. The proceeds from advertising broadcast during those Network Availabilities shall be allocated to Network Sales. UNIVISION shall be solely responsible for determining the advertising rates at which such Network Availabilities shall be offered and sold. The time allocated to UNIVISION for Network Availabilities shall not be covered or dropped or used for any purpose whatsoever by AFFILIATE without the express prior written consent of UNIVISION. (f) The time allocated to AFFILIATE shall be used for Local Availabilities. Sales of Local Availabilities shall be allocated to Local Sales or to National Sales, as the case may be. AFFILIATE shall be solely responsible for determining the advertising rates at which Local Availabilities shall be offered and sold. (g) UNIVISION may, at its discretion, free a portion of Network Availabilities to AFFILIATE for sale by AFFILIATE, and AFFILIATE may, at its discretion, free a portion of Local Availabilities for sale by UNIVISION, with the mutual objective of maximizing the effective use of total Commercial Availabilities in Network Time; provided, however, that AFFILIATE grants UNIVISION the option to purchase from AFFILIATE, at UNIVISION's sole discretion, not more than two (2) minutes of Local Availabilities per hour of network time, for which UNIVISION shall reimburse AFFILIATE at the lowest average unit rate prevailing during the previous ninety (90) days for local commercial advertisements of the same or most comparable class, daypart, and length actually broadcast by Station. Said option shall take precedence over other sales of Local Availabilities by AFFILIATE. (h) Each party may use up to one (1) minute of its Commercial Availabilities within each hour of Network Time for the scheduling of commercials for which no cash compensation is charged and/or received. The use of this time by UNIVISION shall be restricted to company or related company advertising, promotional announcements, and non-cash barter transactions involving the exchange of goods and/or services for time. No amount shall be included in Net Network Sales as the result of such use, or the non-cash transactions related thereto. The use of this time by AFFILIATE shall be restricted to promotional announcements 11 and non-cash barter transactions involving the exchange of goods and/or services for time. Station identification announcements are not included within the scope of this subsection. 8. Compensation. Subject to all other relevant provisions of this ------------ Agreement, the compensation due AFFILIATE and UNIVISION pursuant to this Agreement shall be governed by the following provisions: (a) As consideration for UNIVISION's services as national and regional sales representative for AFFILIATE, AFFILIATE shall pay to UNIVISION fifteen percent (15%) of all Net National Sales of the Station. (b) In the event AFFILIATE packages any Sales which would be included in Net National Sales with other advertising sales which would not be included in Net National Sales, including, but not limited to, a sale in other media such as radio or print by AFFILIATE or any company affiliated with, controlled by, controlling or under common control with AFFILIATE, either directly or indirectly, such package sales will be allocated pro rata to Net National Sales and to other sales on the basis that the rate card values of each bears to the rate card value for the entire package. (c) Without limitation to any provision of this Agreement, in the event that AFFILIATE, for any reason, fails to broadcast or advises UNIVISION that it will not broadcast any UNIVISION Network Programming as provided herein, then, in each such case, AFFILIATE will "make good" the UNIVISION Network commercial announcements contained therein during a time period(s) which shall be of quality and rating value comparable to that of the time period(s) at which such programming was not broadcast. Pursuant to the provisions contained herein, these "make goods" will not be included as Net Allocated Network Sales. (d) AFFILIATE and UNIVISION agree that responsibility for billing and collection of accounts shall be divided as follows: (i) UNIVISION shall be responsible for the billing and collection of all Network Sales. (ii) AFFILIATE shall be responsible for the billing and collection of all National Sales and Local Sales. (e) AFFILIATE shall provide UNIVISION an accurate accounting of all time Sales from all sources on or before the 15th of the month following the month of performance of said Sales. (f) The amounts payable from AFFILIATE to UNIVISION, pursuant to Section 7(a), shall be paid monthly no later than the fifteenth (15th) of each month for all Sales made during the previous broadcast month. Payments from AFFILIATE to UNIVISION shall be accompanied by statements setting forth the name of each advertiser, amounts of time Sales for 12 which payments were received, the amount of commissions due thereon, the net proceeds from such time Sales, and the percentage due UNIVISION. 9. Non-Network Programs. UNIVISION shall retain the right, within its -------------------- sole discretion, to produce and/or to distribute, by means other than the UNIVISION Network, Non-Network Programming of every nature and kind. UNIVISION may, but is not required to, offer such Non-Network Programming to AFFILIATE. In the event that UNIVISION chooses to offer such Non-Network Programming to AFFILIATE, it shall do so by providing a Terms Sheet to AFFILIATE which shall specify the time period in which AFFILIATE may accept such Non-Network Programming on the terms proposed by UNIVISION. In the event of a timely acceptance by AFFILIATE, the compensation and carriage for such Non-Network Programming shall be on the terms as agreed between the parties, and the provisions of this Agreement shall not govern the distribution or broadcast of such Non-Network Programming. In the event that AFFILIATE does not accept UNIVISION's offer or terms within the time period specified in the Terms Sheet, it shall be assumed that AFFILIATE has rejected the Non-Network Programming, and UNIVISION shall be free, within its sole discretion, to offer the Non-Network Programming to any other station or medium on any terms whatsoever. 10. Unauthorized Preemptions. Without limiting any other rights of ------------------------ UNIVISION under this Agreement or otherwise, if within any twelve (12) month period during the term of this Agreement, AFFILIATE makes three (3) or more Unauthorized Preemptions of any UNIVISION Network Programming (or AFFILIATE or Station states, either in general or specific terms, that Station intends to make such Unauthorized Preemptions or UNIVISION reasonably concludes, based upon AFFILIATE's or Station's actions or otherwise, that such Unauthorized Preemptions shall occur), UNIVISION may, upon thirty (30) days prior written notice to AFFILIATE: (a) terminate AFFILIATE's right to broadcast any one or more series or other UNIVISION Network Programming, as UNIVISION shall elect, and, to the extent and for the period(s) that UNIVISION elects, thereafter license the broadcast to the applicable series or other UNIVISION Network Programming to any other television Station or Stations, low power television Station or Stations, or cable television system or systems located in the community of license of the Station or elsewhere; or (b) terminate this Agreement without any obligation, monetary or otherwise, to AFFILIATE and/or its employees, agents, or customers, or to any other person or entity. 11. Delayed Telecasts. [Except for UNIVISION Network Programming ----------------- designated to be carried live, AFFILIATE shall broadcast the entire UNIVISION Network program schedule on a three hour delayed basis. By way of example, a UNIVISION Program transmitted to AFFILIATE via satellite at 7:00 p.m. EST shall be delayed by AFFILIATE and broadcast over the Station at 7:00 p.m. PST. AFFILIATE shall not delay the telecast of any UNIVISION Program by more or less than three hours, nor change the order of the UNIVISION Network Programming schedule, without the express written consent of UNIVISION.] AFFILIATE is 13 hereby authorized to record UNIVISION Network Programming to the extent necessary to permit such delayed telecast, provided however, that AFFILIATE shall erase, destroy, or return to UNIVISION at AFFILIATE's expense such recording within seventy-two (72) hours of the broadcast of the recorded material. [In the event, however, that UNIVISION establishes a direct Pacific Time Zone satellite feed, then AFFILIATE shall broadcast the UNIVISION Network Programming at the times delivered by that feed, without any delay or recording.] 12. Force Majeure. UNIVISION shall not be liable to AFFILIATE nor shall ------------- it incur any liability hereunder for failure to deliver UNIVISION Network Programming or any part thereof, nor shall AFFILIATE be liable to UNIVISION nor shall it incur any liability hereunder for failure to broadcast any UNIVISION Network Programming or any part thereof, by reason of a Force Majeure Event. 13. Written Reports. AFFILIATE shall promptly upon UNIVISION's --------------- request submit to UNIVISION in writing, upon forms approved by UNIVISION, such reports as UNIVISION may request regarding the broadcast by AFFILIATE's Station of UNIVISION Network Programming and commercial announcements. 14. Performing Rights Licenses. All UNIVISION Network Programming -------------------------- shall, to the extent possible, be (a) cleared at the source, (b) within the repertoire of ASCAP, BMI, SESAC, or another performing rights society from which UNIVISION has obtained a performance license, or (c) in the public domain. 15. Indemnification. --------------- (a) UNIVISION shall indemnify, defend and hold AFFILIATE, its affiliates, successors and assigns, and the respective owners, officers, directors, agents, and employees of each, harmless against and from all direct claims, damages, liabilities, costs and expenses (including reasonable attorneys' fees) asserted by third parties alleging that the UNIVISION Network Programming violates or infringes upon the trade name, trademark, copyright, literary or dramatic right, or right of privacy or publicity of any party, or constitute a libel or slander of any party; provided, however, that the foregoing indemnification shall not apply: (i) to public performance rights in music, (ii) to any material furnished or added by any party other than UNIVISION after delivery of the UNIVISION Network Programming to AFFILIATE or the Station, (iii) to the extent such UNIVISION Network Programming is changed or otherwise affected by insertion or deletion of any material by any party other than UNIVISION after delivery of the UNIVISION Network Programming to the Station, (iv) to compliance with the Communications Act of 1934 or to any rules or regulations adopted thereunder by the FCC or any successor agency, or (v) unless AFFILIATE promptly notifies UNIVISION of any claim or litigation to which this indemnity shall apply, and that AFFILIATE cooperates fully with UNIVISION in the defense or settlement of such claim or litigation. The foregoing indemnity shall not apply to any claim by AFFILIATE or the Station for lost revenue, lost profits or other consequential damages, if any, regardless of whether such alleged damages are or were 14 foreseeable. UNIVISION makes no representations, warranties or indemnities, express or implied, except as expressly set forth in this Section 14(a). (b) AFFILIATE shall indemnify, defend and hold UNIVISION, its affiliates, successors and assigns, and the respective owners, officers, directors, agents, and employees of each, harmless against and from all direct claims, damages, liabilities, costs and expenses (including reasonable attorneys' fees) caused by or arising out of matters relating (i) to public performance rights in music, (ii) to any material furnished or added by any party other than UNIVISION after delivery of the UNIVISION Network Programming to AFFILIATE or the Station, (iii) to the extent such UNIVISION Network Programming is changed or otherwise affected by insertion or deletion of any material by any party other than UNIVISION after delivery of the UNIVISION Network Programming to the Station, (iv) any breach of any of AFFILIATE's representations, warranties, covenants or agreements hereunder, (v) any programming broadcast by Station other than UNIVISION Network Programming provided by UNIVISION to AFFILIATE and the Station pursuant to the terms of this Agreement, (vi) from any actions or claims by customers, agents, or employees of Station pursuant to a termination of this Agreement pursuant to Section 15 hereof or otherwise, or (vii) any other action on the part of AFFILIATE and/or Station; provided, however, that the foregoing indemnification shall not apply unless UNIVISION promptly notifies AFFILIATE in writing of any claim or litigation to which this indemnity shall apply, and UNIVISION cooperates fully with AFFILIATE in the defense or settlement of such claim or litigation. The foregoing indemnity shall not apply to any claim by UNIVISION for lost revenue, lost profits or other consequential damages, if any, regardless of whether such alleged damages are or were foreseeable. 16. Termination. This Agreement shall terminate under the following ----------- conditions: (a) The term of this Agreement shall expire without extension pursuant to Section 2 hereof; (b) At option of UNIVISION, in its sole discretion, upon the occurrence of any of the following events: (i) Upon not less than thirty (30) days? written notice to AFFILIATE in the event of a material breach by AFFILIATE by any of its material covenants, representations, warranties, duties, or obligations pursuant to this Agreement, or any other material term or condition hereof, which AFFILIATE has not cured within ten (10) days of written notice of default from UNIVISION; or such longer period if AFFILIATE has commenced such cure within said 10 days and thereafter continues to diligently pursue such cure to the reasonable satisfaction of UNIVISION. (ii) Pursuant to Section 9(b) hereof; (iii) Immediately upon written notice to AFFILIATE in the event (a) AFFILIATE files a petition seeking relief under Title 7 or 11 of the United States Code or under 15 any other Federal or state bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer or consent admitting the material allegations of a petition filed against in any proceeding under any such law, or (b) of entry against AFFILIATE of any order of relief under Title 7 or 11 of the United States Code, or entry of any other order, judgment or decree against AFFILIATE by any court of competent jurisdiction, approving a petition seeking bankruptcy, reorganization, readjustment of debt, dissolution, liquidation, or winding up of AFFILIATE, or (c) of appointment of a receiver, trustee or liquidator of AFFILIATE or of all or substantially all of the assets of AFFILIATE, or (d) if any petition seeking an order of relief under Title 7 or 11 of the States Code or any other such petition is filed against AFFILIATE and is not stayed or dismissed within one hundred twenty (120) days after the date of such filing, or (e) AFFILIATE makes a general assignment of its assets, or transfers a controlling interest, to creditors or other persons or entities; (iv) Pursuant to Section 17 hereof; (v) Upon not less than six (6) months written notice to AFFILIATE in the event UNIVISION, in its sole and voluntary discretion, chooses to cease to operate the UNIVISION Network, or to cease to provide UNIVISION Network Programming to television stations licensed to the community to which the Station is licensed, provided, however, that in the event UNIVISION is required to cease to operate the UNIVISION Network or to cease to provide UNIVISION Network Programming to television stations licensed to the community to which the Station is licensed due to circumstances reasonably beyond its control, including, but not limited to, force majeure events and court or government orders or decrees, and the circumstances preclude, or effectively preclude, UNIVISION from giving six (6) months notice of termination, UNIVISION shall give AFFILIATE as much notice as is reasonably possible under the circumstances; (vi) Intentionally deleted. (vii) Upon not less than thirty (30) days written notice to AFFILIATE in the event that Station becomes substantially less valuable to UNIVISION as an affiliate than it is at the time of execution of this Agreement as a result of a materially adverse change affecting the transmitter location, power, frequency, or hours or mode of operation of Station, or a materially adverse change in the business practices or public reputation or image of Station, AFFILIATE, or their owners and/or management; (viii) Pursuant to Section 20(a) hereof; (ix) Pursuant to Section 21 hereof; (x) Pursuant to Section 25(a)(iv) hereof; or (xi) Pursuant to Section 29 hereof. 16 (xii) Immediately, upon written notice to AFFILIATE, for a material breach of this Agreement due to a Year 2000 Failure. (c) At option of AFFILIATE, in its sole discretion upon thirty (30) days written notice to UNIVISION in the event of a material breach by UNIVISION in any of its covenants, representations, warranties, duties, or obligations pursuant to this Agreement, or any other term or condition hereof, which UNIVISION has not cured within ten (10) days of written notice of default from AFFILIATE. 17. Exclusive Representation. AFFILIATE and UNIVISION agree that ------------------------ UNIVISION shall be the exclusive representative of AFFILIATE for the sale of all national and regional advertising throughout the United States and the world. AFFILIATE agrees to refer requests by any potential national or regional advertisers to UNIVISION, which shall be responsible for servicing such accounts. In any event, all revenues received from national or regional advertising accounts, whether or not serviced by UNIVISION, shall be included in Net National Sales for the purpose of computing the commission due UNIVISION as national and regional sales representative pursuant to Section 7(a) hereof. UNIVISION, in its role of exclusive national sales representative for AFFILIATE, shall have no obligation to market, sell, or administer the sale of any commercial announcement, infomercial, program, or other product which would conflict with any UNIVISION Network Programming or commercial announcement scheduled by UNIVISION for broadcast over the Station. 18. Assignment. ---------- (a) This Agreement shall not be assigned, in whole or in part, by AFFILIATE, directly or indirectly (by operation of law, transfer of stock, merger or otherwise) without the prior written consent of UNIVISION. The decision to grant or not grant such consent shall be at the sole discretion of UNIVISION. Any purported assignment by AFFILIATE in the absence of UNIVISION's prior written consent shall be null and void and not enforceable against UNIVISION. In the event of an attempted unconsented assignment or transfer, UNIVISION may, in its sole discretion, terminate this Agreement effective upon thirty (30) days notice to AFFILIATE and the purported assignee. Any assignment or transfer consented to by UNIVISION shall not relieve AFFILIATE of its obligations hereunder. (b) AFFILIATE shall immediately notify UNIVISION in writing of any application tendered to the FCC pertaining to an assignment of AFFILIATE's license for the Station or a transfer of control of AFFILIATE. Except as to "short form" assignments of license or transfers of control made pursuant to Section 73.3540(f) of the Rules and Regulations of the FCC, UNIVISION shall have the right to terminate this Agreement, effective upon thirty (30) days notice to AFFILIATE and the transferee or assignee of such termination, which notice may be given at any time within ninety (90) days after the later occurring of: (i) the date on which UNIVISION learns of such assignment or transfer, or (ii) the date on which UNIVISION receives written notice of such assignment or transfer. Upon UNIVISION's request, AFFILIATE shall procure and deliver to UNIVISION, in form satisfactory to UNIVISION, the 17 agreement of the proposed assignee or transferee that, upon consummation of the assignment or transfer of control of the Station's authorization, the assignee or transferee will assume and perform this Agreement in its entirety without limitation of any kind. The failure of AFFILIATE to notify UNIVISION of the proposed assignment or transfer of control of Station's authorization, or to procure the agreement of the proposed assignee or transferee in accordance with this Section, shall be deemed a material breach of this Agreement, and in such event UNIVISION may, in its sole discretion and without limitation to any other remedies available to it, terminate this Agreement by giving notice of such termination, which termination shall be effective on the date specified in said notice of termination. (c) Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. AFFILIATE confirms that UNIVISION has no obligation, whether express or implied, to consent to the assignment of AFFILIATE's rights, duties, benefits or obligations pursuant to this Agreement to any other person or entity, and that the grant of such consent shall be within the sole discretion of UNIVISION. AFFILIATE further confirms that UNIVISION shall have no obligation, whether express or implied, to continue the affiliation of the Station with UNIVISION or the UNIVISION Network, whether or not on terms or conditions equivalent to those set forth in this Agreement, in the event of an assignment of the Station's license or a transfer of control of AFFILIATE. 19. Affirmative UNIVISION Rights. Nothing in this Agreement shall ---------------------------- preclude UNIVISION from taking any action not specifically prohibited herein, including, but not limited to: (a) Establishing additional interconnected networks, including but not limited to, television or audio broadcasting networks and cable programming networks. (b) Affiliating the UNIVISION Network with any international network on the terms and conditions determined solely by UNIVISION. (c) Transferring any UNIVISION Programs from the UNIVISION Network to any other networks, whether established by UNIVISION or any other entity. 20. Audit Rights. UNIVISION shall have the right to perform periodic ------------ audits of AFFILIATE and the Station to insure compliance with the provisions of this Agreement. AFFILIATE shall provide UNIVISION with access to the pertinent books and records of AFFILIATE and the Station so that UNIVISION's auditors may verify the accuracy and validity of the time Sales reported to UNIVISION by AFFILIATE as well as all other aspects of compliance with the provisions of this Agreement, including, but not limited to, Sections 4, 5, 6, 7, 9, 10, 13, 16, 17, 23, and 24 hereof. The cost of any such audit shall be borne by UNIVISION; provided, however, that in the event such an audit reveals AFFILIATE to be in material breach of, or in default under, this Agreement, that AFFILIATE has failed to pay UNIVISION all amounts due to UNIVISION pursuant to Section 7(a) hereof, or that 18 AFFILIATE has made more than three Unauthorized Preemptions of UNIVISION Network Programming during the preceding twelve (12) month period, the costs of said audit shall be borne by AFFILIATE. 21. Termination. ------------ (a) AFFILIATE represents and warrants to UNIVISION that Schedule B accurately sets forth the facilities authorized for, and utilized by, the Station. In the event that the transmitter location, antenna height above average terrain, effective radiated power, or frequency or hours of operation as set forth on Schedule B are changed at any time so as to (i) reduce the number of Hispanic Households within the Station's Grade B contour or (ii) to reduce the number of hours of Spanish language programming, UNIVISION, in its sole discretion, shall have the right to terminate this Agreement upon 30 days advance written notice. The above operating hours provision shall not apply to the extent that the reduction in AFFILIATE's hours of operation is in response to a reduction in programming provided to AFFILIATE by UNIVISION. (b) UNIVISION may, from time to time at its sole discretion, establish minimum standards governing matters that, in UNIVISION's sole judgment, require standardization and uniformity among affiliates of the UNIVISION Network, including but not limited to (i) specifications and layout (including form, color, number, location and size) of signage, billboards, and print and other advertising relating to UNIVISION or any UNIVISION Program or Programming; (ii) the design, color, appearance and maintenance of exterior and public portions of studios and other facilities utilized by the Station; and (iii) technical standards relating to commercial announcements, public service announcements, and Local Programming of the Station. 22. Retransmission Consent. Should AFFILIATE be accorded the right under ---------------------- any local, state or federal rule, regulation or law to elect (a) to require any cable television system or other distribution system to obtain AFFILIATE'S consent to such system's transmission or retransmission of the Station's broadcast of any UNIVISION Network Programming, or is given any similar rights (a "Retransmission Consent Election") or (b) to require any shcy system to comply with any "must carry" rule, regulations or laws (a "Must Carry Election"), then AFFILIATE shall notify UNIVISION at least sixty (60) days in advance of any such election by AFFILIATE and UNIVISION shall negotiate in good faith, for a period of no less than sixty (60) days, regarding (x) whether AFFILIATE shall make a Retransmission Consent Election or a Must Carry Election and (y) in the event that AFFILIATE determines to make a Retransmission Consent Election, to which systems such consent is to be given, and I so, the terms under which it is to be given (including without limitations, the amount of compensation to be paid by any such system for such consent and the division of that compensation between AFFILIATE and UNIVISION). If AFFILIATE and UNIVISION do not reach agreement with respect to all of the foregoing matters, then without limitation to any of UNIVISION'S rights under this Agreement, UNIVISION shall have the right to terminate this Agreement upon thirty (30) days written notice to AFFILIATE. Without limiting the generality of the foregoing, AFFILIATE acknowledges and agrees that in no event shall AFFILIATE grant retransmission consent or otherwise permit 19 any retransmission of the Station's broadcast of any UNIVISION Network Programming without the prior written consent of UNIVISION. 23. Severability. Should any part of this Agreement become ------------ inconsistentwith the rules or policies of the FCC or the agreed upon governing law and the parties not to be the beneficiaries of an appropriate waiver, that part of the Agreement shall terminate upon the date that such an inconsistency would otherwise exist, but all other parts of the Agreement shall remain in full force and effect. In such event, the parties shall use their best efforts to modify this Agreement so as to conform it with the applicable FCC rule, policy, or law, if possible, while achieving their respective objectives under this Agreement. 24. No Implied Waiver. Except as expressly provided for herein, no ----------------- failure or delay on the part of the parties hereto to exercise any right, power or privilege hereunder or under any instrument executed pursuant hereto shall operate as a waiver; nor shall any single or partial exercise or any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All rights and remedies granted herein shall be in addition to other rights and remedies to which the parties may be entitled at law or in equity 25. Broadcaster's Liability Insurance. --------------------------------- (a) AFFILIATE shall procure and maintain in force during the term hereof Broadcaster's liability insurance for the Station, including broad form errors and omissions coverage, with minimum limits of liability of $5,000,000.00 or more for each occurrence. (i) Said coverage shall be on an occurrence form, primary and not contributing, with respect to: a. any material furnished or added by any party other than UNIVISION after delivery of UNIVISION Network Programming to AFFILIATE or the Station; b. to the extent any such UNIVISION Network Programming is changed, altered or otherwise affected by insertion or deletion of any material by any party other than UNIVISION; and c. any programming broadcast the Station other than UNIVISION Network Programming provided by UNIVISION to the Station. (ii) Prior to use of UNIVISION Network Programming, AFFILIATE shall cause its broadcaster[_]s liability insurance carrier(s) to add [_]Univision Network Limited Partnership, Univision Television Group, Inc., their parent companies, affiliates, officers, directors, employees, successors and assignees[_] as additional insured parties. All such 20 policies shall be issued by companies of recognized responsibility, having a Bests Key Rating Guide of not less than A, Class VII, licensed to do business in the state where each Station is located. (iii) An original certificate of insurance and notarized copies of the insurance policy endorsement(s) naming UNIVISION, Univision Television Group, Inc., their parent companies, affiliates, officers, directors, employees, successors and assignees as additional insured parties shall be delivered to UNIVISION by AFFILIATE within ten (10) days of the execution of this Agreement. Each such certificate and endorsement must be signed by an authorized agent of the insurance company issuing such coverage, and shall provide that thirty (30) days notice of cancellation shall be given to UNIVISION prior to termination, cancellation, or non-renewal thereof. No action or inaction by UNIVISION, including, without limitation, failure to demand such documentation or continued provision of programming in the absence of such policy, certificate, and/or endorsement(s), shall be construed as a waiver by UNIVISION of AFFILIATE?s obligation to provide the insurance coverage specified herein. (iv) In the event AFFILIATE or the Station fails to comply with the provisions of this Section 25(a), UNIVISION may, in its sole discretion, terminate this Agreement upon thirty (30) days written notice to AFFILIATE. 26. Governing Law. This Agreement and the rights and obligations of the ------------- parties, including without limitation the validity, construction, interpretation, performance and termination of this Agreement, shall be governed by and construed by the laws of the State of New York applicable to contracts between New York parties made and performed in that state, without regard to conflicts of law principles. 27. Notices. Any notice required or permitted to be given hereunder shall ------- be in writing and shall be deemed duly given if delivered on the date of personal delivery or on the date of receipt if mailed by registered or certified mail, postage prepaid and return receipt requested, and shall be deemed to have been received on the date of personal delivery or on the date set forth on the return receipt, to the following addresses, or to such other address as any party may request in writing to the other party: Notices to AFFILIATE shall be sent to: [___________________ ____________________ ____________________] Notices to UNIVISION shall be sent to: Director, Affiliate Relations 21 Univision Network Limited Partnership 9405 NW 41st Street Miami, FL 33178 with a copy, which shall not constitute notice, to: General Counsel Univision Network, L.P. 6701 Center Drive West Fifteenth Floor Los Angeles, CA 90045 28. Limitations of Damages. The parties to this Agreement ---------------------- expressly agree that in the event of termination or breach of this Agreement, neither party shall be liable to the other for any lost revenue, lost profits or other consequential damages allegedly resulting from such termination or breach, including, but not limited to, any expenditures, investments, leases or commitments made in anticipation of the continuance of this Agreement, regardless of whether such alleged lost revenue, lost profits or other consequential damages are foreseeable. 29. Confidentiality. In its capacity as an affiliate of UNIVISION --------------- pursuant to this Agreement, AFFILIATE may acquire or receive information relating to UNIVISION and its affiliates which is of a confidential and proprietary nature. Such information may include, but is not limited to, financial information, business and marketing plans, advertising rates and practices, viewer mailing lists, and plans related to programming and special promotional events. AFFILIATE shall at all times, both during and after the term of this Agreement, maintain in the strictest confidence and trust all of such confidential and proprietary information and shall not directly or indirectly disclose the same to any other person or entity, whether during the term of this Agreement or thereafter. AFFILIATE acknowledges that a breach of this paragraph may subject UNIVISION to immediate and irreparable harm for which damages may not be an adequate remedy and, accordingly, AFFILIATE acknowledges and agrees that UNIVISION may enforce the provisions hereof by means of injunctive or other equitable relief. Any breach of this Section shall constitute a material breach of this Agreement and shall entitle UNIVISION to immediately terminate this Agreement. The provisions of this Section shall survive the expiration and termination of this Agreement. 30. No Joint Venture or Partnership. Nothing contained in this ------------------------------- Agreement shall create any partnership, association, joint venture, fiduciary or agency relationship between UNIVISION and AFFILIATE. Except as otherwise specifically set forth herein, neither UNIVISION or AFFILIATE shall be authorized or empowered to make any representation or commitment or to perform any act which shall be binding on the other unless expressly authorized or empowered in writing. 31. Entire Agreement. This Agreement contains all of the terms agreed ---------------- upon by the parties with respect to the subject matter hereof; it incorporates and merges any and all previous 22 communications and understandings, oral and written, and cannot be amended or changed except in a writing executed by the parties hereto. 32. Counterparts. This Agreement may be signed in any number of ------------ counterparts with the same effect as if the signatures to each such counterpart were upon the same instrument. UNIVISION NETWORK LIMITED PARTNERSHIP Signature: ___________________________________ Name: ___________________________________ Title: ___________________________________ Date: ___________________________________ AGREED AND ACCEPTED: [____________________________________________ ] Signature: _____________________________________ Name: _____________________________________ Title: _____________________________________ Date: _____________________________________ 23 SCHEDULE A SCHEDULE B: Station: Community of License: Television Channel or Frequency: Transmitter Location: Antenna Height Above Average Terrain: Mean Sea Level: Maximum Effective Radiated Power: Minimum Hours of Operation: The registrant has entered into Network Affiliation Agreements for the following stations: Station K19BN, San Diego, California December 30, 1996 Station KVER-LP, Palm Springs, California December 30, 1996 Station KSMS-TV, Monterey, California December 30, 1996 Station KNVO-TV, McAllen, Texas December 30, 1996 Station KINC-TV, Las Vegas, Nevada December 30, 1996 Station KINV-TV, El Paso, Texas December 30, 1996 Station KCEC-TV, Denver, Colorado December 30, 1996 Station KAJB (TV), Calipatria, California December 30, 1996 Station KLDO, Laredo, Texas August 1, 1997 Station KORO-TV, Corpus Christi, Texas April 21, 1998 Station KLUZ-TV, Albuquerque, New Mexico December, 1998 Station WMDO, Washington, D.C. April, 1999 Station WVEA-LP, Tampa, Florida April, 1999 Station WVEN-LP, Orlando, Florida April, 1999 -----END PRIVACY-ENHANCED MESSAGE-----