-----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, Cs3Ub7RnA+dWrR5/rQETdjdU5HFIC3f/UvzxyeI4xlQ9SYn/C5vfyU11RcMKIo8Q d+jQKwirTtoP/gX+YXjPjQ== /in/edgar/work/20000726/0000944209-00-001174/0000944209-00-001174.txt : 20000921 0000944209-00-001174.hdr.sgml : 20000921 ACCESSION NUMBER: 0000944209-00-001174 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 20000726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTRAVISION COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001109116 STANDARD INDUSTRIAL CLASSIFICATION: [4833 ] IRS NUMBER: 954783236 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-35336 FILM NUMBER: 678821 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/A 1 0001.txt FORM S-1 AMENDMENT NO. 4 As filed with the Securities and Exchange Commission on July 25, 2000 Registration No. 333-35336 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- Amendment No. 4 to 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......... $740,600,000 $195,519 - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
(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--JULY 25, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Prospectus , 2000 [LOGO OF ENTRAVISION COMMUNICATIONS CORPORATION] 46,000,000 Shares of Class A Common Stock - -------------------------------------------------------------------------------- The Offering: Proposed Market and Symbol: . We are offering . We have been 46,000,000 shares approved for of our Class A listing on the common stock. New York Stock Exchange under . The underwriters the symbol EVC. have an option to purchase an additional 6,900,000 shares from us to cover over-allotments. . This is our initial public offering, and no public market currently exists for our shares. We anticipate that the initial public offering price for our Class A common stock will be between $13.00 and $15.00 per share. --------------------------------------------
------------------------------------------------------------------------ Per Share Per Share (for shares sold (for shares sold by the directly to underwriters) Univision) 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. ----------- 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] [ENTRAVISION LOGO] TABLE OF CONTENTS
Page ---- Prospectus Summary....................................................... 1 Risk Factors............................................................. 9 Forward-Looking Statements............................................... 17 Use of Proceeds.......................................................... 18 Dividend Policy.......................................................... 19 Capitalization........................................................... 20 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........................................................... 29
Page ---- Business................................................................... 60 Management................................................................. 85 Principal Stockholders..................................................... 93 Certain Relationships and Related Transactions............................. 95 Description of Capital Stock............................................... 100 Shares Eligible for Future Sale............................................ 105 Underwriting............................................................... 107 Legal Matters.............................................................. 111 Experts.................................................................... 111 Where You Can Find More Information........................................ 112 Index to Financial Statements.............................................. F-1
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. ENTRAVISION Entravision is a diversified media company utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States. The description of our business presented in this prospectus includes our recent acquisition of Latin Communications Group Inc., or LCG, and our pending acquisitions of Z-Spanish Media Corporation and certain outdoor advertising assets of Infinity Broadcasting Corporation. The majority of the proceeds of this offering will finance our acquisition of Z- Spanish Media and refinance our acquisition of LCG. Television. We are the largest Univision-affiliated television group in the United States. We own and operate television stations in 18 U.S. markets. We own Univision-affiliated stations in 17 of the top 50 Hispanic markets in the United States. Through our 25-year network affiliation agreements, Univision 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 programming with our local news programming to brand our stations with a local identity. As a result, all but one of our Univision-affiliated stations rank first in Spanish- language television viewership in their markets. Assuming Univision accepts our offer to purchase 7,619,048 shares being sold in this offering, Univision will own an approximately 26% equity interest in us after the offering. Radio. We operate the largest centrally programmed Spanish-language radio network in the United States, which broadcasts via satellite to our 60 owned and operated radio stations and 47 affiliates. Fifty-seven of our owned and operated stations are in the top 50 Hispanic markets. Our radio operations combine national programming with local time slots available for advertising, news, traffic, weather, promotions and community events. This strategy allows us to provide quality programming with significantly lower costs of operations than we could otherwise deliver solely with independent programming. We produce seven primary formats to appeal to the diverse musical tastes of the listeners in the markets we serve. Outdoor. Our approximately 11,200 billboards are concentrated in high- density Hispanic communities in Los Angeles and New York, the two largest Hispanic markets in the United States. Because of its repetitive impact and relatively low cost, outdoor advertising attracts national, regional and local advertisers. We offer the ability to target specific demographic groups on a cost-effective basis compared to other advertising media. In addition, we provide businesses with marketing opportunities in locations near their stores or outlets. Publishing. Our publishing operations, through El Diario/La Prensa, one of only two Spanish-language daily newspapers 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. 1 Market Opportunity and Strategy Hispanics represent approximately 11% of the U.S. population and the U.S. Hispanic population is growing approximately six times faster than the non- Hispanic population. Consequently, advertisers have recently begun to direct more advertising dollars toward Hispanics. We believe that we have benefited and will continue to benefit from the attractive demographic profile of the Hispanic consumer. We seek to increase our advertising revenue through the following strategies: . using our Univision network affiliation and our radio network and station brands to maximize our market share; . investing in media research to provide advertisers with accurate measures of our audience; . continuing to build and retain strong management teams; . emphasizing and investing in our local news and radio formats and supporting community events to enhance our audience recognition, loyalty and ratings; . capitalizing on cross-promotional opportunities created by our diverse portfolio of media properties to maximize audience share and increase advertising revenue; and . continuing to seek acquisitions and investment opportunities in high- growth Hispanic markets. ---------------- We have a history of net losses, and expect to incur net losses in the future, in part as a result of goodwill amortization expense relating to our recent acquisitions. We have had a limited operating history as a diversified company and we may have difficulties integrating our recent and pending acquisitions. After this offering, our executive officers will have approximately 78% voting control over our business. 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. 2 The Offering Class A common stock offered......... 46,000,000 shares Common stock to be outstanding after this offering....................... 58,726,077 shares of Class A common stock 27,678,533 shares of Class B common stock 21,983,392 shares of Class C common stock 108,388,002 total shares of common stock Shares offered to Univision.......... We have offered 7,619,048 shares for sale in this offering to Univision, one of our principal stockholders. If this offer is accepted, we would sell these shares directly to Univision. As a result, we will offer 38,380,952 shares for sale to the public through the underwriters. 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. After this offering, our executive officers will have approximately 78% voting control of our outstanding shares of common stock. Use of proceeds...................... We intend to use the net proceeds of this offering: . to acquire Z-Spanish Media; . to repay the existing loan on LCG; . to repay the debt of Z-Spanish Media; . to repay a bridge loan used to acquire two radio stations from Citicasters Co.; . to repay a portion of Entravision's bank debt; and . for working capital and general corporate purposes. 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 7,187,902 shares of Class A common stock to acquire Z-Spanish Media; . excludes shares of Class A common stock issuable upon the exercise of the underwriters' over-allotment option; . excludes 6,106,497 shares of Class A common stock reserved for issuance upon conversion of our Series A preferred stock; and . excludes 11,500,000 shares of Class A common stock reserved for issuance under our omnibus equity incentive plan. 3 Summary Historical and Unaudited Pro Forma Financial Data (In thousands, except per share and per membership unit data) The following tables present: . our summary historical financial data as of March 31, 2000 which gives effect to the conversion of our predecessor from a limited liability company to a corporation and the related exchange of membership units and member corporation shares for shares of Class A, B and C common stock; . our summary historical financial data for the years ended December 31, 1997, 1998 and 1999 and for the three months ended March 31, 1999 and 2000; . our summary unaudited pro forma financial data as of March 31, 2000 and for the year ended December 31, 1999 and for the three months ended March 31, 1999 and 2000, giving effect to our completed 1999 and 2000 acquisitions and our pending acquisition of Z-Spanish Media as if such transactions had been completed January 1, 1999, the conversion of TSG Capital Fund III, L.P.'s convertible subordinated note into preferred stock, the issuance of 15,750,000 shares of Class A common stock in this offering at $14.00 per share used to finance the cash portion of the purchase price of Z-Spanish Media 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 46,000,000 shares of Class A common stock less 15,750,000 shares of Class A common stock used to finance the cash portion of the purchase price of Z-Spanish Media that we are offering, assuming an initial public offering price of $14.00 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 financial data as of and for the three months ended March 31, 1999 and 2000 were derived from our unaudited financial statements included elsewhere in this prospectus. Such unaudited financial statements were prepared by us on a basis consistent with our annual audited financial statements and, in the opinion of our management, contain all normal recurring adjustments necessary for a fair presentation of the financial position and the results of operations for the applicable periods. Operating results in the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected in the year ending December 31, 2000 or any subsequent period. The summary historical and unaudited pro forma financial data should be read in conjunction with the audited 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. 4
Historical ----------------------------------------------------- Three Months Ended Year Ended December 31, March 31, ---------------------------- ----------------------- 1997 1998 1999 1999 2000 ------- -------- --------- ----------- ----------- (Unaudited) (Unaudited) Statement of Operations Data: Gross revenue: Television............. $32,701 $ 48,689 $ 63,842 $12,558 $ 18,178 Radio.................. 718 1,183 2,362 455 1,162 Outdoor and publishing............ -- -- -- -- -- ------- -------- --------- ------- -------- Total gross revenue.... 33,419 49,872 66,204 13,013 19,340 Less agency commissions.. 2,963 5,052 7,205 1,284 2,076 ------- -------- --------- ------- -------- Net revenue.............. 30,456 44,820 58,999 11,729 17,264 ------- -------- --------- ------- -------- Expenses: Direct operating....... 9,184 15,794 24,441 4,672 7,883 Selling, general and administrative (excluding non-cash stock-based compensation) ........ 5,845 8,877 11,611 2,510 3,749 Corporate.............. 3,899 3,963 5,809 1,304 1,848 Depreciation and amortization.......... 10,216 10,934 15,982 3,321 4,877 Non-cash stock-based compensation (1)...... 900 500 29,143 7,286 -- ------- -------- --------- ------- -------- Total expenses........... 30,044 40,068 86,986 19,093 18,357 ------- -------- --------- ------- -------- Operating income (loss).. 412 4,752 (27,987) (7,364) (1,093) Interest expense, net.... (5,107) (8,244) (9,591) (2,023) (3,897) Non-cash interest expense relating to Univision conversion option (2)... -- -- (2,500) -- (31,600) Income tax (expense) benefit (3)............. 7,531 (210) 121 74 6 ------- -------- --------- ------- -------- Income (loss).......... $ 2,836 $ (3,702) $ (39,957) $(9,313) $(36,584) ======= ======== ========= ======= ======== Loss per membership unit (4)................ $ (1.19) $ (0.07) $ (19.12) $ (4.38) $ (18.68) ======= ======== ========= ======= ======== Pro forma net loss (5)... $(4,052) $ (3,170) $ (37,579) $(8,765) $(34,813) ======= ======== ========= ======= ======== Pro forma basic and diluted loss per share: Net loss (5)........... $ (0.12) $ (0.10) $ (1.16) $ (0.27) $ (1.08) ======= ======== ========= ======= ========
5
Pro Forma ----------------------------------------------- Year Ended Three Months Ended December 31, 1999 March 31, 2000 ----------------------- ----------------------- Pro Forma Pro Forma Pro Forma As Adjusted Pro Forma As Adjusted ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Statement of Operations Data: Gross revenue: Television.................. $ 68,938 $ 68,938 $ 18,256 $ 18,256 Radio....................... 66,638 66,638 15,969 15,969 Outdoor and publishing...... 35,134 35,134 7,476 7,476 -------- -------- -------- -------- Total gross revenue......... 170,710 170,710 41,701 41,701 Less agency commissions....... 15,968 15,968 4,172 4,172 -------- -------- -------- -------- Net revenue................... 154,742 154,742 37,529 37,529 -------- -------- -------- -------- Expenses: Direct operating............ 59,754 59,754 15,818 15,818 Selling, general and administrative (excluding non-cash stock-based compensation).............. 47,418 47,418 11,045 11,045 Corporate................... 12,639 12,639 4,045 4,045 Depreciation and amortization............... 85,770 85,770 21,757 21,757 Non-cash stock-based compensation (1)........... 31,931 31,931 893 893 Gain on sale of assets...... (4,442) (4,442) -- -- -------- -------- -------- -------- Total expenses................ 233,070 233,070 53,558 53,558 -------- -------- -------- -------- Operating income (loss)....... (78,328) (78,328) (16,029) (16,029) Interest expense, net and other........................ (35,134) (3,185) (9,510) (1,523) Non-cash interest expense relating to Univision conversion option (2)........ (2,500) (2,500) (31,600) (31,600) Income tax benefit (3)........ 28,160 15,380 8,609 5,414 -------- -------- -------- -------- Loss from continuing operations................. (87,802) (68,633) (48,530) (43,738) Preferred stock dividends..... 7,650 7,650 1,913 1,913 -------- -------- -------- -------- Loss from continuing operations applicable to common stock................. $(95,452) $(76,283) $(50,443) $(45,651) ======== ======== ======== ======== Pro forma basic and diluted loss per share: Net loss from continuing operations applicable to common stock (5)........... $ (1.23) $ (0.71) $ (0.65) $ (0.42) ======== ======== ======== ========
6
Historical ----------------------------------------------------- Three Months Ended Year Ended December 31, March 31, ---------------------------- ----------------------- 1997 1998 1999 1999 2000 -------- -------- -------- ----------- ----------- (Unaudited) (Unaudited) Other Financial Data: Broadcast cash flow (6).................... $ 15,427 $ 20,149 $ 22,947 $ 4,547 $ 5,632 EBITDA (adjusted for non-cash stock-based compensation) (7)...... 11,528 16,186 17,138 3,243 3,784 Non-cash stock-based compensation (1)....... 900 500 29,143 7,286 -- Cash flows from operating activities... 6,509 7,658 6,128 899 1,028 Cash flows from investing activities... (61,908) (25,586) (59,063) (17,045) (63,826) Cash flows from financing activities... 54,763 19,339 51,631 15,570 63,954
Pro Forma ------------------------------------ Three Months Ended Year Ended March 31, December 31, ----------------------- 1999 1999 2000 ------------ ----------- ----------- (Unaudited) (Unaudited) (Unaudited) Other Financial Data: Broadcast cash flow (6).................. $ 47,570 $ 5,989 $ 10,666 EBITDA (adjusted for non-cash stock-based compensation) (7)....................... 34,931 3,641 6,621 Non-cash stock-based compensation (1).... 31,931 7,983 893 Cash flows from operating activities..... 6,955 (399) 2,070 Cash flows from investing activities..... (724,675) (8,936) (621,537) Cash flows from financing activities..... 720,992 18,527 612,112
As of March 31, 2000 ---------------------------------- Pro Forma Historical Pro Forma As Adjusted ---------- ----------- ----------- (Unaudited) (Unaudited) Balance Sheet Data: Cash and cash equivalents................... $ 3,513 $ 6,457 $ 14,457 Total assets................................ 268,748 1,232,953 1,240,953 Long-term debt, including current portion... 234,601 433,401 61,901 Redeemable preferred stock.................. -- 90,000 90,000 Total owners' equity (7).................... 23,027 477,757 857,257
- -------- (1) For 1999, non-cash stock-based compensation represents management's estimate of the fair value of our award of Class D membership units in our predecessor to an employee and our grant of an option to purchase Class D membership units in our predecessor to an employee based on the estimated price of this offering. (2) During 1999, conditions restricting the exchange of Univision's $10 million convertible subordinated note were eliminated and we recorded non- cash interest expense of $2.5 million. In March 2000, the subordinated note was amended and increased to $120 million, and the option exchange feature was increased to 40%. The estimated fair value of the $110 million amendment to the convertible subordinated note and option feature was $141.6 million based on an estimated initial public offering price. This resulted in a $31.6 million non-cash charge to interest expense in the quarter ended March 31, 2000. 7 (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 taxes were reduced. (4) Loss per membership unit is computed as net loss of our predecessor divided by the number of membership units as of the last day of each reporting period. (5) 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. (6) 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. (7) EBITDA means broadcast cash flow less corporate expenses (adjusted for non-cash stock-based compensation) 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. 8 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 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 $3.7 million and $40.0 million for the years ended December 31, 1998 and 1999, and $9.3 million and $36.6 million for the quarters ended March 31, 1999 and 2000. In addition, we had a pro forma net loss of $95.5 million for the year ended December 31, 1999, and a pro forma net loss of $50.4 million for the three months ended March 31, 2000. We believe losses may continue while we pursue our acquisition strategy. If we cannot generate profits in the future, it 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 we cannot successfully integrate our recent, pending and future acquisitions, it could decrease our revenue or increase our costs. We acquired LCG on April 20, 2000, and we have agreed to acquire Z-Spanish Media and certain outdoor advertising assets of Infinity Broadcasting Corporation. As a result of these acquisitions, our number of employees grew from 562 as of December 31, 1999 to approximately 1,050 as of March 31, 2000. To integrate these and other pending and future 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 revenue could decrease or our costs could increase. If for any reason our acquisition of Z-Spanish Media is not consummated as anticipated, our radio and outdoor operations as described in this prospectus would be significantly reduced. The consummation of our acquisition of Z-Spanish Media requires the approval of the Federal Communications Commission, or FCC, with respect to the transfer of the broadcast licenses of Z-Spanish Media to us. This review process could delay or prevent the acquisition, and will require us to divest some assets. In addition, the definitive merger agreement entered into between Z-Spanish Media and us contains customary closing conditions. Should any of these conditions not be met, one or both parties could terminate the agreement. 9 If this acquisition is not completed, our radio and outdoor operations would be greatly diminished, as approximately 29 of our radio stations and approximately 10,000 of our billboards are attributable to Z-Spanish Media. Without these properties, our expected revenue would decrease significantly. In addition, if this acquisition is not consummated, we will retain broad discretion over the use of the proceeds from this offering that would otherwise have been used to finance the Z-Spanish Media acquisition. You may not agree with how we spend the proceeds and our use of the proceeds may not yield a significant return or any return at all. Antitrust regulatory agencies may oppose or impose conditions on our acquisition of Z-Spanish Media, which may delay the completion of the acquisition and/or lessen the anticipated benefits of the acquisition. Z-Spanish Media and we have filed notifications with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act. Prior to expiration of the initial 30 calendar day waiting period following the filing of such notifications, the parties withdrew their initial filings and refiled on June 13, 2000. On June 14, 2000, the Department of Justice issued an informal request to the parties for additional information regarding the Sacramento, San Jose and Monterey-Salinas-Santa Cruz, California areas, where both Z-Spanish Media and we own radio stations. On July 12, 2000, Z-Spanish Media withdrew the notification forms that it had refiled on June 13, 2000 and immediately refiled its notification forms again, thus extending the waiting period for another 30 days. The second withdrawal and refiling was done with the concurrence of both the Department of Justice and the Federal Trade Commission. The refiled notification forms are for our acquisition of Z-Spanish Media, excluding the Spanish-language stations owned by Z-Spanish Media in the Sacramento, San Jose and Monterey-Salinas-Santa Cruz areas. These six stations in the Sacramento, San Jose and Monterey- Salinas-Santa Cruz areas will be placed in a trust. Together with the trust to which these stations are to be transferred, we intend to then file new and separate notification forms under the Hart-Scott-Rodino Antitrust Improvements Act with respect to our proposed acquisition of these stations from the trust. Having transferred Z-Spanish Media's Spanish-language radio stations in the Sacramento, San Jose and Monterey-Salinas-Santa Cruz areas from Z-Spanish Media to a trust, the parties anticipate that the Department of Justice will approve our acquisition of Z-Spanish Media. If the Department of Justice does not approve this arrangement, however, further negotiations could delay or prevent this acquisition. In addition, if we do not ultimately succeed in acquiring any or all of those stations placed in trust, we would not be forced to purchase such stations but would also lose the anticipated revenue associated with any such lost station. Our acquisition of certain outdoor advertising assets from Infinity Broadcasting Corporation is being reviewed by the Department of Justice, which may disapprove our acquisition of such assets in its sole discretion. The proposed sale of certain outdoor advertising assets from Infinity Broadcasting Corporation to us is being made as a divestiture of assets in accordance with the final written judgment of an antitrust proceeding between the Department of Justice and Infinity Broadcasting, among others. Pursuant to the final judgment, the Department of Justice must be satisfied, in its sole discretion, that the divestiture of these outdoor advertising assets will remedy the competitive harm alleged by the Department of Justice in the complaint underlying the antitrust proceeding. The Department of Justice has informed us in writing that it is reviewing the terms of our acquisition of such assets in 10 order to approve us as a buyer. If, in its sole discretion, the Department of Justice determines that we are not an appropriate buyer for these assets, we will not be permitted to consummate the acquisition and our outdoor advertising revenue will be significantly reduced. If we cannot raise required capital, we may have to curtail existing operations and our future growth 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 future acquisitions and 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. 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 prevent future acquisitions and have a material adverse effect on our ability to grow through acquisitions. Our substantial level of debt could limit our ability to grow and compete. After repaying some of our outstanding indebtedness with a portion of the proceeds from this offering, and after the consummation of our pending acquisitions described elsewhere in this prospectus, we expect to have approximately $340 million of debt outstanding under our proposed new bank credit facility. 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. A significant portion of our cash flow from operations will be dedicated to servicing our debt obligations and our ability to obtain additional financing may be limited. 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 our bank credit facilities are accelerated, our assets may not be sufficient to repay in full the money owed to such lenders. The terms of our current bank credit facilities restrict, and our proposed new bank credit facility will restrict, our ability to make acquisitions or investments and to obtain additional financing. Our bank credit facilities contain, and our proposed new bank credit facility will contain, 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, and our proposed new bank credit facility will require, us to maintain specific financial ratios. A breach of any of the covenants contained in our bank credit facilities, or our proposed new bank credit facility, could allow our lenders to declare all amounts outstanding under such facilities to be immediately due and payable. 11 Following this offering, our executive officers will have control over our policies, affairs and all other aspects of our business and future direction. 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 77% 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 all aspects of our business and future direction. Messrs. Ulloa, Wilkinson and Zevnik have agreed contractually to elect themselves, Amador S. Bustos, the President of our Radio Division, 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. 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 the 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. 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 12 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. Risks Related to the Television, Radio, Outdoor Advertising and Publishing Industries If we are unable to maintain our FCC license at any station, we may have to cease operations at that station. 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. Our failure to maintain our FCC broadcast licenses could cause a default under our credit facilities and cause an acceleration of our indebtedness. 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. Displacement of any of our low-power television stations could cause our ratings and revenue for any such station to decrease. Our low-power television stations operate with far less power and coverage than our full-power stations. The FCC rules under which we operate provide that low-power television stations are treated as a secondary service. In the event that our stations would cause interference to full-power stations, we are required to eliminate the interference or terminate service. As a result of the FCC's initiation of digital television service and actions by Congress to reclaim channels previously used for broadcasting for auction to wireless services or assignment to public safety services, the number of available broadcast channels has been narrowed. The result is that in a few urban markets where we operate, including Washington, D.C. and San Diego, there are a limited number of alternative channels to which our low-power television stations can migrate as they are displaced by full-power broadcasters and non-broadcast services. If we are unable to move our signals to replacement channels, we may be unable to maintain the same level of service, which could harm our ratings and advertising revenue or, in the worst case, cause us to discontinue operations at those low-power stations. 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 could be significant, and there may not be any consumer 13 demand for digital television services. The imposition of digital television 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 the rules and regulations of the FCC could result in increased competition for our broadcast stations that could lead to increased competition in our markets. Recent and prospective actions by the FCC could cause us to face increased competition in the future. The changes include: . relaxation of restrictions on the participation by regional telephone operating companies in cable television and other direct-to-home audio and video technologies; . 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. Because our full-power television stations rely on "must carry" rights to obtain cable carriage, new laws or regulations that eliminate or limit the scope of our cable carriage rights 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 digital television 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 digital television. New laws or regulations that eliminate or limit the scope of our cable carriage rights could have a material adverse impact on our television operations. Our low-power television stations do not have "must carry" rights. In seven 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 market, all of our low-power stations reach a substantial portion of the Hispanic cable households in their respective markets. 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. We compete with Spanish-language and general market media in each of our business segments. 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. 14 If regulation of outdoor advertising increases, we could suffer decreased revenue from 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 disrupt our publishing 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 and the Newspaper Guild of New York represent our publishing employees. Our collective bargaining agreement with the Newspaper and Mail Deliverers' Union of New York and Vicinity 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 result in decreased revenue in our publishing operations. Risks Related to this Offering Future sales by existing stockholders could depress the market price of our Class A common stock. Upon completion of this offering, we will have outstanding 58,726,077 shares of Class A common stock. Of these shares, 38,380,952 shares sold in this offering will be freely tradeable. This will leave 20,345,125 shares of Class A common stock outstanding, 12,589,015 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. There will also be outstanding 27,678,533 shares of Class B common stock and 21,983,392 shares of Class C common stock, all of which will be convertible at any time at the option of the holder, and all of which (with the exception of 249,220 shares of Class B common stock) will be eligible for sale in the public market after the "lock-up" period expires. 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. 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 15 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." 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. 16 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. 17 USE OF PROCEEDS We estimate that the net proceeds to us from the sale of 46,000,000 shares of Class A common stock in this offering will be approximately $600 million, based on an assumed initial public offering price of $14.00 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 $690 million. We intend to use the net proceeds from this offering as follows: . to acquire Z-Spanish Media.................................. $220 million . to repay the existing loan on LCG........................... 115 million . to repay the debt of Z-Spanish Media........................ 110 million . to repay a bridge loan (including fees) used to acquire two radio stations from Citicasters............................. 70 million . to repay part of the balance on Entravision's credit facility.................................................... 77 million . for working capital and general corporate purposes.......... 8 million ------------ $600 million ============
For a description of our acquisitions of LCG, 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 20, 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 19, 2001 and can be prepaid without penalty. Z-Spanish Media has several credit facilities with borrowings outstanding of approximately $110 million as of the date of this prospectus. The interest rates on these facilities range from 9.6% to 11.8% and the facilities can be prepaid without penalty. The maturity dates of these facilities range from December 31, 2000 to September 30, 2006. We expect to repay this debt with proceeds from this offering. Prior to completion of this offering, Univision will make available to our predecessor a $70 million bridge loan to pay the purchase price for two radio stations from Citicasters. Our predecessor would pay to Univision a commitment fee of 2.25% upon funding. The $70 million bridge loan would bear interest at a rate of 14% per annum, would be due and payable in full on December 30, 2021 and would require repayment on the closing of this offering. We would repay the entire balance with proceeds from this offering. If this offering has not closed by October 31, 2000, Univision would have the option, for an exercise price equal to the unpaid balance under the bridge note, to acquire an additional equity interest in us (or our predecessor, if the reorganization described in this prospectus has not occurred) at a price per share (or price per unit) equal to the price per unit of the equity option acquired by Univision in its $110 million investment in our predecessor in March 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. At March 31, 2000, the borrowings outstanding were approximately $96.9 million with an interest rate of 8.165%. We expect to repay $77 million of this debt with proceeds from this offering, and the remainder of the debt with our proposed new $600 million bank credit facility. Until we use the net proceeds of this offering as described above, we will invest them in short-term, interest-bearing, investment grade securities. 18 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. 19 CAPITALIZATION (In thousands, except per share data) The following table shows our cash and cash equivalents and capitalization on: . an actual basis as of March 31, 2000 which gives effect to the conversion of our predecessor from a limited liability company to a corporation and the related exchange of membership units and member corporation shares for shares of Class A, B and C common stock; . a pro forma basis to reflect acquisitions we made or have agreed to make after March 31, 2000, and a $90 million investment made by TSG Capital Fund III, L.P. in 2000 in a convertible subordinated note and its conversion to Series A manditorily redeemable convertible preferred stock; and . a pro forma as adjusted basis to further reflect the sale of the 46,000,000 shares of Class A common stock we are offering at an estimated initial public offering price of $14.00 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 March 31, 2000 ------------------------------------ Pro Forma Actual Pro Forma As Adjusted ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) Cash and cash equivalents.................. $ 3,513 $ 6,457 $ 14,457 ======== ========== ========== Current maturities of long-term debt ...... $ 525 $ 23,329 $ 23,329 Notes payable, less current maturities..... 114,076 410,072 38,572 Subordinated note--Univision (1)........... 120,000 -- -- Convertible subordinated note--TSG Capital Fund III, L.P. (1)........................ -- -- -- -------- ---------- ---------- Total long-term debt...................... 234,601 433,401 61,901 -------- ---------- ---------- Series A mandatorily redeemable convertible preferred stock, $0.0001 par value, 11,000,000 shares authorized; 2000 actual: no shares issued or outstanding; pro forma and pro forma as adjusted: 6,106,497 shares issued and outstanding (1)(2)...... -- 90,000 90,000 -------- ---------- ---------- Stockholders' equity Class A common stock, $0.0001 par value, 260,000,000 shares authorized; 2000 actual: 4,937,854 shares issued and outstanding; pro forma: 27,875,756 shares issued and outstanding; pro forma as adjusted: 58,125,756 shares issued and outstanding (2).......................... 1 3 5 Class B common stock, $0.0001 par value, 40,000,000 shares authorized; 2000 actual, pro forma and pro forma as adjusted: 27,429,313 shares issued and outstanding.............................. 5 5 5 Class C common stock, $0.0001 par value, 25,000,000 shares authorized; 2000 actual: no shares issued and outstanding; pro forma and pro forma as adjusted: 21,983,392 shares issued and outstanding (1).......................... -- 1 1 Additional paid-in capital................ 23,611 489,488 868,986 Deferred compensation..................... -- (11,150) (11,150) Accumulated deficit....................... -- -- -- Stock subscription notes receivable (3)... (590) (590) (590) -------- ---------- ---------- Total stockholders' equity................ 23,027 477,757 857,257 -------- ---------- ---------- Total capitalization....................... $257,628 $1,001,158 $1,009,158 ======== ========== ==========
20 - -------- (1) The unaudited pro forma data reflect 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. In the event this offering has not closed by October 31, 2000, Univision would have the option, for an exercise price equal to the unpaid balance under a $70 million bridge loan that Univision will make available to our predecessor, to acquire an additional equity interest in us (or our predecessor, if the reorganization described in this prospectus has not occurred) at a price per share (or price per unit) equal to the price per unit of the equity option acquired by Univision in its $110 million investment in our predecessor in March 2000. (2) The unaudited pro forma financial information assumes that approximately $220 million of proceeds from this offering are used to finance our pending acquisition of Z-Spanish Media. In the event the offering has not closed by September 30, 2000, we would be required to issue approximately $220 million of redeemable preferred stock with a dividend of LIBOR plus 7%. (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 pro forma liabilities from the total pro forma 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 March 31, 2000, we had a deficit tangible book value of $(168) million or $(5.19) per share. Our pro a deficit tangible book value per share at March 31, 2000 is a deficit of $(604) million or $(7.81) per share which includes the pro forma effect of $220.0 million in offering proceeds. Assuming the sale of 38,380,952 shares at an initial public offering price of $14.00 per share and the sale of 7,619,048 shares to Univision at a price of $13.13 per share and deducting the underwriters' discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of March 31, 2000 would have been a deficit of $(224) million or $(2.08) per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $5.73 per share and an immediate dilution to new investors of $16.08 per share. The following table illustrates this per share dilution:
Per Share --------- Assumed initial public offering price......................... $14.00 Deficit tangible book value per share of March 31, 2000....... (5.19) Pro forma effect of completed and pending acquisitions........ (2.62) ----- Pro forma deficit tangible book value as of March 31, 2000.... (7.81) Increase attributable to new investors........................ 5.73 ----- Pro forma deficit tangible book value after this offering..... (2.08) ------ Dilution per share to new investors........................... $16.08 ======
The following table summarizes, on a pro forma as adjusted basis, the number of shares of Class A common stock (and Class B and Class C common stock convertible into 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 Class B and Class C common stock convertible into 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 $14.00 per share before deducting estimated underwriters' fees and offering expenses (and assuming that the underwriters do not exercise the over-allotment option):
Shares Purchased Total Consideration Average ------------------- -------------------- Price Per Number Percent Amount Percent Share ----------- ------- ------------ ------- --------- Existing stockholders... 61,538,461 57.2% $227,311,442 26.3% $ 3.69 Univision stock purchase............... 7,619,048 7.1 100,000,000 11.6 $13.13 New investors .......... 38,380,952 35.7 537,333,328 62.1 $14.00 ----------- ------ ------------ ------ Total................... 107,538,461 100.0% $864,644,770 100.0% =========== ====== ============ ======
22 SELECTED HISTORICAL FINANCIAL DATA (In thousands, except per share and per membership unit 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. The data as of March 31, 2000 and for the three months ended March 31, 1999 and 2000 were derived from our unaudited financial statements and related notes, which are included in this prospectus. The unaudited financial statements were prepared by us on substantially the same basis as the audited financial statements and, in the opinion of management, include all normal recurring adjustments that we consider necessary for a fair presentation of such data.
Three Months Ended Year Ended December 31, March 31, -------------------------------------------- ----------------------- 1995 1996 1997 1998 1999 1999 2000 ------- ------- ------- ------- -------- ----------- ----------- (Unaudited) (Unaudited) Statement of Operations Data: Gross revenue........... $ 7,797 $13,555 $33,419 $49,872 $ 66,204 $13,013 $19,340 Less agency commissions............ 688 1,481 2,963 5,052 7,205 1,284 2,076 ------- ------- ------- ------- -------- ------- -------- Net revenue............. 7,109 12,074 30,456 44,820 58,999 11,729 17,264 ------- ------- ------- ------- -------- ------- -------- Expenses: Direct operating...... 1,846 3,819 9,184 15,794 24,441 4,672 7,883 Selling, general and administrative (excluding non-cash stock-based compensation)........ 2,295 4,667 5,845 8,877 11,611 2,510 3,749 Corporate............. -- 564 3,899 3,963 5,809 1,304 1,848 Depreciation and amortization......... 673 1,707 10,216 10,934 15,982 3,321 4,877 Non-cash stock-based compensation (1)..... -- -- 900 500 29,143 7,286 -- ------- ------- ------- ------- -------- ------- -------- Total expenses.......... 4,814 10,757 30,044 40,068 86,986 19,093 18,357 ------- ------- ------- ------- -------- ------- -------- Operating income (loss)................. 2,295 1,317 412 4,752 (27,987) (7,364) (1,093) Interest expense, net... (265) (1,035) (5,107) (8,244) (9,591) (2,023) (3,897) Non-cash interest expense relating to Univision conversion option (2)............. -- -- -- -- (2,500) -- (31,600) ------- ------- ------- ------- -------- ------- -------- Income (loss) before income taxes ........ 2,030 282 (4,695) (3,492) (40,078) (9,387) (36,590) Income tax (expense) benefit (3)............ (369) (145) 7,531 (210) 121 74 6 ------- ------- ------- ------- -------- ------- -------- Net income (loss)..... 1,661 137 2,836 (3,702) (39,957) (9,313) (36,584) ======= ======= ======= ======= ======== ======= ======== Income (loss) per membership unit (4).... n/a $ 0.02 $ (1.19) $ (0.07) $ (19.12) $ (4.38) $ (18.68) ======= ======= ======= ======= ======== ======= ======== Pro forma income tax (expense) benefit (5).. (812) (204) 643 322 2,499 622 1,777 ======= ======= ======= ======= ======== ======= ======== Pro forma net income (loss) (5)............. $ 1,218 $ 78 $(4,052) $(3,170) $(37,579) $(8,765) $(34,813) ======= ======= ======= ======= ======== ======= ======== Pro forma basic and diluted earnings per share: Pro forma net income (loss) (5)........... $ 0.04 $ 0.00 $ (0.12) $ (0.10) $ (1.16) $ (0.27) $ (1.08) Pro forma weighted average common shares outstanding.......... 33,519 32,046 32,972 32,895 32,402 32,431 32,367
23
Three Months Ended Year Ended December 31, March 31, -------------------------------------------- ----------------------- 1995 1996 1997 1998 1999 1999 2000 ------ ------ -------- -------- -------- ----------- ----------- (Unaudited) (Unaudited) Other Financial Data: Broadcast cash flow (6).................... $2,968 $3,588 $ 15,427 $ 20,149 $ 22,947 $ 4,547 $ 5,632 EBITDA (adjusted for non-cash stock-based compensation) (7)...... 2,968 3,024 11,528 16,186 17,138 3,243 3,784 Non-cash stock-based compensation (1)....... -- -- 900 500 29,143 7,286 -- Cash flows from operating activities... 2,147 2,001 6,509 7,658 6,128 899 1,028 Cash flows from investing activities... (1,635) (3,396) (61,908) (25,586) (59,063) (17,045) (63,826) Cash flows from financing activities... (750) 3,556 54,763 19,339 51,631 15,570 63,954 Capital expenditures.... 902 935 2,366 3,094 12,825 4,642 2,693 As of December 31, As of -------------------------------------------- March 31, 1995 1996 1997 1998 1999 2000 ------ ------ -------- -------- -------- ----------- (Unaudited) Balance Sheet Data: Cash and cash equivalents............ $ 726 $2,886 $ 2,250 $ 3,661 $ 2,357 $ 3,513 Total assets............ 8,630 49,072 111,953 131,291 205,017 268,748 Long-term debt, including current portion................ 5,265 17,449 74,781 99,938 167,537 234,601 Total owners' equity.... 2,322 30,047 32,057 24,871 28,011 23,027
- ------- (1) For 1999, non-cash stock-based compensation represents management's estimate of the fair value of our award of Class D membership units in our predecessor to an employee and our grant of an option to purchase Class D membership units in our predecessor to an employee based on the estimated price of this offering. (2) During 1999, conditions restricting the exchange of Univision's $10 million convertible subordinated note were eliminated and we recorded non- cash interest expense of $2.5 million. In March 2000, the subordinated note was amended and increased to $120 million, and the option exchange feature was increased to 40%. The estimated fair value of the $110 million amendment to the convertible subordinated note and option feature was $141.6 million based on an estimated initial public offering price. This resulted in a $31.6 million non-cash charge to interest expense in the quarter ended March 31, 2000. (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) Income (loss) per membership unit is computed as net income (loss) of our predecessor divided by the number of membership units as of the last day of each reporting period. (5) 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, non-cash stock-based compensation and non-cash interest expense relating to the Univision conversion option for each period presented. (6) 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. (7) EBITDA means broadcast cash flow less corporate expenses (adjusted for non- cash stock-based compensation) 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. 24 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (In thousands) Our selected unaudited pro forma financial data as of March 31, 2000 and for the year ended December 31, 1999 and for the three months ended March 31, 1999 and 2000 presents: . our summary historical financial data; . the historical financial data of our completed and pending acquisitions; . our summary unaudited pro forma financial data, giving effect to acquisitions completed in 1999 and 2000 and our pending acquisition of Z- Spanish Media as if such transactions had been completed January 1, 1999, the effect of conversion of TSG Capital Fund III, L.P.'s $90 million convertible subordinated note into preferred stock, the issuance of 15,750,000 shares of Class A common stock in this offering assuming an initial public offering price of $14.00 per share used to finance the cash portion of the purchase price of Z-Spanish Media 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 46,000,000 shares of common stock less 15,750,000 shares used to finance the cash portion of the purchase price of Z- Spanish Media that we are offering, assuming an initial public offering price of $14.00 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. The financial data as of and for the three months ended March 31, 2000 are derived from our unaudited financial statements included elsewhere in this prospectus. Such unaudited financial statements have been prepared by us on a basis consistent with our annual audited financial statements and, in the opinion of our management, contain all normal recurring adjustments necessary for a fair presentation of the financial position and the results of operations for the applicable periods. Operating results in the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected in the year ending December 31, 2000 or any subsequent period. 25
Year Ended December 31, 1999 ------------------------------------------------ Completed Entravision and Pending Pro Forma Historical Acquisitions Pro Forma As Adjusted ----------- ------------ ----------- ----------- (Unaudited) (Unaudited) Statement of Operations Data: Gross revenue: Television................. $ 63,842 $ 5,096 $ 68,938 $ 68,938 Radio...................... 2,362 64,276 66,638 66,638 Outdoor and publishing..... -- 35,134 35,134 35,134 -------- -------- -------- -------- Total gross revenue........ 66,204 104,506 170,710 170,710 Less agency commissions...... 7,205 8,763 15,968 15,968 -------- -------- -------- -------- Net revenue.................. 58,999 95,743 154,742 154,742 Expenses: Direct operating........... 24,441 35,313 59,754 59,754 Selling, general and administrative (excluding non-cash stock- based compensation)....... 11,611 35,807 47,418 47,418 Corporate.................. 5,809 6,830 12,639 12,639 Depreciation and amortization.............. 15,982 14,603 85,770 85,770 Non-cash stock-based compensation.............. 29,143 -- 31,931 31,931 Gain on sale of assets..... -- (4,442) (4,442) (4,442) -------- -------- -------- -------- Total expenses............... 86,986 88,111 233,070 233,070 -------- -------- -------- -------- Operating income (loss)...... (27,987) 7,632 (78,328) (78,328) Interest expense, net and other....................... (9,591) (14,657) (35,134) (3,185) Non-cash interest expense relating to Univision conversion option (1)....... (2,500) -- (2,500) (2,500) Income tax benefit .......... 121 1,872 28,160 15,380 -------- -------- -------- -------- Loss from continuing operations................ (39,957) (5,153) (87,802) (68,633) Preferred stock dividends (2)....................... -- -- 7,650 7,650 -------- -------- -------- -------- Net loss from continuing operations applicable to common stock.............. $(39,957) $ (5,153) $(95,452) $(76,283) ======== ======== ======== ========
26
Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 ------------------------------------------------ -------------- Completed Entravision and Pending Pro Forma Historical Acquisitions Pro Forma As Adjusted Pro Forma ----------- ------------ ----------- ----------- -------------- (Unaudited) (Unaudited) (Unaudited) Statement of Operations Data: Gross revenue: Television............ $ 18,178 $ 78 $ 18,256 $ 18,256 $ 13,664 Radio................. 1,162 14,807 15,969 15,969 12,166 Outdoor and publishing........... -- 7,476 7,476 7,476 6,857 -------- ------- -------- -------- -------- Total gross revenue... 19,340 22,361 41,701 41,701 32,687 Less agency commissions............ 2,076 2,096 4,172 4,172 2,887 -------- ------- -------- -------- -------- Net revenue............. 17,264 20,265 37,529 37,529 29,800 Expenses: Direct operating...... 7,883 7,935 15,818 15,818 12,263 Selling, general and administrative (excluding non-cash stock-based compensation)........ 3,749 7,296 11,045 11,045 11,548 Corporate............. 1,848 2,197 4,045 4,045 2,348 Depreciation and amortization......... 4,877 4,295 21,757 21,757 21,446 Non-cash stock-based compensation......... -- 196 893 893 7,983 Gain on sale of assets............... -- -- -- -- (2,223) -------- ------- -------- -------- -------- Total expenses.......... 18,357 21,919 53,558 53,558 53,365 -------- ------- -------- -------- -------- Operating income (loss)................. (1,093) (1,654) (16,029) (16,029) (23,565) Interest expense, net... (3,897) (4,054) (9,510) (1,523) (8,491) Non-cash interest expense relating to Univision conversion option (1)............. (31,600) -- (31,600) (31,600) -- Income tax benefit ..... 6 1,858 8,609 5,414 8,304 -------- ------- -------- -------- -------- Loss from continuing operations........... (36,584) (3,850) (48,530) (43,738) (23,752) Preferred stock dividends (2)........ -- -- 1,913 1,913 1,913 -------- ------- -------- -------- -------- Net loss from continuing operations applicable to common stock................ $(36,584) $(3,850) $(50,443) $(45,651) $(25,665) ======== ======= ======== ======== ========
Year Ended Three Months Ended December 31, 1999 March 31, ----------------- ----------------------- Pro Forma Pro Forma Pro Forma 1999 2000 ----------------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) Other Financial Data: Broadcast cash flow (3)............. $ 47,570 $ 5,989 $ 10,666 EBITDA (adjusted for non-cash stock- based compensation) (4)............ 34,931 3,641 6,621 Cash flows from operating activities......................... 6,955 (399) 2,070 Cash flows from investing activities......................... (724,675) (8,936) (621,537) Cash flows from financing activities......................... 720,992 18,527 612,112
27
As of March 31, 2000 Pro Forma As Adjusted -------------- (Unaudited) Balance Sheet Data: Cash and cash equivalents....................................... $ 14,457 Total assets.................................................... 1,240,953 Long-term debt, including current portion....................... 61,901 Series A mandatorily redeemable convertible preferred stock..... 90,000 Total stockholders' equity (5).................................. 857,257
- -------- (1) During 1999, conditions restricting the exchange of Univision's $10 million convertible subordinated note were eliminated and we recorded non- cash interest expense of $2.5 million. In March 2000, the subordinated note was amended and increased to $120 million, and the option exchange feature was increased to 40%. The estimated fair value of the $110 million amendment to the convertible subordinated note and option feature was $141.6 million based on an estimated initial public offering price. This resulted in a $31.6 million non-cash charge to interest expense in the quarter ended March 31, 2000. (2) Includes 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. (3) 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. (4) EBITDA means broadcast cash flow less corporate expenses (adjusted for non- cash stock-based compensation) 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. (5) 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. 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Unless we indicate otherwise, all of the text of this prospectus describes us giving effect to all of our pending and completed acquisitions. In addition, our unaudited pro forma financial information shows how we would look as if we had owned all of the businesses, licenses and assets that we have recently acquired or agreed to acquire (other than certain outdoor advertising assets from Infinity Broadcasting Corporation, two radio stations from Citicasters Co. and two television stations in Hartford, Connecticut and Orlando, Florida) for all of 1999 and for the three months ended March 31, 1999 and March 31, 2000. Our unaudited financial statements and summary and selected historical financial data, however, show the actual performance of each group's changes, except for our reorganization described elsewhere in this prospectus. We have included Management's Discussion and Analysis of Financial Condition and Results of Operations for each of Entravision, LCG and Z-Spanish Media. 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. Our combined operations generate revenue from the sale of national and local advertising time on our television and radio stations, the sale of outdoor display contracts for our billboard operations and advertising and circulation for our publishing operations. As a result, our revenue is affected by the advertising rates we can charge. For our radio and television operations, the rates are based upon our ability to attract audiences in demographic groups targeted by advertisers. Our revenue is affected by numerous factors, including changes in audience ratings and priorities of advertisers, new laws, governmental regulations and policies and technological advances. The acquisitions of the following businesses are included in the financial portion of this prospectus: . 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 over tangible net assets and identifiable intangible assets was allocated to goodwill, which will be amortized over 15 years. . We have agreed to acquire all of the outstanding capital stock of Z- Spanish Media for approximately $448 million including the assumption of approximately $110 million in debt. The consideration to be paid includes approximately $220 million in cash, 7,187,902 shares of Class A common stock, valued at a price of $14.74 per share and options to purchase an aggregate of 1,615,231 shares of Class A common stock under our omnibus equity incentive plan to be issued in exchange for existing Z-Spanish Media options. The acquisition will be accounted for as a purchase business combination and the excess purchase price over tangible net assets and identifiable intangible assets will be allocated to goodwill, which will be amortized over 15 years. The closing of the acquisition is subject to conditions, including the receipt of required regulatory approvals. To comply with a preliminary Department of Justice inquiry, six of Z-Spanish Media's radio stations will be transferred to a trust. The beneficiary of the trust is Z-Spanish Media. If the Department of Justice permits us to acquire these stations, Z-Spanish Media would be obligated to purchase these stations for an aggregate 29 purchase price of up to $23.0 million. If we are not permitted to purchase these stations, Z-Spanish Media is obligated to remit the proceeds from the sale of those stations to the former stockholders of Z-Spanish Media. . We have agreed to acquire four radio stations in McAllen, Texas for a total of $55 million (including a deposit of $2 million). The acquisition will be accounted for under the purchase method of accounting. The closing of this acquisition is subject to conditions, including the receipt of required regulatory approvals. We expect to close this acquisition in the third quarter of 2000. The following acquisitions represent our purchases of broadcasting, television and outdoor advertising assets that do not represent business acquisitions and therefore historical financial information is not included in the financial portion of the prospectus: . We have agreed to acquire certain outdoor advertising assets from Infinity Broadcasting Corporation for a total of $168.2 million. The entire purchase price for this acquisition will be allocated to tangible and intangible assets and will be amortized over five to 15 years. The closing of this acquisition is subject to conditions, including the receipt of required regulatory approvals. We expect to close this acquisition in the third quarter of 2000. . 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. We expect to close this acquisition in the third quarter of 2000. . We have agreed to acquire two television stations in Hartford, Connecticut and Orlando, Florida for a total of approximately $41 million (including deposits already paid). The entire purchase price for these two 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 these acquisitions in the third quarter of 2000. We expect that the combined company will have revenue from television of 37%, from radio of 35%, from outdoor advertising of 19% and from publishing of 9%. Sources and Uses
(In millions) Sources Uses -------- ----- Net offering proceeds.......................................... $ 600 Proposed new bank credit facility.............................. 600 Acquire Z-Spanish Media........................................ $ 220 Repay existing loan on LCG..................................... 115 Repay Z-Spanish Media debt..................................... 110 Repay a bridge loan used to acquire two radio stations from Citicasters................................................... 70 Repay Entravision bank debt.................................... 157 Purchase: McAllen radio stations....................................... 53 Orlando television station................................... 21 Hartford television station.................................. 17 Infinity Broadcasting outdoor advertising assets............. 168 Working capital and general corporate.......................... 8 ------- ----- $ 1,200 $ 939 ======= ===== Excess borrowing capacity...................................... $ 261
30 Liquidity and Capital Resources Overview Our primary sources of liquidity are 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 intend to enter into a new $600 million credit facility which will be comprised of a $250 million revolver, a $150 million term loan expiring in 2007 and a $200 million term loan expiring in 2008. After consummation of all of the transactions set forth in the Sources and Uses table above, we expect to have approximately $367 million of debt outstanding under our proposed new bank credit facility. The new facility has been committed to and we intend that it will be in place by the time this offering becomes effective and that it will replace all of the current credit facilities for both Entravision and Z-Spanish Media. Our obligations under this facility will be secured by all of our assets as well as a pledge of the stock of several of our subsidiaries, including our special purpose subsidiaries formed to hold our FCC licenses. The facility will contain financial covenants, including a requirement not to exceed a maximum debt to cash flow ratio and interest and fixed charge coverage ratios. The facility will require us to maintain our FCC licenses for our broadcast properties and will contain other operating covenants, including restrictions on our ability to incur additional indebtedness and pay dividends. Prior to the closing of this offering, Univision will make available to our predecessor a $70 million bridge loan to our predecessor, $68 million of which we intend to use to consummate the acquisition of the two radio stations from Citicasters prior to completion of this offering. Our predecessor would pay to Univision a commitment fee of 2.25% upon funding. The $70 million bridge loan would bear interest at a rate of 14% per annum, would be due and payable in full on December 30, 2021 and would require repayment on the closing of this offering. We would repay the entire balance of $70 million with proceeds from this offering. If this offering has not closed by October 31, 2000, Univision would have the option, for an exercise price equal to the unpaid balance under the bridge note, to acquire an additional equity interest in us (or our predecessor, if the reorganization described in this prospectus has not occurred) at a price per share (or price per unit) equal to the price per unit of the equity option acquired by Univision in its $110 million investment in our predecessor in March 2000. During 2000, we anticipate our capital expenditures will be approximately $23 million, including the building of two studio facilities, the transition to digital television for three stations and 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. 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 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 proposed new credit facility 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. 31 ENTRAVISION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We operate 31 television stations (and have three additional television stations that are not yet operational) and 14 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 ten 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 of our predecessor. 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 purchase price for the LCG and Z-Spanish Media acquisitions being allocated to non-tax deductible goodwill. 32 Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31, 1999 The following table sets forth selected data from our operating results for the three months ended March 31, 1999 and 2000 (dollars in thousands):
Three Months Ended ------------------- March 31, March 31, 1999 2000 % Change --------- --------- -------- Statement of Operations Data: Gross revenue................................ $13,013 $ 19,340 48.6% Less agency commissions...................... 1,284 2,076 61.7 ------- -------- Net revenue.................................. 11,729 17,264 47.2 Direct operating expenses.................... 4,672 7,883 68.7 Selling, general and administrative expenses.................................... 2,510 3,749 49.4 Corporate expenses........................... 1,304 1,848 41.7 Depreciation and amortization................ 3,321 4,877 46.9 Non-cash stock-based compensation............ 7,286 -- n/a ------- -------- Operating (loss)............................. (7,364) (1,093) 85.2 Interest expense, net........................ (2,023) (3,897) (92.6) Non-cash interest expense relating to Univision conversion option................. -- (31,600) n/a ------- -------- Loss before income tax....................... (9,387) (36,590) 289.8 Income tax benefit........................... 74 6 (91.9) ------- -------- Net loss..................................... $(9,313) $(36,584) (292.8) ======= ======== Other Data: Broadcast cash flow.......................... $ 4,547 $ 5,632 23.9% EBITDA (adjusted for non-cash stock-based compensation)............................... 3,243 3,784 16.7
Net Revenue. Net revenue increased to $17.3 million for the quarter ended March 31, 2000 from $11.7 million for the quarter ended March 31, 1999, an increase of $5.5 million. This increase was primarily attributable to the acquisition of six television stations and the benefit of operating and integrating our 1999 acquisitions. On a same station basis for stations we owned or operated for the entire first quarter of 1999, net revenue increased $3.7 million, or 31.3%. This increase is attributable to an increase in advertising rates and an increase in the number of commercials sold. Direct Operating Expenses. Direct operating expenses increased to $7.9 million for the quarter ended March 31, 2000 from $4.7 million for the quarter ended March 31, 1999, an increase of $3.2 million. This increase was primarily attributable to the additional operations of six television stations. On a same station basis, for stations owned or operated for the entire first quarter of 1999, direct operating expenses increased $1.6 million, or 33.7%. This increase was due to an increase of approximately $0.8 million in sales management and sales tools at our stations and $0.3 million to implement local news programming in our McAllen, Texas and Las Vegas, Nevada markets. As a percentage of net revenue, direct operating expenses increased to 45.7% for the quarter ended March 31, 2000 from 39.8% for the quarter ended March 31, 1999. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $3.7 million for the quarter ended March 31, 2000 from $2.5 million for the quarter ended March 31, 1999, an increase of $1.2 million. This increase was primarily attributable to the additional operations of six television stations. On a same station basis, for stations owned and operated for the entire first quarter of 1999, selling, general and administrative expenses increased 33 $0.5 million, or 19.3%. The increase was primarily due to increased rent costs for our new facility in Denver, Colorado and the associated moving costs. As a percentage of net revenue, selling, general and administrative expenses increased to 21.7% for the quarter ended March 31, 2000 from 21.4% for the quarter ended March 31, 1999. Corporate Expenses. Corporate expenses increased to $1.8 million for the quarter ended March 31, 2000 from $1.3 million for the quarter ended March 31, 1999, an increase of $0.5 million. This increase was primarily due to additional staffing as a result of our growth, increase in rent associated with moving into a larger facility, and additional costs associated with our acquisitions. As a percentage of net revenue, corporate expenses decreased to 10.7% for the quarter ended March 31, 2000 from 11.1% for the quarter ended March 31, 1999. We expect corporate expenses 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 $4.9 million for the quarter ended March 31, 2000 from $3.3 million for the quarter ended March 31, 1999, an increase of $1.6 million. This increase was primarily attributable to the acquisition of additional television stations. On a same station basis, for stations we owned or operated for the entire first quarter of 1999, depreciation and amortization increased $0.5 million. Non-Cash Stock-Based Compensation. We have an employment agreement with an executive vice president in which the employee was awarded 54,284 Class D membership units in our predecessor which will convert into 922,828 shares of our Class A common stock which vested through January 2000. As December 31, 1999, the estimated fair value of this award was fully recorded. Operating Loss. As a result of the above factors, we recognized an operating loss of $1.1 million for the quarter ended March 31, 2000 compared to an operating loss of $7.4 million for the quarter ended March 31, 1999. Excluding non-cash stock-based compensation, operating loss increased by $1.0 million for the quarter ended March 31, 2000, primarily attributable to additional depreciation and amortization of $1.6 million. Interest Expense, Net. Interest expense increased to $3.9 million for the quarter ended March 31, 2000 from $2.0 million for the quarter ended March 31, 1999, an increase of $1.9 million. This increase is primarily due to borrowings to finance an additional acquisition and an increase in the subordinated note with Univision. The non-cash interest expense of $31.6 million relating to the Univision conversion option represents the estimated fair value of the option feature based on an estimated public offering price of $14.00 per share. This resulted in interest expense of $31.6 million during the quarter ended March 31, 2000. Net Loss. We recognized a net loss of $36.6 million for the quarter ended March 31, 2000 compared to a net loss of $9.3 million for the quarter ended March 31, 1999. Excluding non-cash stock-based compensation and interest expense relating to the estimated intrinsic value of the option feature of our additional $110.0 million subordinated note payable to Univision, our net loss increased to $5.0 million for the quarter ended March 31, 2000 from $2.0 million for the quarter ended March 31, 1999. Broadcast Cash Flow. Broadcast cash flow increased to $5.6 million for the quarter ended March 31, 2000 from $4.5 million for the quarter ended March 31, 1999, an increase of $1.1 million. On a same station basis, for stations we owned or operated for the entire first quarter of 1999, broadcast cash flow increased $1.0 million. As a percentage of net revenue, broadcast cash flow decreased to 32.6% for the quarter ended March 31, 2000 from 38.8% for the quarter ended March 31, 1999. 34 EBITDA. EBITDA increased to $3.8 million for the quarter ended March 31, 2000 from $3.2 million for the quarter ended March 31, 1999, an increase of $0.5 million. As a percentage of net revenue, EBITDA decreased to 21.9% for the quarter ended March 31, 2000 from 27.6% for the quarter ended March 31, 1999. The decrease in EBITDA was primarily due to the increase in direct operating expenses offset by the increase in net revenue. 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................. 10,934 15,982 46.2 Non-cash stock-based compensation............. 500 29,143 5,728.6 ------- -------- Operating income (loss)....................... 4,752 (27,987) (489.0) Interest expense, net......................... (8,244) (9,591) (16.3) Non-cash interest expense relating to Univision conversion option.................. -- (2,500) n/a ------- -------- Loss before income tax........................ (3,492) (40,078) (1,047.7) Income tax benefit (expense).................. (210) 121 157.6 ------- -------- Net loss...................................... $(3,702) $(39,957) (979.3) ======= ======== Other Data: Broadcast cash flow........................... $20,149 $ 22,947 13.9% EBITDA (adjusted for non-cash stock-based compensation)................................ 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 $1.2 million, or 2.7%. This increase is attributable to an increase in advertising rates of approximately 20% in certain of our markets, offset by a $2.2 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 $1.9 million, or 12.0%. This increase was due to approximately $1.4 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. 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 35 basis, for stations owned or operated for all of 1998, selling, general and administrative expenses decreased $1.4 million, or 15.7%. 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 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. Depreciation and Amortization. Depreciation and amortization increased to $16.0 million in 1999 from $10.9 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 decreased $1.0 million. This decrease was due primarily to a decrease in amortization relating to presold advertising contracts. Non-Cash Stock-Based Compensation. We have an employment agreement with an executive vice president in which the employee was awarded 54,284 Class D membership units in our predecessor which will convert into 922,828 shares of our 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 4,835 restricted Class D membership units which will convert into 82,195 shares of Class A common stock at 10 cents per unit. The units 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 units, 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 $28.0 million in 1999 compared to operating income of $4.8 million in 1998. Excluding non-cash stock-based compensation, operating income decreased to $1.2 million in 1999 from $5.3 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 2.0% in 1999 from 11.7% in 1998. Interest Expense, Net. Interest expense increased to $9.6 million in 1999 from $8.2 million in 1998, an increase of $1.3 million. The increase is due to additional borrowings to fund our acquisitions, higher interest rates due to our increased debt to cash flow ratio. Net Loss. We recognized a net loss of $40.0 million in 1999, compared to a net loss of $3.7 million in 1998. Excluding non-cash stock-based compensation and interest expense relating to the estimated intrinsic value of the option feature of our original $10.0 million subordinated note payable to Univision, our net loss increased to $8.3 million in 1999 from $3.2 million in 1998, an increase of $5.1 million. 36 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 $0.8 million. The increase was attributable to an increase in advertising rates of approximately 20% in some of our markets, offset by a $2.2 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. EBITDA. EBITDA increased to $17.1 million in 1999 from $16.2 million in 1998, an increase of $1.0 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................... 10,216 10,934 7.0 Non-cash stock-based compensation............... 900 500 (44.4) ------- ------- Operating income................................ 412 4,752 1,053.4 Interest expense, net........................... (5,107) (8,244) (61.4) ------- ------- Loss before income tax.......................... (4,695) (3,492) 25.6 Income tax benefit (expense).................... 7,531 (210) (102.8) ------- ------- Net income (loss)............................... $ 2,836 $(3,702) (230.5) ======= ======= Other Data: Broadcast cash flow............................. $15,427 $20,149 30.6% EBITDA (adjusted for non-cash stock-based compensation).................................. 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 $1.6 million of the increase. On a same station basis, for stations owned or operated for all of 1997, net revenue increased $2.0 million, or 6.7%. 37 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 $0.8 million of the increase. On a same station basis, for stations owned or operated for all of 1997, direct operating expenses increased $1.4 million, or 15.3%. As a percentage of net revenue, direct operating expenses increased to 35.2% 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 $0.3 million of this increase. The acquisition of two 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, selling, general and administrative expenses increased $0.7 million, or 11.4%. 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 $10.9 million in 1998 from $10.2 million in 1997, an increase of $0.7 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 $4.8 million in 1998 compared to operating income of $0.4 million in 1997, an increase of $4.3 million. Excluding non-cash stock-based compensation, operating income increased to $5.3 million in 1998 from $1.3 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 11.7% in 1998 from 4.3% 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 $3.7 million in 1998 compared to net income of $2.8 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 $3.7 million in 1998 from $4.9 million in 1997, a decrease of $1.2 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 $2.7 million of the increase in 1998. In addition, the increase was due to a rate shift from local to 38 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 remained relatively constant. 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 $2.7 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 37.9% in 1997. Liquidity and Capital Resources On March 2, 2000, Univision invested $110 million in the form of a subordinated note. From these proceeds, we used approximately $32 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 $61.0 million to reduce outstanding borrowings on our revolving bank credit facility. On April 20, 2000, we entered into a $115 million term loan to partially finance our acquisition of LCG. Amounts outstanding under this facility are due April 19, 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 $115 million term loan and $90 million from the issuance to TSG Capital Fund III, L.P. of a convertible subordinated note. Net cash flow from operating activities increased to approximately $1.0 million for the three months ended March 31, 2000, from approximately $0.9 million for the three months ended March 31, 1999. 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 $63.8 million for the three months ended March 31, 2000, from approximately $17.0 million for the three months ended March 31, 1999. During the three months ended March 31, 2000, we acquired broadcast properties for a total of approximately $46.0 million, made a deposit of $17.0 million for an acquisition and made capital expenditures totaling approximately $2.7 million. During the three months ended March 31, 1999, we acquired broadcast properties for a total of approximately $12.4 million, made capital expenditures totaling approximately $4.6 million, which included the purchase of two parcels of land for $1.0 million, and started construction of a new facility in McAllen, Texas for 39 $2.6 million. 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 $46.0 million (including deposits of $8.7 million for acquisitions closed in 2000) and made capital expenditures totaling approximately $13.0 million, which included the purchases of two parcels of land for $1.0 million, the building of a new facility in McAllen, Texas the upgrade of broadcasting equipment at all of our stations totaling $12.0 million. During 1998, we acquired broadcast properties for a total of approximately $23 million and made purchases of capital equipment totaling approximately $3.0 million. Net cash from financing activities increased to approximately $64.0 million for the three months ended March 31, 2000, from approximately $15.6 million for the three months ended March 31, 1999. During the three months ended March 31, 2000, we increased our subordinated debt by $110.0 million. We used the proceeds to complete the acquisition of two radio stations in El Paso, Texas and an investment in a time brokerage arrangement for a television station in Tijuana, Mexico, and put a deposit on two radio stations in Los Angeles, California. We also paid down our revolving credit facility by $46.0 million. During the three months ended March 31, 1999, we drew on our bank credit facility to acquire television stations from LCG and radio stations in El Centro, California. Net cash flow from financing activities was approximately $51.6 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), Florida. In 1998, we completed acquisitions totaling $15.6 million, which were financed with borrowings under our revolving credit facility. These acquisitions included KORO and KVYE. 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. 40 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. 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 (6.54% at March 31, 2000) plus 1.625%, and our term loan used to finance the LCG acquisition bears interest at LIBOR plus 4% at April 19, 2000. At March 31, 2000 we had $96.9 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 March 31, 2000 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. 41 LCG MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General LCG has 17 radio stations, all but two of which are programmed with one of our three formats delivered via satellite to all of our stations. 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, and all of our outstanding debt was paid out of the proceeds. Three Months Ended March 31, 2000 Compared to the Three Months Ended March 28, 1999 The following table sets forth selected data from our operating results for the three months ended March 28, 1999 and March 31, 2000 (dollars in thousands):
Three Months Ended ------------------- March 28, March 31, 1999 2000 % Change --------- --------- -------- Statement of Operations Data: Gross revenue................................. $ 9,473 $12,036 27.1% Less agency commissions....................... 814 1,194 46.7 ------- ------- Net revenue................................... 8,659 10,842 25.2 Direct operating expenses..................... 3,775 4,212 11.6 Selling, general and administrative expenses.. 4,093 4,734 15.7 Corporate expenses............................ 204 429 110.3 Depreciation and amortization................. 1,243 1,229 (1.1) ------- ------- Operating income (loss)....................... (656) 238 136.3 Interest expense and other, net............... (1,644) (1,384) 15.8 ------- ------- Loss from continuing operations before income tax benefit.................................. (2,300) (1,146) 50.2 Income tax benefit............................ 690 344 (50.1) ------- ------- Loss from continuing operations............... $(1,610) $ (802) 50.2 ======= ======= Other Data: Broadcast cash flow........................... $ 791 $ 1,896 139.7% EBITDA........................................ 587 1,467 149.9
Net Revenue. Net revenue increased to $10.8 million for the quarter ended March 31, 2000 from $8.7 million in the same period in 1999, an increase of $2.2 million. Radio advertising accounted for about $1.7 million of the increase. The increase can be primarily attributed to a strong demand for advertising, which allowed for rate increases. 42 Direct Operating Expenses. Direct operating expenses increased to $4.2 million during the quarter ended March 31, 2000 from $3.8 million in the same period in 1999, an increase of $0.4 million. The increase was primarily due to increases in radio engineering and programming costs. For newspaper publishing, direct operating costs remained relatively flat. As a percentage of net revenue, direct operating expenses decreased to 38.8% during the first quarter of 2000 from 43.6% in the same period in 1999. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $4.7 million during the quarter ended March 31, 2000 from $4.1 million during the quarter ended March 28, 1999, an increase of $0.6 million. The increase was primarily the result of increased sales commissions and general and administrative costs in the radio division. A portion of the increase is also due to the start-up of operations of two radio stations in Nevada in December 1999. As a percentage of net revenue, selling, general and administrative expenses decreased to 43.7% during the quarter ended March 31, 2000 from 47.3% during the same period in 1999. Corporate Expenses. Corporate expenses increased to $0.4 million for the quarter ended March 31, 2000 from $0.2 million during the three months ended March 28, 1999, an increase of $0.2 million. Depreciation and Amortization. Depreciation and amortization remained relatively flat at $1.2 million for each of the quarters ended March 31, 2000 and March 28, 1999. Operating Income (Loss). As a result of the above factors, operating income increased to $0.2 million during the first quarter of 2000 from an operating loss of $0.7 million in the same period in 1999, an increase of $0.9 million. Radio operations accounted for $0.7 million of the increase. Interest Expense and Other, Net. Interest expense and other, net decreased to $1.4 million during the quarter ended March 31, 2000 from $1.6 million during the quarter ended March 28, 1999, a decrease of $0.2 million. Loss from Continuing Operations. As a result of the above factors, the loss from continuing operations decreased to $0.8 million during the three month period ended March 31, 2000 from $1.6 million during the three months ended March 28, 1999, a decrease of $0.8 million. Broadcast Cash Flow. Broadcast cash flow increased to $1.9 million during the quarter ended March 31, 2000 from $0.8 million during the quarter ended March 28, 1999, an increase of $1.1 million. Radio operations accounted for $0.7 million of the increase. As a percentage of net revenue, broadcast cash flow increased to 17.5% during the quarter ended March 31, 2000 from 9.1% in the same period in 1999. EBITDA. EBITDA increased to $1.5 million during the quarter ended March 31, 2000 from $0.6 million in the three months ended March 28, 1999, an increase of $0.9 million. The radio operations accounted for $0.7 million of the increase. As a percentage of net revenue, EBITDA increased to 13.5% during the quarter ended March 31, 2000 from 6.8% during the same quarter of 1999. 43 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) 3,073 224.4 Interest expense and other, net................. (6,449) (5,527) 14.3 ------- ------- Loss from continuing operations before income tax benefit.................................... (8,920) (2,454) 72.5 Income tax benefit.............................. 2,570 736 (71.4) ------- ------- Loss from continuing operations................. $(6,350) $(1,718) 72.9 ======= ======= Other Data: Broadcast cash flow............................. $ 5,023 $ 9,775 94.6% EBITDA.......................................... 2,122 7,980 276.1
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 an increase in advertising rates and an increase in the number of commercials sold. 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. 44 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. 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) (115.6) Interest expense and other, net................. (4,511) (6,449) (43.0) ------- ------- Loss from continuing operations before income tax benefit.................................... (5,657) (8,920) (57.7) Income tax benefit.............................. 2,213 2,570 16.1 ------- ------- Loss from continuing operations................. $(3,444) $(6,350) (84.4) ======= ======= 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. 45 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. 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. 46 Financial information for these business segments includes (in thousands):
Historical Three Months Ended ---------------------------- -------------------- March 28, March 31, 1997 1998 1999 1999 2000 -------- -------- -------- --------- --------- Net Revenue: Radio Broadcasting........ $ 19,200 $ 19,345 $ 25,136 $ 4,536 $ 6,228 Newspaper Publishing...... 17,795 18,551 19,109 4,123 4,614 -------- -------- -------- -------- -------- $ 36,995 $ 37,896 $ 44,245 $ 8,659 $ 10,842 ======== ======== ======== ======== ======== Operating Profit (loss): Radio Broadcasting........ $ (98) $ (974) $ 3,718 $ (240) $ 456 Newspaper Publishing...... 672 1,411 1,150 (211) 212 -------- -------- -------- -------- -------- Total Reportable Segments................ 574 437 4,868 (451) 668 Corporate expenses........ (1,720) (2,908) (1,795) (205) (430) -------- -------- -------- -------- -------- $ (1,146) $ (2,471) $ 3,073 $ (656) $ 238 ======== ======== ======== ======== ======== Identifiable Assets: Radio Broadcasting........ $130,863 $131,887 $130,909 $128,847 $129,150 Newspaper Publishing...... 23,308 23,827 24,563 23,916 24,363 -------- -------- -------- -------- -------- Total Reportable Segments................ 154,171 155,714 155,472 152,763 153,513 Corporate................. 4,335 5,476 2,014 4,842 695 Discontinued operations... 4,500 4,832 -- -- -- -------- -------- -------- -------- -------- $163,006 $166,022 $157,486 $157,605 $154,208 ======== ======== ======== ======== ======== Depreciation and Amortization: Radio Broadcasting........ $ 3,023 $ 3,777 $ 3,862 $ 1,001 $ 958 Newspaper Publishing...... 739 816 1,044 242 271 -------- -------- -------- -------- -------- $ 3,762 $ 4,593 $ 4,906 $ 1,243 $ 1,229 ======== ======== ======== ======== ======== Capital Expenditures: Radio Broadcasting........ $ 672 $ 187 $ 1,061 $ 99 $ 1,040 Newspaper Publishing...... 263 868 1,230 420 116 -------- -------- -------- -------- -------- Total Reportable Segments................ 935 1,055 2,291 519 1,156 Discontinued Operations.... 75 216 -- -- -- -------- -------- -------- -------- -------- $ 1,010 $ 1,271 $ 2,291 $ 519 $ 1,156 ======== ======== ======== ======== ========
Liquidity and Capital Resources Net cash flow provided by operating activities increased to approximately $0.8 million for the three months ended March 31, 2000, from approximately zero cash flow for the three months ended March 28, 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 used in investing activities increased to approximately $2.7 million for the three months ended March 31, 2000, compared to net cash flow provided by investing activities of 47 approximately $14.1 million for the three months ended March 28, 1999. During the three months ended March 31, 2000, we made a deposit of $1.6 million for an acquisition and made capital expenditures totaling approximately $1.1 million. During the three months ended March 28, 1999, we received $12.9 million from the sale of our television stations to Entravision and $1.7 million from disposals of other assets, offset by capital expenditures totaling approximately $0.5 million. 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 decreased to approximately $2.5 million for the three months ended March 31, 2000, from approximately $14.2 million for the three months ended March 28, 1999. During the three months ended March 31, 2000, we drew $1.5 million on our existing debt facilities and made payments of $4.0 million on those same debt facilities. During the three months ended March 28, 1999, we used some of the proceeds from the sale of the television stations to Entravision to pay down our debt facilities by $14.2 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. 48 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. We have agreed to sell all of our outstanding capital stock to Entravision for approximately $448 million. 49 Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31, 1999 The following table sets forth selected data from our operating results for the three months ended March 31, 1999 and March 31, 2000 (dollars in thousands):
Three months ended ------------------- March 31, March 31, 1999 2000 % Change --------- --------- -------- Statement of Operations Data: Gross revenue.................................... $ 7,177 $ 8,740 21.8% Less agency and broker commissions............... 425 581 36.7 ------- ------- Net revenue...................................... 6,752 8,159 20.8 Direct operating expenses........................ 2,763 3,425 24.0 Selling, general and administrative expenses..... 2,056 2,034 (1.1) Corporate expenses............................... 774 1,701 119.8 Depreciation and amortization.................... 1,415 2,843 100.9 Non-cash stock based compensation................ -- 196 n/a Gain on sale of assets, net...................... (2,223) -- n/a ------- ------- Operating income (loss).......................... 1,967 (2,040) (203.7) Interest expense, net............................ (1,196) (2,339) (95.6) ------- ------- Income (loss) before income tax and extraordinary loss............................................ 771 (4,379) (668.0) Minority interest................................ 58 2 (96.6) Income tax benefit (expense)..................... (470) 1,514 422.1 Extraordinary loss on debt extinguishment........ (1,132) -- n/a ------- ------- Net loss......................................... $ (773) $(2,863) (270.4) ======= ======= Other Data: Broadcast/billboard cash flow.................... $ 1,933 $ 2,700 39.7% EBITDA (adjusted for non-cash stock-based compensation)................................... 1,159 999 (13.8)
Net Revenue. Net revenue increased to $8.2 million for the three months ended March 31, 2000 from $6.8 million for the three months ended March 31, 1999, an increase of $1.4 million. Approximately $0.9 million of this increase was due to the inclusion of Seaboard Outdoor Advertising Co. Inc., or Seaboard, which we purchased on September 30, 1999. Additionally, the increase in net revenue was attributable to growth in our radio network, which increased 139%, and a turnaround in the Chicago market where our net revenue increased 62.4%. The increase in net revenue was partially offset by the exclusion of radio station WYPA in Chicago, Illinois, which was sold on September 20, 1999. Direct Operating Expenses. Direct operating expenses increased to $3.4 million for the three months ended March 31, 2000 from $2.8 million for the three months ended March 31, 1999, an increase of $0.6 million. The increase in direct operating expenses is mainly attributable to the inclusion of operating expenses of Seaboard. As a percentage of net revenue, direct operating expenses increased to 42.0% for the three months ended March 31, 2000 from 40.9% for the three months ended March 31, 1999. Selling, General and Administrative Expenses. Selling, general and administrative expenses remained essentially flat for the three months ended March 31, 2000 as compared to the three months ended March 31, 1999. As a percentage of net revenue, selling, general and administrative expenses decreased to 24.9% for the three months ended March 31, 2000 from 30.5% for the three months ended March 31, 1999. 50 Corporate Expenses. Corporate expenses increased to $1.7 million for the three months ended March 31, 2000 from $0.8 million for the three months ended March 31, 1999, an increase of $0.9 million. Approximately $0.5 million was the result of non-recurring corporate expenses. Additionally, the increase in corporate expenses was attributable to increases in the number of employees, transferring traffic operations to corporate and higher salary expense. As a percentage of net revenue, corporate expenses increased to 20.8% for the three months ended March 31, 2000 from 11.5% for the three months ended March 31, 1999. Depreciation and Amortization. Depreciation and amortization increased to $2.8 million for the three months ended March 31, 2000 from $1.4 million for the three months ended March 31, 1999, an increase of $1.4 million. The increase in depreciation and amortization was due to the acquisitions of radio stations and billboards during 1999. Non-Cash Stock-Based Compensation. Non-cash stock-based compensation relates to stock options granted under an employee stock option plan. The expense represents the difference between the grant price and the estimated fair value of the related stock. Net Gain on Sale of Assets. Net gain on sale of assets for the three months ended March 31, 1999 was $2.2 million, which resulted from the sale of radio station WBPS in Cambridge, Massachusetts. Operating Income. Operating income decreased to a loss of $2.0 million for the three months ended March 31, 2000 from income of $2.0 million for the three months ended March 31, 1999, a decrease of $4.0 million. The decrease was primarily the result of an increase in depreciation and amortization expense of $1.4 million and additional corporate charges for the three months ended March 31, 2000. Also, the company recorded gains on the sale of assets of $2.2 million for the three months ended March 31, 1999. Excluding gains on the sale of radio stations, operating loss for the three months ended March 31, 1999 would have been $0.2 million for the three months ended March 31, 1999 compared to an operating loss of $2.0 million for the three months ended March 31, 2000. Interest Expense, Net. Net interest expense increased to $2.3 million for the three months ended March 31, 2000 from $1.2 million for the three months ended March 31, 1999, an increase of $1.1 million. The increase was due primarily to higher borrowings to fund acquisitions in 1999 and 2000. Net Loss. As a result of the above factors, we had a net loss of $2.9 million for the three months ended March 31, 2000 compared to a net loss of $0.8 million for the three months ended March 31, 1999, an increase in net loss of $2.1 million. As a percentage of net revenue, net loss increased to 35.1% for the three months ended March 31, 2000 from 11.4% for the three months ended March 31, 1999. Excluding our 1999 extraordinary loss of $1.1 million related to early extinguishment of debt, net income for the three months ended March 31, 1999 would have been $0.4 million. As a percentage of net revenue, our net income, excluding extraordinary loss, was 5.3% for the three months ended March 31, 1999. Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to $2.7 million for the three months ended March 31, 2000 from $1.9 million for the three months ended March 31, 1999, an increase of $0.8 million. This increase was primarily attributable to revenue growth and effective management of operating expenses. Approximately $0.3 million of the increase in broadcast/billboard cash flow was attributable to the inclusion of Seaboard. As a percentage of net revenue, 51 broadcast/billboard cash flow increased to 33.1% for the three months ended March 31, 2000 from 28.6% for the three months ended March 31, 1999. EBITDA. EBITDA decreased to $1.0 million for the three months ended March 31, 2000 from $1.2 million for the three months ended March 31, 1999, a decrease of $0.2 million. As a percentage of net revenue, EBITDA decreased to 12.2% for the three months ended March 31, 2000 from 17.2% for the three months ended March 31, 1999. The decrease was primarily due to $0.5 million of non- recurring corporate expenses. Excluding these non-recurring corporate expenses, EBITDA for the three months ended March 31, 2000 was $1.5 million. As a percentage of net revenue, our EBITDA, excluding these non-recurring corporate expenses, increased to 18.3% for the three months ended March 31, 2000 from 17.2% for the three months ended March 31, 1999. 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 (2.2) Interest expense, net............................ (5,324) (6,471) (21.5) ------- ------- Loss before income tax and extraordinary loss.... (753) (1,999) (165.5) Minority interest................................ (86) 182 311.6 Income tax benefit (expense)..................... (394) 102 125.9 Extraordinary loss on debt extinguishment........ -- (1,047) n/a ------- ------- Net loss......................................... $(1,233) $(2,762) (124.0) ======= ======= Other Data: Broadcast/billboard cash flow.................... $ 9,291 $13,619 46.6% EBITDA........................................... 5,622 8,846 57.3
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. 52 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. 53 Broadcast/Billboard Cash Flow. Broadcast/billboard cash flow increased to $13.6 million in 1999 from $9.3 million 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 1,740 485.9 ------- ------- 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 4,571 823.4 Interest expense, net............................ (2,069) (5,324) (157.3) ------- ------- Loss before income tax and extraordinary items... (1,574) (753) 52.2 Minority interest................................ (31) (86) (177.4) Income tax benefit (expense)..................... 538 (394) (173.2) Extraordinary loss on debt extinguishment........ (568) -- 100.0 ------- ------- Net loss......................................... $(1,635) $(1,233) 24.6 ======= ======= Other Data: Broadcast/billboard cash flow.................... $ 3,546 $ 9,291 162.0% EBITDA........................................... 571 5,622 884.6
Net Revenue. Net revenue increased to $25.9 million in 1998 from $13.0 million in 1997, an increase of $12.9 million. Approximately $7.4 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. 54 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 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 55 $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. 56 Segment Operations Z-Spanish Media provides services through the following two reportable segments: . Radio Group--the Radio Group's portfolio consisted of 33 radio stations (20 FM and 13 AM) at March 31, 2000, including one station operated under a local marketing agreement. . Outdoor Advertising--the Outdoor Advertising Group owned and operated approximately 10,000 outdoor billboards at March 31, 2000. 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:
Three Months Historical Ended March 31, --------------------------- ------------------ 1997 1998 1999 1999 2000 ------- -------- -------- -------- -------- Net Revenue: Radio Broadcasting.......... $ 9,812 $ 15,391 $ 23,811 $ 4,786 $ 5,331 Outdoor Advertising......... 3,230 10,467 12,227 1,966 2,828 ------- -------- -------- -------- -------- $13,042 $ 25,858 $ 36,038 $ 6,752 $ 8,159 ======= ======== ======== ======== ======== Operating Income: Radio Broadcasting.......... $ 2,448 $ 5,394 $ 8,376 $ 2,780 $ 279 Outdoor Advertising......... 1,022 2,846 869 (39) (422) ------- -------- -------- -------- -------- Total Reportable Segments.. 3,470 8,240 9,245 2,741 (143) Corporate................... (2,975) (3,669) (4,773) (774) (1,897) ------- -------- -------- -------- -------- $ 495 $ 4,571 $ 4,472 $ 1,967 $ (2,040) ======= ======== ======== ======== ======== Total Assets: Radio Broadcasting.......... $68,076 $169,664 $218,231 $186,401 $219,419 Outdoor Advertising......... 28,279 27,610 70,812 27,199 62,645 ------- -------- -------- -------- -------- $96,355 $197,274 $289,043 $213,600 $282,064 ======= ======== ======== ======== ======== Depreciation and Amortization: Radio Broadcasting.......... $ 2,130 $ 4,785 $ 5,983 $ 902 $ 1,713 Outdoor Advertising......... 617 1,951 2,687 513 1,130 ------- -------- -------- -------- -------- $ 2,747 $ 6,736 $ 8,670 $ 1,415 $ 2,843 ======= ======== ======== ======== ======== Capital Expenditures: Radio Broadcasting.......... $ -- $ 695 $ 4,926 $ 312 $ 599 Outdoor Advertising......... 855 1,346 535 252 82 ------- -------- -------- -------- -------- $ 855 $ 2,041 $ 5,461 $ 564 $ 681 ======= ======== ======== ======== ========
Segment income from operations excludes interest income, interest expense and provision for income tax. 57 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 $143.9 million, of which $106.2 million was outstanding as of March 31, 2000. We have a $30.0 million revolving line of credit and a $43.9 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 which began 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 March 31, 2000, the balance outstanding on the revolving credit facility was $6.0 million and the balance outstanding on the term facility was $43.9 million. The interest rate on these facilities was 9.0% at March 31, 2000. Our acquisitions of KLNZ-FM and KZMP-FM were financed by a separate $20.0 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 March 31, 2000 bearing interest at 10.0%. 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 $15.0 million revolving credit facility and a $35.0 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 March 31, 2000, the balance outstanding on the revolving facility was $3.2 million, and the balance outstanding on the term facility was $35.0 million. The interest rate on these facilities was 9.1% at March 31, 2000. Net cash flow provided by operating activities was $0.3 million for the three months ended March 31, 2000 compared to net cash flow used in operating activities of $1.3 million for the three months ended March 31, 1999. Changes in our net cash flow from operating activities are primarily a result of changes in advertising revenues and station operating expenses, which are affected by the acquisition and disposition of stations during those periods. 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 for the three months ended March 31, 2000 decreased to $1.0 million compared to $6.0 million for the three months ended March 31, 1999. During the 58 three months ended March 31, 1999, we made radio acquisitions totaling approximately $27.7 million. We funded these acquisitions through proceeds from the issuance of common stock. The funding of these acquisitions was partially offset by proceeds of approximately $20.5 million from radio station sales during the three months ended March 31, 1999. Net cash flow used in investing activities was $79.1 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 $58.7 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 $0.7 million for the three months ended March 31, 2000, compared to $0.6 million for the three months ended March 31, 1999. Capital expenditures 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 used in financing activities was $3.3 million for the three months ended March 31, 2000 compared to net cash flow provided by financing activities of $17.1 million for the three months ended March 31, 1999. During the three months ended March 31, 2000, we made a scheduled debt repayment on our term loan of $1.1 million. We also made payments on our revolving lines of credit of $1.9 million. During the three months ended March 31, 1999, we received proceeds of $25.0 million from the issuance of common stock. A portion of these proceeds was used for acquisitions of radio stations. Net cash flow from financing activities was approximately $80.2 million during 1999. During 1999, we entered into new credit facilities totaling $145.0 million, of which approximately $70.6 million was used to repay the existing debt facilities. 59 BUSINESS Overview We are a 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 in 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 we consider them to be a valuable strategic partner of ours. We also operate 60 radio stations in 23 markets, including leading Spanish-language stations in Los Angeles, San Francisco, Phoenix and Dallas-Ft. Worth. Our outdoor operations consist of approximately 11,200 billboards concentrated in high- density Hispanic communities in Los Angeles and New York. We also own two publications, El Diario/La Prensa, the oldest major Spanish-language daily 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 14 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 will become the 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 approximately $448 million, which includes approximately $110 million of debt. The Infinity Broadcasting Outdoor Advertising Acquisition. We have agreed to acquire certain outdoor advertising assets from Infinity Broadcasting Corporation for $168.2 million consisting of approximately 1,200 billboards located in high-density communities in New York City. This acquisition is an asset purchase and we will acquire no new employees. Other Acquisitions. We have agreed to acquire two television stations in the Hartford and Orlando markets, two radio stations in the Los Angeles market and four radio stations in the McAllen, Texas market for an aggregate of approximately $181 million. The Hispanic Market Opportunity Although Hispanics represent only approximately 11% of the U.S. population, the U.S. Hispanic population is growing six times faster than the non-Hispanic population. Consequently, advertisers have recently begun to direct more advertising dollars toward U.S. Hispanics. 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. 60 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. [HISPANIC POPULATION CHART] Source: Standard & Poor's DRI. Increasing Hispanic Buying Power. The Hispanic population accounted for total consumer expenditures of $380 billion in 1998, an increase of 76% since 1990. Hispanics are expected to account for $443 billion in consumer expenditures in 2000, and $939 billion by 2010. We believe these factors make Hispanics an attractive target audience for many major U.S. advertisers. [HISPANIC CONSUMER SPENDING CHART] Source: Standard & Poor's DRI. 61 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 58% 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) lead Hispanics to spend more per household on many categories of goods and services. Although the average U.S. Hispanic household has less disposable income than the average U.S. household, the average U.S. Hispanic household spends 27% more per year than the average non-Hispanic U.S. household on food at home, 100% more on children's clothing, 35% more on footwear, 12% more on phone services and 23% more on laundry and household cleaning products. 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 increase our advertising revenue through the following strategies: Effectively Use Our 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 Spanish-language radio network in the United States. Univision reaches 92% of all Hispanic households and has an approximately 86% household 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 quality network programming, we believe we have a 62 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. 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 affiliate 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 86% 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. We believe that the breadth and diversity of Univision's programming, combined with our local news and community-oriented segments, provide us with an 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, all but one of our Univision- affiliated stations rank first in Spanish-language television viewership in their markets. Television Programming Univision Network Programming. Univision directs its programming primarily toward its young, family-oriented audience. It begins daily with Despierta America and other 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 63 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 but two of our markets. We believe that our local news brands each of our stations in the market. We shape our local news to relate to our target audiences. In seven 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 our local communities with quality newscasts. 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. 64 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 38 (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% K22FP, 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 (6)
(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, limited voting interest (neutral investment stock) in the entity that has applied for the approval on the transfer of the stock of the company holding the broadcast license for this station. We have been retained to provide the programming and related services available on this station under a time brokerage agreement. The station holds absolute control on the contents and other broadcast issues. (6) We hold a minority, limited voting interest (neutral investment stock) in the entity that has applied for the approval on the transfer of the stock of the company holding the broadcast license for this station. We have been retained to provide the programming and related services available on this station under a time brokerage agreement. The station holds absolute control on the contents and other broadcast issues. 65 Television Advertising In 1998, 46% of our television revenue consisted of national television advertising sales and 51% 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. In 1999, no single advertiser accounted for a significant portion of our gross 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 major 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 research tools to continue to attract major advertisers. The various Nielsen rating services that we use are described below: Nielsen Hispanic Station Index. This service measures Hispanic household viewing at the local market level. Each 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. Nielsen Hispanic Station Index only measures the audience viewing of Hispanic households, that is, households where the head of the household is of Hispanic descent or origin. Although this 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. 66 Nielsen Station Index. This service measures local station viewing of all households in a specific market. We buy these reports in all of our markets to measure our viewing against both English- and Spanish-language competitors. This rating service, however, is not language-stratified and generally underrepresents Spanish-speaking households. As a result, we believe that this typically underreports viewing of Spanish-language television. Despite this limitation, the Nielsen Station Index demonstrates that many of our full-power broadcast stations achieve total market ratings that are fully comparable with their English-language counterparts, with five of our full-power television stations ranking as the top station in their respective markets. Television Competition We compete for viewers and revenues with other Spanish-language and English- language television stations and networks, including the four principal English-language television networks, ABC, CBS, NBC and Fox, and in certain cities, UPN and WB. Certain of these English-language networks and others have begun producing Spanish-language programming and simulcasting certain programming in English and Spanish. Several cable broadcasters have recently commenced, or announced their intention to commence, Spanish-language services as well. Telemundo is a large competitor that broadcasts Spanish-language television programming. As of December 31, 1999, Telemundo served 64 markets in the United States and Puerto Rico, and reached approximately 85% of all Hispanic households in those areas. In some of our markets, we compete directly with a station owned by or affiliated with Telemundo. We also compete for viewers and revenues with independent television stations, other video media, suppliers of cable television programs, direct broadcast systems, newspapers, magazines, radio and other forms of entertainment and advertising. Radio Overview We currently own and operate 60 radio stations in 23 markets. Our radio stations cover in aggregate approximately 60% of the Hispanic audience and 57 of our stations are located in the top 50 Hispanic markets. We also provide programming to 47 affiliate stations in 46 markets. Our radio operations combine national programming with local time slots available for advertising, news, traffic, weather, promotions and community events. This strategy allows us to provide quality programming with significantly lower costs of operations than we could otherwise deliver solely with independent programming. Radio Programming Radio Networks. Through our radio network, we have created the single largest U.S. Hispanic radio market, currently with over 17 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 to deliver a uniform advertising message to the fast growing Hispanic market around the country in an efficient manner and at a cost that is generally lower than our English-language counterparts. Although our networks have a broad reach across the United States, technology allows our stations to offer the necessary local feel and to be responsive to local clients and community needs. 67 Designated time slots are used for local advertising, news, traffic, weather, promotions and community events. The audience gets the benefit of a national radio sound along with local content. To further enhance this effect, our on- air personalities frequently travel to participate in local promotional events. For example, in selected key markets our on-air personalities 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. 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. Our network formats are currently used by 47 affiliates located in 46 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 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. Radio Formats. We produce 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). 68 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(2) Frequency Format - ------------------------------------------------------------------------------------------------- Los Angeles, California 1 KACD-FM 103.1 MHz Super Estrella (3) KBCD-FM 103.1 MHz Super Estrella (3) 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 (4) Hollywood, Florida - ------------------------------------------------------------------------------------------------- San Francisco-San Jose, 4 KBRG-FM 100.3 MHz Radio Romantica California KLOK-AM 1170 kHz Radio Tricolor KZSF-AM (5) 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 (4) - ------------------------------------------------------------------------------------------------- Houston-Galveston, Texas 6 KGOL-AM 1180 kHz Time Brokered (4) - ------------------------------------------------------------------------------------------------- Dallas-Ft. Worth, Texas 8 KRVA-FM (6) 106.9 MHz La Buena KRVF-FM (6) 107.1 MHz La Buena KZMP-FM 101.7 MHz La Zeta KRVA-AM 1600 kHz La Buena KZMP-AM 1540 kHz La Bonita - ------------------------------------------------------------------------------------------------- Harlingen-Weslaco- Brownsville-McAllen, 9 KFRQ-FM (7) 94.5 MHz Classic Rock Texas KKPS-FM (7) 99.5 MHz Tejano KVLY-FM (7) 107.9 MHz Adult Contemporary KVPA-FM (7) 101.1 MHz International Spanish Hits - ------------------------------------------------------------------------------------------------- Phoenix, Arizona 10 KLNZ-FM 103.5 MHz La Zeta KVVA-FM 107.1 MHz Spanish Contemporary KUET-AM (8) 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 (9) 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 (5) 92.1 MHz La Zeta KSQR-AM (5) 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 - ------------------------------------------------------------------------------------------------- Denver-Boulder, Colorado 16 KJMN-FM 92.1 MHz Radio Romantica KMXA-AM 1090 kHz Radio Tricolor - ------------------------------------------------------------------------------------------------- Washington, D.C. 18 WACA-AM (10) 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 KHNZ-FM (5)(6) 106.3 MHz Z MegaHits KRAY-FM (5) 103.5 MHz La Buena KSES-FM 107.1 MHz Super Estrella KZSL-FM (5) 93.9 MHz La Zeta KSES-AM 700 kHz Super Estrella - ------------------------------------------------------------------------------------------------- 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)
69 (1) Source: Nielsen Media Research year 2000 population estimates. (2) Our radio station portfolio does not include four stations that we will divest of in order to comply with FCC rules. (3) Pending acquisition--intended format. (4) Operated pursuant to a local marketing agreement under which we grant to the operator the right to program the station. (5) This station will be placed into a trust by Z-Spanish Media, and we intend to enter into a letter of intent to acquire this station, subject to all required regulatory approvals, including the approval of the FCC and the Department of Justice. (6) Simulcast station. (7) Pending acquisition. (8) Under an FCC construction permit. (9) Not yet operating--expanded band for Station KSVE-AM. (10) 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 an efficient 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); 70 . 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 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 in large part on our 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. Each of our radio stations competes for audience share and advertising revenue directly with both Spanish-language and English- language radio stations in its market, and with other media within their respective markets, such as newspapers, broadcast and cable television, magazines, billboard advertising, transit advertising and direct mail advertising. Our primary competitors in our markets in Spanish-language radio are Hispanic Broadcasting Corporation, Radio Unica Communications Corp. and Spanish Broadcasting System, Inc. Several of the companies with which we compete are large national or regional companies that have significantly greater resources and longer operating histories than we do. Factors that are material to competitive position include management experience, the station's rank in its market, signal strength and audience demographics. 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 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 fluctuation and any adverse change in a particular market could have a material adverse effect on our operations. 71 The radio industry is subject to competition from new media technologies that are being developed or introduced, such as: . audio programming by cable television systems, direct broadcast satellite systems, Internet content providers and other digital audio broadcast formats; . satellite digital audio service, which could result in the introduction of new satellite radio services with sound quality comparable to that of compact disks; and . in-band on-channel digital radio, which could provide multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services. 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, outdoor advertising attracts national, regional and local advertisers. We offer the ability to target specific demographic groups on a cost-effective basis as compared to other advertising media. In addition, we provide businesses with advertising opportunities in locations near 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 11,200 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 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 75 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. 72 Billboard Inventory
Inventory Type Los Angeles New York - -------------- ----------- -------- 8-sheet posters............................................ 6,000 3,500 City-Lights................................................ 250 0 30-sheet posters........................................... 0 1,075 Wall-Scapes................................................ 5 187 Bulletins.................................................. 20 164 ----- ----- Total...................................................... 6,275 4,926 ===== =====
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 new advertising format visible both during the day and night. 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. 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 73 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. 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 including Infinity Broadcasting Corporation, Clear Channel Communications, Inc., J.C. Decaux, Medallion Financial Corp., Ackerley Communications, Inc., Regency Outdoor, and PNE Media, LLC. Many of these competitors have a larger national network and may have greater total resources than we have. 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 segment of the population with a particular set of demographic characteristics within that market. Publishing We publish El Diario/La Prensa, the oldest major Spanish-language daily newspaper in the United States and one of only two Spanish-language newspapers in New York. The newspaper reports news of interest to the Hispanic community, focusing primarily on local news events and daily occurrences in Latin America. El Diario/La Prensa has a daily paid circulation of approximately 52,000, and won the award for "Outstanding Spanish-Language Daily" from the National Association of Hispanic Publications in 1994 and 1996. The majority of El Diario/La Prensa's revenue comes from circulation sales and the sale of local, national and classified advertising. Advertising sales are handled by a sales staff of industry-trained professionals. Our top ten newspaper advertisers by dollar volume accounted for 9% of El Diario/La Prensa's total advertising revenue in 1999. Circulation revenue comes almost exclusively from sales at newsstands and retail outlets, rather than mailed subscriptions. We also publish VEA New York, a visitor guide containing information about transportation, restaurants and other tourism sites targeting visitors from Latin America, Spain and other Spanish-language markets. In addition, the guide includes general interest articles about New York City. VEA New York is distributed weekly to hotels, domestic and international tour operators, travel agencies and other businesses in the tourism industry, and has a quarterly circulation of approximately 105,000. Our primary Spanish-language publishing competitor is a new publication called Hoy. This newspaper, with unaudited circulation of 43,219 as of March 31, 2000, publishes Monday through 74 Friday. Our publishing operations also compete with English-language newspapers and other types of advertising media, many of which reach larger audiences and have greater total resources than we have. Most of our publishing employees are represented by the Newspaper and Mail Deliverers' Union of New York and Vicinity and the Newspaper Guild of New York. Our collective bargaining agreement with the Newspaper Guild of New York expires on June 30, 2002 and our agreement with the Newspaper and Mail Deliverers' Union of New York and Vicinity expires on March 30, 2004. 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 1,050 full-time employees, including 494 full-time employees in television, 354 full-time employees in radio, 46 full-time employees in outdoor and 156 full-time employees in publishing. As of March 31, 2000, 146 of our publishing employees were 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 75 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. 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, 76 although there can be no assurance to that effect. The non-renewal of one or more of our stations' licenses could have a material adverse 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 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. 77 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 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 equity-debt-plus 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. 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. 78 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 will divest of 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, will result in our owning one more radio station than is permitted by the FCC's rules. In order to comply with these rules, we will divest of one station in this market. In an application filed with the FCC on June 9, 2000, Z-Spanish Media Licensing Company, LLC requested consent to assign the licenses of three of its radio stations to Salinas Holdings Partnership, a newly-formed partnership whose purpose is to own and operate such radio stations pending FCC consent to assign the licenses for these radio stations to The Z-Spanish Trust, Charles Giddens, Trustee. Amador Bustos, who will be the President of our Radio Division and a director of ours, is one of three equal partners of Salinas Holdings. To comply with FCC requirements, Mr. Bustos will not hold a position as an officer or director of us during any period in which Salinas Holdings is the licensee of the stations. We expect that this will be a short period of time as, also on 79 June 9, 2000, an application was filed with the FCC requesting its consent to the assignment of licenses for these radio stations to The Z-Spanish Trust, Charles Giddens, Trustee. 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. The FCC requires that licensees must not discriminate in hiring practices, and shall 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. Under the typical joint sales agreement, 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. It also 80 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 joint sales agreement does not involve programming. As part of its increased scrutiny of radio and television station acquisitions, the Department of Justice has stated publicly that it believes that local marketing agreements and joint sales agreements 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 Department of Justice has noted that joint sales agreements may raise antitrust concerns under Section 1 of the Sherman Antitrust Act and has challenged them in certain locations. The Department of Justice 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 digital television service in the United States. Implementation of digital television 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 digital television. Under the table, certain eligible broadcasters with a full- power television station are allocated a separate channel for digital television operation. Stations will be permitted to phase in their digital television 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 paired channels for each station to the government by 2006. Equipment and other costs associated with the transition to digital television, 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 digital television. We cannot predict the overall effect the transition to digital television 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. Radio Frequency Radiation. The FCC has adopted rules limiting human exposure to levels of radio frequency 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 radio frequency radiation. We believe that all of our stations are in compliance with the FCC's current rules regarding radio frequency radiation. 81 Satellite Digital Audio Radio Service. The FCC has allocated spectrum to a new technology, satellite digital audio radio service, to deliver satellite- based audio programming to a national or regional audience. The nationwide reach of the satellite digital audio radio service 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 radio service. The rules have been published in the Federal Register and became effective on April 17, 2000. The new low- power FM 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 low-power FM 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 low-power FM service will be exclusively non-commercial. Current broadcast licensees or parties with interests in cable television or newspapers will not be eligible to hold low-power FM licenses. It is difficult to predict what impact, if any, the new low-power FM service will have on technical interference with our stations' signals or competition for our stations' audiences. The new FCC rules for low-power FM 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 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 regulates outdoor advertising on federally aided primary and interstate highways. As a condition to federal highway assistance, the Highway Beautification Act requires states to restrict billboards on such highways to commercial and 82 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. Since September 8, 1999, we have been a party to a proceeding before the American Arbitration Association in Phoenix, Arizona with Hispanic Broadcasting Corporation regarding a dispute over an agreement to exchange radio stations KLNZ-FM, Glendale, Arizona, and KRTX-FM, Winnie , 83 Texas, with one another. The agreement provides for liquidated damages of $2 million in the case of a breach. We could also be required as a result of the arbitration to exchange stations in accordance with the agreement. Since March 24, 2000, we have been defending against a lawsuit filed in the Superior Court of the District of Columbia by First Millenium Communications, Inc. to resolve certain contract disputes arising out of a terminated brokerage-type arrangement with First Millenium. The litigation primarily concerns the payment of a brokerage fee alleged to be due in connection with our acquisition of television station WBSV in Sarasota, Florida for $17 million. Nevertheless, in addition to its various contractual claims, First Millenium also has asserted claims for fraud, RICO, misappropriation, breach of fiduciary duty, defamation and intentional infliction of emotional distress. First Millenium is seeking in excess of $60 million including the right to a 10% ownership interest in WBSV and the right to exchange such interest in the reorganization described elsewhere in this prospectus. First Millenium has made similar claims relating to our pending acquisitions of television stations WHCT, Hartford, Connecticut, and WNTO, Orlando, Florida. A prior lawsuit was filed by us in the Superior Court of the District of Columbia against First Millenium seeking declaratory relief to determine the final rights of the parties pursuant to the brokerage arrangement, asserting that First Millenium made an irrevocable election under the agreement to receive $250,000 instead of a 10% ownership interest in WBSV. The court dismissed this action finding that there is no language regarding any election by the parties and further found that while we have the ability to force a sale of First Millenium's 10% interest, the time for such a forced sale has not yet occurred. On July 20, 2000, Telemundo Network Group LLC, Telemundo Network, Inc. and Council Tree Communications, L.L.C. filed an action against the Company and certain of our affiliates in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, relating to our investment in XHAS-TV, Channel 33 in Tijuana, Mexico. The action seeks to have the sale voided and other unspecified damages for breach of contract relating to Telemundo's attempted exercise of a right of first refusal to buy the assets of XHAS-TV. In addition to its contract claim, Telemundo asserts tortious interference, fraud and conspiracy to defraud. Subsequently, the Company filed an action in the Superior Court of the State of California for the County of San Diego against the same Telemundo entities, seeking unspecified damages and a declaratory judgment that, among other things, Telemundo failed to timely exercise its right of first refusal with respect to the acquisition of the assets of XHAS- TV. We intend to vigorously defend against these claims and we do not believe that any resolution of these matters is likely to have a material adverse effect on us. 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. 84 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.. 53 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. Ms. Tully was the Executive Vice President and Chief Financial Officer of Alliance Broadcasting from 1994 until early 1996, when the company was sold to Infinity 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 85 our board of directors pursuant to a voting agreement among Messrs. Ulloa, Wilkinson and Zevnik. Mr. Bustos' positions as a director and officer are subject to the required regulatory divestiture of three of Z-Spanish Media's radio stations, as further described in "Business--Regulation of Television and Radio Broadcasting." From November 1992 until our acquisition of Z-Spanish Media, Mr. Bustos served as Chairman, Chief Executive Officer and 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 LuminaAmericas, Inc., Telscape International, Inc. 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. 86 Compensation Committee Interlocks and Insider Participation At the completion of this offering, the members of our compensation committee will consist of Messrs. Hobson and Thompson, neither 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. 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(2) 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 225,000 -- -- -- Chief Financial Officer Amador S. Bustos............... 1999 168,000 10,080 -- -- 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. (2) Represents bonuses earned in 1998 and paid in 1999. Employment Agreements and Arrangements In July 2000, we entered into a five-year employment agreement with Walter F. Ulloa pursuant to which Mr. Ulloa serves as our Chairman and Chief Executive Officer. The agreement provides for a base salary of $600,000 per year, with an annual increase of $50,000 per year. Under the terms of the agreement, Mr. Ulloa is eligible to receive a cash bonus equal to (i) 75% of his then-current base salary if our annual growth rate of earnings before interest, taxes, depreciation and amortization, or EBITDA (pro forma as defined by the compensation committee), exceeds 20% over the previous 87 year, 63% of his then-current base salary if EBITDA growth rate exceeds 17% over the previous year and 50% of his then-current base salary if EBITDA growth rate exceeds 14% over the previous calendar year and (ii) up to an additional 25% of his then-current base salary in the discretion of the compensation committee of our board of directors. If Mr. Ulloa's employment is terminated by us without cause, by Mr. Ulloa for good reason or in connection with a change of control, he will be entitled to receive all accrued salary and bonuses through the date of termination, plus an amount equal to the greater of the sum of three times his then-current base salary plus three times his then-current maximum bonus or his salary and bonuses for the remainder of the term of his employment agreement, plus a continuation of all benefit coverages for a period of two years. In addition, upon any such termination event, all stock options then held by Mr. Ulloa will accelerate and become immediately exercisable, and any restrictions on restricted stock held by Mr. Ulloa shall lapse. In July 2000, we entered into a five-year employment agreement with Philip C. Wilkinson pursuant to which Mr. Wilkinson serves as our President and Chief Operating Officer. The agreement provides for a base salary of $600,000 per year, with an annual increase of $50,000 per year. Under the terms of the agreement, Mr. Wilkinson is eligible to receive a cash bonus equal to (i) 75% of his then-current base salary if our annual growth rate of earnings before interest, taxes, depreciation and amortization, or EBITDA (pro forma as defined by the compensation committee), exceeds 20% over the previous year, 63% of his then-current base salary if EBITDA growth rate exceeds 17% over the previous year and 50% of his then-current base salary if EBITDA growth rate exceeds 14% over the previous calendar year and (ii) up to an additional 25% of his then- current base salary in the discretion of the compensation committee of our board of directors. If Mr. Wilkinson's employment is terminated by us without cause, by Mr. Wilkinson for good reason or in connection with a change of control, he will be entitled to receive all accrued salary and bonuses through the date of termination, plus an amount equal to the greater of the sum of three times his then-current base salary plus three times his then-current maximum bonus or his salary and bonuses for the remainder of the term of his employment agreement, plus a continuation of all benefit coverages for a period of two years. In addition, upon any such termination event, all stock options then held by Mr. Wilkinson will accelerate and become immediately exercisable, and any restrictions on restricted stock held by Mr. Wilkinson shall lapse. Employee Benefit Plans 2000 Omnibus Equity Incentive Plan We have 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. Share Limits. A maximum of 11,500,000 shares of our Class A common stock may be issued under the plan, or approximately 10% of our outstanding shares on a fully-diluted basis after giving effect to this offering. Options to purchase 1,615,231 shares of Class A common stock will be issued under the plan at the closing of our acquisition of Z-Spanish Media in exchange for existing Z-Spanish Media options. 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. 88 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. 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 89 . 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. 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. 90 401(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. 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. 91 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. 92 PRINCIPAL STOCKHOLDERS The following table summarizes information regarding the beneficial ownership of our outstanding common stock as of the date of this prospectus based on an estimated initial public offering price of $14.00 and giving effect to our reorganization described elsewhere in this prospectus 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......... B 11,489,365(3) 16.77% 10.03% Philip C. Wilkinson..... B 11,489,365(4) 16.77% 10.03% Paul A. Zevnik.......... A 13,821(5) * % * % B 4,699,803(6) 6.86% 4.10% Univision Communications Inc. (7)............... C 21,983,392 32.10% 19.20% TSG Capital Group (8)... A 9,418,004 13.76% 8.23% Jeanette Tully.......... A 249,237(9) * % * % Amador S. Bustos........ A 1,881,571 2.75% 1.64% Glenn Emanuel........... A 308,368 * % * % Darryl B. Thompson...... A 9,301,432(10) 13.59% 8.13% Andrew W. Hobson (11)... -- -- -- -- Michael D. Wortsman (12)................... -- -- -- -- All executive officers and directors as a group (nine persons)... A 11,745,929 17.16% 10.26% B 27,678,533 40.40% 24.16%
- -------- * 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) Assumes no exercise of the underwriters' over-allotment option. (3) Includes 889,848 shares held by The Walter F. Ulloa Irrevocable Trust of 1996. (4) Includes 9,424,800 shares held by The Wilkinson Family Trust and 889,848 shares held by The 1994 Wilkinson Children's Gift Trust. (5) Represents shares held by The Zevnik Charitable Foundation. Mr. Zevnik has shared voting power in The Zevnik Charitable Foundation. (6) Includes 800,666 shares held by The Paul A. Zevnik Irrevocable Trust of 1996 and 1,736,516 shares held by The Zevnik Family L.L.C. 93 (7) The address for Univision Communications Inc. is 1999 Avenue of the Stars, Suite 3050, Los Angeles, California 90067. Univision has indicated that it may purchase 7,619,048 shares of Class A common stock directly from us in the offering. The price paid for such shares will be the price per share to the public, less the underwriting discount. At the conclusion of this offering, assuming the underwriters do not exercise the over-allotment option and 46,000,000 shares are issued, Univision will beneficially own approximately 19% of the shares outstanding after the offering if it does not purchase any shares in this offering and approximately 26% if it purchases 7,619,048 shares in this offering. (8) TSG Capital Group includes TSG Capital Fund II, L.P., TSG Capital Fund III, L.P., TSG Associates II Inc., TSG Associates III, LLC and TSG Ventures, L.P. The address for each of these entities is 177 Broad Street, 12th Floor, Stamford, Connecticut 06901. Includes 6,106,497 shares of Class A common stock reserved for issuance upon conversion of Series A preferred stock held by TSG Capital Fund III, L.P. (9) Represents shares held by The Jeanette Tully 1996 Revocable Trust. (10) Represents 9,418,004 shares held by TSG Capital Group, excluding 116,572 shares held by TSG Ventures, L.P. Mr. Thompson is a principal in each of the TSG Capital Group entities, except for TSG Ventures, L.P. 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. (11) Mr. Hobson is an executive officer of an affiliate of Univision Communications Inc. (12) Mr. Wortsman is an executive officer of an affiliate of Univision Communications Inc. 94 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 compensate us in an amount equal to the amount of annual interest due, in exchange for running Univision's programming. 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 21,983,392 shares of our Class C common stock, or an approximately 19% ownership interest in us after this offering. 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. We have also offered Univision the opportunity to purchase 7,619,048 shares of our Class A common stock directly from us in this offering, representing approximately 26% of our outstanding capital stock after the offering. 95 Prior to the closing of this offering, Univision will make available to our predecessor a $70 million bridge loan to our predecessor to pay the purchase price of two radio stations from Citicasters. We would repay the entire balance of the loan with the proceeds of this offering. If this offering has not closed by October 31, 2000, Univision would have the option, for an exercise price equal to the unpaid balance under the bridge note, to acquire an additional equity interest in us (or our predecessor, if the reorganization described in this prospectus has not occurred) at a price per share (or price per unit) equal to the price per unit of the equity option acquired by Univision in its $110 million investment in our predecessor in March 2000. 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. 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 $234,000. 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 96 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 $424,663. 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 Associates II, Inc. and TSG Associates III, L.P. On April 20, 2000, TSG Capital Fund III, L.P. 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. Assuming an initial public offering price of $14.00 per share, the note will automatically convert upon the closing of this offering into shares of our Series A preferred stock at a conversion price of the lower of: . $16.95 per share; or . the greater of 93% of the price per share of the Class A common stock sold in this offering or $14.74 per share. Assuming an initial public offering price of $14.00 per share, the Series A preferred stock would convert into 6,106,497 shares of Class A common stock. In connection with our acquisition of Z-Spanish Media, TSG Capital Fund II, L.P., TSG Capital Fund III, L.P. and their affiliates will receive approximately $169 million in cash and 3,311,507 shares of our Class A common stock. On March 31, 1998, TSG Ventures, L.P., an affiliate of TSG Capital Fund III, 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 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 $2.5 million in advertising to LuminaAmericas, Inc., a provider of e- business services to corporations seeking to use the Internet to serve Hispanics in the United States and Latin America, in exchange for 1,666,666 shares of Series A preferred stock. Mr. Thompson is a director, and TSG Capital Fund III, L.P. is a stockholder, of LuminaAmericas, Inc. 97 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 approximately 1,881,571 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, for which a note receivable and accrued interest totaling $0.3 million was offset against Z-Spanish Media's note payable for fees and accrued interest totaling $0.7 million, 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 was paid to KZSJ Radio LLC in the first quarter of 2000. 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 approximately 308,368 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. Class D Membership Units in Predecessor Our predecessor granted to each of Messrs. Ulloa and Wilkinson 6,050 Class D membership units for nominal consideration, which will be exchanged for 102,850 shares of Class B common stock at the closing of this offering. The Class B common stock will be held pursuant to Restricted Stock Agreements that allow for repurchase of the shares for nominal consideration if Messrs. Ulloa and Wilkinson do not remain employed with us, with such restriction lapsing in one- third increments over three years. Such restriction also lapses upon a change in control affecting us. Our predecessor also granted to Mr. Zevnik 2,560 Class D membership units for nominal consideration, which will be exchanged for 43,520 shares of Class B common stock at the closing of this offering. The Class B common stock will be held pursuant to a Restricted Stock Agreement that 98 allows for repurchase of the shares for nominal consideration if Mr. Zevnik does not remain as an officer or director of Entravision, with such restriction lapsing in one-third increments over three years. Such restriction also lapses on a change in control affecting us. Our predecessor also granted to Jeanette Tully, our Chief Financial Officer, 500 Class D membership units for nominal consideration, which will be exchanged for 8,500 shares of Class A common stock at the closing of this offering. The Class A common stock will be held pursuant to a Restricted Stock Agreement that allows for repurchase of the shares for nominal consideration if Ms. Tully does not remain employed with us, with such restriction lapsing in one-third increments over three years. Such restriction also lapses on a change in control affecting us. 99 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. 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: . 325 million authorized shares of common stock, $0.0001 par value per share, which consists of 260 million shares of Class A common stock, 40 million shares of Class B common stock and 25 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 the date of this prospectus, not including the shares to be issued in this offering and assuming our reorganization described elsewhere in this prospectus, there will be outstanding 12,726,077 shares of Class A common stock held of record by 87 stockholders, 27,678,533 shares of Class B common stock held of record by eight stockholders, 21,983,392 shares of Class C common stock held of record by one stockholder and 6,106,497 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 100 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 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. 101 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 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 equals or exceeds 130% of the initial public offering price of our Class A common stock for 15 consecutive trading days immediately before such redemption. Conversion. The Series A preferred stock is convertible into our Class A common stock on a share-for-share basis at the option of the holder at any time. 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. 102 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. 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 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 103 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. 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. 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 been approved for listing of our Class A common stock on the New York Stock Exchange under the trading symbol "EVC." 104 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 58,726,077 outstanding shares of Class A common stock, 27,678,533 outstanding shares of Class B common stock and 21,983,392 outstanding shares of Class C common stock. Of the shares of Class A common stock, 46,000,000 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. In addition, the 7,619,048 shares of Class A common stock that may be issued to Univision in this offering will be subject to the "lock-up" agreement described below. The remaining 12,726,077 shares of Class A common stock and all of the shares of Class B and Class C 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 (including, with respect to Univision, the 7,619,048 shares of Class A common stock that may be issued to Univision in this offering) 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 (other than the 7,619,048 shares of Class A common stock that may be issued to Univision in this offering) will be immediately available for sale in the public market; and . beginning 180 days after the date of this prospectus, an additional 9,626,250 shares of common stock will be freely tradeable pursuant to Rule 144(k), and an additional 52,375,470 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 Donaldson, Lufkin & Jenrette Securities Corporation, a person who has beneficially 105 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 1,084,000 shares immediately after the offering; or . the average weekly trading volume of the common stock during the four calendar weeks preceding the sale. 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 (other than shares to be issued pursuant to our plan upon the exercise of options granted at the closing of our acquisition of Z-Spanish Media in exchange for existing Z-Spanish Media options). 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 tradeable 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 resalable 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. 106 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........................................................... 38,380,952 ==========
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, 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 and 7,619,048 shares of Class A common stock that may be issued directly to Univision by us, 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. If Univision purchases any shares in this offering, it will purchase them directly from us at a purchase price equal to the per share price to the public, less the underwriting discount. The underwriters would not participate in the sale of any shares to Univision. The following table shows the underwriting fees to be paid to the underwriters by us 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............................................ $ $
107 We estimate expenses related to this offering will be $4,460,019. We have granted to the underwriters an option, exercisable within 30 days after the date of the underwriting agreement, to purchase up to 6,900,000 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. We 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. Our executive officers and directors and all of our stockholders (including, with respect to Univision, the 7,619,048 shares of Class A common stock that may be issued to Univision in this offering) before the closing of the offering 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. Donaldson, Lufkin & Jenrette Securities Corporation has given its consent that shares purchased directly from the 2,300,000 reserved shares described below, or on the open market following this offering, will not be subject to these restrictions if they are purchased by stockholders who are not directors, executive officers or beneficial owners of greater than five percent of our outstanding stock. At our request, the underwriters have reserved for sale up to 2,300,000 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 been approved for listing of our Class A common stock on the New York Stock Exchange under the symbol "EVC." 108 Other than in the United States, no action has been taken by the underwriters or us that would permit a public offering of the shares of Class A common stock offered by this prospectus 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. An electronic prospectus will be available on the web site maintained by DLJdirect Inc. An affiliate of Credit Suisse First Boston Corporation will be a lender under our proposed new bank credit facility. Accordingly, this offering is being conducted in accordance with Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc., which requires that the offering price be no higher than that recommended by a "qualified independent underwriter." In accordance with this requirement, Donaldson, Lufkin & Jenrette Securities Corporation has assumed the responsibilities of acting as the qualified independent underwriter, and will recommend a price in compliance with the requirements of Rule 2720. In connection with the offering, Donaldson, Lufkin & Jenrette Securities Corporation has performed due diligence investigations and reviewed and participated in the preparation of this prospectus and the registration statement of which this prospectus forms a part. As compensation for the services of acting as the qualified independent underwriter, we have agreed to pay $5000 to Donaldson, Lufkin & Jenrette Securities Corporation. 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 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 109 negotiation among the representatives of the underwriters and us. 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. 110 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., will be a member of our board of directors upon completion of this offering and will own 4,699,803 shares of our Class B common stock upon completion of this offering. In addition, upon completion of this offering, certain partners of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. will own an aggregate of 22,950 shares of our Class A 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 Company, L.L.C. and its combined affiliates as of December 31, 1998 and 1999, and for each of the years ended December 31, 1997, 1998, 1999, DeSoto-Channel 62 Associates, Ltd. for the period from January 1, 1999 through September 24, 1999, and the financial statements of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) (stations owned by Sunburst Media, L.P.) as of and for the year ended December 31, 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. 111 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. 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. 112 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-5 Unaudited Pro Forma Condensed Consolidated Balance Sheet............... F-7 Notes to Unaudited Pro Forma Financial Statements...................... F-8 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES (HISTORICAL) INDEPENDENT AUDITOR'S REPORT............................................. F-11 FINANCIAL STATEMENTS Combined Balance Sheets................................................ F-12 Combined Statements of Operations...................................... F-13 Combined Statements of Equity.......................................... F-14 Combined Statements of Cash Flows...................................... F-16 Notes to Combined Financial Statements................................. F-17 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES REPORT OF INDEPENDENT AUDITORS........................................... F-41 FINANCIAL STATEMENTS Consolidated Balance Sheets............................................ F-42 Consolidated Statements of Operations.................................. F-43 Consolidated Statements of Stockholders' Equity........................ F-44 Consolidated Statements of Cash Flows.................................. F-45 Notes to Consolidated Financial Statements............................. F-46 Z-SPANISH MEDIA CORPORATION INDEPENDENT AUDITOR'S REPORT............................................. F-58 FINANCIAL STATEMENTS Combined Balance Sheets................................................ F-59 Combined Statements of Operations...................................... F-60 Combined Statements of Stockholders' Equity............................ F-61 Combined Statements of Cash Flows...................................... F-62 Notes to Combined Financial Statements................................. F-63 DESOTO-CHANNEL 62 ASSOCIATES, LTD. INDEPENDENT AUDITOR'S REPORT............................................. F-82 FINANCIAL STATEMENTS Statement of Operations and Partners' Deficit.......................... F-83 Statement of Cash Flows................................................ F-84 Notes to Financial Statements.......................................... F-85 KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) RADIO STATIONS (STATIONS OWNED BY SUNBURST MEDIA, L.P.) INDEPENDENT AUDITOR'S REPORT............................................. F-89 FINANCIAL STATEMENTS Statements of Assets to be Acquired.................................... F-90 Statements of Revenues and Direct Operating Expenses................... F-91 Notes to the Financial Statements...................................... F-92
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 and the three months ended March 31, 1999 and March 31, 2000 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 March 31, 2000 which gives effect to the conversion of our predecessor from a limited liability company to a corporation and the related exchange of L.L.C. membership units and member corporations' shares of common stock for shares of Class A, B and C common stock has been prepared as if our acquisitions that occurred after March 31, 2000 had occurred as of March 31, 2000. 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, however, management does not expect the final allocation to differ materially from its estimate. 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 combined financial statements and notes thereto and those of LCG, Z-Spanish Media and Desoto-Channel 62 Associates, Ltd. and radio stations KVPA(FM), KVLY(FM), KFRQ(FM) and KKPS(FM) 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 include 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 $15.3 million including the assumption of certain liabilities totaling $2.1 million. This was financed with an advance under our existing bank line of credit. F-2 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. 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, Televisora Alco S.A. de C.V. (ALCO), the Mexican entity in which we own a 40% minority, limited voting interest (neutral investment stock) pursuant to a special authorization obtained from the Mexican Foreign Investment General Bureau, executed a stock purchase agreement to acquire 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, Tijuana, Baja California, Mexico. This transaction is subject to the approval of the Mexican Secretaria de Comunicaciones y Transportes. Additionally, we acquired a 47.5% interest in Vista Television, Inc., and Channel 57, Inc. The aggregate purchase price paid for these transactions was approximately $35 million. Additionally, We have been retained to provide the programming and related services available on this station under a time brokerage agreement. This was financed with proceeds from the $110.0 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 Acquisitions 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 $448 million including the assumption of approximately $110 million of debt. Z-Spanish Media owns 33 radio stations and an outdoor billboard business. To comply with a preliminary Department of Justice inquiry, six of Z-Spanish Media's radio stations will be transferred to a trust. The beneficiary of the trust is Z-Spanish Media. If we are permitted to purchase these stations, we would be obligated to purchase those stations for an aggregate purchase price of up to F-3 $23.0 million. If we are not permitted to purchase these stations, we would be obligated to remit the proceeds from the sale of these stations to the former stockholders of Z-Spanish Media. In addition we are not purchasing four stations pursuant to a Federal Communications Commission request, as such a pro forma adjustment has been recorded to reduce revenues, expenses and operating income related to these four radio stations. 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 7,187,902 shares of Class A common stock valued at $108 million and $220 million cash from offering proceeds. If this offering is not completed, the agreement provides for the issuance of $220 million of redeemable preferred stock with a dividend at LIBOR plus 7%. Harlingen-Weslaco-Brownsville-McAllen Acquisition In May 2000, we agreed to acquire substantially all of the assets relating to the operations of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) from Sunburst Media, L.P. for approximately $55 million. This will be financed through our proposed new bank credit facility. Other Pending Transactions The following transactions represent our purchases of broadcasting and outdoor advertising assets. 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. Outdoor Advertising Acquisition. We have agreed to acquire certain outdoor advertising assets from Infinity Broadcasting Corporation for $168.2 million, consisting of approximately 1,200 billboards in high-density communities in New York City. This acquisition is an asset purchase, and we will acquire no new employees. This will be financed with an advance under our proposed new bank credit facility. F-4 ENTRAVISION COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 1999 (In thousands, except per share data)
Other Historical Completed Pro Forma Historical Historical Z-Spanish and Pending Adjust- Offering Pro Forma Entravision LCG Media Acquisitions ments Pro Forma Adjustments As Adjusted ----------- ---------- ---------- ------------ ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Gross revenue: Television............ $ 63,842 $ -- $ -- $ 5,096 $ -- $ 68,938 $ -- $ 68,938 Radio................. 2,362 29,759 26,334 8,183 -- 66,638 -- 66,638 Outdoor and publishing........... -- 19,109 12,227 3,798 -- 35,134 -- 35,134 -------- ------- ------- ------- -------- -------- -------- -------- Total gross revenue.... 66,204 48,868 38,561 17,077 -- 170,710 -- 170,710 Less agency commissions........... 7,205 4,623 2,523 1,617 -- 15,968 -- 15,968 -------- ------- ------- ------- -------- -------- -------- -------- Net revenue............ 58,999 44,245 36,038 15,460 -- 154,742 -- 154,742 -------- ------- ------- ------- -------- -------- -------- -------- Expenses: Direct operating...... 24,441 15,560 14,183 5,570 -- 59,754 -- 59,754 Selling, general and administrative (excluding non-cash stock-based compensation)........ 11,611 18,910 8,382 8,515 -- 47,418 -- 47,418 Corporate............. 5,809 1,795 4,773 262 -- 12,639 -- 12,639 Depreciation and amortization......... 15,982 4,907 8,670 1,026 55,185 (1) 85,770 -- 85,770 Non-cash stock-based compensation......... 29,143 -- -- -- 2,788 (8) 31,931 -- 31,931 Gain on sale of assets............... -- -- (4,442) -- -- (4,442) -- (4,442) -------- ------- ------- ------- -------- -------- -------- -------- Total expenses......... 86,986 41,172 31,566 15,373 57,973 233,070 -- 233,070 -------- ------- ------- ------- -------- -------- -------- -------- Operating income (loss)................ (27,987) 3,073 4,472 87 (57,973) (78,328) -- (78,328) Interest expense, net and other............. (9,591) (5,527) (6,471) (2,659) (26,601)(2) (335)(3) 16,050 (4) (35,134) 31,949 (14) (3,185) Non-cash interest expense related to Univision conversion option................ (2,500) -- -- -- -- (2,500) -- (2,500) Income tax benefit (expense)............. 121 736 284 852 23,668 (5) 2,499 (6) 28,160 (12,780)(15) 15,380 -------- ------- ------- ------- -------- -------- -------- -------- Loss from continuing operations............ (39,957) (1,718) (1,715) (1,720) (42,692) (87,802) 19,169 (68,633) Preferred stock dividends............. -- -- -- -- 7,650 (7) 7,650 -- 7,650 -------- ------- ------- ------- -------- -------- -------- -------- Loss from continuing operations applicable to common stock....... $(39,957) $(1,718) $(1,715) $(1,720) $(50,342) $(95,452) $ 19,169 $(76,283) ======== ======= ======= ======= ======== ======== ======== ======== Basic and diluted earnings per share: Net loss from continuing operations applicable to common stock................ $ (1.23) $ (0.71) ======== ======== Weighted average common shares outstanding.......... 77,324 107,574 ======== ========
F-5 ENTRAVISION COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data)
Three Months Ended March 31, 2000 ---------------------------------------------------------------------------------------------------- Other Historical Completed Pro Forma Historical Historical Z-Spanish and Pending Adjust- Offering Pro Forma Entravision LCG Media Acquisitions ments Pro Forma Adjustments As Adjusted ----------- ---------- ---------- ------------ ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Gross revenue: Television...... $ 18,178 $ -- $ -- $ 78 $ -- $ 18,256 $ -- $ 18,256 Radio........... 1,162 7,427 5,873 1,507 -- 15,969 -- 15,969 Outdoor and publishing..... -- 4,609 2,867 -- -- 7,476 -- 7,476 -------- ------- ------- ------ -------- -------- ------- -------- Total gross revenue......... 19,340 12,036 8,740 1,585 -- 41,701 -- 41,701 Less agency commissions..... 2,076 1,194 581 321 -- 4,172 -- 4,172 -------- ------- ------- ------ -------- -------- ------- -------- Net revenue...... 17,264 10,842 8,159 1,264 -- 37,529 -- 37,529 -------- ------- ------- ------ -------- -------- ------- -------- Expenses: Direct operating...... 7,883 4,212 3,425 298 -- 15,818 -- 15,818 Selling, general and administrative.. 3,749 4,734 2,034 528 -- 11,045 -- 11,045 Corporate (excluding non- cash stock- based compensation).. 1,848 429 1,701 67 -- 4,045 -- 4,045 Depreciation and amortization... 4,877 1,229 2,843 223 12,585 (1) 21,757 -- 21,757 Non-cash stock- based compensation... -- -- 196 -- 697 (8) 893 -- 893 Gain on sale of assets......... -- -- -- -- -- -- -- -- -------- ------- ------- ------ -------- -------- ------- -------- Total expenses... 18,357 10,604 10,199 1,116 13,282 53,558 -- 53,558 -------- ------- ------- ------ -------- -------- ------- -------- Operating income (loss).......... (1,093) 238 (2,040) 148 (13,282) (16,029) -- (16,029) Interest expense, net and other... (3,897) (1,384) (2,337) (333) (5,489)(2) (83)(3) 4,013 (4) (9,510) 7,987 (14) (1,523) Non-cash interest expense related to Univision conversion option.......... (31,600) -- -- -- -- (31,600) -- (31,600) Income tax benefit (expense)....... 6 344 1,514 -- 4,968 (5) 1,777 (6) 8,609 (3,195)(15) 5,414 -------- ------- ------- ------ -------- -------- ------- -------- Loss from continuing operations...... (36,584) (802) (2,863) (185) (8,096) (48,530) 4,792 (43,738) Preferred stock dividends....... -- -- -- -- 1,913 (7) 1,913 -- 1,913 -------- ------- ------- ------ -------- -------- ------- -------- Loss from continuing operations applicable to common stock.... $(36,584) $ (802) $(2,863) $ (185) $(10,009) $(50,443) $ 4,792 $(45,651) ======== ======= ======= ====== ======== ======== ======= ======== Basic and diluted earnings per share: Net loss from continuing operations applicable to common stock... $ (0.65) $ (0.42) ======== ======== Weighted average common shares outstanding.... 77,288 107,538 ======== ======== Three Months Ended March 31, 1999 ----------- Pro Forma ----------- (Unaudited) Gross revenue: Television...... $ 13,664 Radio........... 12,166 Outdoor and publishing..... 6,857 ----------- Total gross revenue......... 32,687 Less agency commissions..... 2,887 ----------- Net revenue...... 29,800 ----------- Expenses: Direct operating...... 12,263 Selling, general and administrative.. 11,548 Corporate (excluding non- cash stock- based compensation).. 2,348 Depreciation and amortization... 21,446 Non-cash stock- based compensation... 7,983 Gain on sale of assets......... (2,223) ----------- Total expenses... 53,365 ----------- Operating income (loss).......... (23,565) Interest expense, net and other... (8,491) Non-cash interest expense related to Univision conversion option.......... -- Income tax benefit (expense)....... 8,304 ----------- Loss from continuing operations...... (23,752) Preferred stock dividends....... 1,913 ----------- Loss from continuing operations applicable to common stock.... $(25,665) =========== Basic and diluted earnings per share: Net loss from continuing operations applicable to common stock... $ (0.33) =========== Weighted average common shares outstanding.... 77,353 ===========
F-6 ENTRAVISION COMMUNICATIONS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of March 31, 2000 (In thousands)
Other Historical Completed Historical Historical Z-Spanish and Pending Pro Forma Offering Pro Forma As Entravision LCG Media Acquisitions Adjustments Pro Forma Adjustments Adjusted ----------- ---------- ---------- ------------ ----------- ----------- ----------- ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Current assets: Cash and cash equivalents....... $ 3,513 $ 2,236 $ 441 $ 267 $ -- $ 6,457 $ 8,000 (16) $ 14,457 Receivables....... 12,229 7,711 15,270 907 -- 36,117 -- 36,117 Prepaid expenses and taxes......... 1,310 2,163 1,390 19 -- 4,882 -- 4,882 -------- -------- -------- ------ --------- ---------- --------- ---------- Total current assets.......... 17,052 12,110 17,101 1,193 -- 47,456 8,000 55,456 Property and equipment.......... 28,736 7,759 34,240 1,244 -- 71,979 -- 71,979 Intangible assets.. 189,726 129,923 223,831 6,403 526,593 (9) 1,076,476 -- 1,076,476 Other assets....... 33,234 4,416 6,892 -- (7,500)(13) 37,042 -- 37,042 -------- -------- -------- ------ --------- ---------- --------- ---------- Total assets.... $268,748 $154,208 $282,064 $8,840 $ 519,093 $1,232,953 $ 8,000 $1,240,953 ======== ======== ======== ====== ========= ========== ========= ========== Current liabilities: Accounts payable, accrued liabilities and other............. $ 9,130 $ 5,933 $ 12,078 $ 372 $ -- $ 27,513 $ -- $ 27,513 Long-term debt, current portion... 525 25 22,779 -- -- 23,329 -- 23,329 -------- -------- -------- ------ --------- ---------- --------- ---------- Total current liabilities..... 9,655 5,958 34,857 372 -- 50,842 -- 50,842 Long-term debt..... 114,076 39,780 86,021 -- 260,195 (10) (90,000)(11) 410,072 (371,500)(16) 38,572 Subordinated notes.............. 120,000 -- -- -- 90,000 (11) (210,000)(12) -- -- -- Deferred taxes and other.............. 1,990 20,304 26,988 -- 155,000 (10) 204,282 -- 204,282 -------- -------- -------- ------ --------- ---------- --------- ---------- Total liabilities..... 245,721 66,042 147,866 372 205,195 665,196 (371,500) 293,696 -------- -------- -------- ------ --------- ---------- --------- ---------- Series A mandatorily redeemable convertible preferred stock.... -- -- -- -- 90,000 (12) 90,000 -- 90,000 Common stock put options............ -- -- 54,182 -- (54,182)(13) -- -- -- -------- -------- -------- ------ --------- ---------- --------- ---------- -- -- 54,182 -- 35,818 90,000 -- 90,000 -------- -------- -------- ------ --------- ---------- --------- ---------- Stockholders' equity: Class A common stock............. 1 92 251 -- 2 (10) (343)(13) 3 2 (16) 5 Class B common stock............. 5 -- -- -- -- 5 -- 5 Class C common stock............. -- -- -- -- 1 (12) 1 -- 1 Additional paid- in capital........ 23,611 94,485 100,271 -- (177,376)(13) 119,999 (12) 328,498 (10) 489,488 379,498 (16) 868,986 Deferred compensation and other............. -- -- (5,637) -- (5,513)(13) (11,150) -- (11,150) Accumulated deficit........... -- (6,411) (14,869) 8,468 12,812 (13) -- -- -- Stock subscriptions notes receivable........ (590) -- -- -- -- (590) -- (590) -------- -------- -------- ------ --------- ---------- --------- ---------- Total stockholders' equity.......... 23,027 88,166 80,016 8,468 278,080 477,757 379,500 857,257 -------- -------- -------- ------ --------- ---------- --------- ---------- Total liabilities and stockholders' equity.......... $268,748 $154,208 $282,064 $8,840 $ 519,093 $1,232,953 $ 8,000 $1,240,953 ======== ======== ======== ====== ========= ========== ========= ==========
F-7 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.
Year Ended December 31, 1999 ----------------------------------------------- Amortization Depreciation Less Pro Forma Expense Expense Historical Adjustment ------------ ------------ ---------- ---------- LCG......................... $22,430 $1,108 $ (4,907) $18,631 Z-Spanish Media............. 33,158 4,891 (8,670) 29,379 Other....................... 8,279 -- (1,104) 7,175 ------- ------ -------- ------- $63,867 $5,999 $(14,681) $55,185 ======= ====== ======== ======= Three Months Ended March 31, 2000 ----------------------------------------------- Amortization Depreciation Less Pro Forma Expense Expense Historical Adjustment ------------ ------------ ---------- ---------- LCG......................... $ 5,608 $ 277 $ (1,229) $ 4,656 Z-Spanish Media............. 8,289 1,223 (2,843) 6,669 Other....................... 1,511 -- (251) 1,260 ------- ------ -------- ------- $15,408 $1,500 $ (4,323) $12,585 ======= ====== ======== =======
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:
Year Ended December 31, 1999 ------------------------------------------- Debt After Interest Less Pro Forma Acquisitions Expense Historical Adjustment ------------ -------- ---------- ---------- LCG............................. $245,000 $21,070 $ (5,527) $15,543 Z-Spanish Media................. 108,800 9,357 (6,471) 2,886 Other........................... 104,000 10,831 (2,659) 8,172 ------- -------- ------- $41,258 $(14,657) $26,601 ======= ======== ======= Three Months Ended March 31, 2000 ------------------------------------------- Debt After Interest Less Pro Forma Acquisitions Expense Historical Adjustment ------------ -------- ---------- ---------- LCG............................. $245,000 $5,268 $ (1,384) $3,884 Z-Spanish Media................. 108,800 2,339 (2,337) 2 Other........................... 90,000 1,936 (333) 1,603 ------- -------- ------- $9,543 $ (4,054) $5,489 ======= ======== =======
The assumed interest rate under our existing revolving credit facility was 8.6%, which represents our current rate. F-8 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued) (3) These adjustments represent 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.
Year Ended December 31, 1999 Interest Expense ------------ TSG Capital Fund III, L.P...................................... $ 90 Univision...................................................... 1,760 Term loan for acquisition of LCG............................... (2,185) ------ $ (335) ====== Three Months Ended March 31, 2000 Interest Expense ------------ TSG Capital Fund III, L.P...................................... $ 23 Univision...................................................... 440 Term loan for acquisition of LCG............................... (546) ------ $ (83) ======
(4) These adjustments represent 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% after giving effect to non-tax deductible goodwill, non-cash stock-based compensation and non-cash interest expense. 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 and $1.7 million for the three months ended March 31, 2000. (6) These adjustments represent the provision for income taxes on pro forma net loss of historical Entravision to give effect to our conversion from a limited liability company to a C-corporation. An effective combined tax rate of 40% was used after giving effect to non-tax deductible goodwill of $2.2 million and non-cash stock-based compensation of $29.1 million for the year ended December 31, 1999 and non-tax deductible goodwill of $0.5 million for the three months ended March 31, 2000. (7) These adjustments represent the non-cash 8.5% dividend on TSG Capital Fund III, L.P.'s mandatorily redeemable convertible preferred stock.
Three Months Year Ended Ended December 31, March 31, 1999 2000 ------------ ------------ Series A mandatorily redeemable convertible preferred stock............................... $7,650 $1,913 ====== ======
(8) These adjustments represent the amortization of $11.1 million of deferred compensation related to the exchange of Z-Spanish Media stock options for Entravision stock options. F-9 ENTRAVISION COMMUNICATIONS CORPORATION NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS--(Continued) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS (9) 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 ------------ -------- ---------- ----------- LCG............................ $302,452 $34,000 $(129,923) $206,529 Z-Spanish Media................ 444,363 53,000 (223,831) 273,532 Other.......................... 52,935 -- (6,403) 46,532 -------- ------- --------- -------- $799,750 $87,000 $(360,157) $526,593 ======== ======= ========= ========
(10) These adjustments represent the issuance of our common stock in this offering necessary to finance the Z-Spanish Media acquisition and common stock to selling stockholders of Z-Spanish Media and borrowings under credit facilities to finance other acquisitions and to record related deferred tax liabilities.
Borrowings Under Common Credit Stock Deferred Facilities Issued Taxes ---------- -------- -------- LCG............................................ $205,195 $ -- $ 82,000 Z-Spanish Media................................ -- 328,500 73,000 Other.......................................... 55,000 -- -- -------- -------- -------- $260,195 $328,500 $155,000 ======== ======== ========
(11) This adjustment represents TSG Capital Fund III, L.P.'s $90 million investment in the Company which is presented as a reduction of our existing bank debt. (12) These adjustments represent 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. (13) This adjustment represents the elimination of our deposit related to our acquisition of LCG, common stock put options and deferred compensation related to our Z-Spanish Media acquisition, historical stockholders' equity of our acquisitions pending at March 31, 2000 and the estimated fair value related to compensation related to the exchange of Z-Spanish Media stock options for Entravision stock options, as these acquisitions were accounted for as purchase business combinations. UNAUDITED PRO FORMA OFFERING ADJUSTMENTS (14) This adjustment represents the interest savings from using the estimated net proceeds we receive from this offering for the repayment of $371,500 of the pro forma borrowings. (15) This adjustment represents the tax effect of offering adjustments using an estimated statutory tax rate of 40%. (16) This adjustment represents our issuance of 46,000,000 shares of our Class A common stock at a public offering price of $14.00 per share, net of $44 million of estimated expenses and underwriting fees less $220 million in proceeds allocated for our acquisition of Z-Spanish Media. F-10 INDEPENDENT AUDITOR'S REPORT To the Members Entravision Communications Company, L.L.C. Santa Monica, California We have audited the accompanying combined balance sheets of Entravision Communications Company, L.L.C. and its combined affiliates as of December 31, 1998 and 1999, and the related combined statements of operations, 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Entravision Communications Company, L.L.C. and its combined affiliates 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. /s/ McGladrey & Pullen, LLP Pasadena, California March 18, 2000, except Note 12, as to which the date is July 20, 2000 and Note 13 as to which the date is July 25, 2000 F-11 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES COMBINED BALANCE SHEETS December 31, 1998 and 1999 and March 31, 2000 (Unaudited) (In thousands, except share and per share data)
December 31, March 31, ------------------ ----------- 1998 1999 2000 -------- -------- ----------- (Unaudited) ASSETS Current assets Cash and cash equivalents..................... $ 3,661 $ 2,357 $ 3,513 Receivables: Trade, net of allowance for doubtful accounts of 1998 $790; 1999 $979; 2000 $941........... 9,143 12,392 11,956 Related parties............................... 284 273 273 Prepaid expenses and taxes.................... 268 355 1,310 -------- -------- -------- Total current assets......................... 13,356 15,377 17,052 Property and equipment, net.................... 16,788 27,230 28,736 Intangible assets, net......................... 95,458 152,387 189,726 Other assets, including deposits on acquisitions of 1998 $5,533; 1999 $8,742; 2000 $24,733.................................. 5,689 10,023 33,234 -------- -------- -------- $131,291 $205,017 $268,748 ======== ======== ======== LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND OWNERS' EQUITY Current liabilities Current maturities of notes and advances payable, related parties..................... $ 201 $ 231 $ 231 Current maturities of long-term debt.......... 943 1,389 294 Accounts payable and accrued expenses (including related parties of 1998 $71; 1999 $280; 2000 $230)............................. 6,199 7,479 9,130 -------- -------- -------- Total current liabilities.................... 7,343 9,099 9,655 -------- -------- -------- Long-term debt Subordinated note payable to Univision........ 10,000 10,000 120,000 Notes payable, less current maturities........ 88,794 155,917 114,076 -------- -------- -------- 98,794 165,917 234,076 Deferred taxes................................. 283 1,990 1,990 -------- -------- -------- Total liabilities............................ 106,420 177,006 245,721 -------- -------- -------- Commitments and Contingencies Series A mandatorily redeemable convertible preferred stock, $0.0001 par value, 11,000,000 shares authorized; no shares issued or outstanding .................................. -- -- -- Members' capital Entravision Communications Company, L.L.C..... 14,064 59,645 -- Common Stock of member corporations........... 1,256 1,256 -- Additional paid-in capital of member corporations................................. 16,329 16,329 -- Accumulated deficit........................... (6,217) (48,635) -- Stockholders' equity Class A common stock, $0.0001 par value, 260,000,000 shares authorized; shares issued and outstanding 4,937,854.................... -- -- 1 Class B common stock, $0.0001 par value, 40,000,000 shares authorized; shares issued and outstanding 27,429,313................... -- -- 5 Class C common stock, $0.0001 par value, 25,000,000 shares authorized; no shares issued or outstanding........................ -- -- -- Additional paid-in capital.................... -- -- 23,611 Accumulated deficit........................... -- -- -- -------- -------- -------- 25,432 28,595 23,617 Less: L.L.C. membership and stock subscription notes receivable............................. (561) (584) (590) -------- -------- -------- 24,871 28,011 23,027 -------- -------- -------- $131,291 $205,017 $268,748 ======== ======== ========
See Notes to Combined Financial Statements. F-12 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES COMBINED STATEMENTS OF OPERATIONS Years Ended December 31, 1997, 1998 and 1999 and Three Months Ended March 31, 1999 (Unaudited) and 2000 (Unaudited) (In thousands, except share, per share and per L.L.C. membership unit data)
Three Months Ended Year Ended December 31, March 31, ------------------------------------- ------------------------ 1997 1998 1999 1999 2000 ----------- ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Gross revenue (including network compensation from Univision of $2,947, $4,922, $2,748, $740 and $1,046)....... $ 33,419 $ 49,872 $ 66,204 $ 13,013 $ 19,340 Less agency commissions............ 2,963 5,052 7,205 1,284 2,076 ----------- ----------- ----------- ----------- ----------- Net revenue........... 30,456 44,820 58,999 11,729 17,264 ----------- ----------- ----------- ----------- ----------- Expenses: Direct operating (including Univision national representation fees of $1,220, $2,379, $3,149, $594, and $922)................ 9,184 15,794 24,441 4,672 7,883 Selling, general and administrative (excluding non-cash stock-based compensation of $900, $500, $29,143, $7,286 and $0).............. 5,845 8,877 11,611 2,510 3,749 Corporate expenses (including related parties of $321, $453, $522, $81, and $69)................. 3,899 3,963 5,809 1,304 1,848 Non-cash stock-based compensation......... 900 500 29,143 7,286 -- Depreciation and amortization......... 10,216 10,934 15,982 3,321 4,877 ----------- ----------- ----------- ----------- ----------- 30,044 40,068 86,986 19,093 18,357 ----------- ----------- ----------- ----------- ----------- Operating income (loss)............. 412 4,752 (27,987) (7,364) (1,093) Interest expense (including amounts to Univision of $701, $701, $701, $175 and $816)................ (5,222) (8,386) (9,690) (2,043) (4,106) Non-cash interest expense relating to Univision conversion option............... -- -- (2,500) -- (31,600) Interest income....... 115 142 99 20 209 ----------- ----------- ----------- ----------- ----------- Loss before income taxes.............. (4,695) (3,492) (40,078) (9,387) (36,590) Income tax (expense) benefit................ (254) (210) 121 74 6 Effect of change in tax status................. 7,785 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Net income (loss)... $ 2,836 $ (3,702) $ (39,957) $ (9,313) $ (36,584) =========== =========== =========== =========== =========== Loss per L.L.C. membership unit........ $ (1.19) $ (0.07) $ (19.12) $ (4.38) $ (18.68) =========== =========== =========== =========== =========== Pro forma provision for income taxes benefit... 643 322 2,499 622 1,777 ----------- ----------- ----------- ----------- ----------- Pro forma net loss...... $ (4,052) $ (3,170) $ (37,579) $ (8,765) $ (34,813) =========== =========== =========== =========== =========== Pro forma per-share data: Net loss per share: Basic and diluted.... $ (0.12) $ (0.10) $ (1.16) $ (0.27) $ (1.08) =========== =========== =========== =========== =========== Pro forma weighted average common shares outstanding: Basic and diluted.... 32,972,425 32,894,802 32,402,378 32,431,427 32,367,167 =========== =========== =========== =========== ===========
See Notes to Combined Financial Statements. F-13 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES COMBINED STATEMENTS OF EQUITY Years Ended December 31, 1997, 1998 and 1999 (In thousands, except share and L.L.C. membership unit data)
Additional Entravision Paid-in Note Communications Common Stock Capital of Receivable Company, of Member Member Stockholder Accumulated L.L.C. Corporations Corporations and Members Deficit Total -------------- ------------ ------------ ----------- ----------- ------- Balance, December 31, 1996 .................. $12,382 $1,254 $16,211 $(519) $ 719 $30,047 Capitalization of 10,000 shares of Valley Channel 48..... -- 1 118 -- -- 119 Issuance of 644,437 Class A membership units in exchange for assets contributed by member corporation.... -- -- -- -- -- -- Compensation expense attributable to employee equity award................. 900 -- -- -- -- 900 Conversion of note payable to stockholder into Class C membership units...... 240 -- -- -- -- 240 Conversion of 5,000 Class A membership units into 5,000 Class E and F membership units................. -- -- -- -- -- -- Interest earned on notes receivable from member................ 21 -- -- -- -- 21 Increase in notes and subscriptions receivable from member................ -- -- -- (21) -- (21) Repurchase of 500 shares of Golden Hills Broadcasting Corporation common stock................. -- -- -- -- (587) (587) Net income............. -- -- -- -- 2,836 2,836 Distributions and dividends to members and stockholders...... -- -- -- -- (1,498) (1,498) ------- ------ ------- ----- -------- ------- Balance, December 31, 1997................... 13,543 1,255 16,329 (540) 1,470 32,057 Capitalization of 9,750 shares of Telecorpus, Inc................... -- 1 -- -- -- 1 Issuance of 147,411 Class A membership units in exchange for assets contributed by member corporation.... -- -- -- -- -- -- Conversion of 4,500 Class A membership units into 4,500 Class E and F membership units................. -- -- -- -- -- -- Interest earned on notes receivable from member................ 21 -- -- -- -- 21 Increase in notes and subscriptions receivable from member................ -- -- -- (21) -- (21) Repurchase of 1,600 shares of Golden Hills Broadcasting Corporation common stock ................ -- -- -- -- (1,000) (1,000) Compensation expense attributable to employee equity awards ...................... 500 -- -- -- -- 500 Net (loss)............. -- -- -- -- (3,702) (3,702) Distributions and dividends to members and stockholders...... -- -- -- -- (2,985) (2,985) ------- ------ ------- ----- -------- ------- Balance, December 31, 1998................... 14,064 1,256 16,329 (561) (6,217) 24,871 Increase in conversion option on subordinated note agreement relating to acquisition of business.............. 13,915 -- -- -- -- 13,915 Estimated value of subordinated note conversion option..... 2,500 -- -- -- -- 2,500 Conversion of 813 Class A membership units into 813 Class E and F membership units...... -- -- -- -- -- -- Interest earned on notes receivable from member................ 23 -- -- -- -- 23 Increase in notes and subscriptions receivable from member................ -- -- -- (23) -- (23) Compensation expense attributable to employee equity awards ...................... 29,143 -- -- -- -- 29,143 Repurchase of 250 shares of Telecorpus, Inc. common stock..... -- -- -- -- (61) (61) Net (loss)............. -- -- -- -- (39,957) (39,957) Distributions and dividends to members and stockholders...... -- -- -- -- (2,400) (2,400) ------- ------ ------- ----- -------- ------- Balance, December 31, 1999................... $59,645 $1,256 $16,329 $(584) $(48,635) $28,011 ======= ====== ======= ===== ======== =======
See Notes to Combined Financial Statements. F-14 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES COMBINED STATEMENTS OF EQUITY (In thousands, except share data)
Additional Entravision Paid-in Note Communications Common Stock Capital of Receivable Company, of Member Member Stockholder Accumulated L.L.C. Corporations Corporations and Members Deficit Total -------------- ------------ ------------ ----------- ----------- -------- Balance December 31, 1999.................... $ 59,645 $ 1,256 $ 16,329 $(584) $(48,635) $ 28,011 Interest earned on subscriptions receivable (Unaudited)............ -- -- 6 (6) -- -- Intrinsic value of subordinated note conversion option (Unaudited)............ -- -- 31,600 -- -- 31,600 Net loss (Unaudited)... -- -- -- -- (36,584) (36,584) Reclassification of accumulated deficit (Unaudited)............ (37,284) -- (47,935) -- 85,219 -- To give effect to Reorganization described in Note 1 (Unaudited)............ (22,361) (1,256) -- 590 -- (23,027) -------- ------- -------- ----- -------- -------- Balance March 31, 2000.. $ -- $ -- $ -- $ -- $ -- $ -- ======== ======= ======== ===== ======== ========
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 --------- --------- ---------- ------- ------- ------- ------- ---------- ----------- ------------ -------- Adjustments to give effect to Reorganization described in Note 1.......... $ -- 4,937,854 27,429,313 -- $ 1 $ 5 $ -- $23,611 $ -- $(590) $ 23,027 ----- --------- ---------- --- --- --- ----- ------- ----- ----- -------- Balance March 31, 2000 (Unaudited)..... $ -- 4,937,854 27,429,313 -- $ 1 $ 5 $ -- $23,611 $ -- $(590) $ 23,027 ===== ========= ========== === === === ===== ======= ===== ===== ========
See Notes to Combined Financial Statements. F-15 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. AND ITS COMBINED AFFILIATES COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 1997, 1998 and 1999 and Three Months Ended March 31, 1999 (Unaudited) and 2000 (Unaudited) (In thousands)
Three Months Ended Year Ended December 31, March 31, ---------------------------- ----------------------- 1997 1998 1999 1999 2000 -------- -------- -------- ----------- ----------- (Unaudited) (Unaudited) Cash Flows from Operating Activities Net income (loss)....... $ 2,836 $ (3,702) $(39,957) $(9,313) $(36,584) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........... 10,216 10,934 15,723 3,254 4,808 Deferred tax expense (benefit).............. 149 (83) 406 -- -- Effect of change in tax status................. (7,785) -- -- -- -- Amortization of debt issue costs............ 373 1,295 258 65 69 Intrinsic value of subordinated note exchange option........ -- -- 2,500 -- 31,600 Non-cash stock-based compensation........... 900 500 29,143 7,286 -- Loss on disposal of property and equipment.............. 35 15 100 -- 3 Changes in assets and liabilities, net of effect of business combinations: (Increase) in accounts receivable............ (3,525) (2,446) (3,249) 1,043 436 (Increase) in prepaid expenses and other assets................ (64) (119) (87) 9 (955) Increase in accounts payable, accrued expenses and other.... 3,374 1,264 1,291 (1,445) 1,651 -------- -------- -------- ------- -------- Net cash provided by operating activities........... 6,509 7,658 6,128 899 1,028 -------- -------- -------- ------- -------- Cash Flows from Investing Activities Proceeds from sale of equipment.............. 7 19 116 -- 25 Purchases of property and equipment.......... (2,366) (3,094) (12,825) (4,642) (2,693) Cash deposits and purchase price on acquisitions........... (59,549) (22,511) (46,354) (12,403) (61,158) -------- -------- -------- ------- -------- Net cash (used in) investing activities........... (61,908) (25,586) (59,063) (17,045) (63,826) -------- -------- -------- ------- -------- Cash Flows from Financing Activities Proceeds from issuance of common stock........ 119 -- -- -- -- Principal payments on notes payable.......... (1,227) (288) (352) (83) (61,706) Proceeds from borrowings on notes payable....... 58,079 24,407 54,913 15,914 125,660 Dividends paid to members for income taxes.................. (1,498) (2,985) (2,400) (261) -- 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 15,570 63,954 -------- -------- -------- ------- -------- Net increase (decrease) in cash and cash equivalents.......... (636) 1,411 (1,304) (576) 1,156 Cash and Cash Equivalents Beginning............... 2,886 2,250 3,661 3,661 2,357 -------- -------- -------- ------- -------- Ending.................. $ 2,250 $ 3,661 $ 2,357 $ 3,085 $ 3,513 ======== ======== ======== ======= ======== Supplemental Disclosures of Cash Flow Information Cash payments for: Interest................ $ 3,672 $ 6,744 $ 10,542 $ 1,125 $ 2,772 ======== ======== ======== ======= ======== Income taxes (refunds), 1997 $88; 1998 $274; 1999 $308.............. $ (36) $ 51 $ 96 $ 39 $ 225 ======== ======== ======== ======= ======== Supplemental Disclosures of Non-cash Investing and Financing Activities Conversion of note payable for Class C L.L.C. membership units.................. $ 240 $ -- $ -- $ -- $ -- ======== ======== ======== ======= ======== Issuance of note payable in connection with redemption of common stock of member corporations........... $ -- $ 500 $ 30 $ -- $ -- ======== ======== ======== ======= ======== Assets Acquired and Debt Issued in Business Combinations Current assets.......... $ 636 $ 99 $ 86 $ 86 $ 7,751 Broadcast equipment and furniture and fixtures............... 12,001 1,343 4,477 1,636 626 Intangible assets....... 55,991 16,733 67,533 16,145 40,636 Current liabilities..... -- (164) -- -- -- Deferred taxes.......... (7,974) -- (2,112) (2,112) -- Notes payable........... (84) (350) (12,000) -- -- Increase in subordinated debt exchange option........ -- -- (13,915) -- -- Estimated fair value allocated to option agreement.............. -- -- -- -- (3,015) Less cash deposits from prior year............. (1,521) (500) (5,533) (1,700) (1,500) -------- -------- -------- ------- -------- Net cash paid......... $ 59,049 $ 17,161 $ 38,536 $14,055 $ 44,498 ======== ======== ======== ======= ========
See Notes to Combined Financial Statements. F-16 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS, REORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of business Entravision Communications Company, L.L.C. (ECC LLC) and its combined affiliates (hereinafter, individually and collectively, the Company) primarily own and operate 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. 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 13 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. Formation of Entravision Communications Company, L.L.C. Entravision Communications Company, L.L.C. (ECC LLC), a Delaware limited liability company, was formed on January 11, 1996. ECC LLC was established by the three primary stockholders of the then existing affiliated entities to own and operate the broadcast properties. ECC LLC was inactive until it 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 their operations and all of their operating assets and liabilities except for acquisition debt 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 ownership that was not identical prior to the formation of ECC LLC. Accordingly, effective upon the execution of the local marketing agreements and asset contribution agreements, the Company applied purchase accounting. In its F-17 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) application of purchase accounting, the Company determined KBNT to be the accounting acquirer as this Affiliate received the largest share of ECC L.L.C. membership interests in the exchange and was the largest broadcast property as measured by revenue, operating income, cash flows from operations and estimated fair value. KBNT was owned 84% by its principal stockholder who also owned an 18% interest in KCEC. As such, the assets and liabilities of KCEC, KVER, KINC and KEMS were recorded at their fair value to the extent of the ownership interest of each respective company owned by other than the principal stockholder of KBNT and at historical cost for the ownership interest owned by the KBNT principal stockholder. KSMS, KNVO and KORO were each acquired subsequent to January 1996 through newly formed thinly capitalized acquisition companies owned directly by the member corporation's stockholders in proportion to their direct and indirect membership interest in ECC L.L.C. prior to each acquisition. Each of these acquisitions was with unrelated parties at fair value. Upon the consummation of the LMAs and asset contribution agreements on November 1, 1996, each of the members of ECC L.L.C. and all of the individual stockholders of the corporations have been considered members of a control group. Accordingly, effective upon the execution of the KSMS, KNVO and KORO 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. Reorganization Entravision Communications Corporation (ECC), a Delaware corporation, was formed on February 11, 2000, as a subsidiary of ECC LCC. 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, will be 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 8.5% dividend. The purpose of the formation of ECC is to effect an exchange transaction whereby direct and indirect ownership interests in ECC L.L.C. 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 in exchange for their direct and indirect ownership interests. In addition, the remaining individual members and 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 these corporations for Class A common shares in ECC. Accordingly, the Affiliates will become wholly-owned subsidiaries of 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 individual members of F-18 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ECC L.L.C. 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 L.L.C. immediately prior to the exchange. This reorganization and exchange transaction will become effective immediately prior to the effective date of the initial public offering of ECC expected to be consummated during 2000. Significant accounting policies Basis of combination The accompanying combined financial statements include the accounts of ECC L.L.C., its subsidiaries and affiliates. All significant intercompany accounts and transactions have been eliminated in combination. Each of the combined companies is operated under common senior management who also have key elements of ownership control. Unaudited Interim Financial Information The interim financial information of the Company for the three months ended March 31, 1999 and 2000 is unaudited. The unaudited interim financial information has been prepared on the same basis as the annual financial statements except for the Reorganization and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows as of and for the three months ended March 31, 1999 and 2000. The Reorganization and exchange transaction described above will become effective immediately prior to the effective date of the initial public offering of ECC which is expected to be consummated during 2000. ECC L.L.C. and affiliates are considered to be under common control. The capital structure of the combined financial statements, including share data has been presented as if the exchange transaction took place as of March 31, 2000. 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. F-19 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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
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 F-20 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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-21 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED 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 temporary 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. 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. F-22 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 local marketing agreements 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 local marketing and time brokerage agreements 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 L.L.C. membership units 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 membership unit Basic earnings per unit is computed as net income (loss) divided by the number of membership units outstanding as of the last day of each period. Diluted earnings per unit reflects the potential dilution that could occur from membership units through options and convertible securities. F-23 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED 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 earnings per membership unit. If options and convertible debt securities had not been excluded, 676,516, 674,923 and 718,308 of membership units respectively would have been included in the denominator. The following table sets forth the calculation of income loss per membership unit:
Three Months Ended Year Ended December 31, March 31, ------------------------------- -------------------- 1997 1998 1999 1999 2000 --------- --------- --------- --------- --------- Earnings (loss) Net income (loss)...... $ 2,836 $ (3,702) $ (39,957) $ (9,313) $ (36,584) Less income (loss) of member corporations... 4,981 (3,566) (3,547) (951) (1,021) --------- --------- --------- --------- --------- Net loss applicable to L.L.C. members........ $ (2,145) $ (136) $ (36,410) $ (8,362) $ (35,563) ========= ========= ========= ========= ========= Membership Units L.L.C. membership units outstanding........... 1,796,763 1,907,731 1,903,951 1,907,731 1,903,951 ========= ========= ========= ========= =========
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 weighted average number of shares of common stock outstanding during the periods used to compute pro forma net income (loss) per share is based on the conversion ratio used to exchange ECC LLC membership units and member corporation shares for shares of ECC's common stock immediately prior to the effective date of ECC's Initial Public Offering. 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, and for the three months ended March 31, 1999 and 2000 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, F-24 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 management's estimates of the discounted future cash flows to be generated from the broadcast properties for intangible assets and replacement cost for tangible assets, 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. 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 a local marketing agreement. 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. F-25 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 a local marketing agreement. 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. F-26 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 $15.3 million including the assumption of certain liabilities totaling $2.1 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 a local marketing agreement 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 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 F-27 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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, pursuant to a special authorization obtained from the Mexican Foreign Investment General Bureau, the Company acquired a 40% minority, limited voting interest (neutral investment stock) in Televisora Alco S.A. de C.V. (ALCO), a Mexican corporation which operates XUPN-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. On June 9, 1999, the Company also acquired all of the outstanding voting capital stock, and 60% of the limited voting capital stock, of Comercializadora Frontera Norte S.A. de C.V. (CFN), a Mexican corporation, which has a time brokerage agreement with Alco, providing it with broadcast and advertising rights. ALCO holds absolute control on the contents and other broadcast issues. The aggregate consideration paid for this acquisition and related transactions was approximately $19.5 million, of which $7.5 million was in cash with the remaining $12.0 million payable over twelve years. 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, the gross revenue and expenses of this broadcast property have been included in the accompanying consolidated financial statements. The time brokerage agreement provides for a ten-year term with successive 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. F-28 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) See Note 13 for acquisitions subsequent to year end. 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.
December 31, ----------------------- (In millions of dollars 1998 1999 except per membership (Unaudited) (Unaudited) unit) ----------- ----------- Net revenue............. $ 61.2 $ 63.3 Net (loss).............. (5.8) (38.4) Basic and diluted net (loss) per membership unit................... $(3.04) $(20.17)
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 ===== =====
F-29 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) NOTE 4. INTANGIBLE ASSETS At December 31, intangible assets consist of:
March 31, 1998 1999 2000 (In millions of dollars) ----- ------ ----------- (Unaudited) FCC licenses........................................ $17.0 $ 44.0 $ 54.7 Univision affiliation agreements.................... 38.1 52.5 52.5 Goodwill............................................ 42.9 47.6 49.8 Noncompete agreements............................... 6.3 6.8 7.3 Construction rights and permits..................... 3.7 4.0 4.0 Time brokerage agreement............................ -- 19.5 46.8 Deferred debt costs................................. 1.3 1.3 1.3 Other............................................... 1.2 3.3 3.5 ----- ------ ------ 110.5 179.0 219.9 Less accumulated amortization....................... 15.0 26.6 30.2 ----- ------ ------ $95.5 $152.4 $189.7 ===== ====== ======
NOTE 5. LONG-TERM DEBT, NOTES PAYABLE AND SUBSEQUENT EVENT Notes payable at December 31 are summarized as follows:
March 31, 1998 1999 2000 (In millions of dollars) ----- ------ ----------- (Unaudited) Subordinated note with interest at 7.01%........... $10.0 $ 10.0 $120.0 Credit facility with bank.......................... 88.0 142.9 96.9 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 12.0 Other.............................................. 1.7 2.4 5.5 ----- ------ ------ 99.7 167.3 234.4 Less current maturities............................ 0.9 1.4 0.3 ----- ------ ------ $98.8 $165.9 $234.1 ===== ====== ======
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 A membership units of ECC LLC 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 option feature may be exercised solely by the exchange and surrender of the note. 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 F-30 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) license for our Univision affiliate television stations, the issuance of additional membership units and changes to the capital structure of the Company without the consent of Univision. On March 2, 2000 the Note was amended and increased to $120.0 million, and the option exchange feature was increased from 27.9% to 40%, resulting in additional interest expense of $31.6 million during the quarter ended March 31, 2000 (unaudited) based on the estimated intrinsic value of the option feature. The intrinsic value of the option feature was determined using an estimate by management based primarily on the estimated IPO price as the fair market value. 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 $158.0 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. 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. F-31 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 ==== ====
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. F-32 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) 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 ====
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, F-33 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) $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 54,284 redeemable of Class D membership units in the Company, which vested through January 2000. At December 31, 1999, the estimated fair value associated with this award of Class D membership units 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 and $7.3 million for the three months ended March 31, 1999. 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 and the membership unit conversion ratio. 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 4,835 restricted Class D membership units at $0.10 per unit. The Company may repurchase the restricted units at $0.10 per unit. The number of units 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 and the membership unit conversion ratio. 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 Class D membership unit purchase. Accordingly, no amounts have been recorded for non-cash stock-based compensation for this grant during the quarter ended March 31, 2000 (unaudited). 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 membership unit option awards. 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; volatility of 50%; risk-free interest rate of 6.17% and no dividends during the expected life. F-34 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED 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/member/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 member/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. MEMBERS' CAPITAL The capital structure of each of the companies included in these combined financial statements is as follows:
1997 1998 1999 Entravision Communications Company, L.L.C. ------- ------- ------- Class A units, 1997 1,451,273; 1998 1,557,741; 1999 1,553,148 units issued and outstanding............ $ 381 $ 402 $ 425 Class B units, none issued or outstanding.......... -- -- -- Class C units, 1997 276,081; 1998 and 1999 286,206 units issued and outstanding...................... 12,262 12,262 28,677 Class D units, 1997, 1998 and 1999 54,284 units issued and outstanding............................ 900 1,400 30,543 Class E units, 1997 5,000; 1998 9,500; 1999 10,313 units issued and outstanding...................... -- -- -- Class F units, 1997 5,000; 1998 9,500; 1999 10,313 units issued and outstanding...................... -- -- -- Note Receivable for membership equity.............. (381) (402) (425)
These balances are prior to the elimination of equity in combination. Under the terms of the operating agreement, EEC L.L.C. may issue Class A, B, C, D, E, or F membership units. Class A units represent membership interests which carry full voting rights, are issued in return for contributions for cash or other property; these units have been issued to each of the operating entities. Class B units are issued to third parties in accordance with the terms of the operating agreement. These units do not have a capital interest upon issuance. No Class B units have been issued. Class C units carry full voting rights and, as stated in the operating agreement, are only issued to persons in connection with the services to be provided in each person's capacity as a member. Class D units have no voting rights, do not receive an allocation of income or loss and are intended to be issued to senior management. At December 31, 1999, 54,284 Class D units are issued F-35 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) and outstanding related to the employment agreement discussed in Note 8. Class A units can be converted into Class E and Class F units at the option of the holder on the basis of one Class A for one Class E and F unit. As of December 31, 1999, 10,313 Class A units had been converted into 10,313 Class E and F units. Class E units have the same rights to voting privileges and allocation of income and loss as Class A units, while Class F units have the same economic rights as Class A units upon the occurrence of a capital event as defined in the operating agreement. Allocation of net losses and income from operations is in accordance with the operating agreement. Upon the repurchase of any member corporation's common stock in accordance with the stockholders' agreement, a proportionate amount of ECC L.L.C. membership units will also be retired to maintain a consistently proportionate ownership of ECC L.L.C., among the remaining members. The Company has subscriptions receivable from managing members for 250,250 Class C units in ECC L.L.C. and a $425 note receivable at December 31, 1999 including accrued interest in the amount of $65 from a member for 10,313 Class A units in ECC L.L.C.
1997 1998 1999 Cabrillo Broadcasting Corporation ------ ------ ------ Common stock, no par value per share, 1997, 1998 and 1999 9,445.7 shares authorized issued and outstanding........................................... $ 221 $ 221 $ 221 Note receivable from stockholder....................... (159) (159) (159) Golden Hills Broadcasting Corporation Class A voting common stock, $.01 par value per share, 10,000 shares authorized, 1997 7,650; 1998 and 1999 6,050 shares issued and outstanding................... $ 1 $ 1 $ 1 Additional paid-in capital............................. 6,729 6,729 6,729
Golden Hills Broadcasting Corporation Stock repurchases On May 20, 1997, Golden Hills Broadcasting Corporation reached an agreement to repurchase 500 shares of Class A voting common stock. The consideration paid in cash in May 1997, advanced by ECC L.L.C., was $587. On September 30, 1998, Golden Hills Broadcasting Corporation reached an agreement to repurchase 1,600 shares of Class A voting common stock pursuant to the terms of an existing stockholder agreement. The consideration was $1,000 of which $500 was paid in cash advanced by ECC L.L.C. with the balance payable in the form of a $500 note (paid in full during 1999).
1997 1998 1999 KSMS-TV, Inc. ------ ------ ------ Common stock, no par value, 10,000 shares authorized, 1997, 1998 and 1999 10,000 shares issued and outstanding............................................. $ 530 $ 530 $ 530 Las Tres Palmas Corporation Common stock, no par value, 10,000 shares authorized, 1997, 1998 and 1999 10,000 shares issued and outstanding............................................. $ 500 $ 500 $ 500 Additional paid-in capital............................... 953 953 953 Tierra Alta Broadcasting, Inc. Class A voting common stock, $.01 par value per share, 20,000 shares authorized, 1997, 1998 and 1999 4,500 shares issued and outstanding........................... $ 1 $ 1 $ 1 Class B voting common stock, $.01 par value per share, convertible, 15,500 shares authorized, 1997, 1998 and 1999 15,500 shares issued and outstanding............... 1 1 1 Additional paid-in capital............................... 8,529 8,529 8,529
F-36 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Class B conversion feature At any time, each holder of the Tierra Alta Broadcasting, Inc. Class B nonvoting common stock may convert, subject to FCC Approval, on a one-share- for-one-share basis, any Class B nonvoting common stock into Class A voting common stock. No additional obligations or amounts are due upon exercising conversion.
1997 1998 1999 Valley Channel 48, Inc. ---- ---- ---- Common stock, $0.0001 par value, 10,000 shares authorized, 1997, 1998, and 1999 9,558 shares issued and outstanding............. $ 1 $ 1 $ 1 Additional paid-in capital...................................... 118 118 118 Telecorpus, Inc. Common stock, no par value, 10,000 shares authorized, 1997 0 shares issued and outstanding; 1998 and 1999 9,750 shares issued and outstanding......................................... $-- $ 1 $ 1
On July 19, 1999, Telecorpus, Inc. entered into an agreement to repurchase 250 shares of Class A voting common stock. The consideration was $61 of which $30 was paid in cash advanced by ECC L.L.C. with the balance payable in the form of a note. NOTE 11. 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 12. LITIGATION The Company is a defendant to a lawsuit filed in the Superior Court of the District of Columbia by First Millenium Communications, Inc. to resolve certain contract disputes arising out of a terminated brokerage-type arrangement with First Millenium. The litigation primarily concerns the payment of a brokerage fee alleged to be due in connection with the acquisition of television station WBSV in Sarasota, Florida for $17.0 million. In addition to its various contractual claims, First Millenium also has asserted claims for fraud, RICO, misappropriation, breach of fiduciary duty, defamation and intentional infliction of emotional distress. First Millenium is seeking in excess of $60 million including the right to a 10% ownership interest in WBSV and the right to exchange such interest in the reorganization described in Note 1. First Millenium has made similar claims relating to other pending acquisitions. No accrual has been recorded in the accompanying financial statements beyond the amount management believes is the remaining contractual obligation of $250,000 since the ultimate liability in excess of the amount recorded, if any, cannot be reasonably estimated. Management intends to vigorously defend against these claims and does not believe that any resolution of this litigation is likely to have a material adverse effect on the Company's financial position, results of operations or cash flows. On July 20, 2000, Telemundo Network Group LLC, Telemundo Network, Inc. and Council Tree Communications, L.L.C. filed an action against the Company and certain of the Company's affiliates in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida relating to F-37 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) the Company's investment in XHAS-TV, Channel 33 in Tijuana, Mexico. The action seeks to have the sale voided and other unspecified damages for breach of contract relating to Telemundo's attempted exercise of a right of first refusal to buy the assets of XHAS-TV. In addition to its contract claim, Telemundo asserts tortious interference, fraud and conspiracy to defraud. Subsequently, the Company filed an action in the Superior Court of the State of California for the County of San Diego against the same Telemundo entities seeking unspecified damages and a declaratory judgment that, among other things, Telemundo failed to timely exercise its right of first refusal with respect to the acquisition of the assets of XHAS-TV. The Company intends to vigorously defend against this action and does not believe that any resolution of this matter is likely to have an adverse material impact. NOTE 13. SUBSEQUENT EVENTS Subordinated note On March 2, 2000, the Company received $110.0 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 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 $14.0 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 and was accounted for as a purchase business combination. The purchase price has been allocated as follows: $0.6 million to fixed assets, $10.7 million to the FCC license, $2.2 million to goodwill and $0.5 million to a non-competition agreement. WHCT-TV In February 2000, the Company entered into an agreement to acquire the FCC license of television station WHCT in Hartford Connecticut, for $18.0 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. 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 $85.0 million. On March 3, 2000 the Company deposited F-38 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) $17 million in escrow relating to this acquisition. Management intends to close this transaction upon receiving FCC approval, which it anticipates receiving in the third quarter of 2000. XHAS-TV In March 2000, ALCO, the Company's 40% limited-neutral equity method investee, executed a stock purchase agreement to acquire 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, Tijuana, Mexico. In March 2000, the Company entered into agreements to acquire a 47.5% interest in each of Vista Television, Inc., and Channel 57, Inc. The Company has an option, which must be exercised at the expiration of the five year term, to acquire an additional 47.5% interest in each of these companies for $3.5 million. Additionally, ECC entered into time brokerage agreements in connection with these acquisitions. The aggregate consideration to be paid in connection with these transactions is approximately $35.0 million of which $1.0 million was deposited into escrow at December 31, 1999. These transactions closed on March 16, 2000. The purchase price has been preliminarily allocated as follows: $1.0 million to fixed assets, $27.5 million to intangibles and $6.7 million to other assets. Latin Communications Group Inc. (LCG) On April 20, 2000, the Company acquired all of the outstanding capital stock of LCG for approximately $252.0 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 19, 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 as amended on July 25, 2000 is approximately $448.0 million, including approximately $110 million of debt. The purchase price will be paid in cash of $220.0 million and the remainder in newly-issued Class A common stock of the Company after the reorganization as discussed in Note 1. To comply with a preliminary Department of Justice inquiry, six of Z-Spanish Media's radio stations will be transferred to a trust. The beneficiary of the trust is Z-Spanish Media. If the Department of Justice permits the Company to acquire these stations, the Company would be obligated to purchase those stations for an aggregate purchase F-39 ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) price of up to $23.0 million. If the Company is not permitted to purchase these stations, the Company would be obligated to remit the proceeds from the sale of those stations to the former stockholders of Z-Spanish Media. In connection with this acquisition, the Company will be issuing approximately 1.6 million options of its Class A common stock in exchange for Z-Spanish Media's previously outstanding stock options. In connection with these stock options, the Company will record as additional purchase price approximately $7.0 million for the excess of the estimated fair value over the intrinsic value of the options. In addition, the Company will recognize approximately $11.0 million as non-cash stock-based compensation over the remaining three year vesting period. Management intends to close on this transaction concurrently with the IPO. Radio Stations KFRQ(FM), KKPS(FM), KVPA(FM), and KVLY(FM) On May 22, 2000 the Company agreed to acquire certain assets relating to the operations of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) from Sunburst Media, L.P., for approximately $55.0 million. Management intends to close on this transaction upon receiving FCC approval, which it anticipates receiving in the third quarter of 2000. Infinity Broadcasting Corporation On June 13, 2000 the Company agreed to acquire certain outdoor advertising assets from Infinity Broadcasting Corporation for a total of $168.2 million. The closing of this acquisition is subject to conditions, including the receipt of required approvals. The Company will finance the acquisition with proceeds from its credit facility. 2000 Omnibus Equity Incentive Plan The Company adopted a 2000 Omnibus Equity Incentive Plan that allows for the award of up to 11,500,000 shares of Class A common stock. Awards under the plan may be in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock or stock units. No awards have been granted. Stock Grants In June 2000, the Company granted stock awards to employees, directors and consultants totaling 478,720 Class A shares of common stock. As a result of these grants, the Company will record a non-cash stock-based compensation charge of $6.7 million that will be recognized over the three year vesting period beginning in the second quarter of 2000. F-40 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-41 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
December 27, December 26, March 31, 1998 1999 2000 ------------ ------------ ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents............... $ 3,010 $ 6,695 $ 2,236 Accounts receivable, less allowance for doubtful accounts of $1,965 in 1998, $1,518 in 1999 and $1,496 in 2000...... 5,956 8,184 7,711 Prepaid expenses and other.............. 794 344 498 Deferred income taxes................... 1,278 1,288 1,665 -------- -------- -------- Total current assets..................... 11,038 16,511 12,110 Net assets of discontinued operations.... 4,831 -- -- Land held for sale....................... 4,000 -- -- Deferred finance costs, less accumulated amortization of $1,316 in 1998, $751 in 1999 and $84 in 2000.................... 2,097 1,265 1,181 Property and equipment, at cost, less accumulated depreciation of $2,337 in 1998, $3,618 in 1999 and $3,889 in 2000.................................... 6,487 7,259 7,759 Broadcast licenses and other intangible assets, less accumulated amortization of $8,054 in 1998, $11,583 in 1999 and $12,456 in 2000......................... 137,349 131,162 129,923 Other assets (including notes receivable of $366 in 1999 and $342 in 2000 from a related party).......................... 220 1,289 3,235 -------- -------- -------- Total assets............................. $166,022 $157,486 $154,208 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses... $ 5,136 $ 5,366 $ 5,706 Accrued interest........................ 1,175 715 227 Current portion of long-term debt....... 4,318 69 25 -------- -------- -------- Total current liabilities................ 10,629 6,150 5,958 Long-term liabilities: Debt.................................... 50,541 42,037 39,780 Deferred income taxes................... 17,471 18,889 18,890 Other................................... 1,492 1,442 1,414 -------- -------- -------- Total liabilities........................ 80,133 68,518 66,042 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 92 Additional paid-in capital.............. 94,485 94,485 94,485 Accumulated deficit..................... (8,688) (5,609) (6,411) -------- -------- -------- Total stockholders' equity............... 85,889 88,968 88,166 -------- -------- -------- Total liabilities and stockholders' equity.................................. $166,022 $157,486 $154,208 ======== ======== ========
See notes to consolidated financial statements. F-42 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
Years Ended Three Months Ended -------------------------------------- ------------------------ December 28, December 27, December 26, March 28, March 31, 1997 1998 1999 1999 2000 ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) Gross revenue: Advertising............ $ 33,710 $ 34,469 $ 41,814 $ 7,863 $ 10,414 Less agency commissions........... 3,472 3,692 4,623 814 1,194 ---------- ---------- ---------- ---------- ---------- 30,238 30,777 37,191 7,049 9,220 Circulation............ 5,759 5,741 5,875 1,392 1,398 Other.................. 998 1,378 1,179 218 224 ---------- ---------- ---------- ---------- ---------- Net revenue............ 36,995 37,896 44,245 8,659 10,842 ---------- ---------- ---------- ---------- ---------- Expenses: Direct operating....... 15,131 15,196 15,560 3,775 4,212 Selling, general and administrative........ 17,535 17,677 18,910 4,093 4,734 Corporate.............. 1,713 2,901 1,795 204 429 Depreciation and amortization.......... 3,762 4,593 4,907 1,243 1,229 ---------- ---------- ---------- ---------- ---------- 38,141 40,367 41,172 9,315 10,604 ---------- ---------- ---------- ---------- ---------- Operating income (loss) (1,146) (2,471) 3,073 (656) 238 Interest expense (including amounts associated with related parties of $1,200 in 1997, $1,800 in 1998, $1,900 in 1999 and $286 in each of the three month periods ended March 28, 1999 and March 31, 2000)................. (4,176) (6,211) (4,895) (1,407) (1,009) Interest income........ -- 138 115 16 28 Other finance costs and related amortization (including amounts associated with related parties of $250 in 1999 and $63 in 2000).............. (335) (376) (626) (98) (146) Gain (loss) on sale of assets................ -- -- (121) (155) (257) ---------- ---------- ---------- ---------- ---------- Loss from continuing operations before income taxes........... (5,657) (8,920) (2,454) (2,300) (1,146) Income tax benefits..... 2,213 2,570 736 690 344 ---------- ---------- ---------- ---------- ---------- Loss from continuing operations............. (3,444) (6,350) (1,718) (1,610) (802) Income from discontinued operations, net of income taxes of $595 in 1997, $974 in 1998, $271 in 1999 and $271 in the three months ended March 28, 1999... 1,161 1,312 418 418 -- Gain on sale of discontinued operations, net of income taxes of $3,123 in 1999................ -- -- 5,006 5,006 -- ---------- ---------- ---------- ---------- ---------- Net income (loss) before extraordinary item..... (2,283) (5,038) 3,706 3,814 (802) 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 $ 3,814 $ (802) ========== ========== ========== ========== ========== Net income (loss) per share: Basic and diluted: Loss from continuing operations............ $ (0.39) $ (0.69) $ (0.19) $ (0.18) $ (0.09) Discontinued operations............ 0.13 0.14 0.59 0.59 -- Extraordinary loss..... (0.03) -- (0.07) -- -- ---------- ---------- ---------- ---------- ---------- Net income (loss)...... $ (0.29) $ (0.55) $ 0.33 $ 0.41 $ (0.09) ========== ========== ========== ========== ========== Weighted average common shares outstanding: Basic and diluted...... 8,761,301 9,165,468 9,235,468 9,235,468 9,235,468 ========== ========== ========== ========== ==========
See notes to consolidated financial statements. F-43 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 Net loss (unaudited)... -- -- -- (802) (802) --------- --- ------- ------- ------- Balance at March 31, 2000 (unaudited)....... 9,235,468 $92 $94,485 $(6,411) $88,166 ========= === ======= ======= =======
See notes to consolidated financial statements. F-44 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years Ended Three Months Ended -------------------------------------- ----------------------- December 28, December 27, December 26, March 28, March 31, 1997 1998 1999 1999 2000 ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) Operating activities Net income (loss)....... $ (2,505) $(5,038) $ 3,079 $ 3,814 $ (802) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.......... 4,435 5,343 5,279 1,341 1,312 Provision for doubtful accounts.............. 994 827 558 105 135 Provision for deferred taxes................. (1,847) (1,741) 1,732 2,606 (376) Gain on sale of discontinued operations............ -- -- (8,128) (8,128) -- Extraordinary loss on early debt extinguishments....... 375 -- 1,042 -- -- Loss on sale of assets................ -- -- 121 155 257 Amortization of debt discount.............. 477 733 749 187 206 Changes in assets and liabilities, net of amounts acquired and net of disposals: (Increase) decrease in accounts receivable.. (1,095) 434 (2,786) 325 338 (Increase) decrease in prepaid expenses and other................ (921) 130 461 (844) (154) (Decrease) increase in accounts payable and accrued expenses..... 2,372 (147) (554) 485 (176) (Decrease) increase in other assets and liabilities.......... 46 57 (446) (85) 22 -------- ------- -------- ------- ------- Net cash provided by operating activities... 2,331 598 1,107 (39) 762 -------- ------- -------- ------- ------- Investing activities Capital expenditures.... (1,010) (1,272) (2,291) (519) (1,156) Proceeds from sale of discontinued operations............. -- -- 12,949 12,949 -- Proceeds from disposal of assets.............. -- -- 6,608 1,665 16 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) -- (1,574) -------- ------- -------- ------- ------- Net cash provided by (used in) investing activities............. (66,555) (2,490) 16,663 14,095 (2,714) -------- ------- -------- ------- ------- Financing activities Proceeds from debt...... 58,285 2,800 26,200 -- 1,500 Payments on debt........ (23,078) (1,634) (39,703) (14,160) (4,007) 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) (14,160) (2,507) -------- ------- -------- ------- ------- Net increase in cash and cash equivalents....... (26,530) 130 3,685 (104) (4,459) Cash and cash equivalents at beginning of year...... 29,410 2,880 3,010 3,010 6,695 -------- ------- -------- ------- ------- Cash and cash equivalents at end of year................... $ 2,880 $ 3,010 $ 6,695 $ 2,906 $ 2,236 ======== ======= ======== ======= =======
See notes to consolidated financial statements. F-45 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 closed on April 20, 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. Interim Financial Information The interim financial information as of March 31, 2000 and for the three months ended March 28, 1999 and March 31, 2000 is unaudited, but in the opinion of management, has been prepared on the same basis as the annual financial statements and includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of its consolidated financial position at such dates and its consolidated results of operations and cash flows for those periods. Operating results for the three months ended March 31, 2000 are not necessarily indicative of results that may be expected for any future periods. Fiscal Year The Company closes its year on the last Sunday in December. Effective in 2000, the Company adopted a calendar year reporting period. 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. F-46 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. 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. F-47 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. 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 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"). The Company accounts for stock appreciation rights in accordance with Financial Accounting Standards Board Interpretations No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans ("FIN 28"). 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. F-48 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 ==== ====
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) ====== =====
F-49 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. DEBT Debt consists of the following:
December 27, December 26, March 31, 1998 1999 2000 (in millions of dollars) ------------ ------------ ----------- (Unaudited) 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 22.5 Senior subordinated debt maturing in February 2005 and bearing interest at 5%...................................... 16.2 17.0 17.2 Other.................................... 2.1 0.1 0.1 ----- ----- ----- Total debt............................... 54.8 42.1 39.8 Less current portion of long-term debt... 4.3 0.1 -- ----- ----- ----- Long-term debt........................... $50.5 $42.0 $39.8 ===== ===== =====
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 repaid 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. F-50 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 =====
Simultaneous with the closing of the merger transaction with ECC in April, 2000, the amounts outstanding under the Facility and the senior subordinated debt were repaid (see Note 1). 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 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. Upon consummation of the merger with ECC in April, 2000, $3.4 million was paid to the option holders in exchange for termination of all options. 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
F-51 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 and March 31, 2000 (unaudited)............. 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. 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 and March 31, 2000. In 1999, the Company recorded approximately $0.3 million of compensation expense associated with this plan. Upon consummation of the merger with ECC in April, 2000, a payment of $0.6 million was made to the holders of stock appreciation rights. 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. F-52 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 ==== ===== ==== ===== ==== =====
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. F-53 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. 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 F-54 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 paid an additional $0.1 million in January 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 and were forgiven upon closing of the merger with ECC in April, 2000. (See Note 1.) At December 26, 1999, the balance due on these notes totaled $0.4 million. 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. F-55 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In September of 1999, the Company entered a ten-year lease commitment for facilities currently under construction in Campbell, California. The Company's corporate headquarters will be relocated to the new facility upon its completion. 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 acquisition closed on April 20, 2000, simultaneous with the merger of the Company with ECC. As of March 31, 2000, the Company had deposited $2.0 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 third quarter of 2000 and the Company expects to record a gain in connection with 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 consists of two Spanish-language publications in New York City. 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-56 LATIN COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Financial information for these business segments includes:
Years Ended Three Months Ended -------------------------------------- ----------------------- December 28, December 27, December 26, March 28, March 31, 1997 1998 1999 1999 2000 (in millions of dollars) ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) Revenue: Radio Broadcasting..... $ 19.2 $ 19.3 $ 25.1 $ 4.6 $ 6.2 Newspaper Publishing... 17.8 18.6 19.1 4.1 4.6 ------ ------ ------ ------ ------ $ 37.0 $ 37.9 $ 44.2 $ 8.7 $ 10.8 ====== ====== ====== ====== ====== Operating Profit (loss): Radio Broadcasting..... $ (0.1) $ (1.0) $ 3.7 $ (0.3) $ 0.4 Newspaper Publishing... 0.7 1.4 1.2 (0.2) 0.2 ------ ------ ------ ------ ------ Total Reportable Segments............. 0.6 0.4 4.9 (0.5) 0.6 Corporate.............. (1.7) (2.9) (1.8) (0.2) (0.4) ------ ------ ------ ------ ------ $ (1.1) $ (2.5) $ 3.1 $ (0.7) $ 0.2 ====== ====== ====== ====== ====== Identifiable Assets: Radio Broadcasting..... $130.9 $131.9 $131.0 $128.9 $129.1 Newspaper Publishing... 23.3 23.8 24.5 23.9 24.4 ------ ------ ------ ------ ------ Total Reportable Segments............. 154.2 155.7 155.5 152.8 153.5 Corporate.............. 4.3 5.5 2.0 4.8 0.7 Discontinued operations............ 4.5 4.8 -- -- -- ------ ------ ------ ------ ------ $163.0 $166.0 $157.5 $157.6 $154.2 ====== ====== ====== ====== ====== Depreciation and Amortization: Radio Broadcasting..... $ 3.1 $ 3.8 $ 3.9 $ 1.0 $ 0.9 Newspaper Publishing... 0.7 0.8 1.0 0.2 0.3 ------ ------ ------ ------ ------ $ 3.8 $ 4.6 $ 4.9 $ 1.2 $ 1.2 ====== ====== ====== ====== ====== Capital Expenditures: Radio Broadcasting..... $ 0.7 $ 0.2 $ 1.1 $ 0.1 $ 1.1 Newspaper Publishing... 0.2 0.9 1.2 0.4 0.1 ------ ------ ------ ------ ------ Total Reportable Segments............. 0.9 1.1 2.3 0.5 1.2 Discontinued Operations............. 0.1 0.2 -- -- -- ------ ------ ------ ------ ------ $ 1.0 $ 1.3 $ 2.3 $ 0.5 $ 1.2 ====== ====== ====== ====== ======
F-57 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-58 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED BALANCE SHEETS December 31, 1998, 1999 and March 31, 2000 (Unaudited) (In thousands, except share and per share data)
March 31, 1998 1999 2000 -------- -------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents................... $ 3,602 $ 4,493 $ 441 Accounts receivable, net of allowance for doubtful accounts of $869, $1,233 and $1,295 at December 31, 1998, 1999 and March 31, 2000, respectively............... 5,717 8,471 7,617 Notes receivable............................ -- 7,500 7,653 Other current assets........................ 752 1,983 1,390 -------- -------- -------- Total current assets...................... 10,071 22,447 17,101 Property and equipment, net.................. 27,049 34,267 34,240 Investments.................................. -- 2,501 2,501 Intangible assets, net....................... 155,243 225,408 223,831 Other assets................................. 4,911 4,420 4,391 -------- -------- -------- Total assets................................. $197,274 $289,043 $282,064 ======== ======== ======== LIABILITIES, REDEEMABLE PREFERRED STOCK, COMMON STOCK PUT OPTIONS AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................ $ 1,090 $ 810 $ 618 Current portion of long-term debt........... 4,056 22,779 22,779 Accrued expenses............................ 3,854 4,636 4,049 Accrued interest............................ 1,163 1,160 889 Other liabilities........................... 2,732 5,020 5,949 Income taxes payable........................ 521 628 573 -------- -------- -------- Total current liabilities................. 13,416 35,033 34,857 Long-term debt............................... 62,251 89,066 86,021 Other long-term liabilities.................. 1,003 1,101 1,101 Deferred income taxes........................ 26,563 27,442 25,878 Minority interest............................ 225 11 9 Commitments and contingencies (note 9) Redeemable preferred stock................... 3,870 -- -- Common stock put options..................... 24,984 37,591 54,182 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, 25,090,000 and 25,090,000 issued and outstanding at December 31, 1998, 1999 and March 31, 2000, respectively......................... 154 251 251 Additional paid-in capital.................. 59,813 115,751 100,271 Loans to stockholders....................... (570) (1,010) (1,019) Deferred stock compensation................. -- (4,187) (4,618) Accumulated deficit......................... (4,958) (12,006) (14,869) -------- -------- -------- Total stockholders' equity................ 64,962 98,799 80,016 -------- -------- -------- Total liabilities, redeemable preferred stock, common stock put options and stockholders' equity........................ $197,274 $289,043 $282,064 ======== ======== ========
See notes to combined financial statements. F-59 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF OPERATIONS Years Ended December 31, 1997, 1998 and 1999 and the Three Months Ended March 31, 1999 (Unaudited) and 2000 (Unaudited) (In thousands)
Years Ended Three Months Ended December 31, March 31, ------------------------- ----------------------- 1997 1998 1999 1999 2000 ------- ------- ------- ----------- ----------- (Unaudited) (Unaudited) Revenue: Revenue................... $13,339 $27,598 $38,561 $ 7,177 $ 8,740 Less agency and broker commissions.............. 297 1,740 2,523 425 581 ------- ------- ------- ------- ------- Net revenue............. 13,042 25,858 36,038 6,752 8,159 ------- ------- ------- ------- ------- Operating expenses: Direct operating expenses................. 4,391 10,108 14,183 2,763 3,425 Selling, general and administrative........... 5,105 6,459 8,382 2,056 2,034 Depreciation and amortization............. 2,747 6,736 8,670 1,415 2,843 Corporate expenses........ 2,975 3,669 4,773 774 1,897 ------- ------- ------- ------- ------- Total operating expenses............... 15,218 26,972 36,008 7,008 10,199 ------- ------- ------- ------- ------- Gain on sale of assets, net........................ 2,671 5,685 4,442 2,223 -- ------- ------- ------- ------- ------- Operating income............ 495 4,571 4,472 1,967 (2,040) Interest expense............ (2,425) (5,664) (7,485) (1,305) (2,641) Interest and other income... 356 340 1,014 109 302 ------- ------- ------- ------- ------- Income (loss) before minority interest, income taxes and extraordinary item....................... (1,574) (753) (1,999) 771 (4,379) Minority interest in (loss) income of subsidiaries..... (31) (86) 182 58 2 Income taxes benefit (provision)................ 538 (394) 102 (470) 1,514 ------- ------- ------- ------- ------- Loss before extraordinary loss....................... (1,067) (1,233) (1,715) 359 (2,863) Extraordinary loss on debt extinguishment (Net of income tax benefit of $378 in 1997 and $699 in 1999)...................... (568) -- (1,047) (1,132) -- ------- ------- ------- ------- ------- Net loss................ $(1,635) $(1,233) $(2,762) $ (773) $(2,863) ======= ======= ======= ======= =======
See notes to combined financial statements. F-60 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 1997, 1998 and 1999 and Three Months Ended March 31, 2000 (Unaudited) (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 Deferred stock compensation (Unaudited)............ -- -- -- -- 628 -- (628) -- -- Amortization of deferred stock compensation (Unaudited)............ -- -- -- -- -- -- 679 -- 679 Increase in fair value of common stock put options (Unaudited).... -- -- -- -- (16,590) -- -- -- (16,590) Interest on loans to stockholders (Unaudited)............ -- -- -- -- -- (9) -- -- (9) Conversion of bonus to options (Unaudited).... -- -- -- -- 482 -- (482) -- -- Net loss (Unaudited)... -- -- -- -- -- -- -- (2,863) (2,863) ------- -------- ---------- ---- -------- ------- ------- -------- -------- Balance at March 31, 2000 (Unaudited)....... -- $ -- 25,090,000 $251 $100,271 $(1,019) $(4,618) $(14,869) $ 80,016 ======= ======== ========== ==== ======== ======= ======= ======== ========
See notes to combined financial statements. F-61 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 1997, 1998 and 1999 and Three Months Ended March 31, 1999 (Unaudited) and 2000 (Unaudited) (In thousands)
Years Ended Three Months Ended December 31, March 31, ----------------------------- ----------------------- 1997 1998 1999 1999 2000 -------- -------- --------- ----------- ----------- (Unaudited) (Unaudited) Cash flows from operating activities: Net loss.............. $ (1,635) $ (1,233) $ (2,762) $ (773) $(2,863) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization......... 2,747 6,736 8,670 1,415 2,843 Deferred income taxes................ (1,223) (11,946) 879 (142) (1,564) Minority interest..... 31 86 (182) (58) (2) Loss on debt extinguishment....... 568 -- 1,047 1,132 -- Gain on sale of assets............... (2,671) (5,685) (4,442) (2,223) -- Loss on write-off of advertising displays............. -- -- 1,664 -- -- Amortization of deferred stock compensation......... -- -- -- -- 196 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable.. (455) 567 (2,754) 767 854 Other current assets.............. (531) 1,144 (1,539) (206) 588 Receivable from affiliate and other............... (12,929) 4,637 -- -- (153) Other assets......... (6) 180 (29) (156) 73 Accounts payable and accrued liabilities......... 741 (1,109) (717) (1,078) (621) Other liabilities.... (1,077) 2,227 (115) 63 929 -------- -------- --------- ------- ------- Net cash (used in) from operating activities......... (16,440) (4,396) (280) (1,259) 280 -------- -------- --------- ------- ------- Cash flows from investing activities: Proceeds from sale of assets............... 19,396 43,600 23,710 20,500 -- Escrow deposits on pending acquisitions......... -- (4,335) 520 2,488 34 Purchase of property and equipment and intangible assets.... (40,042) (7,003) (103,305) (28,974) (1,031) -------- -------- --------- ------- ------- Net cash (used in) from investing activities......... (20,646) 32,262 (79,075) (5,986) (997) -------- -------- --------- ------- ------- Cash flows from financing activities: Repayment of notes payable.............. (2,354) -- -- -- -- Issuance of notes payable.............. 482 -- 7,100 3,100 (1,919) Proceeds from long- term debt............ 26,983 -- 109,100 45,250 -- Repayment of long-term debt................. (15,000) (19,018) (70,662) (50,248) (1,126) Debt issuance costs... (857) -- (1,313) (960) (281) Issuance of common and preferred stock...... 30,727 24,984 40,956 25,000 -- Repurchase of common stock................ -- (3,051) (1,143) (1,143) -- Redemption of redeemable preferred stock................ -- -- (3,870) (3,870) -- Purchase of Z-Spanish Radio Network net of cash acquired........ -- (30,683) -- -- -- Loans to stockholders......... -- (66) 78 (12) (9) Minority interest in subsidiary........... -- 56 -- -- -- -------- -------- --------- ------- ------- Net cash from (used in) financing activities......... 39,981 (27,778) 80,246 17,117 (3,335) -------- -------- --------- ------- ------- Net increase (decrease) in cash and cash equivalents........... 2,895 88 891 9,872 (4,052) Cash and cash equivalents, beginning of year............... 619 3,514 3,602 3,602 4,493 -------- -------- --------- ------- ------- Cash and cash equivalents, end of year.................. $ 3,514 $ 3,602 $ 4,493 $13,474 $ 441 ======== ======== ========= ======= ======= 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 -- -- -- Reversal of dividends declared............. -- -- $ 176 $ 176 -- 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 -- -- Increase in value of common stock put option............... -- -- -- -- $16,591 Deferred stock compensation......... -- -- 4,333 -- 628 Conversion of accrued bonus to stock option............... -- -- -- -- 482
See notes to combined financial statements. F-62 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS For the years ended December 31, 1997, 1998 and 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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. F-63 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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. Unaudited Interim Financial Information -- The unaudited interim financial information for the three months ended March 31, 1999 and 2000 has been prepared on the same basis as the audited financial statements. In the opinion of management, such unaudited information includes all adjustments consisting only of normal recurring accruals necessary for a fair presentation of this interim information. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for any other interim period or any other future fiscal year. 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
F-64 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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. 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. F-65 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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 and for the period ended March 31, 2000, 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 the year ended 1999, and for the period ended March 31, 2000, the Company recognized $0.1 and $0.7 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, 1999, and for the period ended March 31, 2000, the Company had no items of other comprehensive income. Accordingly, comprehensive income equals net income. 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. F-66 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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, 1999, and for the period ended March 31, 2000 (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. 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 F-67 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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 ==== ==== ==== ==== =====
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 F-68 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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-69 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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 $ 0.6 Goodwill and FCC licenses..................... 8.0 5.3 1.5 14.8 ---- ---- ---- ----- 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. F-70 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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. 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 F-71 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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. 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-72 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1998, 1999 and for the three months ended March 31, 2000 (in millions):
March 31, 1998 1999 2000 ----- ----- ----------- (unaudited) Land.............................................. $ 0.2 $ 0.3 $ 0.2 Buildings and improvements........................ 0.6 1.1 1.2 Furniture, fittings and fixtures.................. 0.9 0.4 0.4 Station, transmitters and antennas................ 1.4 0.9 1.1 Advertising displays.............................. 24.5 27.6 27.8 Machinery and equipment........................... 2.3 5.3 5.5 Motor vehicles.................................... 0.1 0.2 0.2 Computer hardware and software.................... 0.2 0.4 0.5 Construction-in-progress.......................... 0.3 3.8 3.9 ----- ----- ----- Total........................................... 30.5 40.0 40.8 Less accumulated depreciation and amortization.... (3.5) (5.7) (6.6) ----- ----- ----- Property and equipment, net....................... $27.0 $34.3 $34.2 ===== ===== =====
6. INTANGIBLE ASSETS Intangible assets consist of the following at December 31, 1998, 1999 and for the three months ended March 31, 2000 (in millions):
March 31, 1998 1999 2000 ------ ------ ----------- (unaudited) FCC licenses..................................... $125.7 $158.5 $158.7 Goodwill......................................... 31.2 69.2 69.1 Deferred charges................................. 2.8 4.0 4.2 Non-competition agreements....................... 0.4 0.4 0.4 Other............................................ 1.0 2.6 2.6 ------ ------ ------ Total.......................................... 161.1 234.7 235.0 Less accumulated amortization.................... (5.9) (9.3) (11.2) ------ ------ ------ Intangible assets, net........................... $155.2 $225.4 $223.8 ====== ====== ======
F-73 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 7. LONG-TERM DEBT Borrowing arrangements consist of the following at December 31, 1998, 1999, and for the three months ended March 31, 2000 (in millions):
March 31, 1998 1999 2000 ----- ------ ----------- (unaudited) 1999 Credit Agreement Revolving credit facility of $30.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (8.965% at December 31, 1999), available through January 20, 2006........................................ -- $ 7.1 $ 6.0 Term facility of $43.9 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (8.965% 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 43.9 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 (9.063% at December 31, 1999), secured by substantially all of the Company's assets....... $ 1.2 4.0 3.2 Term facility of $35.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (9.063% 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 35.0 Other Borrowings Credit line of $20.0 million, interest payable quarterly at LIBOR plus Applicable Margin, as defined (10% at December 31, 1999), principal due December 31, 2000........................... -- 18.1 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 2.3 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 -- -- Other............................................ 1.1 0.4 0.3 ----- ------ ------ Total............................................ 66.3 111.9 108.8 Less current portion............................. (4.0) (22.8) (22.8) ----- ------ ------ Long-term debt................................... $62.3 $ 89.1 $ 86.0 ===== ====== ======
F-74 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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............................................................ 41.7 ------ Total................................................................. $111.9 ======
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-75 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 8. INCOME TAXES The Company's combined income tax (benefit) provision or the years ended December 31, 1998, 1999, and for the three months ended March 31, 2000, included the following (in millions):
March 31, 1997 1998 1999 2000 ----- ----- ----- ----------- (unaudited) Current taxes: Federal...................................... $ 0.1 $ 4.6 $ 0.1 $ -- State........................................ 0.2 1.3 0.1 0.1 ----- ----- ----- ----- Total..................................... 0.3 5.9 0.2 0.1 ----- ----- ----- ----- Deferred income taxes: Federal...................................... (1.0) (4.5) (0.9) (1.3) State........................................ (0.2) (1.0) (0.1) ( .3) ----- ----- ----- ----- Total..................................... (1.2) (5.5) (1.0) (1.6) ----- ----- ----- ----- Total income taxes........................... (0.9) 0.4 (0.8) (1.5) Less income taxes related to extraordinary items....................................... 0.4 -- 0.7 -- ----- ----- ----- ----- Total........................................ $(0.5) $ 0.4 $(0.1) $(1.5) ===== ===== ===== =====
Deferred income tax assets (liabilities) resulting from tax effects of temporary differences at December 31, 1998, 1999 and for the three months ended March 31, 2000, are as follows (in millions):
March 31, 1998 1999 2000 ------ ------ ----------- (unaudited) Deferred income tax assets: Net operating loss and tax credit carryforwards.... $ 5.5 $ 7.5 $ 8.9 Allowance for doubtful accounts.................... 0.8 0.5 0.6 Other.............................................. 2.4 2.2 2.6 ------ ------ ------ Total........................................... 8.7 10.2 12.1 ------ ------ ------ Deferred income tax liabilities: Property, equipment and intangible assets.......... (35.3) (37.6) (37.8) Other.............................................. -- -- (0.2) ------ ------ ------ Total........................................... (35.3) (37.6) (38.0) ------ ------ ------ Net deferred income tax liability.................. $(26.6) $(27.4) $(25.9) ====== ====== ======
F-76 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:
March 31, 1997 1998 1999 2000 ----- ----- ----- ----------- (unaudited) Federal tax at statutory rate.......... (35.0)% (35.0)% (35.0)% (35.0)% State income taxes, net of federal benefit............................... (4.2) (3.2) (3.5) (6.0) Non-deductible goodwill amortization... 1.3 25.5 10.6 5.9 Non-deductible meals and entertainment......................... 1.0 2.4 1.5 -- Other accruals......................... -- 57.3 -- 4.0 Other.................................. 1.0 -- 3.9 0.1 ----- ----- ----- ----- Total.................................. (35.9)% 47.0 % (22.5)% (31.0)% ===== ===== ===== =====
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, 1999 and for the three months ended March 31, 2000 was $1.2 million, $1.9 million, $1.6 million and $0.4 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. F-77 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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 and March 31, 2000, 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, and March 31, 2000 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. 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. F-78 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) Put Options--At December 31, 1998, 1999 and March 31, 2000, 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, 1999, and March 31, 2000. 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 and March 31, 2000, 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. 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 $6.21)................... 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 for the year ended December 31, 1999 and $0.6 million for the three months ended March 31, 2000, 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. Compensation expense was $0.1 million for the year ended December 31, 1999 and $0.2 million for the three months ended March 31, 2000. F-79 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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 and $0 for the three months ended March 31, 2000. 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, 1999 and for the three months ended March 31, 2000. 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. F-80 Z-SPANISH MEDIA CORPORATION AND ITS PREDECESSOR NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the years ended December 31, 1997, 1998, 1999 and for the three months ended March 31, 1999 and 2000 (Information for the three months ended March 31, 1999 and 2000 is unaudited) 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, and for the period ended March 31, 2000. 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):
March 31, 1997 1998 1999 2000 ----- ------ ------ ----------- (unaudited) Radio broadcasting: Net revenue................................... $ 9.8 $ 15.4 $ 23.8 $ 5.3 Operating expenses............................ 7.9 10.9 13.9 5.1 Depreciation and amortization................. 2.1 4.8 6.0 1.7 Operating (loss) income....................... (0.3) 2.2 4.1 (1.5) Total assets.................................. 68.1 169.7 218.2 219.0 Outdoor advertising: Net revenue................................... $ 3.2 $ 10.5 $ 12.2 $ 2.8 Operating expenses............................ 1.6 5.7 8.7 2.2 Depreciation and amortization................. 0.6 1.9 2.7 1.1 Operating income.............................. 0.8 2.4 0.4 (0.5) Total assets.................................. 28.3 27.6 70.8 63.0
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. 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-81 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-82 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-83 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-84 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 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). 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-85 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. F-86 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(Continued) 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. 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. F-87 DESOTO -- CHANNEL 62 ASSOCIATES, LTD. (A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(Continued) 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. 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, was 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-88 INDEPENDENT AUDITOR'S REPORT To the Partners of Sunburst Media, L.P. Dallas, Texas We have audited the accompanying special purpose statement of assets to be acquired of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) (collectively, the Stations), which are owned by Sunburst Media, L.P. (the Seller), as of December 31, 1999, and the related special purpose statement of revenue and direct operating expenses for the year then ended. These financial statements are the responsibility of the Stations' 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. As described in Note 1 to the financial statements, these special purpose financial statements are prepared to reflect the assets to be acquired by Entravision Communications Corporation in its proposed acquisition of the Stations, as well as the Stations' revenue and direct operating expenses. The special purpose financial statements are not intended to be a complete presentation of Sunburst Media, L.P.'s assets and liabilities or results of its operations, and accordingly, these special purpose financial statements are not intended to be a presentation in accordance with generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets to be acquired of the Stations as of December 31, 1999, and the results of their revenue and direct operating expenses for the year then ended on the basis of accounting described in Note 1. /s/ McGladrey & Pullen, LLP Pasadena, California June 9, 2000 F-89 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) STATEMENTS OF ASSETS TO BE ACQUIRED December 31, 1999 and March 31, 2000 (Unaudited) (In thousands)
December 31, March 31, Assets To Be Acquired 1999 2000 - --------------------- ------------ ----------- (Unaudited) Property and equipment, net............................ $1,271 $1,244 Intangible assets, net................................. 6,847 6,661 ------ ------ $8,118 $7,905 ====== ======
See Notes to Financial Statements. F-90 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES Year Ended December 31, 1999 and Three Months Ended March 31, 1999 (Unaudited) and 2000 (Unaudited) (In thousands)
Three Months Ended Year Ended ----------------------- December 31, March 31, March 31, 1999 1999 2000 ------------ ----------- ----------- (Unaudited) (Unaudited) Gross revenue............................. $6,512 $1,276 $1,707 Less agency commissions................... 691 132 197 ------ ------ ------ Net revenue........................... 5,821 1,144 1,510 ------ ------ ------ Direct Operating Expenses: Operating............................... 1,144 255 317 Selling, general and administrative..... 2,685 756 751 Depreciation and amortization........... 835 182 238 ------ ------ ------ 4,664 1,193 1,306 ------ ------ ------ Excess of revenue over (under) direct operating expenses .................. $1,157 $ (49) $ 204 ====== ====== ======
See Notes to Financial Statements. F-91 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of business Radio Stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) (collectively, the Stations) are owned by Sunburst Media, L.P. (Sunburst), a Delaware limited partnership. The Stations operate Spanish-language adult contemporary and rock format radio stations serving the Rio Grande Valley, Texas metropolitan area. These Stations are not separate legal entities and are part of the operations of Sunburst. On May 22, 2000, Entravision Communications Corporation (Entravision) entered into an agreement with Sunburst to purchase property and equipment, FCC licenses and other intangibles related to the operations of the Stations. The aggregate consideration to be paid in connection with this proposed transaction is $55 million. Under the terms of the agreement Entravision will not acquire cash and cash equivalents, accounts receivable or deposits nor will they assume any liabilities. Entravision will assume the operating leases discussed in Note 4. The transaction is expected to close in the third quarter of 2000 upon receiving FCC approval. Significant accounting policies Basis of presentation The accompanying statements of assets to be acquired as of December 31, 1999 and revenue and direct operating expenses for the year then ended have been prepared for the purpose of complying with rules and regulations of the Securities and Exchange Commission. These financial statements may not be indicative of the future financial condition or results of operations of these Stations due to the anticipated changes in the business subsequent to the proposed acquisition and the omission of various non-direct operating expenses. Statement of cash flows information is not presented because primarily all financing and investing activities are performed by Sunburst and not the Stations. The statements of assets to be acquired include the historical amounts of the net tangible and intangible assets of the Stations to be acquired by Entravision in its proposed acquisition of the Stations, presented in accordance with generally accepted accounting principles applicable to the Stations. Entravision plans to assume the operations of the Stations upon the FCC approval of the sale. The estimated fair value of the net assets to be assigned in the allocation of the purchase price by Entravision may differ significantly from the reported values. The statements of revenue and direct operating expenses include only revenue and operating expenses directly related to the Stations. Sunburst provides certain senior management, financing and treasury functions to the Stations. However, all costs for managing the daily operations of the Stations are reflected in direct operating expenses. Entravision anticipates its existing corporate staff will provide these senior management financing and treasury functions. The non-direct expenses for functions performed by Sunburst, consisting of management fees and interest expense, have historically been allocated to the Stations from Sunburst and have been excluded from the accompanying financial statements. F-92 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) NOTES TO FINANCIAL STATEMENTS--(Continued) Unaudited Interim Financial Information The interim financial information presented herein as of and for the three months ended March 31, 1999 and 2000 reflect all adjustments which are, in the opinion of management, necessary for a fair presentation for the periods presented. Such adjustments are of a normal recurring nature. The financial information is not intended to be a complete presentation in accordance with generally accepted accounting principles. The March 31, 2000 interim financial statements are not necessarily indicative of the results in the entire fiscal year ending December 31, 2000, or any subsequent period. 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 Stations' 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 Stations cannot predict if any of these factors might have a significant impact on the radio industry in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on the Stations' operations. Significant estimates and assumptions made by management are used for, but are not limited to, the carrying value of long-lived and intangible assets. Property and equipment Property and equipment are recorded at cost. Depreciation is provided using straight-line methods over the following estimated useful lives:
Years ----- Building............................................................... 30 Transmission, studio and broadcast equipment........................... 5-15 Office and computer equipment.......................................... 5-7 Transportation equipment............................................... 5
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 Goodwill............................................................... 15 Noncompete agreements.................................................. 1-6
Revenue recognition Revenue related to the sale of advertising is recognized at the time of broadcast. F-93 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) NOTES TO FINANCIAL STATEMENTS--(Continued) Trade transactions The Stations exchange 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. Barter revenue and costs were approximately $0.1 million for the year ended December 31, 1999. Income Taxes As a limited partnership, Sunburst does not pay income taxes at a company level, accordingly there is no provision for income taxes to be allocated or recorded. Advertising costs Advertising costs are expensed as incurred. Advertising expense totaled approximately $0.1 million for the year ended December 31, 1999. NOTE 2. PROPERTY AND EQUIPMENT The composition of property and equipment at December 31, 1999 is as follows:
Amount ------ Land................................................................. $ 34 Building............................................................. 502 Transmission, studio and other broadcast equipment................... 939 Office and computer equipment........................................ 113 Transportation equipment............................................. 30 ------ 1,618 Less accumulated depreciation........................................ 347 ------ $1,271 ======
NOTE 3. INTANGIBLE ASSETS At December 31, 1999, intangible assets consist of:
Amount ------ FCC licenses......................................................... $7,913 Noncompete agreements................................................ 738 Goodwill............................................................. 50 ------ 8,701 Less accumulated amortization........................................ 1,854 ------ $6,847 ======
F-94 RADIO STATIONS KFRQ(FM), KKPS(FM), KVPA(FM) AND KVLY(FM) (STATIONS OWNED BY SUNBURST MEDIA, L.P.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 4. OPERATING LEASE COMMITMENTS The Stations lease facilities and broadcast equipment under various operating lease agreements with various terms and conditions, which expire at various dates through July 2004. The approximate future minimum lease payments under these operating leases at December 31, 1999 are as follows:
Years Ending December 31, Amount ------------------------- ------ 2000.................................................................. $ 38 2001.................................................................. 34 2002.................................................................. 28 2003.................................................................. 22 2004.................................................................. 9 ---- $131 ====
Total rent expense under operating leases, including rent under month-to- month arrangements, was approximately $0.1 million for the year ended December 31, 1999. NOTE 5. ACQUISITION On September 9, 1999, Sunburst acquired certain assets of Coast Broadcasting, which includes the radio station KVPA(FM) in Port Isabel, Texas, for $0.8 million. The acquisition was accounted for as a purchase business combination. The excess purchase price over the tangible net assets to be acquired of $0.7 million was allocated to specifically identifiable intangibles consisting of $0.5 million to the FCC license and $0.2 million to noncompete agreements. F-95 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO OF ENTRAVISION COMMUNICATIONS CORPORATION] Class A Common Stock --------------------- PROSPECTUS --------------------- , 2000 Donaldson, Lufkin & Jenrette Credit Suisse First Boston Merrill Lynch & Co. ---------------- 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 should 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.............. $ 195,519 NASD filing fee.................................................. 30,500 New York Stock Exchange listing fee.............................. 500,000 Legal fees and expenses.......................................... 1,475,000 Accounting fees and expenses..................................... 1,398,000 Printing expenses................................................ 600,000 Blue sky fees and expenses....................................... 7,500 Transfer agent and registrar fees and expenses................... 3,500 Miscellaneous.................................................... 250,000 ---------- Total............................................................ $4,460,019 ==========
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, II-1 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. 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 in order for Entravision to be properly capitalized at all times from its inception until the consummation of such reorganization. These shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. On April 19, 2000, we entered into an Exchange Agreement with our predecessor, certain exchanging members and stockholders and Univision in which direct and indirect ownership interests in our predecessor and Univision's subordinated note and option will be exchanged for newly-issued shares of our common stock as part of our recapitalization from a limited liability company to a C-corporation. This reorganization will be consummated immediately prior to this offering. These shares will be issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. On April 20, 2000, we entered into an Acquisition Agreement and Plan of Merger as amended in July 2000, with our predecessor, ZSPN Acquisition Corporation, Z-Spanish Media and certain of its stockholders pursuant to which we agreed to acquire all of the outstanding capital stock of Z-Spanish Media for approximately $448 million, including the assumption of approximately $110 million in debt. The consideration to be paid to the stockholders of Z-Spanish Media consists of approximately $220 million in cash and 7,187,902 shares of our Class A common stock. 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(1) 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(1) 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(1) Exchange Agreement dated April 19, 2000 by and among the registrant, Entravision Communications Company, L.L.C., certain exchanging members and stockholders and Univision Communications Inc. 2.6(1) Asset Purchase Agreement dated as of June 14, 2000 by and between the registrant and Infinity Broadcasting Corporation. 3.1(1) Certificate of Incorporation of the registrant as currently in effect. 3.2(2) Form of First Restated Certificate of Incorporation of registrant as in effect immediately prior to the closing of the offering. 3.3(2) Form of First Amended and Restated Bylaws of the registrant as in effect immediately prior to the closing of the offering. 4.1(1) Form of specimen common stock certificate of the registrant. 5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 10.1(1) 2000 Omnibus Equity Incentive Plan of the registrant. 10.2(1) Form of Voting Agreement by and among Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and the registrant. 10.3(2) 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(1) 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.
II-3
Exhibit Exhibit Description Number ------------------- ------- 10.7(2) 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. 10.8(2) 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 20, 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 20, 2000 by and between LCG Acquisition Corporation and Union Bank of California, N.A. 10.11(2) Pledge Agreement dated April 20, 2000 by Walter F. Ulloa and Philip C. Wilkinson in favor of Union Bank of California, N.A. 10.12(2) 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(2) 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(2) 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(1) 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(1) 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) 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.
- -------- (1) Previously filed. (2) Filed herewith. (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 amendment to registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Monica, State of California, on July 25, 2000. ENTRAVISION COMMUNICATIONS CORPORATION By: /s/ Walter F. Ulloa ______________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this amendment to 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 July 25, 2000 ____________________________________ Officer (principal Walter F. Ulloa executive officer) * President, Chief Operating July 25, 2000 ____________________________________ Officer and Director Philip C. Wilkinson /s/ Jeanette Tully Executive Vice President, July 25, 2000 ____________________________________ Treasurer and Chief Jeanette Tully Financial Officer (principal financial officer and principal accounting officer) * Secretary and Director July 25, 2000 ____________________________________ Paul A. Zevnik * President of Radio Division July 25, 2000 ____________________________________ and Director Amador S. Bustos * Director July 25, 2000 ____________________________________ Darryl B. Thompson * Director July 25, 2000 ____________________________________ Andrew W. Hobson * Director July 25, 2000 ____________________________________ Michael D. Wortsman
*By: /s/ Jeanette Tully ________________________________ Jeanette Tully, Attorney-in-fact II-6 EXHIBIT INDEX
Exhibit Number Exhibit Description ------- ------------------- 1.1(1) 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(1) 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(1) Exchange Agreement dated April 19, 2000 by and among the registrant, Entravision Communications Company, L.L.C., certain exchanging members and stockholders and Univision Communications Inc. 2.6(1) Asset Purchase Agreement dated as of June 14, 2000 by and between the registrant and Infinity Broadcasting Corporation. 3.1(1) Certificate of Incorporation of the registrant as currently in effect. 3.2(2) Form of First Restated Certificate of Incorporation of registrant as in effect immediately prior to the closing of the offering. 3.3(2) Form of First Amended and Restated Bylaws of the registrant as in effect immediately prior to the closing of the offering. 4.1(1) Form of specimen common stock certificate of the registrant. 5.1(2) Opinion of Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 10.1(1) 2000 Omnibus Equity Incentive Plan of the registrant. 10.2(1) Form of Voting Agreement by and among Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and the registrant. 10.3(2) 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(1) 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(2) 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 Exhibit Description Number ------------------- ------- 10.8(2) 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 20, 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 20, 2000 by and between LCG Acquisition Corporation and Union Bank of California, N.A. 10.11(2) Pledge Agreement dated April 20, 2000 by Walter F. Ulloa and Philip C. Wilkinson in favor of Union Bank of California, N.A. 10.12(2) 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(2) 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(2) 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(1) 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(1) 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) 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.
- -------- (1) Previously filed. (2) Filed herewith. (b) Financial Statement Schedules--None. EX-3.2 2 0002.txt 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 ---------------- 325,000,000 shares of Common Stock, par value $0.0001 per share, divided into the following classes: (i) 260,000,000 shares of Class A Common Stock (the "Class A Common Stock"); (ii) 40,000,000 shares of Class B Common Stock (the "Class B Common Stock"); and (iii) 25,000,000 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 11,489,365 shares of Class B Common Stock with respect to Ulloa, 11,489,365 shares of Class B Common Stock with respect to Wilkinson and 4,699,803 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 21,983,392 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- 45 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. (a) 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 c orporation) 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 foregoing amendment and restatement was duly adopted in accordance with the provisions of Section 242 and Section 245 of the Delaware General Corporation Law by obtaining a majority vote of the Common Stock in favor of said amendment and restatement in the manner set forth in Section 228 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 effective as of this 24th day of July, 2000. ---------------------------------------------------- Philip C. Wilkinson, President ---------------------------------------------------- Walter F. Ulloa, Secretary [Signature Page to First Restated Certificate of Incorporation of Entravision Communications Corporation] -13- EX-3.3 3 0003.txt 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 -2- 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 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- 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 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, Walter F. Ulloa, hereby certifies that he the duly elected and acting Secretary of Entravision Communications Corporation, a Delaware corporation (the "Company"), and that the First Amended and Restated Bylaws attached hereto constitute the First Amended and Restated Bylaws of the Company as duly adopted by the Board of Directors of the Company by unanimous written consent effective as of July 24, 2000. IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name as of this 24th day of July, 2000. -------------------------------------- Walter F. Ulloa, Secretary EX-5.1 4 0004.txt OPINION OF ZEVNIK HORTON GUIBORD MCGOVERN ET AL EXHIBIT 5.1 [LETTERHEAD OF ZEVNIK HORTON GUIBORD McGOVERN PALMER & FOGNANI, L.L.P.] July 25, 2000 Entravision Communications Corporation 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Re: Entravision Communications Corporation Registration Statement on Form S-1 for up to 52,900,000 shares of Class A Common Stock Ladies and Gentlemen: We have acted as counsel to Entravision Communications Corporation, a Delaware corporation (the "Company"), in connection with the proposed issuance and sale by the Company of up to 46,000,000 shares (52,900,000 shares if the underwriters' over-allotment option is exercised) of the Company's Class A Common Stock (the "Shares") pursuant to the Company's Registration Statement on Form S-1 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. This opinion is being furnished in accordance with the requirements of Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K. We have reviewed the Company's Certificate of Incorporation and Bylaws, each as amended, and the corporate proceedings taken by the Company in connection with the issuance and sale of the Shares. Based on such review, we are of the opinion that the Shares have been duly authorized, and if, as and when issued in accordance with the Registration Statement and the related prospectus (as amended and supplemented through the date of issuance) will be legally issued, fully paid and nonassessable. This opinion is limited to the laws of the State of Delaware, and we express no opinion as to the laws of any other jurisdiction and no opinion regarding the statutes, administrative decisions, rules, regulations or requirements of any county, municipality, subdivision or local authority of any jurisdiction. Entravision Communications Corporation July 25, 2000 Page 2 We consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus which is part of the Registration Statement. This opinion letter is rendered as of the date first written above and we disclaim any obligation to advise you of any facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company or the Shares. Very truly yours, /s/ Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. ZEVNIK HORTON GUIBORD McGOVERN PALMER & FOGNANI, L.L.P. EX-10.3 5 0005.txt 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 ================================================================================ 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 -iv- EXHIBIT A --------- TO AMENDED AND RESTATED CREDIT AGREEMENT ---------------------------------------- REVOLVING NOTE -------------- Los Angeles, California $27,000,000 November __, 1998 FOR VALUE RECEIVED, each of the undersigned, KSMS-TV, INC., TIERRA ALTA BROADCASTING, INC., CABRILLO BROADCASTING CORPORATION, GOLDEN HILLS BROADCASTING CORPORATION, LAS TRES PALMAS CORPORATION, VALLEY CHANNEL 48, INC., TELECORPUS, INC. and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. (collectively, the "Borrowers"), hereby unconditionally promises to pay, jointly and severally, to --------- the order of UNION BANK OF CALIFORNIA, N.A. (the "Lender"), in lawful money of ------ the United States and in immediately available funds, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the undersigned pursuant to Sections 2.1 and 2.3(c) of the Credit Agreement (as hereinafter defined), on the Revolving Loan Commitment Expiration Date (as defined in the Credit Agreement) and on such other dates as are required under the Credit Agreement. Such payment shall be made for the account of the Lender at the office of Union Bank of California, N.A. located at 445 South Figueroa Street, Los Angeles, California 90071 or at such other office as the holder of this Revolving Note may notify the undersigned and as agreed to by Union Bank of California, N.A. Each of the undersigned further agrees to pay, jointly and severally, interest in like money at such office or such other office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates specified in Sections 2.8 and 2.9 of the Credit Agreement until paid in full (both before and after judgment to the extent permitted by law). This Revolving Note is one of the Revolving Notes referred to in the Amended and Restated Credit Agreement dated as of November __, 1998 (as amended, supplemented, modified or restated from time to time, the "Credit Agreement"), ---------------- among the undersigned and the Lender, the other Lenders parties thereto, and Union Bank of California, N.A., as Agent, is entitled to the benefits thereof and of the other Loan Documents and is subject to optional and mandatory prepayment in whole or in part as provided therein. Capitalized terms used herein which are defined in the Credit Agreement shall have such meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Revolving Note shall become, or may be declared to be, immediately due and payable, all as provided therein. THIS REVOLVING NOTE 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). BORROWERS --------- KSMS-TV, INC. By:________________________________ Name:______________________________ Title:_____________________________ TIERRA ALTA BROADCASTING, INC. By:________________________________ Name:______________________________ Title:_____________________________ CABRILLO BROADCASTING CORPORATION By:________________________________ Name:______________________________ Title:_____________________________ GOLDEN HILLS BROADCASTING CORPORATION By:________________________________ Name:______________________________ Title:_____________________________ LAS TRES PALMAS CORPORATION By:________________________________ Name:______________________________ Title:_____________________________ VALLEY CHANNEL 48, INC. By:________________________________ Name:______________________________ Title:_____________________________ -2- TELECORPUS, INC. By:________________________________ Name:______________________________ Title:_____________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By:________________________________ Walter F. Ulloa Managing Member By:________________________________ Philip C. Wilkinson Managing Member -3- EXHIBIT B --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- FORM OF INCREMENTAL NOTE ------------------------ Los Angeles, California $____________ ____________, ____ FOR VALUE RECEIVED, each of the undersigned, KSMS-TV, INC., TIERRA ALTA BROADCASTING, INC., CABRILLO BROADCASTING CORPORATION, GOLDEN HILLS BROADCASTING CORPORATION, LAS TRES PALMAS CORPORATION, VALLEY CHANNEL 48, INC., TELECORPUS, INC. and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. (collectively, the "Borrowers"), hereby unconditionally promises to pay, jointly and severally, to - ---------- the order of _______________________________________________ (the "Lender"), in ------ lawful money of the United States and in immediately available funds, the aggregate unpaid principal amount of the Incremental Loans made by the Lender to the undersigned pursuant to Section 2.2 of the Credit Agreement (as hereinafter defined), on the Incremental Loan Commitment Expiration Date (as defined in the Credit Agreement) and on such other dates as are required under the Credit Agrement. Such payment shall be made for the account of the Lender at the office of Union Bank of California N.A., located at 445 South Figueroa Street, Los Angeles, California 90071 or at such other office as the holder of this Incremental Note may notify the undersigned and as agreed to by Union Bank of California, N.A. Each of the undersigned further agrees to pay, jointly and severally, interest in like money at such office or such other office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates specified in Sections 2.8 and 2.9 of the Credit Agreement until paid in full (both before and after judgment to the extent permitted by law). This Incremental Note is one of the Incremental Notes referred to in the Amended and Restated Credit Agreement dated as of November 10, 1998 (as amended, supplemented, modified or restated from time to time, the "Credit Agreement"), ---------------- among the undersigned, the Lender, the other Lenders parties thereto, and Union Bank of California, N.A., as Agent, is entitled to the benefits thereof and of the other Loan Documents and is subject to optional and mandatory prepayment in whole or in part as provided therein. Capitalized terms used herein which are defined in the Credit Agreement shall have such meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Incremental Note shall become, or may be declared to be, immediately due and payable, all as provided therein. THIS INCREMENTAL NOTE 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). BORROWERS --------- KSMS-TV, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ TIERRA ALTA BROADCASTING, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ CABRILLO BROADCASTING CORPORATION By: _______________________________ Name: _____________________________ Title: ____________________________ GOLDEN HILLS BROADCASTING CORPORATION By: _______________________________ Name: _____________________________ Title: ____________________________ LAS TRES PALMAS CORPORATION By: _______________________________ Name: _____________________________ Title: ____________________________ VALLEY CHANNEL 48, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ -2- TELECORPUS, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: _______________________________ Walter F. Ulloa Managing Member By: _______________________________ Philip C. Wilkinson Managing Member -3- EXHIBIT C --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- ASSIGNMENT AND ACCEPTANCE ------------------------- Date: _____________________ Reference is made to that certain Amended and Restated Credit Agreement dated as of November 10, 1998, (as it may be amended, modified, supplemented or restated from time to time, the "Credit Agreement") 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., a Delaware limited liability company (each a "Borrower", and collectively, the -------- "Borrowers"), whose obligations thereunder are joint and several, (2) the - ---------- several banks and other financial institutions from time to time parties thereto (the "Lenders"), and (3) Union Bank of California, N.A., as agent for the ------- Lenders thereunder (in such capacity, the "Agent"). Terms defined and the rules ----- of interpretation contained in the Credit Agreement have the same meanings and application herein. _________________ (the "Assignor") is a Lender under the Credit Agreement -------- and agrees with _________________________ (the "Assignee") as follows: -------- 1. As of the Effective Date (as defined below), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, a _____% interest in and to all of the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents (which assignment will result in the Assignee having (i) an Incremental Loan Commitment Percentage of ___% and a Revolving Loan Commitment Percentage of ___% and (ii) an Incremental Loan Commitment of $_____________ and a Revolving Loan Commitment of $_____________ in respect of (a) the Assignor's Commitments as in effect on the Effective Date (as set forth in the Schedule attached hereto and without giving effect to other assignments thereof which have become or will be effective as of the Effective Date), (b) the Loans owing to the Assignor on the Effective Date (as set forth in the Schedule attached hereto and without giving effect to other assignments thereof which have become or will be effective as of the Effective Date), (c) the Assignor's participations in Letters of Credit (as set forth in the Schedule attached hereto and without giving effect to other assignments thereof which have become or will be effective as of the Effective Date) and (d) all amounts payable to the Assignor under the Loan Documents, including the Assignor's Notes. The Assignee hereby appoints and authorizes the Agent to exercise such powers as are delegated to the Agent by Section 8 of the Credit Agreement and by the other Loan Documents. 2. The Assignor (i) represents and warrants that as of the Effective Date its Commitments, Commitment Percentages, participations in Letters of Credit and Loans (without giving effect to other assignments thereof which have become or will be effective as of the Effective Date or any funding or repayment on the Effective Date) are as set forth in the Schedule attached hereto; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) represents and warrants that it has full power and authority and has taken all action necessary to execute and deliver this Assignment and any and all other documents required or permitted to be executed or delivered by it in connection herewith and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; (iv) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignor; (v) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto; and (vi) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under the Loan Documents or any other instrument or document furnished thereto. 3. The Assignee (i) confirms that it has received copies of such of the Loan Documents and other documents delivered pursuant to Section 4 of the Credit Agreement as it has requested, together with a copy of the most recent financial statements of the Borrower received by the Agent pursuant to Section 5.1 of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (iii) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; (iv) specifies as its Applicable Lending Offices the offices set forth beneath its name on the signature pages hereof; /1/ (v) represents and warrants, for the benefit of the Assignor, the Agent and the Borrowers, that under applicable law and treaties no taxes will be required to be withheld by the Agent, any Borrower or the Assignor with respect to any payments to be made to Assignee with respect to the Loans; (vi) attaches either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service From 1001 certifying as to the Assignee's entitlement to claim complete exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement (and the Notes held by it); (vii) agrees, for the benefit of the Assignor, the Agent and the Borrowers, that it will provide to the Assignor (and, in the event the Assignee becomes a Lender registered in the Register, 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 - -------------------------- 1 Bracketed provisions to be included if Assignee is organized under the laws of any jurisdiction other than the United States or any state thereof. -2- applicable U.S. laws and regulations and amendments duly executed and completed by Assignee, and that it will comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption; (viii) represents and warrants that it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment, and any and all other documents required or permitted to be executed or delivered by it in connection with this Assignment and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; and (ix) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignee. 4. The effective date for this Assignment shall be _________________ (the "Effective Date"). Following the execution of this Assignment, it will be - --------------- delivered to the Agent for acceptance and recording by the Agent and, if applicable, for acceptance by the Borrowers. 5. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment, shall have the rights and obligations of a Lender thereunder and under the other Loan Documents as if the Assignee had been an original party to the Credit Agreement and (ii) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the other Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the other Loan Documents for periods prior to the Effective Date, as the case may be, directly between themselves. 7. Concurrently with the execution of this Assignment, the Assignor shall execute two counterpart original Requests for Registration, in the form of Exhibit A to this Assignment, to be forwarded to Agent. The Assignor and the Assignee further agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment, and the Assignor specifically agrees to cause the delivery of (i) two original counterparts of this Assignment and (ii) the Requests for Registration, to the Agent for the purpose of registration of the Assignee as a "Lender" pursuant to Section 9.6 of the Credit Agreement. 8. This Assignment shall be governed by, and construed in accordance with, the laws of the State of California. ________________________________, as Assignor By: _____________________________ Name: __________________________ Title: __________________________ -3- ________________________________, as Assignee By:_____________________________ Name:___________________________ Title:__________________________ Applicable Lending Offices: -------------------------- LIBOR Loans ----------- Address: ____________________________________ ____________________________________ ____________________________________ Alternate Base Rate Loans ------------------------- Address: ____________________________________ ____________________________________ ____________________________________ Address for Notices: ------------------- ____________________________________ ____________________________________ ____________________________________ Telephone No.: _____________________ Telecopier No.: _____________________ Attention: _____________________ Consented to as of the _____ day of ____________, ____./2/ BORROWERS --------- KSMS-TV, INC. By: _____________________ - ----------------------------------- /2/ To be completed if Borrowers' consent required under Section 9.6(c) of the Credit Agreement. -4- Name:___________________________ Title:__________________________ TIERRA ALTA BROADCASTING, INC. By:_____________________________ Name:___________________________ Title:__________________________ CABRILLO BROADCASTING CORPORATION By:_____________________________ Name:___________________________ Title:__________________________ GOLDEN HILLS BROADCASTING CORPORATION By:_____________________________ Name:___________________________ Title:__________________________ LAS TRES PALMAS CORPORATION By:_____________________________ Name:___________________________ Title:__________________________ VALLEY CHANNEL 48, INC. By:_____________________________ Name:___________________________ Title:__________________________ TELECORPUS, INC. By:_____________________________ Name:___________________________ Title:__________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. -5- By:_____________________________ Walter F. Ulloa Managing Member By:_____________________________ Philip C. Wilkinson Managing Member -6- SCHEDULE -------- Assignor's Commitments - ---------------------- Incremental Loan Commitment $_______________ Revolving Loan Commitment $_______________ Assignor's Commitment Percentages - --------------------------------- Incremental Loan Commitment Percentage _____% Revolving Loan Commitment Percentage _____% Assignor's Loans - ---------------- Incremental Loans $_______________ Revolving Loans $_______________ Assignor's Participations in Letters of Credit $_______________ EXHIBIT A TO ------------ ASSIGNMENT AND ACCEPTANCE ------------------------- REQUEST FOR REGISTRATION ------------------------ TO: UNION BANK OF CALIFORNIA, N.A., as Agent THIS REQUEST FOR REGISTRATION is made as of the date of the enclosed Assignment and Acceptance with reference to that certain Amended and Restated Credit Agreement, dated as of November 10, 1998 (as it may be amended, modified, supplemented or restated from time to time, the "Credit Agreement") 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 Delaware corporation and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company (each a "Borrower", and collectively, the "Borrowers"), whose obligations thereunder are - --------- --------- joint and several, (2) the several banks and other financial institutions from time to time parties thereto (the "Lenders"), and (3) Union Bank of California, ------- N.A., as agent for the Lenders thereunder (in such capacity, the "Agent"). ----- Terms defined and the rules of interpretation contained in the Credit Agreement have the same meanings and application herein. The Assignor and Assignee described below hereby request that Agent register the Assignee as a Lender pursuant to Section 9.6 of the Credit Agreement effective as of the Effective Date described in the enclosed Assignment and Acceptance and, in connection with this request, certify to Agent that the enclosed Assignment and Acceptance sets forth the correct Commitments and Commitment Percentages of the Assignee. Enclosed with this Request are (i) the registering and processing fee of $2,500 payable to the Agent pursuant to Section 9.6 of the Credit Agreement, (ii) two counterpart originals of the Assignment and Acceptance and (iii) the original Incremental Note and Revolving Note/3/ of Borrowers in favor of the Assignor in the principal amount[s] of its Commitment[s]. The Assignor and Assignee hereby jointly request that Agent cause Borrowers to issue, pursuant to Section 9.6(c) of the Credit Agreement, (i) a replacement [Incremental Note and Revolving Note], dated as of the same date as the original note[s] being replaced, in favor of Assignor in the principal amount[s] of the balance of its Commitment[s] (after giving effect to the Assignment), and (ii) a new Incremental Note and Revolving Note, dated as of the date of the note[s] referred to in the immediately preceding clause, in favor of the Assignee in the principal amount[s] of the Assignee's Commitment[s]. - ------------------------------- /3/ Delete as applicable. IN WITNESS WHEREOF, the Assignor and Assignee have executed this Request for Registration by their duly authorized officers as of this ______ day of ________________, ____. "Assignor" ________________________________ By:_____________________________ Name:___________________________ Title:__________________________ "Assignee" ________________________________ By:_____________________________ Name:___________________________ Title:__________________________ - ------------------------------------------------------------------------------- CONFIRMATION OF REGISTRATION BY AGENT ------------------------------------- TO: The Assignor and Assignee referred to in the above Request for Registration The Agent referred to below hereby certifies that it has registered the Assignee as a Lender under the Credit Agreement, effective as of the Effective Date described above, with the Commitments and Commitment Percentages set forth for the Assignee in the Assignment and Acceptance and has adjusted the registered Commitments and Commitment Percentages of the Assignor to reflect the assignment effected by such Assignment and Acceptance. UNION BANK OF CALIFORNIA, N.A., as Agent By:_____________________________ Name:___________________________ Title:__________________________ -2- EXHIBIT D --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- FORM OF NO DEFAULT/REPRESENTATION CERTIFICATE --------------------------------------------- __________the ______________ of ____________________, a _______________________ (the "Borrower") hereby certifies in connection with the Amended and Restated -------- Credit Agreement dated as of November 10, 1998 among Union Bank of California, N.A., as agent (the "Agent"), the financial institutions parties thereto, the ----- Borrower and the other Borrowers parties thereto (such Credit Agreement, as it may be amended, modified or supplemented from time to time, the "Credit ------ Agreement"; capitalized terms used herein and not defined shall have the - --------- meanings assigned to them in the Credit Agreement), as of the date set forth below, that: (i) the representations and warranties contained in the Credit Agreement and in each other Loan Document and each certificate or other writing delivered to the Lenders in satisfaction of the conditions set forth in Section 4.1*/4.2** of the Credit Agreement prior to or on the Closing Date*/initial borrowing date of Incremental Loans** are correct in all material respects on and as of the Closing Date*/initial borrowing date of such Incremental Loans** as though made on and as of such date; and (ii) no Default has occurred or is continuing on the Closing Date*/initial borrowing date of such Incremental Loans** 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*/on the initial borrowing date of such Incremental Loans**. IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME AS OF THIS ____ DAY OF ________________, ____: ------------------------------ Name: Title: - --------------------- * To be included in Certificate delivered on Closing Date. ** To be included in Certificate delivered on initial borrowing date of Incremental Loans. EXHIBIT E --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- FORM OF COVENANT COMPLIANCE CERTIFICATE --------------------------------------- The undersigned, _________________________, the _________________________ of Entravision Communications Company, L.L.C. (the "Borrower"), refers to that -------- certain Amended and Restated Credit Agreement dated as of November 10, 1998, among Union Bank of California, N.A., as agent (the "Agent"), the financial ----- institutions parties thereto, the Borrower and the other Borrowers parties thereto (such Credit Agreement, as it may be amended, modified, supplemented or restated from time to time, the "Credit Agreement"; capitalized terms used ---------------- herein and not defined shall have the meanings assigned to them in the Credit Agreement) and certifies as to the accuracy of the following:
1. Maximum Total Debt Ratio ------------------------ a. Total Debt for Borrowers and Subsidiaries (excluding Univision Subordinated Note) $_________ b. Operating Cash Flow for Borrowers and Subsidiaries A. Net Income (after eliminating extraordinary gains and losses) $_________ B. provision for taxes $_________ C. depreciation and amortization $_________ D. Interest Expense (i) Interest on Total Debt $_________ (ii) commitment, L/C and line of credit fees $_________ (iii) net amounts payable (or receivable) under Interest Rate Agreements $_________ (iv) interest income (v) (i) + (ii) + or -(iii) - (iv) $_________ E. termination payments $_________ F. other non-cash charges $_________ G. Program Payments made or scheduled to be made $_________
H. non-cash revenues $_________ I. Management Fees $_________ J. Corporate Overhead $_________ K. a + b + c + d + e + f - g - h- i- j $_________ L. Ratio of (a) to (b): _____ to 1 (Section 6.1(a) of the Credit Agreement requires that the Maximum Total Debt Ratio not exceed ___:1) 2. Total Interest Coverage Ratio ----------------------------- a. Operating Cash Flow (see 1(b)(K) above) $_________ b. Interest Expense (see 1(b)(d) above) $_________ c. Ratio of (a) to (b): _____ to 1 (Section 6.1(b) of the Credit Agreement requires that the Total Interest Coverage Ratio not be less that ___:1) 3. Fixed Charge Coverage Ratio --------------------------------------------------------- a. Operating Cash Flow (see 1(b)(K) above) $_________ b. Total Debt Service/Capital Expenditures/Cash Income Taxes $_________ A. Total Debt Service (i) Interest Expense (see 1(b)(d) above) $_________ (ii) regularly scheduled principal $_________ payments on Total Debt $_________ (iii) A + B $_________ B. Capital Expenditures $_________ C. Cash Income Taxes $_________ D. (A)(iii)+ (B) + (C) $_________ c. Ratio of (a) to (b): _____ to 1
-2- (Section 6.1(c) of the Credit Agreement requires that the Fixed Charge Coverage Ratio not be less than ___:1) 4. Maximum Capital Expenditures ---------------------------- a. Capital Expenditures for the fiscal year ending ___________, ____: $_________ (Section 6.1(d) of the Credit Agreement requires that Capital Expenditures for such fiscal year not exceed $____________) 5. Limitation on Indebtedness -------------------------- a. Other Indebtedness permitted pursuant to Section 6.2(j) of the Credit Agreement (cannot exceed $7,500,000 less Escrow Deposits under Section 6.7(f) of the Credit Agreement) $_________ 6. Limitation on Investments ------------------------- a. Investments made pursuant to Section 6.7(e) of the Credit Agreement (cannot exceed the greater of $5,000,000 or 10% of Net Asset Value during term of Credit Agreement) $_________ b. Escrow Deposits made pursuant to Section 6.7(f) of the Credit Agreement (cannot exceed $7,500,000 during the term of Credit Agreement less Indebtedness outstanding under Section 6.2(j) of the Credit Agreement ) $_________ 7. Limitation on Unfunded Liabilities ---------------------------------- a. unfunded liabilities of Plans of Borrowers and Subsidiaries (cannot exceed $500,000) $_________
IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME, AS THE ________________ OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., AS OF THIS ____ DAY OF ______________, ____: _____________________________ Name: _______________________ Title:_______________________ -3- _____________________________ Name: _______________________ Title: ______________________ -4- EXHIBIT F --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- FORM OF CONTINUATION NOTICE --------------------------- Date: ------------------------------ To: Union Bank of California, N.A. as Agent 445 South Figueroa Street Los Angeles, California 90071 Attention: Lena M. Bryant Re: KSMS-TV, INC., TIERRA ALTA BROADCASTING, INC., CABRILLO BROADCASTING CORPORATION, GOLDEN HILLS BROADCASTING CORPORATION, LAS TRES PALMAS CORPORATION, VALLEY CHANNEL 48, INC., TELECORPUS, INC. and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. (each a "Borrower", and collectively, -------- the "Borrowers") --------- We refer to that certain Amended and Restated Credit Agreement dated as of November 10, 1998 among Union Bank of California, N.A., as agent, the financial institutions parties thereto and the Borrowers (such Credit Agreement, as amended, modified, supplemented or restated from time to time, the "Credit ------ Agreement"). Capitalized terms used herein and not defined have the meanings - --------- assigned to them in the Credit Agreement. [Pursuant to Section 2.6(a) of the Credit Agreement, the undersigned elects to convert the following LIBOR Loans to Base Rate Loans at the end of the current Interest Period for such LIBOR Loans: LIBOR Loan Amount Last Day of Current Interest Period - ----------------- ----------------------------------- 1. 2. 3. [and so on] ] Pursuant to Section 2.6(a) of the Credit Agreement, the undersigned elects to convert Base Rate Loans in the aggregate amount of $__________ to LIBOR Loan(s) as follows: Desired Date Length of LIBOR Loan Amount of Conversion Interest Period - ----------------- ------------- --------------- 1. 2. 3. [and so on] ] Pursuant to Section 2.6(b) of the Credit Agreement, the undersigned elects to continue the Interest Periods with respect to the following LIBOR Loans for the following additional Interest Period: Last Day of Current Length of Continued LIBOR Loan Amount Interest Period Interest Period - ----------------- ----------------- ----------------- 1. 2. 3. [and so on] ] Sincerely, BORROWERS --------- KSMS-TV, INC. By: ----------------------------- Name: ----------------------------- Title: ----------------------------- TIERRA ALTA BROADCASTING, INC. By: ----------------------------- Name: ----------------------------- Title: ----------------------------- -2- CABRILLO BROADCASTING CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- GOLDEN HILLS BROADCASTING CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- LAS TRES PALMAS CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- VALLEY CHANNEL 48, INC. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- TELECORPUS, INC. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By:________________________________ Walter F. Ulloa Managing Member By:________________________________ Philip C. Wilkinson Managing Member -3- APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF CREDIT ----------------- [LOGO OF UNION BANK OF CALIFORNIA] BANK USE ONLY Letter of Credit Number: ----------------- PLEASE CHECK AND COMPLETE APPLICABLE BOXES BELOW: - -------------------------------------------------------------------------------- We ("Applicant") request you, Union Bank of California, N.A. ("Bank") to issue an irrevocable standby letter of credit ("Credit") with the following terms and conditions for delivery to the beneficiary named below ("Beneficiary") by: [_] Telex/SWIFT or [_] Courier - -------------------------------------------------------------------------------- AMOUNT (in words and figures, including currency type:) |EXPIRY DATE: | | | | - -------------------------------------------------------------------------------- APPLICANT (complete name and address) |BENEFICIARY (complete name and address) | | | | | - -------------------------------------------------------------------------------- ADVISING BANK (name and address)-if |PARTIAL DRAWINGS: left blank. Bank will select at its | option | [_] Allowed or [_] Not Allowed |---------------------------------------- |ANY CHARGES OF ADVISING BANK ARE FOR THE |ACCOUNT OF: | | [_] Applicant or [_] Beneficiary - -------------------------------------------------------------------------------- CREDIT AVAILABLE BY SIGHT PAYMENT: Against presentation of the documents detailed herein and Beneficiary's draft(s) drawn at sight on Bank or bank's correspondent, at Bank's option, or Bank may waive requirement for draft. - -------------------------------------------------------------------------------- DOCUMENTS REQUIRED: [_] A dated statement purportedly signed by an authorized officer or representative of Beneficiary stating: "The undersigned being a duly authorized officer or representative of________________________ hereby represents and warrants that the amount of (BENEFICIARY'S NAME) the accompanying draft represents and covers: (insert text of statement below) [_] See attached exhibit (please sign and date on each attached page) [_] others (specify): - -------------------------------------------------------------------------------- SPECIAL CONDITIONS: [_] No drat is required [_] Automatic Renewal Clause for _____________ with _______ days prior PERIOD notification of non-renewal Final Expiry Date:________________ (Month/Day/Year) [_] Others (Specify) - -------------------------------------------------------------------------------- IMPORTANT NOTICE (A) Applicant understands that the risk is greater if Applicant requests a standby letter of credit which requires only a draft without any supporting documentation. Typically, standby letters of credit require the beneficiary to provide some statement of alleged non-performance or default in order to obtain payment. However, a beneficiary that can obtain a standby letter of credit available only against presentation of draft or a demand, relieves itself of any documentary requirements. (B) Applicant understands that the final form of Credit may be subject to such revision and changes as are deemed necessary or appropriate by Bank and Applicant hereby consents to such revisions and changes. - -------------------------------------------------------------------------------- The opening of the Credit is subject to the terms and conditions as set forth in the Standby Letter of Credit Agreement appearing on the reverse hereof to which Applicant agrees and, if Applicant's continuing agreement is lodged with Bank, subject to the terms and provisions set forth therein. - -------------------------------------------------------------------------------- THE UNDERSIGNED AGREES TO BE BOUND BY THE TERMS AND CONDITIONS SET FORTH ABOVE AND ON THE REVERSE SIDE HEREOF. - -------------------------------------------------------------------------------- NAME OF APPLICANT - -------------------------------------------------------------------------------- AUTHORIZED SIGNATURE DATE |ADDITIONAL AUTHORIZED SIGNATURE DATE | X |X - -------------------------------------------------------------------------------- TELEPHONE NUMBER |ACCOUNT NUMBER | ( ) | - -------------------------------------------------------------------------------- BANK USE ONLY ================================================================================ RISK GRADE PURPOSE CODE OBLIGATION TYPE RISK CAPITAL TYPE EXHIBIT H --------- TO AMENDED AND RESTATED ----------------------- CREDIT AGREEMENT ---------------- FORM OF EXCESS CASH FLOW CERTIFICATE ------------------------------------ The undersigned, _________________________, the _________________________ of Entravision Communications Company, L.L.C. (the "Borrower"), refers to that -------- certain Amended and Restated Credit Agreement dated as of November 10, 1998 among Union Bank of California, N.A., as agent (the "Agent"), the financial ----- institutions parties thereto, the Borrower and the other Borrowers parties thereto (such Credit Agreement, as it may be amended, modified or supplemented from time to time, the "Credit Agreement"; capitalized terms used herein and not ---------------- defined shall have the meanings assigned to them in the Credit Agreement) and certifies as to the accuracy of the following: Excess Cash Flow for the Borrower and its Subsidiaries on a consolidated basis for the fiscal year ending December 31, ____ is $_____________, calculated as follows: 1. Operating Cash Flow ------------------- a. Net Income (after eliminating extraordinary gains and losses) $_________ b. provision for taxes $_________ c. depreciation and amortization $_________ d. Interest Expense (i) Interest on Total Debt $_________ (ii) commitment, L/C and line of credit fees $_________ (iii) net amounts payable (or receivable) under Interest Rate Agreements $_________ (iv) interest income $_________ (v) (i) + (ii) + or - (iii) - (iv) $_________ e. termination payments $_________ f. other non-cash charges $_________ g. Program Payments made or scheduled to be made $_________ h. non-cash revenues $_________ i. Management Fees $_________ j. Corporate Overhead $_________ k. a + b + c + d + e + f - g - h - i - j $_________ 2. Total Debt Service a. Interest Expense (from 1(d) above) $_________ b. regularly scheduled principal payments on Total Debt $_________ c. a + b $_________ 3. Cash Income Taxes $_________ 4. Capital Expenditures $_________ 5. increase or decrease in Net Working Investment $_________ 6. 1 - 2 - 3 - 4 + or - 5 $_________ IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME, AS THE ____________________ OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., AS OF THIS ____ DAY OF ____________, ___: _____________________________ Name:________________________ Title:_______________________ _____________________________ Name:________________________ Title:_______________________ -2- EXHIBIT I --------- TO AMENDED AND RESTATED CREDIT AGREEMENT ---------------------------------------- INCREMENTAL LOAN ACTIVATION NOTICE ---------------------------------- Date: January 12, 2000 To: Union Bank of California, N.A., as Administrative Agent 445 South Figueroa Street Los Angeles, California 90071 Attention: Lena M. Bryant Re: KSMS-TV, INC., TIERRA ALTA BROADCASTING, INC., CABRILLO BROADCASTING CORPORATION, GOLDEN HILLS BROADCASTING CORPORATION, LAS TRES PALMAS CORPORATION, VALLEY CHANNEL 48, INC., TELECORPUS, INC. and ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. (each a "Borrower", and collectively, -------- the "Borrowers") --------- We refer to that certain Amended and Restated Credit Agreement dated as of November 10, 1998 among Union Bank of California, N.A., as agent, the financial institutions parties thereto and the Borrowers (such Credit Agreement, as amended and as further amended, modified, supplemented or restated from time to time, the "Credit Agreement"). Capitalized terms used herein and not defined ---------------- have the meanings assigned to them in the Credit Agreement. This notice is the Activation Notice referred to in the Credit Agreement, and the Borrowers and each of the Lenders signatory hereto (the "Incremental ----------- Loan Lenders") hereby notify you that: - ------------ 1. The Activation Date is January 13, 2000. 2. The Incremental Loan Commitment of each Incremental Loan Lender is set forth opposite such Incremental Loan Lender's name on the signature pages hereof after the words "Incremental Loan Commitment". 3. The Incremental Loan Commitment Percentage of each Incremental Loan Lender is set forth opposite such Incremental Loan Lender's name on the signature pages hereof after the words "Incremental Loan Commitment Percentage". Sincerely, BORROWERS --------- KSMS-TV, INC. By:______________________________________ Name:____________________________________ Title:___________________________________ TIERRA ALTA BROADCASTING, INC. By:______________________________________ Name:____________________________________ Title:___________________________________ CABRILLO BROADCASTING CORPORATION By:______________________________________ Name:____________________________________ Title:___________________________________ GOLDEN HILLS BROADCASTING CORPORATION By:______________________________________ Name:____________________________________ Title:___________________________________ LAS TRES PALMAS CORPORATION By:______________________________________ Name:____________________________________ Title:___________________________________ -2- VALLEY CHANNEL 48, INC. By:______________________________________ Name:____________________________________ Title:___________________________________ TELECORPUS, INC. By:______________________________________ Name:____________________________________ Title:___________________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By:______________________________________ Walter F. Ulloa Managing Member By:______________________________________ Philip C. Wilkinson Managing Member INCREMENTAL LOAN LENDER ----------------------- Incremental Loan Commitment: $8,000,000 UNION BANK OF CALIFORNIA, N.A. Incremental Loan Commitment Percentage: 100% By:______________________________________ Name:____________________________________ Title:___________________________________ CONSENTED TO: - ------------ UNION BANK OF CALIFORNIA, N.A., as Agent By:__________________________ Name:________________________ Title:_______________________ -3- 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)
UNION BANK CREDIT FACILITY LIST OF SCHEDULES AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- ITEM ---- SCHEDULE 3.1 GOOD STANDING/FOREIGN QUALIFICATION JURISDICTIONS SCHEDULE 3.2 MISSING CONSENTS SCHEDULE 3.5A INTELLECTUAL PROPERTY SCHEDULE 3.5B REAL PROPERTY INTERESTS SCHEDULE 3.5C OPERATING NAMES/TRADE NAMES SCHEDULE 3.6 CAPITAL STRUCTURE/EQUITY OWNERSHIP SCHEDULE 3.7 SUBSIDIARIES, AFFILIATES AND INVESTMENTS SCHEDULE 3.8 MATERIAL CONTRACTS SCHEDULE 3.9 MEDIA LICENSES SCHEDULE 3.10 TAXES AND ASSESSMENTS SCHEDULE 3.11 MATERIAL LITIGATION SCHEDULE 3.12 DEVIATIONS FROM GAAP SCHEDULE 3.18 FEES AND COMMISSIONS SCHEDULE 3.21 PENDING FCC MATTERS SCHEDULE 6.2 PERMITTED ADDITIONAL INDEBTEDNESS SCHEDULE 6.7 PERMITTED ADDITIONAL INVESTMENTS SCHEDULE 3.1 GOOD STANDING/FOREIGN QUALIFICATION JURISDICTIONS Cabrillo Broadcasting Corporation - --------------------------------- Organization: California Qualified to do Business: None Entravision, L.L.C. - ------------------- Organized: Delaware Qualified to do business: None Entravision-El Paso, L.L.C. - --------------------------- Organized: Delaware Qualified to do business: None Entravision Communications Company, L.L.C. - ------------------------------------------ Organized: Delaware Qualified to do business: California; Texas; Colorado; Nevada Entravision Communications of Midland, L.L.C. - --------------------------------------------- Organized: Delaware Qualified to do business: Texas Entravision Holdings, LLC - ------------------------- Organized: California Qualified to do business: None Entravision Midland Holdings, L.L.C. - ------------------------------------ Organized: Delaware Qualified to do business: Texas ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Golden Hills Broadcasting Corporation - ------------------------------------- Organized: Delaware Qualified to do business: Colorado KSMS-TV, Inc. - ------------- Organized: Delaware Qualified to do business: California Las Tres Palmas Corporation - --------------------------- Organized: Delaware Qualified to do business: California Los Cerezos Television Company - ------------------------------ Organized: Delaware Qualified to do business: District of Columbia, Maryland Telecorpus, Inc. - ---------------- Organized: Texas Qualified to do business: None Tierra Alta Broadcasting, Inc. - ------------------------------ Organized: Delaware Qualified to do business: Nevada Valley Channel 48, Inc. - ----------------------- Organized: Texas Qualified to do business: None ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.2 MISSING CONSENTS 1. Consents of Landlords/Licensors set forth on Schedule 3.5B as follows: a. Golden Hills ------------ i. Studio lease for 777 Grant Street ii. Transmitter site leases KWGN (Main Tower) KWGN (Minor Tower) iii. Cheyenne Mountain iv. STL Site: 600 Grant Street b. Las Tres Palmas --------------- i. Studio Lease - George Caswell c. Tierra Alta ----------- i. Studio Lease - 22 Commerce Center Way, Henderson, Nevada ii. Transmitter Site Lease - Oak Hill d. Entravision Communications Company, L.L.C. ------------------------------------------ i. Industrial Real Estate lease with Howard Hughes Properties dated December 3, 1996 e. KSMS-TV ------- i. Studio lease with Waddell 2. Golden Hills Broadcasting ------------------------- Consent of Home Shopping Club, Inc., concerning Affiliation Agreement dated March 3, 1992 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.5A INTELLECTUAL PROPERTY The License Subsidiaries have been granted the exclusive right to use the call signs listed on this Schedule 3.5A to identify the Stations under the allocations granted by the FCC. Certain common law trademark rights to the call sign letter combinations have subsequently arisen from the use of such call signs in commerce. Cabrillo Broadcasting Corporation - --------------------------------- "K19BN" "KBNT-LP" Entravision Communications Company, L.L.C. - ------------------------------------------ "KINT" "KINT-FM" "KSVE(AM)" "KLDO" "KVYE" "WVEN-LP" "WVEA-LP" Golden Hills Broadcasting Corporation - ------------------------------------- "KCEC" "KGHB-LP" "K43DK" KSMS-TV, Inc. - ------------- "KSMS" Las Tres Palmas Corporation - --------------------------- "KVER-LP" "K05JY" "K28ET" "KLOB-FM" Los Cerezos Television Company - ------------------------------ "WMDO-LP" Telecorpus, Inc. - ---------------- "KORO" Tierra Alta Broadcasting, Inc. - ------------------------------ ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. "KINC" Valley Channel 48, Inc. - ----------------------- "KNVO" ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.5B REAL PROPERTY INTERESTS/LICENSES All assets were previously transferred and are curently held by Entravision Communications Company, L.L.C. Entity names are provided for reference only. Cabrillo Broadcasting Corporation - --------------------------------- Studio Lease: Location: 5770 Ruffin Road, San Diego, California 92123 Landlord: Danka Corporation, 3220 South Fairline #12, Tempe, AZ 85282 Term: September 1, 1997 - July 31, 2003 w/ no renewal period Monthly Payments: $9,396.88, adjusted annually at 5% per year Restrictions: Prior written consent of Landlord required. Breaches/Defaults: None. Transmitter Site Lease: Location: Crestline Drive, Mt. Palomar, San Diego, CA Landlord: Palomar Repeater, Inc., 11828 Rancho Bernardo Road, Suite 123-56, San Diego, CA 92128 Term: October 1, 1995 - September 30, 2000 Monthly Payments: $1,675 Restrictions: Prior written consent of Landlord required. Breaches/Defaults: None. Other Leases/Interests: Office Lease used for sales and other administrative functions. Location: 11900 Olympic Blvd., Suite 590, Los Angeles, CA 90064 Landlord: Douglas Emmett Joint Venture, c/o Douglas Emmett & Co., 12121 Wilshire Blvd., Suite 910, Los Angeles, CA 90025 Entravision Communications Company, L.L.C. - ------------------------------------------ Office Lease: Industrial real estate lease between Howard Hughes Properties Limited Partnership as Landlord and Entravision Communications Company, L.L.C. dba KINC as Tenant, dated December 3, 1996 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Term/Options/Renewals: Initial term of five (5) years from completion of tenant improvements with one (1) renewal option of three (3) years Monthly Payments: $4,438.40 for first 12 months. WVEN-LP Office / Studio Lease: Location: 5135 Adanson Street, Suite 300, Orlando, Florida 32804-1353 Landlord: Adanson Ltd. Partnership, P.O. Box 950666, Orlando, Florida 32795 Term: January, 2001 Monthly Payments: $3,300 Restrictions: Prior written consent with processing fee. Breaches/Defaults: None Transmitter Site Lease: Location: WCPX-TV Channel 6, 4466 John Young Parkway, Orlando, Florida 32804 Landlord: Same Term: August, 2003 Monthly Payments: $2,862 Restrictions: None stated Breaches/Defaults: None WVEA-LP Office / Studio Lease: Location: 2942 W. Columbus Drive, Suite 204, Tampa, Florida 33607 Landlord: McDill Columbis Corporation, 2700 N. McDill Avenue, Tampa, Florida 33607 Term: March, 2002 Monthly Payments: $3,959 Restrictions: None stated Breaches/Defaults: None Transmitter Site Lease: Location: 111 Madison Street, Tampa, FL 33602 Landlord: Park Tower Investors, same address ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Term: June, 2001 Monthly Payments: $4,200 Restrictions: None stated Breaches/Defaults: None Other Leases/Interests: Commercial Lease Agreement between Latin Communications Group TV, Inc. and A.V.P. International regarding lease of production equipment located in Tampa, Florida dated July 1996 Monthly Payments: $2,287 Term: June, 2000 Restrictions: None stated Breaches/Defaults: None Golden Hills Broadcasting Corporation - ------------------------------------- Studio Lease: Location: 777 Grant Street, Suite 110, Denver, CO 80203 Landlord: Atlantic Richfield Company, Master Pension Trust, Metric Property Mgmt., 8700 Via De Ventura, Suite 215, Scottsdale, AZ 85258 Term/Options/Renewals: February 15, 1995 - February 28, 2005 Monthly Payments: $6,619.67 Restrictions on Assignment: Prior written consent of Landlord required. Breaches or Defaults: None. Lease: Lease of Governor's Center II, 600 Grant Street, Denver, Colorado between Atlantic Richfield Company Master Pension Trust and Golden Hills Broadcasting dated September 5, 1995 Term/Options/Renewals: October 1, 1995 - February 28, 2005 Monthly Payments: $200 Restrictions on Assignment: Prior written consent of Landlord required. Breaches or Defaults: None. Transmitter Site: Location: KWGN Transmitter Tower, East Highway 68, Lookout Mountain, Golden, CO (Channel 50) ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Landlord: WGN of Colorado, Inc. (now KWGN, Inc.), 6160 South Wabash Way, Englewood, CO 80111 Location: KWGN Tower, East Highway 68, Lookout Mountain, Golden, CO (Channel 43) Landlord: WGN of Colorado, Inc. (now KWGN, Inc.), 6160 South Wabash Way, Englewood, CO 80111 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Lease: License Agreement of Transmitter Site between WGN of Colorado, Inc. (now KWGN, Inc.), and Lomas de Oro Broadcasting Corporation dated November 1, 1989. (There is an oral lease of the premises between Lomas de Oro Broadcasting Corporation and Golden Hills Broadcasting Corporation.) Terms: October 1, 1989 to five (5) years from the date of Tenant's first Home Shopping Network Broadcast with an additional term ending August 21, 2000 Monthly Payments: $10,000 Restrictions: Prior written consent of Landlord required. Breaches/Defaults: None. Lease: Lease and License Agreement of Transmitter Site between WGN of Colorado, Inc., and Golden Hills Broadcasting Corporation dated October 1, 1989 Term: November 1, 1989 - October 31, 1994 with an additional term ending October 31, 1999 Monthly Payments: $3,257 Restrictions: Prior written consent of Landlord required. Breaches/Defaults: None. Location: Cheyenne Mountain, Colorado Springs, CO (Channel 27) Landlord: Cheyenne Propagation Company, P.O. Box 60277, Colorado Springs, CO 80960 Lease: Between Cheyenne Propagation Company and Lomas de Oro Broadcasting dated April 30, 1992 and assigned to Golden Hills Broadcasting Corporation Term: May 1, 1992 - April 30, 1997 Monthly Payments: $675 Restrictions: Prior written consent of Landlord required. Breaches/Defaults: None. STL Site Lease: Location: 600 Grant Street, Denver, CO 80203 Landlord: Atlantic Richfield Company Master Pension Trust, c/o Metric Property Management, 8700 East Via Ventura, Suite 215, Scottsdale, AZ 85258 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Other Leases/Interests: Office Lease used for sales and other administrative functions. Location: 11900 Olympic Blvd., Suite 590, Los Angeles, CA 90064 Landlord: Douglas Emmett Joint Venture, c/o Douglas Emmett & Co., 12121 Wilshire Blvd., Suite 910, Los Angeles, CA 90025 Term: January 1, 1996 - December 21, 2001 Monthly Payments: $3,958.24 Restrictions: Prior written consent of Landlord required. Breaches: None. KSMS-TV, Inc. - ------------- Studio Lease: Location: 46 Garden Court, Monterey, California (AKA 67 Garden Court, Monterey, California) Landlord: W.C. Waddell, trustee of the W.C. Waddell Trust dated February 20, 1989, 1006 Katherine Lane, Lafayette, CA 94549, Phone (510) 283-6878 Term: July 1, 1996 - June 30, 1997 Monthly Payments: $8,400 per month for rent plus pass-through expense of $557 per month for insurance. Restrictions: Prior written consent of Landlord. Breaches/Defaults: None. Transmitter Site License: Location: Fremont Peak, Monterey County, California Landlord: Telecommunications Properties, 1333 Willow Pass Road, Suite 201, Concord, CA 94520, Attn: Jay S. Watson Term: July 13, 1992 - July 12, 1997 Restrictions: Prior written consent of Licensor. Breaches: None. Other Leases: None ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Las Tres Palmas Corporation - --------------------------- KVER Studio Lease: Location: 41-701 Corporate Way, Suite 4, Palm Desert, CA 92260 Landlord: George Caswell Term: January 1, 1996 - December 31, 2000 with two five-year extension periods. Monthly Payments: $4,690 Restrictions: None stated. Breaches/Defaults: None. Transmitter Site License: Location: Indio Peak, California Landlord: Carrier Communication, 42326 N. 10th Street West, Lancaster, CA 93534 Term: September 1, 1995 - August 30, 2000 Monthly Payments: $750 Restrictions: Prior written consent required. Relay Site License: Location: Section 35, Township 3 South, Range S East, S.B.B.'s M, Riverside County, CA Landlord: The Michael & Linda Nichols Trust, Ronald & Pamela Nichols, and the Bender Moore Trust Term: October 1, 1995 through September 30, 2000, with two 5 year renewals. KLOB-FM Transmitter Site License: Location: Edom Hill, Thousand Palms, California Landlord: Meridian Corporation, 23501 Park Sorrento, Suite 213A, Calabasas, CA ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Los Cerezos Television Company - ------------------------------ Office Lease: Location: 962 Wayne Avenue, Silver Spring, Maryland 20910 Landlord: Wayne Associates, c/o Dreyfus Brothers, 4833 Rugby Avenue, Bethesda, Maryland 20814 Term: 9/30/2005 Monthly Payments: $11,035 Restrictions: Prior written consent required. Breaches/Defaults: None. Television Transmitter Site Lease: Location: American University, 4400 Massachusetts Ave., N.W., Washington D.C. 20016 Landlord: American University, 4400 Massachusetts Ave., N.W., Washington D.C. 20016 Term: August 31, 2002 Monthly Payments: $5,458 Restrictions: Prior written consent required. Breaches/Defaults: None. Radio Transmitter Site Lease: Location: Sligo Creek Golf Course, Sligo Creek Parkway, Silver Spring, Maryland 20910 Landlord: MNPCC, 9500 Burnett Avenue, Silver Spring, Maryland 20901 Term: May 31, 2000 Monthly Payments: $790 Restrictions: Prior written consent required. Breaches/Defaults: None. Other Leases/Interests: None. Tierra Alta Broadcasting, Inc. - ------------------------------ Studio Lease: Location: 500 Pilot Road, Suite D, Las Vegas, Nevada 89119 Landlord: Howard Hughes Properties, Limited Partnership 1231 Town Center Drive, Suite 200, Las Vegas, Nevada 89134 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Transmitter Site License: Location: KFBT 33 Tower, Arden Peak, Henderson, NV Landlord: Tower Management, Inc. 3840 South Jones Boulevard, Las Vegas, Nevada 89103 Term: March 20, 1995 - March 19, 2005 Monthly Payments: $4,000 Restrictions: Prior consent required. Breaches/Defaults: None. Other Leases/Interests: Office Space: Landlord: Howard Hughes Properties, LP and Las Tres Campanas, Inc. (Las Tres Campanas, Inc. and Tierra Alta Broadcasting, Inc. have an oral, rent-free lease of the premises for the term of this lease agreement.) Term: December 3, 1996 through December 3, 2001 Monthly Payments: $4,571.55 Restrictions: Prior consent required. Breaches/Defaults: None. Valley Channel 48, Inc. / KNVO - ------------------------------ Studio Lease: Location: 1800 South Main Street, Suite 850, McAllen, Texas 78503 Landlord: Liquidator of Kentucky Central Life Insurance Co., 300 West Vine, Suite 515, Lexington, KY 40507 Term: Month-to-month Monthly Payments: $4000 Restrictions: Prior consent required. Breaches/Defaults: None. Transmitter Site Lease: Location: LaDonna Subdivision, Hidalgo County, State of Texas Landlord: Sunland Farms, Inc. Term: March 1, 1989 to February 28, 1999 with one (1) twenty (20) year right to renew. Annual Payments: $20,000 Restrictions: None. Breaches/Defaults: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Other Leases/Interests: None. KLDO - ---- Studio Lease: Location: 40 N.E. Loop 410, Suite 102, San Antonio, TX 78216 Landlord: Spigel Properties, 40 N.E. Loop 410, Suite 102, San Antonio, TX 78216 Transmitter Site Lease: Location: 1600 Water Street, Riverdale Mall, Laredo, TX 78040 Landlord: Properties, 40N.E. Loop 410, Suite 102, San Antonio, TX Other Leases/Interests: None. KINT / KSVE - ----------- Studio Lease Location: None Landlord: None Transmitter Site Lease Location: KINT-TV Tower at Comanch Peak, Mt. Franklin, El Paso County, TX Landlord: KDBC-TV, Ltd. Term: March 31, 1982 through August 31, 2007 Location: KINT-FM Tower at Comanch Peak, Mt. Franklin, El Paso County, Texas Landlord: KDBC-TV, Ltd. Term: Five years through September 22, 1997 with two 5 1/2 year extensions Location: KINT-AM Tower at Intersection of Fonseca Street and Border Highway Landlord: City of El Paso Term: Ten years through May 26, 1997, with two 10 year extensions to renew Other Leases/Interests: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. KVYE - ---- Studio Lease Location: 200 South 5th Street El Centro, California 92243 Landlord: Miller and Associates 304 North Eight Street El Centro, California 92243 Transmitter/Site Lease Location: Black Mountain / Brawley Landlord: Gila Electronics (Transmitter) 2481 E. Palo Verde Yuma, Arizona 85365 Drysdale (Tower Site) 232 West Duarte, Brawley, CA 92227 Other Leases/Interests: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.5C OPERATING NAMES/TRADE NAMES Cabrillo Broadcasting Corporation - --------------------------------- "Cabrillo Broadcasting Corporation" "KBNT-LP" Entravision Communications Company, L.L.C. - ------------------------------------------ "Entravision Communications Company, L.L.C." "KINT" "KINT-FM" "KVYE-TV" "KSVE(AM)" "KLDO" "WVEN-LP" "WVEA-LP" Golden Hills Broadcasting Corporation - ------------------------------------- "Golden Hills Broadcasting Corporation" "KCEC(TV)" "KGHB-LP" "Lomas de Oro Broadcasting Corporation" "Lomas de Oro Broadcasting" "K43DK" KSMS-TV, Inc. - ------------- "KSMS-TV, Inc." Las Tres Palmas Corporation - --------------------------- "Las Tres Palmas Corporation" "KVER-Channel 4" "KVER-LP" "KLOB-FM" ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Los Cerezos Television Company - ------------------------------ "Los Cerezos Television Company" "Los Cerezos Broadcasting Corporation" "WMDO" "TV-48 Univision" "Univision Washington" "Channel 48" "WMDO-LP" "Radio Mundo" "WMDO-AM" "1540-AM" "WACA" (as licensee) Tierra Alta Broadcasting, Inc. - ------------------------------ "Tierra Alta Broadcasting, Inc." "KINC(TV) - Channel 15" Telecorpus, Inc. - ---------------- "KORO" Valley Channel 48, Inc. - ----------------------- "KNVO" ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.6 CAPITAL STRUCTURE/EQUITY OWNERSHIP OF BORROWERS 1. KSMS-TV, INC. ------------- Number of Shares Authorized: 10,000 shares Common Voting Stock Number of Shares Outstanding: 10,000 shares Common Voting Stock Ownership of Shares: Walter F. Ulloa: 3,000 shares Philip C. Wilkinson: 3,000 shares Paul A. Zevnik: 3,000 shares Richard D. Norton: 1,000 shares 2. TIERRA ALTA BROADCASTING, INC. ------------------------------ Number of Shares Authorized: 20,000 shares Class A Voting Common Stock 15,500 shares Class B Non-Voting Convertible Common Stock Number of Shares Outstanding: 4,500 shares Class A Voting Common Stock 15,500 shares Class B Non-Voting Convertible Common Stock Ownership of Shares: Irma G. Rico: 4,500 Shares Class A Voting Common Stock Walter F. Ulloa: 6,750 Shares Class B Non-Voting Convertible Common Stock Paul A. Zevnik: 6,750 Shares Class B Non-Voting Convertible Common Stock Richard D. Norton: 2,000 Shares Class B Non-Voting Convertible Common Stock ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 3. CABRILLO BROADCASTING CORPORATION --------------------------------- Number of Shares Authorized: 100,000 shares Common Stock Number of Shares Outstanding: 9,445.7 shares Common Stock Ownership of Shares: The Wilkinson Family Trust 8,000 shares dated June 2, 1988: Carol Kruidinier Luery, Trustee 963.8 shares of the Carol K. Luery Revocable Trust U/A/D/ 07/27/89: Walter F. Ulloa: 481.9 shares 4. GOLDEN HILLS BROADCASTING CORPORATION ------------------------------------- Number of Shares Authorized: 10,000 shares Class A Common Stock 7,000 shares Class B Non-Voting Common Stock Number of Shares Outstanding: 6,050 shares Class A Voting Common Stock 0 shares Class B Non-Voting Common Stock Ownership of Shares: Walter F. Ulloa: 2,100 shares Class A Voting Common Stock Philip C. Wilkinson: 1,475 shares Class A Voting Common Stock Paul A. Zevnik: 1,475 shares Class A Voting Common Stock Richard D. Norton: 1,000 shares Class A Voting Common Stock 5. LAS TRES PALMAS CORPORATION --------------------------- Number of Shares Authorized: 10,000 shares Common Voting Stock Number of Shares Outstanding: 10,000 shares Common Voting Stock Ownership of Shares: Walter F. Ulloa: 5,000 shares Paul A. Zevnik: 5,000 shares ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 6. VALLEY CHANNEL 48, INC. ----------------------- Number of Shares Authorized: 10,000 shares of Common Stock Number of Shares Outstanding: 9,558 shares of Common Stock Ownership of Shares: Walter F. Ulloa: 3,454 shares The Wilkinson Family Trust: 3,454 shares Paul A. Zevnik: 1,466 shares Richard D. Norton: 509 shares Irma G. Rico: 356 shares Carol Kruidinier Luery, Trustee of the Carol K. Luery Revocable Trust U/A/D/ 07/27/89: 319 shares 7. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ------------------------------------------ Ownership of Membership Units: w/o Univision ------------- Class A Units ------------- Cabrillo Broadcasting Corp. 330,816 Golden Hills Broadcasting Corp. 137,801 KSMS-TV, Inc. 14,413 Las Tres Palmas Corp. 13,460 Tierra Alta Broadcasting, Inc. 171,507 The Walter F. Ulloa Irrevocable Trust of 1996 23,920 The 1994 Wilkinson Children's Gift Trust 23,920 Paul A. Zevnik 813 The Paul A. Zevnik Irrevocable Trust 23,920 Valley Channel 48, Inc. 665,980 Telecorpus 151,191 --------- TOTAL (w/o Univision) 1,557,741 Univision Option 664,509 Class C Units ------------- Managing Members and Service Providers 286,206 Class D Units ------------- Equity Pool 5% 54,284 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Class E Units ------------- Paul A. Zevnik 5,000 Paul A. Zevnik 4,500 Class F Units ------------- The Zevnik-Harvard Fund 5,000 The Zevnik Charitable Foundation 4,500 8. TELECORPUS, INC. ---------------- Number of Shares Authorized: 10,000 shares of Common Stock Number of Shares Outstanding: 10,000 shares of Common Stock Ownership of Shares: The 1994 Wilkinson Children's Gift Trust Dated September 30, 1994 1,880 shares The Wilkinson Family Trust Dated June 2, 1988 1,734 shares The Paul A. Zevnik Trust Dated November 2, 1996 1,533 shares Richard D. Norton 533 shares Yrma G. Rico 372 shares Carol K. Luery Revocable Trust UA Dated 7/27/89 334 shares Walter F. Ulloa 1,734 shares The Walter F. Ulloa Irrevocable Trust of 1996 Dated October 9, 1996 1,880 shares ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.7 SUBSIDIARIES & AFFILIATES Borrowers - --------- KSMS-TV, Inc., a Delaware corporation Tierra Alta Broadcasting, Inc., a Delaware corporation Golden Hills Broadcasting Corporation, a Delaware corporation Las Tres Palmas Corporation, a Delaware corporation Valley Channel 48, Inc., a Texas corporation Entravision Communications Company, L.L.C., a Delaware limited liability company Cabrillo Broadcasting Corporation, a California corporation Telecorpus, Inc., a Texas corporation Subsidiaries - ------------ Entravision Holdings, LLC, a California limited liability company Entravision Communications of Midland, L.L.C., a Delaware limited liability company Entravision Midland Holdings, L.L.C., a Delaware limited liability company Entravision-El Paso, L.L.C., a Delaware limited liability company Entravision, L.L.C., a Delaware limited liability company Los Cerezos Television Company, a Delaware corporation Other Affiliates - ---------------- Costa de Oro Television, Inc., a California corporation Tidewater Capital Corporation, a Delaware corporation 43 Corporation, Inc., a Delaware corporation TCC II Corporation, a Delaware corporation Beach 43 Corporation, a Delaware corporation Las Tres Campanas Television, Inc., a Nevada corporation Biltmore Broadcasting Corporation, a Delaware corporation Channel 44 Associates, a California limited partnership La Paz, Ltd., a California limited partnership La Paz Wireless, Ltd., a California limited partnership La Paz Wireless Corp., a Delaware corporation Zeus Corporation of Washington, Inc., a Delaware corporation Lomas de Oro Broadcasting Corporation Mundo Vision Broadcasting Affiliates also include any shareholder owning 5% or more of the shares of any Borrower. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.8 MATERIAL CONTRACTS All assets were previously transferred and are curently held by Entravision Communications Company, L.L.C. Entity names are provided for reference only. Cabrillo Broadcasting Corporation - --------------------------------- 1. Contract: Local Hispanic Television Audience Measurement Service Agreement by and between Cabrillo Broadcasting Company and A.C. Nielsen Company dated May 1, 1995 Term/Options/Renewals: May 1, 1995 - April 30, 1997 Monthly Payments: $10,000 for first 12 months, $10,500 for next 12 months Restrictions on Assignment: None stated. Breaches or Defaults: None 2. Contract: Local Hispanic Television Audience Measurement Service Agreement by and between Cabrillo and A.C. Nielsen Company Term/Options/Renewals: Through October 31, 2002 Monthly Payments: $13,400 Restrictions: None stated. Breaches / Defaults: None. 3. Contract: Local Television Audience Measurement Service Agreement by and between Cabrillo and A.C. Nielsen Company Term/Options/Renewals: Through April 30, 2000 Monthly Payments: $12,500 Restrictions on Assignment: None stated. Breaches or Defaults: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 4. Contract: Office Lease by and among Douglas Emmett Joint Venture, a California general partnership, Golden Hills Broadcasting, Inc. and Cabrillo Broadcasting Corporation dated December 19, 1995 Term/Options/Renewals: January 1, 1996 - December 21, 2001 Monthly Payments: $3,958.24 Restrictions on Assignment: Prior written consent of Landlord required (See (S)11). Breaches or Defaults: None. 5. Contract Shareholders' Agreement among Cabrillo Broadcasting Corporation and its Shareholders, dated December 30, 1996. Term/Options/Renewals: N/A Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 6. Contract Third Amendment to the First Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C., among Walter F. Ulloa an individual, Philip C. Wilkinson, an individual, Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, KSMS-TV, Inc., Las Tres Palmas Corporation, Tierra Alta Broadcasting, Inc., Valley Channel 48, Inc., Edith Seros, Trustee of the Walter F. Ulloa Irrevocable Trust of 1996, Kevin Grenham and Steve G. Rowles, Co-Trustees of the Paul A. Zevnik Trust, Philip C. Wilkinson and Wendy K. Wilkinson, Trustees of The 1994 Wilkinson Children's Gift Trust dated September 30, 1994, Paul A. Zevnik, an individual, and Richard D. Norton, an individual. Term/Options/Renewals: N/A. Monthly Payments: N/A. Restrictions on Assignment: N/A Breaches or Defaults: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 7. Contract That certain Network Affiliation Agreement between Cabrillo Broadcasting Corporation and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 Entravision Communications Company, LLC - --------------------------------------- 1. Contract: Those certain Network Affiliation Agreements between each of (1) Cabrillo Broadcasting Corporation, (2) Golden Hills Broadcasting Corporation, (3) KSMS-TV, Inc., (4) Las Tres Palmas Corporation, (5) Tierra Alta Broadcasting, Inc. (6) Valley Channel 48, Inc., (7) KNVO, all dated December 30, 1996, and (8) KORO, (9) KLDO and (10) KINT dated subsequent to December 30, 1996 and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership 2. Contract: Employment Agreement with Walter F. Ulloa dated October 1, 1996 Term: Seven years Monthly Payments: $30,000 base salary 3 Contract: Employment Agreement with Philip C. Wilkinson dated October 1, 1996 Term: Seven years Monthly Payments: $30,000 base salary 4 Contract: Employment Agreement with Larry E. Safir dated January 23, 1997 Term: January 23, 1997 to November 12, 1999 Monthly Payments: $10,000 base salary ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. WVEN-TV 1. Contract: Agreement between WVEN Channel 63 and Cooper HMS Partners Miami, L.C. regarding broadcast of Florida Lottery information dated June 3, 1998 Term: June 30, 1999 Monthly Payments: N/A WVEA-TV 1. Contract: Agreement between WVEA Channel 61 and Cooper HMS Partners Miami, L.C. regarding broadcast of Florida Lottery information dated June 3, 1998 Term: June 30, 1999 Monthly Payments: N/A 2. Contract: Monthly Payment Option License Agreement between Latin Communications Group Television, Inc. and Network Production Music Library regarding monthly royalty rates dated March 2, 1998. Term: 36 months Monthly Payments: $97.03 3. Contract: LPTV News Report Agreement between Press Association, Inc. and Latin Communications Group Television, Inc. Term: 36 months Monthly Payments: $97.03 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Golden Hills Broadcasting Corporation - ------------------------------------- 1. Contract: Television Affiliation Agreement between Lomas de Oro Broadcasting Corporation and Home Shopping Club, Inc., dated March 3, 1992 Term/Options/Renewals: March 1, 1992 - February 28, 1993 with automatic 1-year renewals unless either party gives 6-months' notice. Monthly Payments: Corporation receives $12,000 per month (see Schedule AB@ of Contract). Restrictions on Assignment: Prior written consent required. Breaches or Defaults: None. 2. Contract Stockholders' Agreement among Golden HillsBroadcasting, Inc. and its Stockholders, dated December 30, 1996. Term/Options/Renewals: N/A. Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 3. Contract: Third Amendment to the First Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C., among Walter F. Ulloa an individual, Philip C. Wilkinson, an individual, Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, KSMS-TV, Inc., Las Tres Palmas Corporation, Tierra Alta Broadcasting, Inc., Valley Channel 48, Inc., Edith Seros, Trustee of the Walter F. Ulloa Irrevocable Trust of 1996, Kevin Grenham and Steven G. Rowles, Co-Trustees of the Paul A. Zevnik Trust, Philip C. Wilkinson and Wendy K. Wilkinson, Trustees of The 1994 Wilkinson Children's Gift Trust dated September 30, 1994, Paul A. Zevnik, an individual, and Richard D. Norton, an individual. Term/Options/Renewals: N/A ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Monthly Payments: N/A. Restrictions on Assignment: N/A Breaches or Defaults: None. 4. Contract: That certain Network Affiliation Agreement between Golden Hills Broadcasting Corporation and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 KSMS-TV, Inc. - ------------- 1. Contract Stockholders' Agreement among KSMS-TV, Inc. and its Stockholders, dated December 30, 1996. Term/Options/Renewals: N/A Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's Securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 2. Contract That certain Network Affiliation Agreement between KSMS-TV, Inc., and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 Las Tres Palmas Corporation - --------------------------- 1. Contract: Lease between The Michael and Linda Nichols Trust, Ronald and Pamela Nichols, and the Bender Moore Trust and Las Tres Palmas Corporation dated October 1, 1995 Term/Options/Renewals: October 1, 1995 - September 1, 1996 Monthly Payments: $400 Restrictions on Assignment: Prior consent required. Breaches or Defaults: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 2. Contract Stockholders' Agreement among Las Tres Palmas Corporation and its Stockholders, dated December 30, 1996. Term/Options/Renewals: N/A Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's Securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 3. Contract That certain Network Affiliation Agreement between Las Tres Palmas Corporation and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 Los Cerezos Television Company - ------------------------------ 1. Contract Time Brokerage Agreement between Los Cerezos Television Company and AC Communications Corp. dated March 19, 1997 Term/Options/Renewals: March 31, 2000 Monthly Payments: $30,000.00 Restrictions on Assignment: Prior written consent required. Breaches or Defaults: None. 2. Contract Retransmission Consent and Private Licensing Agreement between Los Cerezos Television Company and Cable TV Arlington and Cable TV Montgomery dated June 24, 1998 Term/Options/Renewals: Perpetual, until receipt of 90-day notice Monthly Payments: Unspecified Restrictions on Assignment: Prior written consent required. Breaches or Defaults: None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 3. Contract Spanish Television Audience Research Purchase Agreement between Television Station WDMO and Strategy Research Corporation dated June 30, 1998 Term/Options/Renewals: June 1999 Monthly Payments: Four monthly payments of $650 - March through June 1999 Restrictions on Assignment: Unspecified. Breaches or Defaults: None. Tierra Alta Broadcasting, Inc. - ------------------------------ 1. Contract Stockholders' Agreement among Tierra Alta Broadcasting, Inc. and its Stockholders, dated December 30, 1996. Term/Options/Renewals: N/A Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's Securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 2. Contract That certain Network Affiliation Agreement between Tierra Alta Broadcasting, Inc., and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Valley Channel 48, Inc. - ----------------------- 1. Contract: Stockholders' Agreement among Valley Channel 48, Inc., and its Stockholders, dated January 23, 1997 Term/Options/Renewals: N/A Monthly Payments: N/A Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's Securities pursuant to terms thereof; provided that person acquiring such securities agrees to be bound to all terms thereof. Breaches or Defaults: None. 2. Contract: That certain Network Affiliation Agreement between Valley Channel 48, Inc., and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1997 3. Contract: Noncompetition Agreement with William B. Goldberg dated January 23, 1997 4. Contract: Noncompetition Agreement with Rosalie A. Goldberg dated January 23, 1997 5. Contract: Noncompetition Agreement with Larry E. Safir dated January 23, 1997 6. Contract: Noncompetition Agreement with L.S. Communications dated January 23, 1997 7. Contract That certain Network Affiliation Agreement between KSMS-TV, Inc., and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated December 30, 1996 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 8. Contract: Local Television Audience Measurement Service Agreement by and between KINT and A.C. Nielsen Company Term/Options/Renewals: May 1995 through April 1999 Monthly Payments: $3,675.13 Restrictions on Assignment: None stated. Breaches or Defaults: None. 9. Contract: Local Television Audience Measurement Service Agreement by and between KINT and Arbitron Term/Options/Renewals: April 1, 1997 through March 31, 2002 Monthly Payments: $48,000 Restrictions on Assignment: None stated. Breaches or Defaults: None. Telecorpus, Inc. - ---------------- 1. Contract: Stockholders' Agreement among Telecorpus, Inc. and its Shareholders, dated April 19, 1998. Term/Options/Renewals: N/A Monthly Payments: N/A. Restrictions on Assignment: Assignments permissible only in connection with a transfer of Corporation's Securities pursuant to terms thereof; provided that person acquiring such securities agree to be bound to all terms thereof. Breaches or Defaults: None. 2. Contract That certain Network Affiliation Agreement between Telecorpus, Inc., and Entravision Communications Company, L.L.C., and Univision Network Limited Partnership dated April 19, 1998. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.9 LICENSES AND AUTHORIZATIONS Entravision Holdings, LLC - ------------------------- FCC Licenses/Permits: 1. License Call Sign: KBNT-LP Frequency: Channel 19 Class: N/A Location: San Diego, CA File No.: BPTTL-930402XJ Issuance Date: October 20, 1995 Expiration Date: December 1, 1998 (Note: See Schedule 3.21 for information regarding pending displacement application and renewal application.) 2. License Call Sign: KCEC-TV Frequency: Channel 50 Class: N/A Location: Denver, CO File No.: BMPCT-901231KH Issuance Date: June 24, 1991 Expiration Date: April 1, 2006 3. License Call Sign: KGHB-LP Frequency: Channel 27 Class: N/A Location: Colorado Springs and Pueblo, CO File No.: BPTTL-931104JC Issuance Date: December 6, 1993 Expiration Date: April 1, 2006 (Note: See Schedule 3.21 for information regarding pending displacement application.) ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 4. License Call Sign: K43DK Frequency: Channel 43 Class: N/A Location: Denver, CO File No.: BPTTL-911112JN Issuance Date: January 30, 1992 Expiration Date: April 1, 2006 5. License Call Sign: KSMS-TV Frequency: Channel 67 Class: N/A Location: Monterey, CA File No.: BALCT-950911KE Issuance Date: December 12, 1995 Expiration Date: December 1, 1998 (Note: Application pending for renewal of license.) 6. License Call Sign: KVER-LP Frequency: Channel 4 Class: N/A Location: Indio, CA File No.: BLTVL-90082010 Issuance Date: October 26, 1990 Expiration Date: December 1, 1998 (Note: Application pending for renewal of license.) 7. License Call Sign: KLOB(FM) Frequency: 94.7 MHZ Class: N/A Location: Thousand Palms, CA File No.: BALL-950919GE Issuance Date: November 13, 1995 Expiration Date: December 1, 2005 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 8. Permit Call Sign: K05JY Frequency: Channel 5 Class: N/A Location: Indio, CA File No.: BPTVL-930402SS Issuance Date: September 24, 1996 Expiration Date: n/a (permit only) 9. Permit Call Sign: K28ET Frequency: Channel 28 Class: N/A Location: Palm Springs, CA File No.: BPTTL-940415MY Issuance Date: June 14, 1995 Expiration Date: n/a (permit only) 10. License Call Sign: KINC(TV) Frequency: Channel 15 Class: N/A Location: Las Vegas, NV File No.: BMPCT-950705KE Issuance Date: August 30, 1995 Expiration Date: October 1, 2005 11. License Call Sign: KNVO(TV) Frequency: Channel 48 Class: N/A Location: McAllen, TX File No.: BPCT-820315KI Issuance Date: October 9, 1983 Expiration Date: August 1, 2006 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 12. License Call Sign: KINT-TV Frequency: Channel 26 Class: N/A Location: El Paso, TX File No.: BPCT-800721KK Issuance Date: October 19, 1981 Expiration Date: August 1, 2006 13. License Call Sign: KSVE(AM) Frequency: 1650 KHz Class: B Location: El Paso, TX File No.: BL-930817AA Issuance Date: January 12, 1994 Expiration Date: August 1, 2005 (Note: See Schedule 3.21 for information regarding pending construction permit.) 14. License Call Sign: KINT-FM Frequency: 93.9 MHZ Class: C Location: El Paso, TX File No.: BPH-780829AJ Issuance Date: September 29, 1978 Expiration Date: August 1, 2005 15. License Call Sign: KLDO(TV) Frequency: Channel 27 Class: N/A Location: Laredo, TX File No.: BPCT-820614KI Issuance Date: May 18, 1983 Expiration Date: August 1, 2006 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 16. License Call Sign: K03EM (Temporary Call Sign K43FN, Fort Collins, CO) Frequency: Channel 3 Location: Glen Haven, CO File No.: BRTTV-820202IS Issuance Date: April 9, 1985 Expiration Date: April 1, 2006 (Note: Operating under special temporary authorization.) 17. License Call Sign: KORO(TV) Frequency: Channel 28 Class: N/A Location: Corpus Christi, TX File No.: BLCT-871029KF Issuance Date: November 30, 1987 Expiration Date: August 1, 2006 18. Permit Call Sign: KVYE(TV) Frequency: Channel 7 Class: N/A Location: El Centro, CA File No.: BPCT-870602KI Issuance Date: August 3, 1989 Expiration Date: n/a (permit only) 19. License Call Sign: WMDO-LP Frequency: Channel 48 Class: N/A Location Washington, D.C. File No.: BRTTL-980202CN Issuance Date: May 29, 1998 Expiration Date: September 30, 2004 ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. 20. License Call Sign: WVEN-LP Frequency: Channel 63 Class: N/A Location Florida - Orlando File No.: BLTTL-970616JC Issuance Date: July 10, 1997 Expiration Date: February 1, 2005 21. License Call Sign: WVEA-LP Frequency: Channel 61 Class: N/A Location Florida - Tampa File No.: BLTTL-980401RE Issuance Date: July 29, 1998 Expiration Date: February 1, 2005 22. Permit Call Sign: WVEA-LP Frequency: Channel 61 Class: N/A Location Florida - Tampa File No.: BLTTL-960517KH Issuance Date: December 12, 1997 Expiration Date: June 12, 1999 Entravision Midland Holdings, LLC - --------------------------------- 1. Permit Call Sign: KUPB(TV) Frequency: Channel 18 Class: N/A Location: Midland, TX File No.: BPCT-970331KR Issuance Date: June 22, 1998 Expiration Date: n/a (permit only) ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.10 TAXES AND ASSESSMENTS Cabrillo Broadcasting Corporation - --------------------------------- None. Entravision Communications Company, L.L.C. - ------------------------------------------ None. Golden Hills Broadcasting Corporation - ------------------------------------- None. KSMS-TV, Inc. - ------------- None. Las Tres Palmas Corporation - --------------------------- None. Telecorpus, Inc. - ---------------- None. Tierra Alta Broadcasting, Inc. - ------------------------------ None. Valley Channel 48, Inc. - ----------------------- None. Entravision Holdings, LLC - ------------------------- None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Entravision Communications of Midland, L.L.C. - --------------------------------------------- None. Entravision Midland Holdings, L.L.C. - ------------------------------------ None. Entravision-El Paso, L.L.C. - --------------------------- None. Entravision, L.L.C. - ------------------- None. Los Cerezos Television Company - ------------------------------ None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SECTION 3.11 MATERIAL LITIGATION None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.12 DEVIATIONS FROM GAAP Cabrillo Broadcasting Corporation - --------------------------------- None. Entravision Communications Company, L.L.C. - ------------------------------------------ None. Golden Hills Broadcasting Corporation - ------------------------------------- None. KSMS-TV, Inc. - ------------- None. Las Tres Palmas Corporation - --------------------------- None. Telecorpus, Inc. - ---------------- None. Tierra Alta Broadcasting, Inc. - ------------------------------ None. Valley Channel 48, Inc. - ----------------------- None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.18 FEES AND COMMISSIONS Cabrillo Broadcasting Corporation - --------------------------------- None. Golden Hills Broadcasting Corporation - ------------------------------------- None. KSMS-TV, Inc. - ------------- None. Las Tres Palmas Corporation - --------------------------- None. Tierra Alta Broadcasting, Inc. - ------------------------------ None. Entravision Communications Company, L.L.C. - ------------------------------------------ None. Telecorpus, Inc. - ---------------- None. Valley Channel 48, Inc. - ----------------------- None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Entravision Communications of Midland, L.L.C. - --------------------------------------------- None. Entravision Midland Holdings, L.L.C. - ------------------------------------ None. Entravision-El Paso, L.L.C. - --------------------------- None. Entravision, L.L.C. - ------------------- None. Los Cerezos Television Company - ------------------------------ None. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 3.21 PENDING FCC MATTERS Station KBNT-LP - --------------- Pending displacement application (File No. BPTTL-JG0601JA) requesting that Station's license be modified for operation on Channel 20. An application is pending for renewal of the Station's license. Station KGHB-LP - --------------- Pending displacement application (File No. BPTTL-JG0601VU) requesting that Station's license be modified for operation on Channel 55. Station KVYE(TV) - ---------------- Pending application (File No. BLCT-980602KG) for a license to cover the construction of the new Station. Station K03EM - ------------- Presently operates on a temporary basis as Station K43 FN, Fort Collins, Colorado. Station KVER-LP - --------------- Application pending for renewal of license. Station KSVE(AM) - ---------------- Construction permit (File No. BP-970616BL) for new expanded band AM radio station on 1650 kHz. Station KSMS-TV - --------------- Application pending for renewal of license. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. Station KUPB(TV) - ---------------- Entravision Midlands Holdings, LLC holds a construction permit (File No. BAPCT- 980817IA) to construct this new Station. Station K28ET - ------------- Application pending (File No. BPTT-980609JC) for extension of existing construction permit to build new Station. Station K05JY - ------------- Application pending (File No. BPTVL-980609JF) for extension of existing construction permit to build new Station. Station WVEN-LP - --------------- Application pending (File No. BPTTL-JG0601JQ) for minor changes in facilities to specify operation on Channel 16 in lieu of currently authorized Channel 63. Application pending for authorization in the microwave services for a new studio-to- transmitter link for Low Power Television Station WVEN-LP, Orlando, Florida. Station WVEA-LP - --------------- Application pending (File No. BMPTTL-JG0601MW) for minor changes in facilities to specify operation on Channel 36 in lieu of currently authorized Channel 61. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 6.2 PERMITTED ADDITIONAL INDEBTEDNESS 1. Golden Hills Broadcasting Corporation That certain Promissory Note dated October 16, 1996, in the principal amount of $360,366.38 payable to the order of Entravision Communications Company, L.L.C., with a stated interest rate of 5.625% per annum. 2. Entravision Communications, L.L.C. a. That certain Non-Negotiable Subordinated Note dated December 30, 1996, in the principal amount of $10,000,000 payable to the order of Univision Communications Inc., a Delaware corporation, with a stated interest rate of 7.01% per annum. b. That certain Promissory Note dated September 12, 1996, in the principal amount of $262,500, payable to the order of Henry F. Jojola, Mary C. Jojola and Steven C. Jojola, with a stated interest rate of 7% per annum. c. That certain Promissory Note dated March 6, 1998, in the principal amount of $350,000, payable to the order of La Paz Wireless Corporation, with a stated interest rate of 4.5% per annum. 3. Golden Hills Broadcasting That certain $50,000 Letter of Credit agreement with Union Bank issued in connection with that certain Douglas Emmette Los Angeles Studio lease. 4. Valley Channel 48, Inc. Co-lessee on Master Lease Agreement dated as of May 5, 1995, between Middle American Communications, Inc., and Tokai Financial Services. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. SCHEDULE 6.7 PERMITTED ADDITIONAL INVESTMENTS 1. That certain Promissory Note dated May 6, 1998, in the principal amount of $500,000.00 payable to the order of Entravision Communications Company, L.L.C., a Delaware limited liability company, from Manuel Alonso Munoz and Jorge Aolonso Coratella, jointly and severally, with a stated interest rate of 9.00% per annum. 2. That certain Promissory Note dated May 5, 1998, in the principal amount of $500,000.00 payable to the order of Entravision Communications Company, L.L.C., a Delaware limited liability company, from Imagenes NTE, S.A. de C.V., a Mexico corporation, with a stated interest rate of 9.00% per annum. 3. That certain Loan from Entravision Communications Company, L.L.C., a Delaware limited liability company, to Entravision Communications of Midland, L.L.C., a Delaware limited liability company for $2,575,000. ITEMS APPLICABLE TO MULTIPLE SCHEDULES WILL BE ONLY BE PROVIDED ON ONE SCHEDULE, AND SHOULD BE APPLIED TO ALL APPROPRIATE SCHEDULES. EX-10.7 6 0006.txt AMENDED AND RESTATED SECURITY AGREEMENT 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) UNION BANK CREDIT FACILITY LIST OF SCHEDULES AMENDED AND RESTATED SECURITY AGREEMENT --------------------------------------- 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. ------------------------------------------ ITEM ---- SCHEDULE A PLEDGED COLLATERAL SCHEDULE B LOCATIONS OF EQUIPMENT AND INVENTORY SCHEDULE C LOCATIONS OF BOOKS AND RECORDS FOR ALL BORROWERS SCHEDULE D DEPOSIT ACCOUNTS SCHEDULE E UCC FILING OFFICES SCHEDULE F FORM OF LIMITED LIABILITY COMPANY NOTICE SCHEDULE A PLEDGED COLLATERAL ------------------ A. KSMS-TV, INC. 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest -------------------------- --------------------- Entravision Communications .76% Company, L.L.C. B. TIERRA ALTA BROADCASTING, INC. 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest ------------------------- --------------------- Entravision Communications 8.99% Company, L.L.C. A-1 C. CABRILLO BROADCASTING CORPORATION 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest ---------------------------- --------------------- Entravision Communications 17.34% Company, L.L.C. D. GOLDEN HILLS BROADCASTING CORPORATION 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest ---------------------------- --------------------- Entravision Communications 7.22% Company, L.L.C. A-2 E. LAS TRES PALMAS CORPORATION 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest -------------------------- --------------------- Entravision Communications .71% Company, L.L.C. F. VALLEY CHANNEL 48, INC., Successor-By-Merger to ENTRAVISION MERGER CORP. 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Name of Limited Percentage Membership Liability Company Interest -------------------------- --------------------- Entravision Communications 34.91% Company, L.L.C. A-3 G. TELECORPUS, INC. 1. Pledged Securities None 2. Pledged Partnership Interests None 3. Pledged Limited Liability Company Interests Percentage Membership Name of Limited Liability Interest --------------------------------------- --------------------- Entravision Communications Company, L.L.C., 7.93% a Delaware limited liability company H. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. 1. Pledged Securities Name of Corporation Number of Shares --------------------------------------- --------------------- Los Cerezos Television Company, a Delaware 1,000 shares common corporation stock 2. Pledged Partnership Interests None A-4 3. Pledged Limited Liability Company Interests A-5 Percentage Membership Name of Limited Liability Company Interest - ----------------------------------------- ------------------------ Entravision Holdings, LLC, 99.999% a California limited liability company Entravision-El Paso, L.L.C., 100% a Delaware limited liability company Entravision, L.L.C., 100% a Delaware limited liability company Entravision Communications of Midland, L.L.C., 80% a Delaware limited liability company A-6 SCHEDULE B LOCATIONS OF EQUIPMENT AND INVENTORY ------------------------------------
ENTRAVISION: TIERRA ALTA: - ----------- ----------- Entravision Communications Co., L.L.C. KINC-TV, Channel 15 1190 Olympic Boulevard, Suite 590 500 Pilot Road, Suite D Los Angeles, California 90064 Las Vegas, Nevada 89119 KINT-TV, Channel 26 KSMS-TV: 5426 North Mesa ------- El Paso, Texas 79912 KSMS-TV, Channel 67 KLDO-TV, Channel 27 67 Garden Court 1600 Water Street, #C5 Monterey, California 93940 Laredo, Texas 78040 LAS TRES PALMAS: KVYE-TV, Channel 7 --------------- 200 South 5th Street El Centro, California 92243 KVER-TV, Channel 4 41601 Corporate Way WVEN-TV Palm Desert, California 92260 5135 Adanson Street, Suite 300 Orlando, Florida 32804-1353 VALLEY CHANNEL: -------------- WVEA-TV 2942 W. Columbus Drive, Suite 204 KNVO-TV, Channel 48 Tampa, Florida 33607 1800 South Main Street, Suite 850 McAllen, Texas 78503 CABRILLO: - -------- TELECORPUS: ---------- KBNT-TV, Channel 19 5770 Ruffin Road KORO-TV, Channel 28 San Diego, California 92123 102 North Mesquite Drive Corpus Christi, Texas 78403 GOLDEN HILLS: - ------------ KCEC-TV, Channel 50 777 Grant Street, #110 Denver, Colorado 80203
B-1 SCHEDULE C LOCATIONS OF BOOKS AND RECORDS FOR ALL BORROWERS ------------------------------------------------ 1. Chief Executive Office 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 2. Locations of Account Records, Material Contract and Chattel Paper 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 C-1 SCHEDULE D DEPOSIT ACCOUNTS ---------------- NAME AND ADDRESS OF INSTITUTION HOLDING ACCOUNT ACCOUNT NO. - ---------------------------------- ---------------- ENTRAVISION: - ----------- Union Bank of California, N.A. 0700494195 445 South Figueroa Street Los Angeles, California 90071 Union Bank of California, N.A. (for KVYE) 700492095 445 South Figueroa Street Los Angeles, California 90071 [Entravision Account in Florida Information to be provided] CABRILLO: - -------- Union Bank of California, N.A. (for KBNT) 700492001 445 South Figueroa Street Los Angeles, California 90071 D-1 NAME AND ADDRESS OF INSTITUTION HOLDING ACCOUNT ACCOUNT NO. - ---------------------------------- ---------------- LAS TRES PALMAS: - --------------- Union Bank of California, N.A. (for KVER) 700487105 445 South Figueroa Street Los Angeles, California 90071 VALLEY CHANNEL: - -------------- Texas State Bank (for KNVO) 114472 Post Office Box 4797 McAllen, Texas 78502 D-2 SCHEDULE E UCC FILING OFFICES ------------------ ENTRAVISION: - ----------- Secretary of State, California Secretary of State, District of Columbia Secretary of State, Florida Secretary of State, Maryland Secretary of State, Texas CABRILLO: - -------- Secretary of State, California GOLDEN HILLS: - ------------ Secretary of State, Colorado TIERRA ALTA: - ----------- Secretary of State, Nevada KSMS-TV: - ------- Secretary of State, California LAS TRES PALMAS: - --------------- Secretary of State, California VALLEY CHANNEL: - -------------- Secretary of State, Texas TELECORPUS: - ---------- Secretary of State, Texas E-1 SCHEDULE F FORM OF LIMITED LIABILITY COMPANY NOTICE ---------------------------------------- [Letterhead of Grantor] TO: [Name of Pledged Entity] Notice is hereby given that, pursuant to the Amended and Restated Security Agreement (a true and correct copy of which is attached hereto), dated as of _____________________, 1998 (as amended, modified, restated or supplemented from time to time in accordance with the terms thereof, the "Agreement"), between [NAME OF GRANTOR] (the "Grantor"), the other grantors from time to time party thereto and Union Bank of California, N.A., as Guarantor (the "Agent") on behalf of the lenders described therein, the Grantor has pledged and assigned to the Agent for the benefit of the Secured Party (as defined in the Agreement), and granted to the Agent for the benefit of the Secured Party a continuing security interest in, all right, title and interest of the Grantor, whether now existing or hereafter arising or acquired, as a member in [NAME OF PLEDGED ENTITY] (the "Limited Liability Company"), and in, to and under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] (the "Limited Liability Company Agreement"), as such security interest is more particularly described in the Agreement. Pursuant to the Agreement, the Limited Liability Company is hereby authorized and directed to register the Grantor's pledge to the Agent on behalf of the Secured Party of the interest of the Grantor on the Limited Liability Company's books. The Grantor hereby requests the Limited Liability Company to indicate the Limited Liability Company's acceptance of this Notice and consent to and confirmation of its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Agent on behalf of the Lender. [NAME OF GRANTOR] By:_________________________________________________ Title:______________________________________________ F-1 FORM OF ACKNOWLEDGMENT ---------------------- [NAME OF PLEDGED ENTITY] (the "Limited Liability Company") hereby acknowledges receipt of a copy of the assignment by [NAME OF GRANTOR] ("Grantor) of its interest under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] pursuant to the terms of the Amended and Restated Security Agreement, dated as of _________________, 1998, between Grantor, the other grantors from time to time party thereto, and Union Bank of California, N.A. (the "Agent") on behalf of the Secured Party described therein. The undersigned hereby further confirms the registration of the Grantor's pledge of its interest to the Agent on behalf of the Lenders on the Limited Liability Company's books. Dated: _________________, 1998 [NAME OF PLEDGED ENTITY] By:____________________________________________ Title:_________________________________________ F-2 EX-10.8 7 0007.txt 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 UNION BANK CREDIT FACILITY LIST OF SCHEDULES AMENDED AND RESTATED PLEDGE AGREEMENT ------------------------------------- ITEM ---- SCHEDULE A PLEDGED COLLATERAL SCHEDULE B UCC FILING OFFICES SCHEDULE C FORM OF LIMITED LIABILITY COMPANY NOTICE SCHEDULE D PRIOR PLEDGE AGREEMENTS SCHEDULE A PLEDGED COLLATERAL ------------------ A. Walter F. Ulloa 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- KSMS-TV, Inc. 3,000 Common Voting 30% Tierra Alta Broadcasting, Inc. 6,750 Class B Non-Voting 33.8% Convertible Common Cabrillo Broadcasting Corporation 481.9 Common 5.0% Golden Hills Broadcasting 2,100 Class A Voting 27.5% Corporation Common Las Tres Palmas Corporation 5,000 Common Voting 50% Telecorpus, Inc. 1,734 Common 17.34% Valley Channel 48, Inc. 3,454 Common 36.1%
2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC Membership Interest Uncertificated ----------- ------------------- -------------- Entravision Communications 225,139 Class C Units Uncertificated Company, L.L.C. Entravision Holdings, LLC 0.0005% Membership Uncertificated Interest
A-1 B. Philip C. Wilkinson 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- KSMS-TV, Inc. 3,000 Common Voting 30% Golden Hills Broadcasting 1,475 Class A Voting 19% Corporation Common
2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests
Name of LLC Membership Interest Uncertificated ----------- ------------------- -------------- Entravision Holdings, LLC 0.0005% Membership Uncertificated Interest
C. Paul A. Zevnik 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- KSMS-TV, Inc. 3,000 Common Voting 30% Tierra Alta Broadcasting, Inc. 6,750 Class B Non-Voting 33.8% Convertible Common Golden Hills Broadcasting 1,475 Class A Voting 19% Corporation Common Las Tres Palmas Corporation 5,000 Common Voting 50% Valley Channel 48, Inc. 1,466 Common 15.3%
A-2 2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 5,313 Class A Units Uncertificated Company, L.L.C. Entravision Communications 22,119 Class C Units Uncertificated Company, L.L.C. Entravision Communications 5,000 Class E Units Uncertificated Company, L.L.C. Entravision Communications 5,000 Class F Units Uncertificated Company, L.L.C.
D. Richard D. Norton 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- KSMS-TV, Inc. 1,000 Common Voting 10% Tierra Alta Broadcasting, Inc. 2,000 Class B Non-Voting 10% Convertible Common Golden Hills Broadcasting 1,000 Class A Voting 13% Corporation Common Telecorpus, Inc. 533 Common 5.33% Valley Channel 48, Inc. 509 Common 5.3%
2. Pledged Partnership Interests None. A-3 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 13,817 Class C Units Uncertificated Company, L.L.C.
E. Irma (Yrma) Rico 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Tierra Alta Broadcasting, Inc. 4,500 Class A Voting 22.5% Common Telecorpus, Inc. 372 Common 3.72% Valley Channel 48, Inc. 356 Common 3.7%
2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests None. F. The Paul A. Zevnik Trust 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Telecorpus, Inc. 1,533 Common 15.33%
2. Pledged Partnership Interests None. A-4 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 23,920 Class A Units Uncertificated Company, L.L.C.
G. The Walter F. Ulloa Trust of 1996 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Telecorpus, Inc. 1,880 Common 18.80%
2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 23,920 Class A Units Uncertificated Company, L.L.C.
H. The 1994 Wilkinson Children's Gift Trust 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Telecorpus, Inc. 1,880 18.8%
2. Pledged Partnership Interests None. A-5 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 23,920 Class A Units Uncertificated Company, L.L.C.
I. The Wilkinson Family Trust 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Cabrillo Broadcasting Corporation 8,000 Common 84.7% Telecorpus, Inc. 1,734 Common 17.34% Valley Channel 48, Inc. 3,454 Common 36.1%
2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests
Certificated/ Name of LLC % Membership Interest Uncertificated ----------- --------------------- -------------- Entravision Communications 25,131 Class C Units Uncertificated Company, L.L.C.
J. Carol K. Luery Revocable Trust UA Dated 7/27/98 1. Pledged Securities
% Interest Pledged Company No. Of Shares in Issuer --------------- ------------- --------- Telecorpus, Inc. 334 Common 3.34% Valley Channel 48, Inc. 319 Common 3.34%
A-6 2. Pledged Partnership Interests None. 3. Pledged Limited Liability Company Interests None. A-7 SCHEDULE B UCC FILING OFFICES ------------------ Pledgor UCC Filing Offices / Secretary of State Walter F. Ulloa California Philip C. Wilkinson California Paul A. Zevnik District of Columbia Richard D. Norton California Irma (Yrma) Rico Colorado The Paul A. Zevnik Trust Connecticut District of Columbia California The Walter F. Ulloa Trust California of 1996 The 1994 Wilkinson California Children's Gift Trust The Wilkinson Family Trust California Carol K. Luery Revocable California Trust UA Dated 7/27/98 B-1 SCHEDULE C FORM OF LIMITED LIABILITY COMPANY NOTICE ---------------------------------------- TO: [Name of Pledged Entity] Notice is hereby given that, pursuant to the Amended and Restated Pledge Agreement (a true and correct copy of which is attached hereto), dated as of _______________, 1998 (as amended, modified, restated or supplemented from time to time in accordance with the terms thereof, the "Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"), the other pledgors party thereto and Union Bank of California, N.A., as Agent (the "Agent") on behalf of the lenders described therein, the Pledgor has pledged and assigned to the Agent for the benefit of the Secured Party (as defined in the Agreement), and granted to the Agent for the benefit of the Secured Party a continuing security interest in, all right, title and interest of the Pledgor, whether now existing or hereafter arising or acquired, as a member in [NAME OF PLEDGED ENTITY] (the "Limited Liability Company"), and in, to and under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] (the "Limited Liability Company Agreement"), as such security interest is more particularly described in the Agreement. Pursuant to the Agreement, the Limited Liability Company is hereby authorized and directed to register the Pledgor's pledge to the Agent on behalf of the Secured Party of the interest of the Pledgor on the Limited Liability Company's books. The Pledgor hereby requests the Limited Liability Company to indicate the Limited Liability Company's acceptance of this Notice and consent to the confirmation of its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Agent on behalf of the Lender. [NAME OF PLEDGOR] By: ____________________________________ Title: _________________________________ C-1 FORM OF ACKNOWLEDGMENT ---------------------- [NAME OF PLEDGED ENTITY] (the "Limited Liability Company") hereby acknowledges receipt of a copy of the assignment by [NAME OF PLEDGOR] ("Pledgor") of its interest under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] pursuant to the terms of the Amended and Restated Pledge Agreement, dated as of October __, 1998, among Pledgor, the other pledgors party thereto and Union Bank of California, N.A. (the "Agent") on behalf of the Lendors described therein. The undersigned hereby further confirms the registration of the Pledgor's pledge of its interest to the Agent on behalf of the Lenders on the Limited Liability Company's books. Dated:______________, 1998 [NAME OF PLEDGED ENTITY] By: ____________________________________ Title: _________________________________ C-2 SCHEDULE D PRIOR PLEDGE AGREEMENTS ----------------------- 1. Pledge Agreement dated as of December 31, 1996 made by PHILIP C. WILKINSON in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 2. Pledge Agreement dated as of December 31, 1996 made by WALTER F. ULLOA in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 3. Pledge Agreement dated as of December 31, 1996 made by PAUL A. ZEVNIK in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 4. Pledge Agreement dated as of December 31, 1996 made by RICHARD D. NORTON in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 5. Pledge Agreement dated as of December 31, 1996 made by IRMA RICO in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 6. Pledge Agreement dated as of December 31, 1996 made by KEVIN GRENHAM and STEVEN G. ROWLES, Co-Trustees of THE PAUL A. ZEVNIK TRUST dated November 2, 1996 in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 7. Pledge Agreement dated as of December 31, 1996 made by EDITH SEROS, as Trustee of THE WALTER F. ULLOA IRREVOCABLE TRUST OF 1996 in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 8. Pledge Agreement dated as of December 31, 1996 made by PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustee of THE 1994 WILKINSON CHILDREN'S GIFT TRUST in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 9. Pledge Agreement dated as of December 31, 1996 made by PHILIP C. WILKINSON and WENDY K. WILKINSON, as Trustee of THE WILKINSON FAMILY TRUST in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 10. Pledge Agreement dated as of August 1, 1997 made by CAROL KRUIDENIER LUERY TTE, CAROL K. LUERY REVOCABLE TRUST UA DATED 7/27/89 in favor of UNION BANK OF CALIFORNIA, N.A., as Agent 11. Pledge Agreement dated as of April 21, 1998 made by TELECORPUS, INC. in favor of UNION BANK OF CALIFORNIA, N.A., as Agent D-1 EX-10.9 8 0008.txt TERM LOAN AGREEMENT DATED APRIL 20, 2000 EXHIBIT 10.9 ================================================================================ TERM LOAN AGREEMENT among LCG ACQUISITION CORPORATION, THE LENDERS PARTIES HERETO, THE BANK OF NOVA SCOTIA, as Syndication Agent, FLEET NATIONAL BANK, as Documentation Agent, and UNION BANK OF CALIFORNIA, N.A., as Agent Dated as of April 20, 2000 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- SECTION 1. DEFINITIONS.............................................................. 1 1.1 Defined Terms............................................................ 1 1.2 Other Definitional Provisions............................................ 15 SECTION 2. AMOUNT AND TERMS OF LOANS; COMMITMENT AMOUNTS............................ 16 2.1 Loans; Commitment Amounts................................................ 16 2.2 Optional Prepayments..................................................... 17 2.3 Mandatory Prepayments.................................................... 17 2.4 Conversion and Continuation Options...................................... 17 2.5 Minimum Amounts of Tranches.............................................. 18 2.6 Interest Rates and Payment Dates......................................... 18 2.7 Computation of Interest and Fees......................................... 19 2.8 Inability to Determine Interest Rate..................................... 19 2.9 Pro Rata Treatment and Payments.......................................... 19 2.10 Illegality............................................................... 20 2.11 Increased Costs.......................................................... 20 2.12 Taxes.................................................................... 21 2.13 Indemnity................................................................ 22 2.14 Mitigation of Costs...................................................... 23 SECTION 3. REPRESENTATIONS AND WARRANTIES........................................... 23 3.1 Organization and Good Standing........................................... 23 3.2 Power and Authority...................................................... 23 3.3 Validity and Legal Effect................................................ 23 3.4 No Violation of Laws or Agreements....................................... 23 3.5 Title to Assets; Existing Encumbrances; Intellectual and Real Property... 24 3.6 Capital Structure and Equity Ownership................................... 24 3.7 Subsidiaries, Affiliates and Investments................................. 24 3.8 Material Contracts....................................................... 24 3.9 Media Licenses........................................................... 25 3.10 Taxes and Assessments.................................................... 25 3.11 Litigation and Legal Proceedings......................................... 25 3.12 Accuracy of Financial Information........................................ 26 3.13 Accuracy of Other Information............................................ 26 3.14 Compliance with Laws Generally........................................... 26 3.15 ERISA Compliance......................................................... 26 3.16 Environmental Compliance................................................. 27 3.17 Federal Regulations...................................................... 28 3.18 Fees and Commissions..................................................... 28 3.19 Publishing Business...................................................... 28 3.20 Solvency................................................................. 28 3.21 FCC-Related Representations.............................................. 28 3.22 Investment Company Act; Other Regulations................................ 29
-i- 3.23 Copyright Act Requirements............................................... 29 3.24 Nature of Business....................................................... 29 3.25 Ranking of Loans......................................................... 30 3.26 Condemnation............................................................. 30 SECTION 4. CONDITIONS PRECEDENT..................................................... 30 4.1 Conditions to Closing Date............................................... 30 SECTION 5. AFFIRMATIVE COVENANTS.................................................... 34 5.1 Financial Statements..................................................... 34 5.2 Certificates; Other Information.......................................... 35 5.3 Payment of Obligations................................................... 37 5.4 Conduct of Business and Maintenance of Existence......................... 37 5.5 Maintenance of Property; Insurance....................................... 37 5.6 Inspection of Property; Books and Records; Discussions................... 38 5.7 Environmental Laws....................................................... 38 5.8 Use of Proceeds.......................................................... 39 5.9 Compliance With Laws, Etc................................................ 39 5.10 Media Licenses........................................................... 39 5.11 Guarantees, Etc.......................................................... 40 5.12 License Subsidiary....................................................... 40 5.13 Interest Rate Protection................................................. 40 5.14 Leases and Licenses...................................................... 40 5.15 Lease and License Approvals.............................................. 40 5.16 Notices.................................................................. 41 5.17 Additional Material Contracts and Media Licenses......................... 41 SECTION 6. NEGATIVE COVENANTS....................................................... 41 6.1 Financial Condition Covenants............................................ 41 6.2 Limitation on Indebtedness............................................... 42 6.3 Limitation on Liens...................................................... 42 6.4 Limitation on Fundamental Changes........................................ 43 6.5 Limitation on Sale of Assets............................................. 43 6.6 Limitation on Dividends.................................................. 43 6.7 Limitation on Investments, Loans and Advances............................ 44 6.8 Limitation on Modifications of Certain Documents and Instruments......... 44 6.9 Transactions with Affiliates............................................. 44 6.10 Fiscal Year.............................................................. 44 6.11 Lease Obligations........................................................ 44 6.12 Unfunded Liabilities..................................................... 45 6.13 Management Fees.......................................................... 45 6.14 Equity Offerings......................................................... 45 SECTION 7. EVENTS OF DEFAULT........................................................ 45 SECTION 8. THE AGENT................................................................ 50 8.1 Appointment.............................................................. 50
-ii- 8.2 Delegation of Duties..................................................... 50 8.3 Exculpatory Provisions................................................... 50 8.4 Reliance by the Agent.................................................... 50 8.5 Notice of Default........................................................ 51 8.6 Non-Reliance on the Agent and Other Lenders.............................. 51 8.7 Indemnification.......................................................... 52 8.8 The Agent in Its Individual Capacity..................................... 52 8.9 Successor Agent.......................................................... 52 SECTION 9. MISCELLANEOUS............................................................ 52 9.1 Amendments and Waivers................................................... 52 9.2 Notices.................................................................. 53 9.3 No Waiver; Cumulative Remedies........................................... 54 9.4 Survival of Representations and Warranties............................... 54 9.5 Payment of Expenses and Taxes............................................ 55 9.6 Successors and Assigns; Participations; Purchasing Lenders............... 55 9.7 Adjustments; Set-Off..................................................... 58 9.8 Counterparts............................................................. 59 9.9 Severability............................................................. 59 9.10 Integration.............................................................. 59 9.11 GOVERNING LAW............................................................ 59 9.12 Alternative Dispute Resolution........................................... 59 9.13 Acknowledgements......................................................... 60 9.14 Headings................................................................. 61 9.15 Copies of Certificates, Etc.............................................. 61 9.16 Publicity................................................................ 61 9.17 Confidentiality.......................................................... 61
-iii- TERM LOAN AGREEMENT ------------------- THIS TERM LOAN AGREEMENT, dated as of April 20, 2000, among (1) LCG ACQUISITION CORPORATION, a Delaware corporation ("LCGAC"), (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. LCGAC, a direct wholly-owned subsidiary of Entravision Communications Company, L.L.C., a Delaware limited liability company ("Entravision"), was ----------- organized by Entravision to acquire Latin Communications Group Inc., a Delaware corporation ("LCG"). --- B. Pursuant to the Agreement and Plan of Merger dated December 21, 1999 among Entravision, LCGAC, LCG and certain other parties (the "Merger ------ Agreement"), LCGAC will merge with and into LCG (the "Merger"), and LCG will be - --------- ------ the surviving corporation. C. LCGAC has requested that, simultaneously with the consummation of the Merger, the Lenders lend to the Borrower (i) $105,000,000 to pay a portion of the aggregate consideration to be paid by LCGAC in the Merger for outstanding shares of LCG and (ii) $10,000,000 to pay a portion of the interest accruing hereunder. The Lenders have indicated their willingness to agree to lend such amounts on the terms and conditions of this Agreement. 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 Borrower and satisfactory to the Agent. "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. "Agent": as defined in the preamble hereto. ----- "Aggregate Commitment": the sum of the 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 Term Loan Agreement, as amended, waived, supplemented or --------- otherwise modified from time to time. "Applicable Lending Office": for any Lender, its offices for LIBOR Loans ------------------------- and Base Rate Loans specified below its signature on the signature pages hereof or in the Assignment and Acceptance pursuant to which it becomes a party hereto, as the case may be, any of which offices may, upon 10 days' prior written notice to the Agent and the Borrower, be changed by such Lender. "Applicable Margin": for each LIBOR Loan and for each Base Rate Loan as set ----------------- forth below:
Period LIBOR Margin Base Rate Margin ------ ------------ ---------------- Closing Date to and including August 17, 2000 4.00% 3.00% August 18, 2000 to and including October 16, 2000 4.25% 3.25% October 17, 2000 and thereafter 4.50% 3.50%
; provided, however, that if the Entravision IPO is not consummated prior to -------- ------- September 30, 2000, each percentage listed in the table above shall automatically increase by 0.25%, effective with respect to all interest accruing on or after September 30, 2000. "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 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 Borrower or any of its Subsidiaries to any Person or Persons other than to the Borrower or any of its 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 B to this Agreement. -2- "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 that 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": that portion of the Loans the rate of interest --------------- applicable to which is based upon the Base Rate. "Borrower": prior to the Merger, LCGAC, and, from and after the Merger, --------- LCG, as surviving corporation. "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. "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 Income Taxes": cash income taxes paid by the Borrower and its ----------------- Subsidiaries during the fiscal quarter most recently ended and the immediately preceding three fiscal quarters. "Change in Control": either ----------------- (a) Entravision shall no longer be the owner of all of the Capital Stock of the Borrower; or -3- (b) (i) Walter F. Ulloa and Philip C. Wilkinson cease collectively to have, directly or indirectly, Voting Control of Entravision; or (ii) So long as Entravision is a limited liability company, Walter F. Ulloa and Philip C. Wilkinson cease to (A) be the Managing Members thereof, (B) have the veto rights with regard to decisions of the Executive Committee set forth in Section 16(a)(i) of the Operating Agreement and (C) 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. ---- "Collateral": all of the property (tangible or intangible) purported to be ---------- subject to the lien or security interest purported to be created by any security agreement, pledge agreement, assignment or other security document heretofore or hereafter executed by the Borrower as security for all or part of the Obligations. "Collateral Documents": 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 executed by the Borrower encumbering the Collateral or evidencing or perfecting a security interest therein for the benefit of the Lenders. "Commitment Percentage": with respect to each Lender, the percentage --------------------- equivalent of the ratio which such Lender's Commitment bears to the Aggregate Commitment, as such Lender's Commitment and the Aggregate Commitment may be adjusted from time to time pursuant to the terms hereof, or, following termination of the Aggregate Commitment, the percentage equivalent of the ratio which such Lender's outstanding principal balance of Loans bear to the principal balance of all Loans outstanding, excluding from such calculation Lenders which have failed or refused to fund a Loan when required to do so. "Commitments": as to any Lender, the amount listed as its "Commitment" on ----------- the signature pages hereto to make a term loan hereunder through its Applicable Lending Office, as the same shall be adjusted from time to time pursuant to this Agreement. "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, regulations and policies issued thereunder, as from time to time in effect. "Continuation Notice": a request for continuation or conversion of a Loan ------------------- as set forth in Section 2.4, substantially in the form of Exhibit E. -4- "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. "Corporate Overhead": for any period, all general and administrative ------------------ expenses of the Borrower and its Subsidiaries for such period not solely attributable to an individual Station or group of Stations or publication. 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 the Borrower, the salaries of its officers, lease expenses for its headquarters office and the legal and accounting expenses relating to the Borrower, and not relating solely to any Station, group of Stations or publication. "Covenant Compliance Certificate": a certificate of the Chief Financial ------------------------------- Officer of the Borrower substantially in the form of Exhibit D 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. ------- - "Entravision": as defined in Recital A hereto. ----------- "Entravision Credit Agreement": 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 Second Amendment to Amended and Restated Credit Agreement dated as of January 14, 2000, and the Third Amendment to Amended and Restated Credit Agreement dated as of April 20, 2000, and as it may be further amended, waived, supplemented or otherwise modified from time to time, among (1) KSMS-TV, Inc., Tierra Alta Broadcasting, Inc., Cabrillo Broadcasting Corporation, Golden Hills Broadcasting Corporation, Las Tres Palmas Corporation, Valley Channel 48, Inc., Telecorpus, Inc. and Entravision, (2) the lenders parties thereto and (3) Union Bank of California, N.A., as agent for such lenders. "Entravision IPO": the initial public offering of equity interests in --------------- Entravision Communications Corporation, a Delaware corporation wholly owned by Entravision. "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 the Entravision Media Licenses. "Entravision 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 Entravision or any of its Subsidiaries (other than the Borrower and its Subsidiaries). -5- "Entravision 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 Entravision or any of its Subsidiaries (other than the Borrower and its Subsidiaries). "Environmental Control Statutes": as defined in Section 3.16. ------------------------------ "Equity Offering": the sale or issuance (or reissuance) by the Borrower or --------------- any 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 the Borrower or any Subsidiary either (a) between the Borrower or any Subsidiary and any holder or prospective holder of any equity interest of the Borrower or any Subsidiary (including interests convertible into such equity) or (b) otherwise between any two or more such holders of equity interests. "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. "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. "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 2.12(b). "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. "Final Order": 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 -6- 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. "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 Borrower 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 Borrower in good faith. "Guarantees": the guarantees made by each of the Guarantors (which ---------- guarantees shall be nonrecourse except for any executed by a Subsidiary of the Borrower), 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 Entravision Credit Agreement, as the same may be amended or modified from time to time in accordance with the terms hereof. -7- "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 security agreement, pledge agreement, assignment or other security document heretofore or 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 executed by any Guarantor encumbering the Guarantor Collateral or evidencing or perfecting a security interest therein in favor of the Agent for the benefit of the Lenders. "Guarantor Security Agreements": each security agreement (which, in the ----------------------------- case of Walter F. Ulloa and Philip C. Wilkinson, shall be only with respect to their equity interests in the Entravision License Subsidiary), in form and substance substantially identical to those executed in connection with the Entravision Credit Agreement, made by each Guarantor 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. "Guarantors": (i) each Subsidiary of the Borrower, (ii) Walter F. Ulloa, ---------- (iii) Philip C. Wilkinson, (iv) Entravision and (v) each Subsidiary of Entravision other than the Borrower, including but not limited to the Entravision License Subsidiary. "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 that is evidenced by a note, bond, debenture or similar instrument, (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 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 (f) 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. --------------------- "Intercreditor Agreement": the Intercreditor Agreement, in form and ----------------------- substance satisfactory to the Agent and the Lenders, between the Agent, on behalf of the Lenders, and the -8- "Agent" under the Entravision Credit Agreement, on behalf of the lenders thereunder, as amended, waived, supplemented or otherwise modified from time to time. "Interest Expense": for any specified period ended as of any specified ---------------- date, (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 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 Borrower in its 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 Borrower 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 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 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 Maturity Date shall end on the Maturity Date; (iii) any Interest Period 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 Borrower shall select Interest Periods so as not to require a payment or prepayment of any LIBOR Loan during an Interest Period. -9- "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 the Borrower is a party or a beneficiary. "Interest Reserve Account": a bank account to be established and ------------------------ maintained at Union Bank of California, N.A., Los Angeles, under the control of the Agent, for the purpose of holding certain Loan proceeds to be used to pay interest on the Loans until the funds in such account are exhausted or, if earlier, the Obligations have been paid in full. "Investment Company Act": as defined in Section 3.22. ---------------------- "LCGAC": as defined in the preamble hereto. ----- "LCG License Subsidiary": LCG Holdings, L.L.C., a Delaware limited ---------------------- liability company, which is wholly-owned by the Borrower and was formed solely for the purpose of holding Media Licenses and FCC files and records with respect 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 Borrower has 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. "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": that portion of the 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 System or other Governmental Authority having jurisdiction with respect thereto) dealing with -10- 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. "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" and "Loans": collectively, each term loan made under Section ---- ----- 2.1(a). "Loan Documents": this Agreement, the Notes, the Collateral Documents, the -------------- Guarantor Collateral Documents, the Intercreditor Agreement, the Guarantees, any Interest Rate Agreements, and the closing side letter referred to in Section 4.1(g) 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. "Majority Lenders": Lenders having Commitments equal to or more than 51% ---------------- of the Aggregate Commitment, or, following the termination of the Aggregate Commitment, Lenders with outstanding Loans having an unpaid principal balance equal to or more than 51% of the unpaid principal balance of all Loans outstanding, excluding from such calculation Lenders which have failed or refused to fund a Loan when required to do so. "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 the Borrower and its Subsidiaries (taken as a whole) or Entravision and its Subsidiaries (other than the Borrower and its Subsidiaries), taken as a whole, (b) the ability of the Borrower and its Subsidiaries (taken as a whole) or Entravision and its Subsidiaries (other than the Borrower 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. ------------------ "Maturity Date": the earlier of (i) April 18, 2001 or such earlier date as ------------- the Loans shall mature (whether by acceleration or otherwise) and (ii) consummation of the Entravision IPO. "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 radio broadcasting operations of the Borrower or any Subsidiaries. -11- "Merger": as defined in the Recitals hereto. ------ "Merger Agreement": as defined in the Recitals hereto. ---------------- "Multiemployer Plan": a plan which is a multiemployer plan as defined in ------------------ Section 4001(a)(3) of ERISA. "Net Income": for the Borrower and its Subsidiaries on a consolidated ---------- basis, net income as determined in accordance with GAAP. "Non-Compete Agreements": all agreements pursuant to which the Borrower or ---------------------- any Subsidiary has agreed to make payments (whether in cash or in kind) to another Person for the agreement of such Person not to compete with the Borrower or such Subsidiary in a given area. "Note": as defined in Section 2.1(c). ---- "Obligations": the unpaid principal of and interest on (including, without ----------- limitation, interest accruing after the maturity of the 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 Borrower, 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, all obligations of the Borrower 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 Borrower 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, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, 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 Borrower pursuant to the terms of this Agreement) or otherwise. "Obligor": the Borrower, LCG, each Subsidiary, each Guarantor and any ------- other Person (other than a Lender) obligated under any Loan Document. "Occupancy Agreements": as defined in Section 5.14. -------------------- "Operating Cash Flow": for any specified period ended as of any specified ------------------- date, Net Income after eliminating extraordinary gains and losses, plus (i) ---- provisions for taxes, (ii) depreciation and amortization, (iii) Interest Expense, (iv) permitted termination payments owing by the Borrower resulting from early termination of a time brokerage agreement, local marketing agreement or similar agreement, (v) operating losses from Stations KVBC-FM and KRNV-FM, to the extent that such losses are incurred during the first twelve months of such Stations being on the air, and (vi) other non-cash charges, all to the extent deducted from the computation of Net Income, but after deducting, without duplication, (A) non-cash revenues and (B) Corporate Overhead, all to the extent included in the calculation of Net Income. -12- "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). "Program Services Agreements": any local marketing agreement, time --------------------------- brokerage agreement, program services agreement or similar agreement providing for the 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. "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, by the Borrower and its Subsidiaries. "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. -13- "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. "Security Agreement": the Security Agreement in form and substance ------------------ reasonably satisfactory to the Majority Lenders, made by the Borrower in favor of the Agent, for the benefit of the Lenders, in respect of the tangible and intangible personal property of the Borrower described therein, as the same may be amended from time to time in accordance with the terms hereof. "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 now or hereafter owned, leased or operated by ------- the Borrower or any of its Subsidiaries. "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 Borrower. "Taxes": as defined in Section 2.12(a). ----- -14- "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 Capitalized Lease Obligations) of the Borrower and its Subsidiaries. "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 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. "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. -15- (e) For the purpose of determining financial covenant compliance hereunder for any period, 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; COMMITMENT AMOUNTS 2.1 Loans; Commitment Amounts. ------------------------- (a) Subject to the terms and conditions hereof, each Lender severally agrees to make a term loan through its Applicable Lending Office to the Borrower on the Closing Date in accordance with the provisions of this Agreement in an aggregate principal amount equal to the amount of the Commitment of such Lender. After the making of such Loans, each Commitment, and the Aggregate Commitment, shall terminate. (b) Subject to Sections 2.8 and 2.10, the Loans may from time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Agent in accordance with either Section 2.1(d) or 2.4. Each Lender may make or maintain its Loan to the Borrower by or through any Applicable Lending Office. (c) The Loan made by each Lender to the Borrower shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A (a "Note"), with appropriate insertions therein as to payee, date and principal ---- amount, payable to the order of such Lender and representing the obligations of the Borrower to pay the aggregate unpaid principal amount of the Loan made by such Lender to the Borrower in accordance with the terms of this Agreement, with interest thereon as prescribed in Sections 2.6 and 2.7. Each Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Loan made to the Borrower, 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 Lender, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The - ----- ----- failure of any Lender to make any such recordation or notation in the books and records of the Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrower hereunder or under the Notes. Each Note shall (i) be dated the Closing Date, (ii) provide for the payment of interest in accordance with Sections 2.6 and 2.7 and (iii) be stated to be payable on the Maturity Date. (d) The Borrower 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, or if all or any part of the Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to, the Closing Date) requesting that the Lenders make the Loans in accordance with their respective Commitments on the Closing Date and specifying (i) subject to Section 2.1(b), whether the Loans are to be LIBOR Loans, Base Rate Loans or a combination thereof and (ii) if the Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Upon receipt of such notice, the Agent shall promptly notify each Lender thereof. Not later than 12:00 noon, Los Angeles time on the Closing Date, each Lender shall make available to the Agent at its office -16- specified in Section 9.2 the amount of such Lender's Commitment in immediately available funds. The Agent may, in the absence of notification from any Lender that such Lender has not made its pro rata share available to the Agent, on such date, credit the account of the Borrower on the books of such office of the Agent with the aggregate amount of Loans. (e) All outstanding Loans shall be due and payable, to the extent not previously paid in accordance with the terms hereof, on the Maturity Date. (f) Neither the Agent nor any Lender shall be responsible for the obligation or Commitment of any other Lender hereunder, nor will the failure of any Lender to comply with the terms of this Agreement relieve any other Lender or the Borrower of its obligations under this Agreement and the Notes. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.2 Optional Prepayments. The Borrower 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 Borrower 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. Amounts prepaid may not be reborrowed. Upon receipt of any such notice from the Borrower, 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 Borrower 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. 2.3 Mandatory Prepayments. --------------------- (a) If the Borrower or any of its Subsidiaries receives insurance proceeds or condemnation proceeds with respect to any of their Properties that 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 Borrower shall, on such 90th day prepay the Loans in an amount equal to the amount of such proceeds not so applied. (b) Each prepayment of the Loans pursuant to this Section 2.3 shall be accompanied by payment in full of all accrued interest to and including the date of such prepayment, together with any additional amounts owing pursuant to Section 2.13. 2.4 Conversion and Continuation Options. ----------------------------------- (a) The Borrower may elect from time to time to convert LIBOR Loans to Base Rate Loans, by the Borrower 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 -17- Borrower may elect from time to time to convert Base Rate Loans to LIBOR Loans by the Borrower 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 2.5 shall not have been contravened, (ii) no Loan may be converted into a LIBOR Loan after the date that is one month prior to the Maturity Date and (iii) the Borrower 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 Borrower 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 2.5 would be contravened, (ii) after the date that is one month prior to the Maturity Date or (iii) if a Default shall have occurred and be continuing and provided, further, that if the -------- ------- Borrower 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. 2.5 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 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. 2.6 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 Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable 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. -18- (e) If and so long as funds are available in the Interest Reserve Account, the Agent shall deduct funds from the Interest Reserve Account, and shall distribute such funds pro rata to the Lenders, to pay interest due and payable on the Loans. 2.7 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 and all other Obligations of the Borrower 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 Borrower 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 Borrower 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 Borrower and the Lenders in the absence of manifest error. 2.8 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 Borrower 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 Lenders) of making or maintaining their affected Loans during such Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Borrower 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 Borrower have the right to convert Base Rate Loans to LIBOR Loans. 2.9 Pro Rata Treatment and Payments. The borrowing by the Borrower from ------------------------------- the Lenders hereunder shall be made pro rata according to the respective Commitment Percentages of the applicable Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective -19- outstanding principal and interest amounts of the Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower 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. 2.10 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 Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.13. To the extent that a Lender's LIBOR Loans have been converted to Base Rate Loans pursuant to this Section 2.10, 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. 2.11 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 -20- 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 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 to reduce any amount receivable hereunder in respect thereof then, in any such case, the Borrower shall immediately pay to the Agent, on behalf of such Lender or Applicable Lending Office, as applicable, upon the request of such Lender any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender or any Applicable Lending Office becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower, 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 such Lender or Applicable Lending Office, through the Agent, to the Borrower shall be conclusive evidence of the accuracy of the information so recorded, absent manifest error. The obligations of the Borrower under this Section 2.11(a) shall survive the termination of this Agreement and the payment of the Loans, 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 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 Lender, the Borrower 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. The obligations of the Borrower under this Section 2.11(b) shall survive the termination of this Agreement and the payment of the Loans, the Notes and all other amounts payable hereunder. 2.12 Taxes. ----- (a) All payments made by the Borrower 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 -21- 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 Borrower 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 Borrower, as promptly as possible thereafter, the Borrower 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 Borrower showing payment thereof or such other evidence of payment reasonably satisfactory to the Agent. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower 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 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 Borrower and the Agent (i) two duly completed copies of United States Internal Revenue Service Form W-9, W-8BEN or W-8ECI (as applicable to it) or successor applicable form. Each such Lender also agrees to deliver to the Borrower and the Agent two further copies of the said Form W-9, W-8BEN or W-8ECI (as applicable to it), 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 Borrower and the Agent, and such extensions or renewals thereof as may reasonably be requested by the Borrower 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 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 Borrower and the Agent. Each such Lender shall certify pursuant to such Forms that it is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. 2.13 Indemnity. The Borrower agrees 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 Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (d) the making by the Borrower of a prepayment or conversion of LIBOR -22- 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. 2.14 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 Borrower under Section 2.8, 2.10, 2.11, or 2.12, 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, the Borrower hereby represents and warrants to the Agent and each Lender, such representations to be given, with respect to the Closing Date, both before and after the consummation of the Merger, that: 3.1 Organization and Good Standing. The 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. Each state and jurisdiction in which the 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. The Borrower has all requisite power and ------------------- authority under applicable law and under its Organic Documents to consummate the Merger and to borrow hereunder. The 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 the Borrower and each Subsidiary to execute, deliver and perform the Loan Documents to which it is a party and for the Borrower to consummate the Merger have been taken and/or received. Except as provided in Section 4.1(r)(i), all applicable waiting periods in connection with the Merger and the other transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the Merger or the rights of the Borrower of its Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them. 3.3 Validity and Legal Effect. This Agreement constitutes, and the other ------------------------- Loan Documents to which the Borrower or any Subsidiary is a party, constitute (or will constitute when executed and delivered), the legal, valid and binding obligations of the Borrower 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 -23- result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which the Borrower, any Subsidiary or any of its respective properties 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 the Borrower or any Subsidiary, whether such properties are now owned or hereafter acquired. 3.5 Title to Assets; Existing Encumbrances; Intellectual and Real ------------------------------------------------------------- Property. The 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 the Borrower or any Subsidiary (the "Intellectual Property"). To the Borrower's 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 does the Borrower know of any valid basis for any such claim. To the Borrower's knowledge, the use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, nor, to the Borrower's knowledge, does the use by other Persons of such Intellectual Property infringe on the rights of the Borrower and its Subsidiaries. Schedule 3.5B hereto lists each real property interest and license owned, leased or otherwise used by the 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 the Borrower is titled in the current legal name of the Borrower. Each such property and asset owned by any Subsidiary is titled in the current legal name of such Subsidiary. The Borrower has not, and no Subsidiary has, used (or permitted the filing of any financing statement under) any legal or operating name at 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 the Borrower (whether existing as common or preferred stock 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. There are no Equityholder Agreements with respect to the Borrower or any Subsidiary. 3.7 Subsidiaries, Affiliates and Investments. Schedule 3.7 hereto ---------------------------------------- accurately and completely discloses (a) each Subsidiary and Affiliate of the Borrower (other than its officers and directors) and (b) each investment in or loan to any other Person by the Borrower or any Subsidiary. 3.8 Material Contracts. Schedule 3.8 hereto accurately and completely ------------------ discloses each contract and agreement material to the financial condition or operation of the Borrower or any Subsidiary (each, a "Material Contract," and ----------------- collectively, the "Material Contracts"). The Borrower has not, and no Subsidiary ------------------ has, committed any unwaived breach or default under any -24- Material Contract, and the Borrower has no knowledge or reason to believe that any other party to any Material Contract has or might have committed any unwaived breach or default thereof. Each of the Material Contracts is a legal, valid and binding obligation of the 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. 3.9 Media Licenses. The Borrower and each Subsidiary have obtained, and -------------- are holding through the Entravision License Subsidiary or the LCG License Subsidiary, all Media Licenses necessary or required in the conduct of their respective businesses and/or the operation of their respective properties. Each Media License is valid, binding and enforceable on, against and by the 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 the 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 such Media License. With respect to each FCC license listed on Schedule 3.9 hereto, the description shall include, 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, --------------------- the 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. The Borrower has no 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 the 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 Borrower or its Subsidiaries by any political subdivision or taxing authority due or payable either on or by virtue of the execution and delivery by the Borrower, the Agent, or the Lenders of this Agreement or any other Loan Document to which the Borrower or its Subsidiaries are party, or on any payment to be made by the Borrower 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 the Borrower's knowledge and information after due inquiry, threatened, except as set forth in the following clauses (i) and (ii), (i) against the Borrower, any Subsidiary or any Property that, if adversely resolved, could have a Material Adverse Effect, (ii) with respect to any Loan Document or the transactions contemplated thereby or (iii) with respect to the legality, validity or enforceability of the Merger. -25- 3.12 Accuracy of Financial Information. --------------------------------- (a) All information previously furnished to the Agent and the Lenders concerning the financial condition and operations of LCGAC and LCG, including (i) a balance sheet of LCGAC dated the Closing Date showing no assets or liabilities of LCGAC and (ii) the audited consolidated and consolidating financial statements of LCG as of December 31, 1999, (A) have been prepared in accordance with GAAP consistently applied, (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 LCGAC and LCG, respectively. (b) (i) With respect to the balance sheet delivered pursuant to Section 3.12(a), since the Closing Date there has been no event or condition resulting in a Material Adverse Effect and (ii) with respect to the audited financial statements delivered pursuant to Section 3.12(a), since December 31, 1999 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 by the 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 the Borrower or any other Person on behalf of the 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 Borrower 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. The 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) The 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 Borrower, any Subsidiary or any ERISA Affiliate thereof maintains or contributes to (or has maintained or contributed to) any Multiemployer Plan under which the Borrower, any Subsidiary or any ERISA Affiliate thereof could have any withdrawal liability. (c) None of the Borrower, 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. -26- (d) The liability for accrued benefits under each defined benefit pension plan that will be sponsored or maintained by the 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 the 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 the 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 the Borrower or any Subsidiary is associated. 3.16 Environmental Compliance. ------------------------ (a) The 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) The Borrower has not, and no 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 the Borrower or such Subsidiary or (ii) otherwise in connection with the conduct of its business and operations. (c) The Borrower has not, and no 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 Borrower, threatened, under any Environmental Control Statute to which -27- the Borrower or any of its 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 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 Borrower or any Subsidiary, the Borrower 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 the letter referred to in Section 4.1(g), the Borrower does not and will not owe, and no Subsidiary owes or will owe, any fees or commissions of any kind in connection with this Agreement or the transactions contemplated hereby, and the Borrower does not know of any claim (or any basis for any claim) for any fees or commissions in connection with this Agreement or such transactions. 3.19 Publishing Business. The Borrower and each Subsidiary possess all ------------------- licenses necessary or required in the conduct of its publishing businesses and/or the operation of its properties used in connection with such businesses. Each license is valid, binding and enforceable on, against and by the Borrower or such Subsidiary, as applicable. Each license is subsisting without any defaults thereunder or enforceable adverse limitations thereon, and no such license is subject to any proceedings or claims opposing the issuance, renewal, development or use thereof or contesting the validity thereof. Each publication owned or operated by the Borrower or any Subsidiary is listed on Schedule 3.19. 3.20 Solvency. Immediately prior to and upon the execution of this -------- Agreement and the funding of the Loans on the Closing Date, the Borrower and each Guarantor was, is and will be Solvent. 3.21 FCC-Related Representations. Without limiting the generality of the --------------------------- foregoing representations and warranties, the 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 the Borrower or any Subsidiary for any Media License or by the Entravision License Subsidiary for any Entravision Media License, including any renewal of any Media License or Entravision Media License, (ii) to the best of the Borrower's knowledge, material complaint to the FCC regarding the Borrower, any Subsidiary, the Entravision License Subsidiary, any Media License or any Entravision Media License, (iii) litigation, investigation or other inquiry by or before the FCC involving the Borrower, any Subsidiary, the Entravision License Subsidiary, any Media License or any Entravision Media License, or (iv) FCC enforcement proceeding against the Borrower, any Subsidiary, the Entravision License -28- Subsidiary, any Media License or any Entravision 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 the 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 the Borrower after due inquiry, threatened) that could materially and adversely affect the operations or financial condition of the Borrower, any Subsidiary or any Station. After due inquiry, the Borrower does not know of any reason why the FCC would not routinely grant, for a full term and without condition, the application by the Borrower , any Subsidiary or the Entravision License Subsidiary, as applicable, for the renewal of each Media License and Entravision 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, the Borrower does not know 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 the 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). 3.22 Investment Company Act; Other Regulations. The Borrower is not, and ----------------------------------------- no Subsidiary 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. The 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. The Borrower is not, and no Subsidiary is, ------------------ engaged in any material business other than the ownership and operation of Spanish-language radio stations, a Spanish-language radio network, Spanish- language newspapers and other Spanish-language print publications. -29- 3.25 Ranking of Loans. This Agreement and the other Loan Documents to ---------------- which the Borrower is party, when executed, and the Loans, when borrowed are and will be the direct and general obligations of the Borrower. The Borrower's obligations hereunder and thereunder rank and will rank at least pari passu in ---- ----- priority of payment to all other Indebtedness of the Borrower and its Subsidiaries. 3.26 Condemnation. To the Borrower's 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 Borrower, 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 is subject to the satisfaction, immediately prior to or concurrently with the making of such Loans on the Closing Date, of the following conditions precedent: (a) Merger. (i) The Merger shall have been consummated in accordance with ------ the terms of the Merger Agreement, without any waiver or amendment not consented to by the Agent, and the Agent shall have received a certificate of a Responsible Officer of the Borrower to the effect that all material transactions contemplated by the Merger Agreement to be consummated on or prior to the Closing Date have been consummated without any such waiver or amendment; (ii) The Agent shall have received a copy of the certificate of merger filed with the Delaware Secretary of State evidencing the consummation of the Merger; (iii) The Agent shall have received evidence, in form and substance satisfactory to the Agent, that Entravision has made an equity investment in the Borrower, on terms and conditions satisfactory to the Agent, in the amount of at least $145,000,000; (iv) The Agent shall have received a copy of the Merger Agreement (including the Disclosure Schedules thereto), along with all bills of sale and similar agreements and documents relating thereto, certified by the Borrower to be true, correct and complete copies thereof, with no amendments thereto; (v) The Agent shall have received all necessary corporate resolutions of the shareholders and board of directors of LCG approving the Merger; (vi) The Agent shall have received the legal opinions of counsel delivered under the Merger Agreement, each in form and substance satisfactory to the Agent, and each such opinion shall contain a statement or be accompanied by a letter addressed to the Agent and the Lenders dated the Closing Date, to the effect that the Agent and the Lenders may rely upon such opinion to the same extent as if it were originally addressed to each of them; (vii) The Agent shall have received evidence, in form and substance satisfactory to the Agent, that the aggregate consideration paid for all outstanding shares of LCG -30- in connection with the Merger shall not exceed $252,000,000, and the Agent shall have received a certificate of a Responsible Officer of the Borrower to such effect; and (viii) The Agent shall have received evidence, in form and substance satisfactory to the Agent, that the Merger is in compliance with the Hart-Scott- Rodino Act, and that any necessary approval thereunder has been obtained and is in full force and effect. (b) Credit Agreement. The Agent shall have received this Agreement, ---------------- executed and delivered by an officer of the Borrower as of the Closing Date. (c) Other Loan Documents. The Agent shall have received the Notes, the -------------------- Guarantees, the Guarantor Security Agreements, the Security Agreement, the Intercreditor Agreement and all 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. (d) Incumbency Certificates. The Agent shall have received an incumbency ----------------------- certificate of LCGAC, LCG (setting forth the officers thereof immediately after the consummation of the Merger) and each other Guarantor, in each case dated the Closing Date and executed by one of its Responsible Officers or its Secretary or Assistant Secretary. (e) Corporate/Limited Liability Company Proceedings. The Agent shall have ----------------------------------------------- received a copy of the resolutions of the Board of Directors of LCGAC, LCG (immediately after the consummation of the Merger) and each other corporate Guarantor, and a copy of the resolutions of the appropriate governing body of each limited liability company 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 LCGAC and LCG), (iii) the consummation of the Merger (in the case of LCGAC and LCG) and (iv) the execution and delivery on behalf of the 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 Member(s) 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. (f) Organic Documents. The Agent shall have received copies of the ----------------- Organic Documents of LCGAC, LCG (immediately after consummation of the Merger) and each other 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 under the Entravision 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. (g) 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 closing side letter executed by the Borrower and the Agent in connection herewith, accrued and unpaid -31- and otherwise due and payable on or before the Closing Date by the Borrower in connection with this Agreement. (h) 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 Borrower 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 Borrower and the Guarantors, in form and substance satisfactory to the Agent; (iii) the executed legal opinions of (A) Fried, Frank, Harris, Shriver & Jacobson and Leventhal, Senter & Lerman, P.L.L.C., counsel to the sellers under the Merger Agreement, and (B) Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel to the purchasers under the Merger Agreement, in each case in the form delivered pursuant to the Merger Agreement and either addressed to the Agent and the Lenders or with a letter authorizing the Agent and the Lenders to rely on such legal opinions; and (iv) such other legal opinions as the Agent may reasonably request. (i) Material Contracts. The Agent shall have received, with a counterpart ------------------ for each Lender, copies of (i) each Material Contract and (ii) to the extent not referred to in clause (i), the Merger Agreement. (j) Recording/Filing. The Agent shall have received as of the Closing ---------------- Date evidence of (i) the filing, or of provision acceptable to the Agent for the filing, of appropriate financing statements naming the Agent, for the benefit of the Lenders, as secured party (including recordation of all fixture filings requested by the Agent), 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, (ii) the payment by the Borrower of all filing taxes or assessments imposed by any such state or county office and (iii) all filings and other actions necessary or desirable to perfect a security interest in any intellectual property of any Obligor pledged under the Loan Documents. (k) Lien Searches. The Agent shall have received such UCC searches as it ------------- shall deem necessary. (l) Stock Certificates; Etc. The Agent shall have received (i) original ------------------------ stock certificates representing all outstanding shares of stock of the Borrower 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 or any Guarantor Security Agreement. -32- (m) Good Standing Certificates. With respect to the LCGAC, LCG and each -------------------------- Guarantor, the Agent shall have received a certificate, dated a 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. (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 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 Borrower to such effect in the form of Exhibit C, dated as of the Closing Date and executed by a Responsible Officer of the 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 Borrower, 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 Borrower to such effect. (p) Solvency Certificate. The Agent shall have received a certificate of -------------------- the Chief Financial Officer of the Borrower and each Guarantor, to the effect that the Borrower and each Guarantor is Solvent after giving effect to the consummation of the Merger, the funding of the Loans, the execution and delivery of the Guarantees, and the payment of all estimated legal, investment banking, accounting, and other fees related hereto and thereto. (q) 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 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. (r) Operational Consents; FCC Matters. The Agent shall have received --------------------------------- evidence, in form and substance reasonably satisfactory to the Agent that (i) all necessary FCC consents to the transaction contemplated by the Merger Agreement have been obtained, provided that such consents need not have become Final Orders, (ii) the Borrower and its Subsidiaries have obtained all FCC consents and licenses required by law or necessary for the operation of the Borrower and its Subsidiaries, (iii) the Borrower and its Subsidiaries have obtained all other consents and licenses required by law or necessary for the operation of the Borrower and its Subsidiaries and (iv) pro forma applications for FCC approval of the transfer of the Media Licenses to the LCG License Subsidiary have been filed with the FCC. (s) Existing Indebtedness. The Agent shall have received evidence --------------------- satisfactory to it of (i) the full repayment of all existing Indebtedness of the Borrower and its Subsidiaries, except as described in Schedule 6.2, and (ii) the termination of all guarantees and collateral pledges (or -33- evidence that arrangements for termination of such collateral pledges satisfactory to the Agent shall have been made). (t) Operating Cash Flow. The Agent shall have received a certificate of a ------------------- Responsible Officer of the Borrower stating that the consolidated Operating Cash Flow of the Borrower and its Subsidiaries for the twelve months ended on January 31, 2000 was not less than $7,200,000, including calculations with respect thereto in the form set forth in paragraph 2 of the Covenant Compliance Certificate. (u) Financial Information. The Agent shall have received (i) the --------------------- financial statements referred to in Section 3.12, (ii) a pro forma balance sheet --- ----- of the Borrower and its Subsidiaries giving effect to the Merger, in form and substance satisfactory to the Agent, (iii) projections of the performance of the Borrower, in form and substance satisfactory to the Agent, and (iv) an operating budget for the Borrower and its Subsidiaries for the period from the Closing Date through December 31, 2000, in form and substance satisfactory to the Agent. (v) Third Amendment to Entravision Credit Agreement. The Agent shall have ----------------------------------------------- received evidence of the satisfaction of the conditions precedent to the third amendment, dated as of the date hereof, to the Entravision Credit Agreement. (w) 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 shall be reasonably satisfactory to the Agent. SECTION 5. AFFIRMATIVE COVENANTS The 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: 5.1 Financial Statements -------------------- (a) Within 120 days after the close of each fiscal year, the Borrower shall deliver to the Agent, for distribution to the Lenders, a complete set of audited annual consolidated and consolidating financial statements of the Borrower, 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 consolidated and consolidating financial condition of the Borrower 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. (b) Within 45 days after the end of each fiscal quarter, the Borrower shall deliver to the Agent, for distribution to the Lenders, (x) unaudited consolidated and consolidating financial statements of the Borrower for such quarter and (y) unaudited consolidated and consolidating -34- financial statements for the Borrower for the year-to-date period 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) and shall include a comparison of the results of each such period with the results for the same period of the previous fiscal year and 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 on the Closing Date) 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 the Borrower (A) stating that the financial statements fairly present the financial condition of the 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 Default has occurred and the Borrower is in compliance with its respective covenants in the Loan Documents to which it is party and (ii) a Covenant Compliance Certificate. (c) Within 30 days after the end of each month, the Borrower shall deliver to the Agent, for distribution to the Lenders, an unaudited monthly consolidated and consolidating income statement and balance sheet, along with a comparison of the results of such month with the same month of the previous fiscal year and 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 on the Closing Date), in each case in form and substance acceptable to the Agent, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition of the Borrower as of the date thereof and for the period covered thereby. (d) Within 45 days of the end of each fiscal quarter, the Borrower 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 each publication 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 the Borrower as fairly presenting the financial condition of each Station and publication as of the end of such quarter. 5.2 Certificates; Other Information. The Borrower 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 that the Borrower 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 Borrower or any Subsidiary by the Accountants in connection with any annual or interim audit of the books thereof; -35- (c) by January 31 of each year, commencing with the fiscal year ending on December 31, 2000, a copy of the annual operating budget for the Borrower and its Subsidiaries for such fiscal year, in form satisfactory to the Agent; (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 the Borrower, a Material Adverse Effect, the written statement by a Responsible Officer of the Borrower, setting forth the details of such Default or Material Adverse Effect and the action that the Borrower proposes to take with respect thereto; (e) promptly, but in any event within 30 days after any change in the senior management personnel of the Borrower, 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 that the Borrower sends to any holder of an equity interest therein; (g) (A) as soon as possible and in any event within 30 days after the 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 the Borrower describing such Termination Event and the action, if any, which the Borrower proposes to take with respect thereto, (B) promptly and in any event within ten days after receipt thereof by the Borrower or any ERISA Affiliate of the Borrower from the PBGC, copies of each notice received by the 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 Borrower 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 the Borrower or any ERISA Affiliate of the Borrower from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by the 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, the 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) relating to any Media License or Entravision Media License, and any supplements thereto, and (B) all statements, reports and other information filed with the FCC by or on behalf of the Borrower, any Subsidiary or the Entravision License Subsidiary with respect to any Media License or Entravision Media License; -36- (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 the Borrower, any Subsidiary or the Entravision License Subsidiary shall have received from the FCC with respect to any FCC hearing, order or dispute (A) directly concerning the Borrower, any Subsidiary, the Entravision License Subsidiary, any Station, any Media License or any Entravision Media License or (B) that may have a Material Adverse Effect; (l) promptly upon receipt thereof, but in any event not later than ten Business Days following such receipt, copies of all 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. The 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 the Borrower or its Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence. The Borrower shall, ------------------------------------------------ and shall cause each of its Subsidiaries to, continue to engage in business of the same general type as conducted by the 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. The 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 Borrower 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 -37- 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. The Borrower shall deliver to the Agent insurance certificates certified by the 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 Borrower 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 Borrower and its Subsidiaries shall maintain all insurance required under the other Loan Documents. (i) Each policy for liability insurance shall provide for all losses to be paid on behalf of the Agent and the 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 the Borrower or such Subsidiary, as applicable) to be paid directly to the Agent. (ii) Reimbursement under any liability insurance maintained by the Borrower or its 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 Borrower 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 Borrower or its Subsidiaries pursuant to this Section 5.5 shall be paid by the Agent to the Borrower 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. 5.6 Inspection of Property; Books and Records; Discussions. The Borrower ------------------------------------------------------ shall, and shall cause each of its Subsidiaries to, keep proper books of record 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 the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its Accountants. 5.7 Environmental Laws. The 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 -38- 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 (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 Borrower or any of its Subsidiaries, or the Borrower's or any of its 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 Borrower will use (i) $105,000,000 of the --------------- proceeds of the Loans to pay a portion of the aggregate consideration to be paid by LCGAC in the Merger for outstanding shares of LCG and (ii) $10,000,000 of the proceeds of the Loans to fund the Interest Reserve Account. 5.9 Compliance With Laws, Etc. The 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 the 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) the Borrower or such Subsidiary shall, to the extent required by GAAP, have set aside on its books adequate reserves with respect thereto. 5.10 Media Licenses. The Borrower will obtain, maintain and preserve, and -------------- cause each of its Subsidiaries to obtain, maintain and preserve, all Media Licenses (and will cause the Media Licenses to be held by the Entravision License Subsidiary or the LCG License Subsidiary in accordance with the terms of this Agreement), 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 -39- 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. The 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 Subsidiary, 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 Subsidiary. The Borrower will cause each Media License to be ------------------ transferred to the LCG License Subsidiary by May 31, 2000 and to be held by the LCG License Subsidiary at all times thereafter until the Obligations have been paid in full and all Commitments have expired. The Borrower will not permit the LCG 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 ------------------------ Borrower will enter into and maintain one or more Interest Rate Agreements, each in form and substance reasonably satisfactory to the Agent, covering a minimum of 75% of the Loans outstanding on the Closing Date. 5.14 Leases and Licenses. The Borrower shall or shall cause its ------------------- 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 Borrower or any of its 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. 5.15 Lease and License Approvals. The Borrower and its 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 Borrower or any of its 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 -40- other similar agreement become part of the Collateral or the Guarantor Collateral, and the Borrower and its 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. 5.16 Notices. The Borrower will provide, and will cause its Subsidiaries ------- to provide to the Agent, within 5 Business Days following receipt by the Borrower or any Subsidiary, copies of all notices received by the Borrower or such 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 Borrower or such Subsidiary, would have a Material Adverse Effect. 5.17 Additional Material Contracts and Media Licenses. The 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 and (b) will concurrently update Schedule 3.8 hereto or Schedule 3.9 hereto (as appropriate). SECTION 6. NEGATIVE COVENANTS The 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: 6.1 Financial Condition Covenants. The Borrower shall not: ----------------------------- (a) Total Interest Coverage Ratio. Permit the Total Interest Coverage ----------------------------- Ratio for the Borrower and its Subsidiaries on a consolidated basis, for the period representing the number of whole months (not exceeding twelve months) that have passed from and including May 1, 2000 to and including the last day of the fiscal quarter of the Borrower ending on the applicable date specified below, as determined by reference to the applicable Covenant Compliance Certificate to be provided pursuant to Section 5.1(b), to be less than the following levels for the periods indicated:
Period Ending Ratio ------------- ----- September 30, 2000 1.35:1 December 31, 2000 1.50:1 and thereafter
; provided, however, that the Borrower need not comply with the foregoing -------- ------- covenant for any period specified above during which all interest in respect of the Loans was paid from the Interest Reserve Account. -41- (b) Minimum Operating Cash Flow. Permit the Operating Cash Flow of the --------------------------- Borrower and its Subsidiaries on a consolidated basis, for the twelve months ended as of the end of any fiscal quarter of the Borrower as determined by reference to the applicable Covenant Compliance Certificate to be provided pursuant to Section 5.1(b), to be less than the following levels for the periods indicated:
Period Ending Maximum Amount ------------- -------------- June 30, 2000 $8,000,000 September 30, 2000 $8,500,000 December 31, 2000 $9,200,000 and thereafter
6.2 Limitation on Indebtedness. The Borrower shall not create, incur, -------------------------- assume or suffer to exist any Indebtedness, and shall not permit any of its 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 Borrower or any Subsidiary outstanding on the Closing Date and listed on Schedule 6.2; (c) 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; and (d) trade credit incurred to acquire goods, supplies, services and incurred in the ordinary and normal course of business. Notwithstanding the foregoing, the LCG License Subsidiary 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 Borrower shall not, and shall not permit ------------------- any of its 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 -42- 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 Borrower or its 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; and (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. Notwithstanding the foregoing, the LCG License Subsidiary 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. 6.4 Limitation on Fundamental Changes. The Borrower shall not, and shall --------------------------------- not permit any of its Subsidiaries to, enter into any merger, consolidation or amalgamation (other than the Merger), 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. 6.5 Limitation on Sale of Assets. The Borrower shall not, and shall not ---------------------------- permit any of its Subsidiaries to, make any Asset Disposition without the prior written consent of the Majority Lenders in each case, such consent not to be unreasonably withheld. 6.6 Limitation on Dividends. The Borrower shall not, and shall not permit ----------------------- any of its Subsidiaries to (a) if a corporation, declare or pay any dividend (other than dividends payable solely in common stock of the 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 the 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, -43- 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 Borrower or any Subsidiary. 6.7 Limitation on Investments, Loans and Advances. The Borrower shall --------------------------------------------- not, and shall not permit any of its 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 any assets constituting a business unit of, or make any other investment in (any of the foregoing, an "investment"), any Person, except for: ---------- (a) consummation of the Merger in accordance with the terms of Section 4.1; (b) the Borrower's ownership interest in its 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; and (e) investments existing on the Closing Date and listed on Schedule 6.7. Notwithstanding the foregoing, the LCG License Subsidiary shall not be permitted, under any circumstances, to make any investments. 6.8 Limitation on Modifications of Certain Documents and Instruments. ---------------------------------------------------------------- The Borrower shall not, and shall not permit its Subsidiaries to, terminate, amend or modify any provision of any document, instrument or agreement relating to any Material Contract or any Organic Document, in each case which could have a Material Adverse Effect. 6.9 Transactions with Affiliates. The Borrower shall not, and shall not ---------------------------- permit any of its 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 Borrower, unless such transaction (i) is otherwise permitted under this Agreement or (ii) is in the ordinary course of the Borrower's or such Subsidiary's business and is upon terms no less favorable to the Borrower 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. The Borrower shall not 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 Borrower 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. -44- 6.12 Unfunded Liabilities. The Borrower shall not permit unfunded -------------------- liabilities for any and all Plans maintained for or covering employees of the Borrower or any Subsidiary to exceed $500,000 in the aggregate at any time. 6.13 Management Fees. The Borrower shall not, and shall not permit any of --------------- its Subsidiaries to, incur any management fees for services rendered. 6.14 Equity Offerings. The Borrower shall not, and shall not permit any of ---------------- its Subsidiaries to, consummate or agree to consummate any Equity Offering. SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal on any Note when due, the Borrower shall fail to pay any interest on any Note, any fee referred to in the letter referred to in Section 4.1(g) within two Business Days after any such interest or fee becomes due in accordance with the terms thereof and hereof, or the Borrower shall fail to 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 that 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; or (c) The Borrower shall default in the observance or performance of any agreement contained in Section 5.2(d), 5.3, 5.4, 5.8, 5.9, 5.10, 5.11, 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 Borrower 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), (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 (iii) a "Default" shall have occurred and be continuing under the Entravision Credit Agreement; 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 -45- (f) Except as set forth in Section 7(d)(iii), the Borrower 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 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; or (g) (i) The Borrower or any other Obligor 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 the Borrower or any other Obligor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any other Obligor 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 the Borrower or any other Obligor 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) the Borrower or any other Obligor 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) the Borrower or any other Obligor 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 -46- 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) the 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 the Borrower or any other Obligor to any tax, penalty or other liabilities in the aggregate to exceed $500,000; or (i) One or more judgments or decrees shall be entered against the Borrower or any other Obligor 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 Borrower or any other Obligor 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; or (j) There shall occur any default in the material observance or material performance of any Material Contract 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 the Borrower, any of its Subsidiaries, or any other Obligor 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 the Borrower or its Subsidiaries, or any material Entravision Media License held by Entravision or any of its Subsidiaries (other than the Borrower or its Subsidiaries), or (B) any Governmental Authority (including the FCC) shall terminate, revoke or substantially and adversely modify any material Media License of the Borrower or its Subsidiaries, or any material Entravision Media License held by Entravision or any of its Subsidiaries (other than the Borrower or its Subsidiaries), 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 or any material Entravision 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 or any material Entravision 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 relating to any material Media License or any material Entravision Media License shall expire or is revoked or -47- 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, (2) any Entravision Media License (other than an Entravision Media License issued by the FCC), alone or in conjunction with other Entravision 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 (3) any Media License or Entravision 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: (i) the Borrower provides the Agent with written notice of such event within five Business Days after it or any other Obligor is notified by the FCC of such designation (and also provides 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 or a single Entravision Station rather than to the licenses and/or applications of more than one Station or Entravision Station, and (iii) with respect to any Media License, if an adverse ruling in the proceeding would threaten the Borrower's ability to continue providing the same level of underlying service by such Station as theretofore provided, then (A) the Borrower 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 the Borrower 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 Borrower shall thereafter exclude the Operating Cash Flow attributable to such Station from the calculation of the Borrower's 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 the Borrower and without any divestiture of assets required by the FCC or otherwise voluntarily accomplished by the Borrower pursuant to the next sentence. Once the Borrower has made such prepayment and exclusion from Operating Cash Flow under the circumstances contemplated by this clause (iii), then the Borrower 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) the Borrower 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 Borrower 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) the Borrower 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; or -48- (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 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 Borrower and Entravision (which plan shall include compliance with the terms of this Agreement and the other Loan Documents) 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 or any Entravision 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) With respect to any 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; 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 Borrower shall immediately terminate and the Loans made to the Borrower hereunder (with 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 Borrower declare the Commitments to the Borrower to be terminated forthwith, whereupon such Commitments shall immediately terminate; and (ii) by notice of default to the Borrower, declare the Loans (with accrued interest thereon) and all other Obligations under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. 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 -49- 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 Borrower. 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 Borrower, 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 other Loan Document or for any failure of the Borrower, 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 Borrower, 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 Borrower), the Accountants and independent -50- 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 Borrower 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 Borrower, 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 Borrower, any Subsidiary and the other Obligors and made its own decision to make its Loans 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 Borrower, its 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 Borrower, any Subsidiary or any other Obligor that may come into the possession of the Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. -51- 8.7 Indemnification. The Lenders agree to indemnify the Agent in its --------------- capacity as such (to the extent not reimbursed by the Borrower, its Subsidiaries or the other Obligors and without limiting the obligation of such Persons to do so), ratably according to the respective amounts of their Commitment Percentages, 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. 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 Borrower, 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 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 Borrower (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 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 or Commitment hereunder, the Agent shall immediately resign and shall be replaced, and have the benefits, as set forth in this Section 8.9. 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 Borrower (and, in the case of any Loan Document other than this Agreement, the relevant Obligor), the Borrower may, from time to time, enter into written amendments, -52- 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 Borrower 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, 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; 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(f) or 2.9; 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 8 without the written 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 Borrower, the other Obligors, the Lenders, the Agent and all future holders of the Notes. In the case of any waiver, the Borrower, 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 Borrower and the Agent, and as set forth on the signature pages 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 Borrower: -53- LCG Acquisition Corporation 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Attention: Walter F. Ulloa Philip C. Wilkinson Jeanette Tully Telecopy: (310) 447-3899 With a copy to (which shall not constitute notice to the Borrower): Thompson Hine & Flory, LLP 1920 N Street, N.W. Washington, DC 20036-1601 Attention: Barry A. Friedman, Esq. Telecopy: (202) 331-8330 and 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 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 or 2.4 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. -54- 9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay to ----------------------------- 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), which counsel fees shall be subject to the approval of the Borrower, 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 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 Merger or the use of the proceeds of the Loans and any such other documents (all the foregoing, collectively, the "indemnified liabilities" irrespective of whether the transactions contemplated by this Agreement and the other Loan Documents are consummated), provided, that the Borrower 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 Borrower 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 Borrower, the Lenders, the Agent, all future holders of the Notes and their respective successors and -55- assigns, except that the Borrower may not assign, transfer or delegate any of its 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 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 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 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 for all purposes under this Agreement and the other Loan Documents, and the Borrower 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 Borrower agrees 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 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 Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.11, 2.12 and 2.13 with respect to its participation in the Commitments and the Loans 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 ("Purchasing Lenders"), which additional ------------------ lenders shall be subject to the consent of the Borrower (such consent not to be unreasonably withheld and not to be required if a Default has occurred and is continuing) 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 B, 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 -56- 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 Borrower, at its 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 Commitment 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 Borrower marked "canceled." (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 Commitment of, and principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower 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 Borrower 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 $3,500, 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 Borrower. (f) The Borrower authorizes 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 Borrower and its Subsidiaries and Affiliates, which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or any other Loan Document or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Subsidiaries and Affiliates prior to becoming a party to this Agreement. -57- (g) If, pursuant to this Section, any interest in this Agreement 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 Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Borrower or the transferor Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Lender, the Agent and the Borrower either U.S. Internal Revenue Service Form W-9, W-8BEN or W-8ECI (as applicable to it) (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 Borrower) to provide the transferor Lender, the Agent and the Borrower a new Form W-9, W-8BEN or W-8ECI (as applicable to it) 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. (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under its Notes to any Federal Reserve Bank in accordance with applicable law. 9.7 Adjustments; Set-Off. --------------------- (a) If any Lender (a "benefited Lender") shall at any time receive any ---------------- payment of all or part of its Loans 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 or interest thereon, or fees, such benefited Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loans 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 benefited 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 benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loan 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 Borrower, any such notice being expressly waived by the Borrower 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, -58- 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 Borrower. Each Lender agrees promptly to notify the Borrower 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 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 ----------- Borrower, 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 Subject To Judicial Reference; Selection Of Referee. All ---------------------------------------------------------- Claims, including any and all questions of law or fact relating thereto, shall, at the written request of any Party, be determined by Reference. The Parties shall select a single neutral referee, who shall be a retired state or federal judge with at least five years of judicial experience in civil matters. In the event that the Parties cannot agree upon a referee, the referee shall be appointed by the court. The Parties shall equally bear the fees and expenses of the referee unless the referee otherwise provides in the statement of decision. (b) Waiver Of Jury Trial. In connection with a Reference or any other -------------------- action or proceeding, whether brought in state or federal court, the Parties hereby expressly, intentionally and deliberately waive any right they may otherwise have to trial by jury of any Claim. (c) Conduct Of Reference. Except as provided in this Section 9.12, the -------------------- Reference shall be conducted pursuant to Applicable State Law. The referee shall determine all issues relating to the applicability, interpretation, legality and enforceability of this Section 9.12. (d) Provisional Remedies, Self-Help And Foreclosure. No provision of this ----------------------------------------------- Section 9.12 shall limit the right of any party to (i) exercise self-help remedies including set-off, -59- (ii) foreclose against or sell any Collateral or Guarantor Collateral, by power of sale or otherwise or (iii) obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Reference. The exercise of, or opposition to, any such remedy does not waive the right of any Party to Reference pursuant to this Section 9.12. (e) Limitation On Damages. In the event that punitive damages are --------------------- permitted under Applicable State Law, the amount thereof shall not exceed a sum equal to three times the amount of actual damages as determined by the referee. (f) Severability. 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. (g) Miscellaneous. In the event that multiple Claims are asserted, some ------------- of which are found not subject to this Section 9.12, the Parties agree to stay the proceedings of the Claims not subject to this Section 9.12 until all other Claims are resolved in accordance with this Section. In the event that Claims are asserted against multiple parties, some of whom are not subject to this Section, the Parties agree to sever the Claims subject to this Section 9.12 and resolve them in accordance with this Section 9.12. 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. (h) Defined Terms. As used in this Section 9.12, the following terms ------------- shall have the respective meanings set forth below: "Applicable State Law": the law of the State of California; provided, -------------------- however, that if any Party seeks to (i) exercise self-help remedies, including set-off, (ii) foreclose against or sell any Collateral or Guarantor Collateral, by power of sale or otherwise or (iii) obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Reference, the law of the state where such Collateral or Guarantor Collateral, as the case may be, is located shall govern the exercise of or opposition to such rights and remedies. "Claim": any claim, cause of action, action, dispute or controversy ----- between or among the Parties, whether sounding in contract, tort or otherwise, which arises out of or relates to: (i) any of the Loan Documents; (ii) any negotiations or communications relating to any of the Loan Documents, whether or not incorporated into the Loan Documents or any indebtedness evidenced thereby; or (iii) any alleged agreements, promises, representations or transactions in connection therewith. "Party": any Obligor, any Lender or the Agent. ----- "Reference": a judicial reference conducted pursuant to this Section 9.12 --------- in accordance with Applicable State Law, as in effect at the time the referee is selected pursuant to Section 9.12(a). 9.13 Acknowledgements. The Borrower hereby acknowledges that: ---------------- -60- (a) its has 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 Borrower 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 Borrower on the other hand, is solely that of creditor and debtor; and (c) no joint venture exists among the Lenders or among the Borrower, on one hand and the Lenders, on the other hand. 9.14 Headings. Section headings herein are included for convenience of -------- reference only and shall not constitute a part of this Agreement for any other purpose. 9.15 Copies of Certificates, Etc. Whenever the Borrower is 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. 9.16 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 Borrower (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 Borrower's attorneys reasonably believe that such disclosure is required by law. 9.17 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 Borrower, 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 (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 such transferee, assignee or participant agrees to comply with the provisions of this Section 9.17 unless specifically prohibited by applicable law or court order. In no event shall any Lender be obligated or required to return any materials furnished by the Borrower or any Subsidiary. -61- 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. BORROWER -------- LCG ACQUISITION CORPORATION By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman/CEO 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 Commitment: $115,000,000 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 EXHIBIT A --------- TO TERM LOAN AGREEMENT ---------------------- FORM OF NOTE ------------ $____________ Los Angeles, California ____________, ____ FOR VALUE RECEIVED, the undersigned, Latin Communications Group Inc., a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to -------- the order of ______________________________ (the "Lender"), in lawful money of ------ the United States and in immediately available funds, the lesser of (1) _____________ and (2) the aggregate unpaid principal amount of the Loan made by the Lender to the undersigned pursuant to the Loan Agreement (as hereinafter defined), on the Maturity Date (as defined in the Loan Agreement) and on such other dates as are required under the Loan Agreement. Such payment shall be made for the account of the Lender at the office of Union Bank of California, N.A. located at 445 South Figueroa Street, Los Angeles, California 90071 or at such other office as the holder of this Note may notify the undersigned and as agreed to by Union Bank of California, N.A. The undersigned further agrees to pay interest in like money at such office or such other office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates specified in the Loan Agreement until such principal has been paid in full (both before and after judgment to the extent permitted by law). This Note is one of the Notes referred to in the Term Loan Agreement dated as of April 20, 2000 (as amended, supplemented, modified or restated from time to time, the "Loan Agreement"), among LCG Acquisition Corporation, the Lender, -------------- the other Lenders parties thereto and Union Bank of California, N.A., as agent for the Lenders; is entitled to the benefits thereof and of the other Loan Documents; and is subject to optional and mandatory prepayment in whole or in part as provided therein. Capitalized terms used herein which are defined in the Loan Agreement shall have such meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Loan Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. THIS NOTE 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). BORROWER -------- LATIN COMMUNICATIONS GROUP INC. By:_________________________ Name:_______________________ Title:______________________ -2- EXHIBIT B --------- TO TERM LOAN AGREEMENT ---------------------- ASSIGNMENT AND ACCEPTANCE ------------------------- Date: _____________________ Reference is made to that certain Term Loan Agreement dated as of April 20, 2000 (as it may be amended, modified, supplemented or restated from time to time, the "Loan Agreement") among (1) LCG ACQUISITION CORPORATION, a Delaware -------------- corporation, (2) the several banks and other financial institutions from time to time parties thereto (the "Lenders") and (3) Union Bank of California, N.A., as ------- agent for the Lenders thereunder (in such capacity, the "Agent"). Terms defined ----- and the rules of interpretation contained in the Loan Agreement have the same meanings and application herein. _________________ (the "Assignor") is a Lender under the Loan Agreement and -------- agrees with _________________________ (the "Assignee") as follows: -------- 1. As of the Effective Date (as defined below), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, $_____________ in principal amount of the Assignor's $_____________ Loan under the Loan Agreement (as in effect on the Effective Date and without giving effect to other assignments by the Assignor that have become or will be effective as of the Effective Date), together with the related rights and obligations under the Loan Agreement and the other Loan Documents, which assignment will result in the Assignee having a Commitment Percentage of ___%. The Assignee hereby appoints and authorizes the Agent to exercise such powers as are delegated to the Agent by Section 8 of the Loan Agreement and by the other Loan Documents. 2. The Assignor (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (b) represents and warrants that it has full power and authority, and has taken all action necessary, (i) to execute and deliver this Assignment and any and all other documents required or permitted to be executed or delivered by it in connection herewith and (ii) to fulfill its obligations under, and consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; (c) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignor; (d) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto; and (e) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Documents or any instrument or document furnished thereto. 3. The Assignee (a) confirms that it has received copies of such of the Loan Documents and other documents delivered pursuant to Section 4 of the Loan Agreement as it has requested, together with a copy of the most recent financial statements of the Borrower received by the Agent pursuant to Section 5.1 of the Loan Agreement, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (b) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (c) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Loan Documents are required to be performed by it as a Lender; (d) specifies as its Applicable Lending Offices the offices set forth beneath its name on the signature pages hereof; (e) represents and warrants, for the benefit of the Assignor, the Agent and the Borrower, that under applicable law and treaties no taxes will be required to be withheld by the Agent, the Borrower or the Assignor with respect to any payments to be made to the Assignee with respect to the Loans; /1/[(f) attaches either U.S. Internal Revenue Service Form W-9, W-8BEN or W-8ECI, or successor applicable form certifying as to the Assignee's entitlement to claim complete exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Loan Agreement (and the Note held by it); (g) agrees, for the benefit of the Assignor, the Agent and the Borrower, that it will provide to the Assignor (and, in the event the Assignee becomes a Lender registered in the Register, the Agent and the Borrower) a new Form W-9, W-8BEN or W-8ECI, or successor applicable form 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 Assignee, and that it will comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption;] (h) represents and warrants that it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment, and any and all other documents required or permitted to be executed or delivered by it in connection with this Assignment and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; and (i) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignee. 4. The effective date for this Assignment shall be _________________ (the "Effective Date"). Following the execution of this Assignment, it will be - --------------- delivered to the Agent for acceptance and recording by the Agent and, if applicable, for acceptance by the Borrower. _____________________ /1/ Bracketed provisions to be included if Assignee is organized under the laws of any jurisdiction other than the United States or any state thereof. 5. Upon such acceptance and recording, as of the Effective Date, (a) the Assignee shall be a party to the Loan Agreement and, to the extent provided in this Assignment, shall have the rights and obligations of a Lender thereunder and under the other Loan Documents as if the Assignee had been an original party to the Loan Agreement and (b) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Loan Agreement and the other Loan Documents. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Loan Agreement and the other Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the other Loan Documents for periods prior to the Effective Date, as the case may be, directly between themselves. 7. Concurrently with the execution of this Assignment, the Assignor shall execute two counterpart original Requests for Registration, in the form of Exhibit A to this Assignment, to be forwarded to the Agent. The Assignor and the Assignee further agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment, and the Assignor specifically agrees to cause the delivery of two original counterparts of this Assignment and the Request for Registration to the Agent for the purpose of registration of the Assignee as a "Lender" pursuant to Section 9.6 of the Loan Agreement. 8. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. Assignor -------- ____________________________________ By:_________________________________ Name:_______________________________ Title:______________________________ Assignee -------- ____________________________________ By:_________________________________ Name:_______________________________ Title:______________________________ Applicable Lending Offices: -------------------------- LIBOR Loans ----------- Address: ____________________________________ ____________________________________ ____________________________________ Base Rate Loans --------------- Address: ____________________________________ ____________________________________ ____________________________________ Address for Notices: ------------------- ____________________________________ ____________________________________ ____________________________________ Telephone No.:______________________ Telecopier No.:_____________________ Attention:__________________________ Consented to as of ____________, ____./2/ Borrower - -------- LATIN COMMUNICATIONS GROUP INC. By:_________________________ Name:_______________________ Title:______________________ _______________________ /2/ To be completed if Borrower's consent required under Section 9.6(c) of the Loan Agreement. EXHIBIT A TO ------------ ASSIGNMENT AND ACCEPTANCE ------------------------- REQUEST FOR REGISTRATION ------------------------ TO: UNION BANK OF CALIFORNIA, N.A., as Agent THIS REQUEST FOR REGISTRATION is made as of the date of the enclosed Assignment and Acceptance with reference to that certain Term Loan Agreement dated as of April 20, 2000 (as it may be amended, modified, supplemented or restated from time to time, the "Loan Agreement") among (1) LCG ACQUISITION -------------- CORPORATION, a Delaware corporation, (2) the several banks and other financial institutions from time to time parties thereto (the "Lenders") and (3) Union ------- Bank of California, N.A., as agent for the Lenders thereunder (in such capacity, the "Agent"). Terms defined and the rules of interpretation contained in the ----- Loan Agreement have the same meanings and application herein. The Assignor and the Assignee described below hereby request that the Agent register the Assignee as a Lender pursuant to Section 9.6 of the Loan Agreement, effective as of the Effective Date described in the enclosed Assignment and Acceptance and, in connection with this request, certify to the Agent that the enclosed Assignment and Acceptance sets forth the correct Commitment Percentage and Loan of the Assignee. Enclosed with this Request are (i) the registering and processing fee of $3,500 payable to the Agent pursuant to Section 9.6 of the Loan Agreement, (ii) two counterpart originals of the Assignment and Acceptance and (iii) the original Note of the Borrower in favor of the Assignor in the principal amount of its Loan. The Assignor and the Assignee hereby jointly request that the Agent cause the Borrower to issue, pursuant to Section 9.6(c) of the Loan Agreement, (i) a replacement Note, dated as of the same date as the original note being replaced, in favor of the Assignor in the principal amount of the balance of its Loan (after giving effect to the Assignment) and (ii) a new Note, dated as of the Effective Date, in favor of the Assignee in the principal amount of the Assignee's Loan. IN WITNESS WHEREOF, the Assignor and the Assignee have executed this Request for Registration by their duly authorized officers as of ________________, ____. Assignor -------- __________________________________ By:_______________________________ Name:_____________________________ Title:____________________________ Assignee -------- __________________________________ By:_______________________________ Name:_____________________________ Title:____________________________ - -------------------------------------------------------------------------------- CONFIRMATION OF REGISTRATION BY AGENT ------------------------------------- TO: The Assignor and the Assignee referred to in the above Request for Registration The Agent referred to below hereby certifies that it has registered the Assignee as a Lender under the Loan Agreement, effective as of the Effective Date described above, with the Commitment Percentage and the Loan set forth for the Assignee in the Assignment and Acceptance and has adjusted the registered Commitment Percentage and Loan of the Assignor to reflect the assignment effected by such Assignment and Acceptance. UNION BANK OF CALIFORNIA, N.A., as Agent By:__________________________________ Name:________________________________ Title:_______________________________ -2- EXHIBIT C --------- TO TERM LOAN AGREEMENT ---------------------- FORM OF NO DEFAULT/REPRESENTATION CERTIFICATE --------------------------------------------- ________________________________________, the ___________________ of the _____________________, a Delaware corporation, hereby certifies in connection with the Term Loan Agreement dated as of April 20, 2000 among LCG Acquisition Corporation, the several banks and other financial institutions parties thereto and Union Bank of California, N.A., as agent (the "Agent") (such Term Loan ----- Agreement, as it may be amended, restated, modified or supplemented from time to time, the "Loan Agreement"; capitalized terms used herein and not defined shall -------------- have the meanings assigned to them in the Loan Agreement), as of the date set forth below, that: (i) the representations and warranties contained in the Loan Agreement and in each other Loan Document and certificate or other writing delivered to the Lenders prior to, on or after the Closing Date are correct on and as of the Closing Date in all material respects as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date; and (ii) no Default has occurred and is continuing on the Closing Date or would result from the making of the Loan being made available on the Closing Date pursuant to the Loan Agreement. IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME AS OF THIS ____ DAY OF ________________, ____: By:________________________________ Name:______________________________ Title:_____________________________ EXHIBIT D --------- TO TERM LOAN AGREEMENT ---------------------- FORM OF COVENANT COMPLIANCE CERTIFICATE --------------------------------------- The undersigned, ____________________, the Chief Financial Officer of LATIN COMMUNICATIONS GROUP INC., a Delaware corporation (the "Borrower"), refers to -------- that certain Term Loan Agreement dated as of April 20, 2000 among the Borrower, the several banks and other financial institutions parties thereto (the "Lenders") and Union Bank of California, N.A., as agent for the Lenders (as it ------- may be amended, modified, restated or supplemented from time to time, the "Loan ---- Agreement"; capitalized terms used herein and not defined shall have the - --------- meanings assigned to them in the Loan Agreement) and certifies as to the accuracy of the following: 1. Total Interest Coverage Ratio ----------------------------- a. Operating Cash Flow i. Net Income after eliminating extraordinary gains and losses $_______ ii. provisions for taxes (to the extent deducted from the computation of Net Income) $_______ iii. depreciation and amortization (to the extent deducted from the computation of Net Income) $_______ iv. Interest Expense (see 1(b) below) (to the extent deducted from the computation of Net Income) $_______ v. permitted termination payments owing by the Borrower resulting from early termination of a time brokerage agreement, local marketing agreement or similar agreement (to the extent deducted from the computation of Net Income) $_______ vi. operating losses from Stations KVBC-FM and KRNV-FM, to the extent that such losses are incurred during the first twelve months of such Stations being on the air (to the extent deducted from the computation of Net Income) $_______ vii. other non-cash charges (to the extent deducted from the computation of Net Income) $_______ viii. non-cash revenues (to the extent included in the calculation of Net Income) $_______ ix. Corporate Overhead (to the extent included in the calculation of Net Income) $_______ x. i + ii + iii + iv + v + vi + vii $_______ - viii - ix b. Interest Expense i. amount of all interest on Total Debt that was paid, payable and/or accrued for such period (without duplication of previous amounts) $_______ ii. all commitment 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 $_______ iii. net amounts payable (or receivable) under all Interest Rate Agreements $_______ iv. all interest income $_______ v. i + ii + iii - iv $_______ -2- c. Ratio of a to b/1/: _____:1 2. Minimum Operating Cash Flow/2/ (see 1(a) above) $______ ----------------------------------------------- 3. Unfunded Liabilities/3/ $______ As of the date hereof, the Chief Financial Officer represents and warrants to the Lenders as follows: a. The representations and warranties contained in each Loan Document and certificate or other writing delivered to the Lenders are correct on and as of the date hereof in all material respects, as though made on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case as of such date); and b. no Default has occurred and is continuing. IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME, AS THE CHIEF FINANCIAL OFFICER OF LATIN COMMUNICATIONS GROUP INC., AS OF __________, 200_. LATIN COMMUNICATIONS GROUP INC. ________________________________________ Name:___________________________________ Chief Financial Officer _________________________ /1/ Section 6.1(a) of the Loan Agreement requires that the Total Interest Coverage Ratio for the period representing the number of whole months (not exceeding 12 months) that have passed from and including May 1, 2000 to and including the last day of the relevant fiscal quarter not be less than ____:1. /2/ Section 6.1(b) of the Loan Agreement requires that the Operating Cash Flow of the Borrower and its Subsidiaries on a consolidated basis for the 12 months ended as of the end of the relevant fiscal quarter of the Borrower not be less than $_________. /3/ Section 6.12 of the Loan Agreement requires that unfunded liabilities for any and all Plans maintained for or covering employees of the Borrower or any Subsidiary not exceed $500,000 in the aggregate at any time. -3- EXHIBIT E --------- TO TERM LOAN AGREEMENT ---------------------- FORM OF CONTINUATION NOTICE --------------------------- Date: To: Union Bank of California, N.A., as Agent 445 South Figueroa Street Los Angeles, California 90071 Attention: Communications/Media Division Re: LATIN COMMUNICATIONS GROUP INC., a Delaware corporation We refer to that certain Term Loan Agreement dated as of April 20, 2000 among LCG Acquisition Corporation, the several banks and other financial institutions parties thereto and Union Bank of California, N.A., as agent (such Term Loan Agreement, as amended, modified, supplemented or restated from time to time, the "Loan Agreement"). Capitalized terms used herein and not defined have -------------- the meanings assigned to them in the Loan Agreement. [Pursuant to Section 2.4(a) of the Loan Agreement, the undersigned elects to convert the following LIBOR Loans to Base Rate Loans at the end of the current Interest Period for such LIBOR Loans: LIBOR Loan Amount Last Day of Current Interest Period - ----------------- ----------------------------------- 1. 2. 3. [and so on] ] [Pursuant to Section 2.4(a) of the Loan Agreement, the undersigned elects to convert Base Rate Loans in the aggregate amount of $__________ to LIBOR Loan(s) as follows: Desired Date Length of LIBOR Loan Amount of Conversion Interest Period - ----------------- ------------- --------------- 1. 2. 3. [and so on] ] [Pursuant to Section 2.4(b) of the Loan Agreement, the undersigned elects to continue the following LIBOR Loans for the following additional Interest Periods: Last Day of Current Length of Continued LIBOR Loan Amount Interest Period Interest Period - ----------------- --------------- --------------- 1. 2. 3. [and so on] ] Sincerely, BORROWER -------- LATIN COMMUNICATIONS GROUP INC. By:____________________________ Name:__________________________ Title:_________________________ -2- Schedule 3.1 ------------ Good Standing/Foreign Qualifications Jurisdictions 1. Latin Communications Group Inc. Organized: Delaware Qualified to do Business: New York 2. Latin Communications Inc. Organized: Delaware Qualified to do Business: California, New York 3. Vea Acquisition Corp. Organized: Delaware Qualified to do Business: California, New York 4. Latin Radio of Washington D.C., L.L.C. Organized: Delaware Qualified to do Business: Maryland 5. Latin Communications Group Television Inc. Organized: Delaware Qualified to do Business: Florida 6. Latin Communications EXCL Inc. Organized: Delaware Qualified to do Business: California 7. LCG Holdings, L.L.C. Organized: Delaware Qualified to do Business: None 8. EXCL Holdings, Inc. Organized: Illinois Qualified to do Business: California 9. EXCL Communications, Inc. Organized: Illinois Qualified to do Business: California Note: doing business in California as EXCL Radio ----- Communications, Inc. 10. Norte Broadcasting of Colorado, Inc. Organized: Illinois Qualified to do Business: California, Colorado 11. SUR Broadcasting of Colorado, Inc. Organized: Illinois Qualified to do Business: California, Colorado 12. SUR Broadcasting of New Mexico, Inc. Organized: New Mexico Qualified to do Business: California 13. Norte Broadcasting of New Mexico, Inc. Organized: New Mexico Qualified to do Business: None 14. Metro Mix, Inc. Organized: Illinois Qualified to do Business: California 15. Radio Exito, Inc. Organized: Nevada Qualified to do Business: California 16. Pacifico Broadcasting, Inc. Organized: California Qualified to do Business: None 17. Sur Broadcasting, Inc. Organized: California Qualified to do Business: None 18. Norte Broadcasting, Inc. Organized: California Qualified to do Business: None 19. Sur Broadcasting of San Diego, Inc. Organized: California Qualified to do Business: None 20. Embarcadero Media, Inc. Organized: Delaware Qualified to do Business: California 21. Portland Radio, Inc. Organized: Washington Qualified to do Business: California, Oregon 22. Riverside Radio, Inc. Organized: California Qualified to do Business: None 23. EMI Sacramento Radio, Inc. Organized: California Qualified to do Business: None 24. EMI Los Angeles Radio, Inc. Organized: California Qualified to do Business: None 25. Norte Broadcasting of Nevada, Inc. Organized: Nevada Qualified to do Business: None Schedule 3.2 ------------ Required Consents Consents of Landlords/Licensors set forth on Schedule 3.5B are as follows: EMI Los Angeles Radio, Inc. --------------------------- i. Lease dated November 1, 1994 (Zufu Properties, Co., Ltd.). EMI Sacramento Radio, Inc. -------------------------- i. Lease dated May 27, 1994 (between Great American Television and Radio Company, Inc. and Fuller-Jeffrey Broadcasting Corporation, Inc., now assigned to EMI Sacramento Radio, Inc.). EXCL Communications, Inc. ------------------------- i. Office Lease Dated January 12, 2000 (Tropicana Office Investments, L.L.C.). ii. Lease dated October 3, 1996 (Candeleria Business Park Associates, L.P.). Metro Mix, Inc. --------------- i. Lease Agreement and Option to Purchase dated June 1, 1990, as amended (Villanueva Capital Corporation). Norte Broadcasting, Inc. ------------------------ i. Lease of State Lands dated June 28, 1996 (State of Colorado). Riverside Radio, Inc. --------------------- i. Lease dated May 15, 1990 (Unum Life Insurance Co., now American Pacific Financial Corporation). Schedule 3.5A ------------- Intellectual Property 1. FCC Licenses Owned by LCG Subsidiaries KBRG(FM), San Jose, California ------------------------------ Main Station Aural STL WPNN-710 K261BW, Los Gatos, California ----------------------------- Main Station Intercity Relay WPNN-709 KLOK(AM), San Jose, California ------------------------------ Main Station R/P Base Station KOS 331 KSES-FM, Seaside, California ---------------------------- Main Station KSES(AM), Soledad, California ----------------------------- Main Station Direct Measurement KLOK-FM, Greenfield, California ------------------------------- Main Station Aural STL WGX-250 FM Translator K260AA, Carmel Valley, California ----------------------------------------------- Main Station KMXA(AM), Aurora, California ---------------------------- Main Station KJMN(FM), Castle Rock, Colorado ------------------------------- Main Station Aural STL WHS-701 R/P Base Mobile System KPG-372 Aural STL WGR-787 KRZY(AM), Albuquerque --------------------- Main Station Direct Measurement KRZY(FM), Santa Fe, New Mexico ------------------------------ Main Station Construction Permit (to correct coordinates) Direct Measurement Earth Station E950068 --------------------- Authorization KRCX-FM, Marysville, California ------------------------------- Main Station R/P Base Station KPE-548 R/P Auxiliary - KQY-890 Aural STL - WHA-993 KCAL(AM), Redlands, California ------------------------------ Main Station Auxiliary Antenna Aural STL WLG-908 Auxiliary R/P KC - 25214 KSZZ(AM), San Bernardino, California ------------------------------------ Main Station KSSE(FM), Riverside, California ------------------------------- Main Station KRRE(FM), Shingle Springs, California ------------------------------------- Main Station Aural STL WPNM-947 Aural STL WPJB-933 WACA(AM), Wheaton, Maryland --------------------------- Main Station KRNV(FM), Reno Nevada --------------------- 2. Trademarks and Copyrights
Owner Jurisdiction Trademark Ser./Reg No. ============================================================================================== Latin Communications Group Inc. USA EL DIARIO LA PRENSA 1,863,697 - ---------------------------------------------------------------------------------------------- EMI Sacramento Radio, Inc. USA KRCX 1110AM RADIO 1,466,610 CAPITAL
EMI Sacramento Radio, Inc. (still USA LA SUPER X 2,070,252 assigned of record to Marysville Radio, Inc.) ================================================================================================== EXCL Communications, Inc. USA MARKETSPAN 1,781,772 EXCL Communications, Inc. USA OK RADIO 1,823,220 EXCL Communications, Inc. USA CADENA SUPER 1,824,629 ESTRELLA greater than STAR less than EXCL Communications, Inc. USA SUPER ESTRELLA FM 1,838,138 greater than STAR less than EXCL Communications, Inc. USA RADIO TRICOLOR 1,993,998 EXCL Communications, Inc. USA RADIO ROMANTICA 2,021,380 greater than RADIO ROMANTIC less than EXCL Communications, Inc. USA RADIO TRICOLOR 2,025,873 MEXICANISIMA EXCL Communications, Inc. USA MEXICANISMA 75/781,280 =================================================================================================
3. The following marks related to the KINK station were sold to American Radio Systems, Inc. pursuant to the Asset Exchange Agreement, dated April 21, 1997, among LCG, EXCL Communications, Inc., Portland Radio, Inc., Radio Exito, Inc. and American Radio Systems, Inc., as amended on January 5, 1998: "KINK," "SATURDAY NIGHT CD," "FOCUS," "SUNDAY NIGHT JAZZ," "SUNDAY MORNING JAZZ," "TRUE TO THE MUSIC." This Agreement closed on May 27, 1998, but these marks have not yet been recorded as sold. 4. The marks "SUPERTALK" and "RADIO THAT BITES" were sold to Citicasters, Co. pursuant to the Sale Agreement dated February 26, 1997, between EXCL Communications, Inc. and Citicasters, Co. This Agreement closed on May 5, 1997, but these marks have not yet been recorded as sold. 5. The following copyrights were sold to Citicasters, Co. pursuant to the Sale Agreement, dated February 26, 1997, between EXCL Communications, Inc. and Citicasters, Co.: "a stack of records" (PAu918-684), "177 records" (PAu915-406), "the kink primate test, cut 1" (PA 286-755) and "the kink primate test, cut 2" (PA 308-003). This Agreement closed on May 5, 1997, but these marks have not yet been recorded as sold. 6. Internet domain names: EXCLRADIO.COM HISPANICRADIO.COM KLOK.COM KBRG.COM KVRG.COM KMXA.COM KJMN.COM RADIOTRICOLOR.COM SUPERESTRELLA.COM RADIOROMANTICA.COM 7. See, also, Section (e) of Schedule 3.8. Schedule 3.5B ------------- Real Property A. Owned Real Property -------------------- PROPERTY OWNER 5301 Madison Avenue, #402 EMI Sacramento Radio, Inc. /1/ Sacramento, CA -------------------------------------------------------------- 765 Show Case Dr. San Bernardino, CA San Bernardino, Inc./2/ -------------------------------------------------------------- 1605 Simpson Lane, Marysville, CA Marysville, Radio, Inc./3/ -------------------------------------------------------------- B. Real Property Leases -------------------- 1. Lease, dated October 31, 1997, by and between LCG and the Rector, Churchwardens and Vestrymen of Trinity Church in the City of New York. 2. Lease, dated July 30, 1997, by and between Vea Acquisition Corp. and Corporate Realty Income Fund I, L.P. 3. Site Lease, dated January 24, 1995, by and between GPA Enterprises, Inc. and Century Broadcasting Corporation. Consent to Assignment, dated June 4, 1996, by GPA Enterprises, Inc. of the assignment by Century Broadcasting Corporation to Sur Broadcasting of Colorado Inc. 4. Lease, dated January 4, 1994, by and between Pen Nom I Corporation by the Equitable Life Assurance Society of the U.S. and Century Broadcasting Corporation, as amended. Assignment and Assumption and Consent to - ------------- /1/ Subject to any liens or encumbrances set forth in the California Title Association Title Report, dated March 31, 1998 re 5301 Madison Avenue, #402, Sacramento, CA. The underlying indebtedness secured by any liens referenced on this report and showing Greyhound Financial Corporation or First National Bank of Boston as the secured party has been satisfied. LCG will take commercially reasonable steps to remove such liens. /2/ Subject to any liens or encumbrances set forth in the California Title Association Title Report, dated March 26, 1998 re 765 Show Case Dr., San Bernardino, CA. The underlying indebtedness secured by any liens referenced on this report and showing Greyhound Financial Corporation as the secured party has been satisfied. LCG will take commercially reasonable steps to remove such liens. /3/ 3 Marysville, Radio, Inc. merged into Roseville Radio, Inc. Roseville Radio, Inc. later became EMI Sacramento Radio, Inc. This property will be sold upon consummation of the Asset Purchase Agreement dated April 8, 1999 between Huth Broadcasting and EMI Sacramento Radio, Inc. Assignment Agreement, dated June 25, 1996, by and among Pen Nom I Corporation (WHTRI Real Estate L.P. as successor), Century Broadcasting Corporation (Sur Broadcasting of Colorado, Inc. as assignee). 5. Lease of State Lands, dated June 28, 1996, by and between the State of Colorado and Norte Broadcasting, Inc. 6. Lease Agreement and Option to Purchase, dated June 1, 1990, between Villanueva Capital Corp. and Bahia Radio, Inc. (assigned to Metro Mix, Inc.), as amended. 7. Office Lease, dated December 1, 1996, by and between RNM 135 Main, L.P. and Metro Mix, Inc. 8. Assignment of Grants of Easement, dated January 12, 1994, by and between Mt. Wilson FM Broadcasters, Inc. and Norte Broadcasting, Inc. 9. License, by and between Richard D. Sight and Mt. Wilson FM Broadcasters. First Amendment to License Agreement, dated October 4, 1993, by and between Diablo Communications (assignee) and Mt. Wilson FM Broadcasters. Assignment of License Agreement, dated January 12, 1995, by and among Diablo Communications, Inc., Mt. Wilson FM Broadcasters, Inc. and Norte Broadcasting, Inc. 10. Easement Grant, dated September 2, 1997, by and among William E. Jones, Lewis E. Jones, Doris Jones, EXCL Communications, Inc. Sur Broadcasting, Inc., Norte Broadcasting, Inc. and LCG. 11. Tower Lease, dated June 3, 1987, by and among Edward F. Hogan and Cynthia S. Hogan and KMBY Radio, Inc. (assigned to Pacifico Broadcasting, Inc.), as amended. 12. Antenna Space Lease, dated April 23, 1996, by and between Radio Exito, Inc. and Destineer, as amended on December 8, 1997. 13. Lease, dated October 3, 1996, by and between EXCL Communications, Inc. and Candeleria Business Park Associates, L.P. 14. Lease, dated March 17, 1994, by and between Broadcast Properties, Inc. and Commonwealth Broadcasting of Northern California. Sublease Agreement, dated October 9, 1996, by and between Citadel Broadcasting Company (successor to Commonwealth Broadcasting of Northern California) and Sur Broadcasting of New Mexico, Inc. Agreement, dated January 27, 1999, between Citadel Broadcasting Company, EXCL Communications, Inc., Norte Broadcasting of New Mexico, Inc. and Sur Broadcasting of New Mexico, Inc. Antenna Site Lease, dated January 27, 1999, between Citadel Broadcasting Company and Sur Broadcasting of New Mexico, Inc. 15. Radio Antenna and Equipment Space Lease, dated November 1, 1993, by and between SON Broadcasting, Inc. and The Braiker Family Trust d/b/a KOLT. Assignment and Assumption of Lease, dated October 1996, between Crescent Communications L.P. (assignee of The Braiker Family Trust) and Norte Broadcasting of New Mexico, Inc. 16. Lease and Option to Purchase, dated October 29, 1993, by and among Andrew J. Fakas and Eileen M. Fakas as Trustees for the Fakas Family Trust and Redlands Radio, Inc. (now Riverside Radio, Inc.). 17. Lease, dated May 15, 1990, by and between Unum Life Insurance Co. (now American Pacific Financial Corporation) and Henry Broadcasting Company (assigned to Riverside Radio, Inc.), as amended. 18. License Agreement, dated August 11, 1987, between Atlas Land Company and Henry Broadcasting Co. (assigned to EMI Los Angeles Radio, Inc.). 19. License Agreement, dated December 12, 1994, by and between Henry Broadcasting Co. and San Bernardino Radio, Inc. (now EMI Los Angeles Radio, Inc.). 20. Easement, dated July 25, 1986, by and between Orange Show Plaza Associates and Henry Broadcasting Co. (assigned to EMI Los Angeles Radio, Inc.). 21. Restated Easement Agreement, dated February 6, 1987, by and between Orange Show Plaza Associates and Henry Broadcasting Company (assigned to EMI Los Angeles Radio, Inc.), as amended on August 14, 1987 and February 24, 1988. 22. License Agreement, dated February 6, 1987, by and between Orange Show Plaza Associates and Henry Broadcasting Co. Assignment (assigned to EMI Los Angeles Radio, Inc.). 23. Parcel 6 Easement Agreement, dated February 6, 1987, by and between Herbert T. Friedlander/ Trustee of Friedlander Family Trust (successor to Orange Show Plaza Associates) and Henry Broadcasting Co. (assigned to EMI Los Angeles Radio, Inc.) 24. Parcel 6 License Agreement, dated February 6, 1987, by and between Herbert T. Friedlander/ Trustee of Friedlander Family Trust (successor to Orange Show Plaza Associates) and Henry Broadcasting Co. (assigned to EMI Los Angeles Radio, Inc.) 25. Space Lease Agreement, dated August 1, 1994, by and between Kruse Microwave Enterprises and Redlands Radio, Inc. (now Riverside Radio, Inc.). 26. License Agreement, dated November 15, 1995, between Kruse Microwave Enterprises and EMI Los Angeles Radio, Inc. 27. Lease, dated May 27, 1994, by and between Great American Television and Radio Company, Inc. and Fuller-Jeffrey Broadcasting Corporation, Inc. Assignment of Lease, dated August 31, 1994, by Fuller-Jeffrey Broadcasting Corporation, Inc. to Roseville Radio, Inc. (now EMI Sacramento Radio, Inc.). 28. License Agreement, dated October 14, 1994, by and between TOR Broadcasting Corporation and Marysville Radio, Inc. (now EMI Sacramento Radio, Inc.). 29. License Agreement, dated June 1, 1995, by and between Rosebud Properties and Roseville Radio, Inc. (now EMI Sacramento Radio, Inc.). 30. Lease, dated February 1998, by and between EXCL Communications, Inc. and Equifax Credit Information Systems, Inc. Notice of Cancellation, dated October 27, 1999. 31. Lease, dated November 1, 1994, by and between Zufu Properties Co., Ltd. by and through Total Properties Management, and San Bernardino Radio, Inc. (now EMI Los Angeles Radio, Inc.), with Embarcadero Media, Inc. as guarantor, as amended. 32. Storage Agreement, dated December 8, 1995, by and between Zufu Properties Co., Ltd. and San Bernardino Radio, Inc. (now EMI Los Angeles Radio, Inc.). 33. Lease, dated May 5, 1997, by and between Portland Radio Inc. and Citicasters, Inc. 34. Agreement to lease SCA Sub-Carrier Capacity, dated February 1, 1985, between American Diversified Capital Corporation and United Broadcasting Co., and assigned to American Radio Systems, subsequently assigned to Portland Radio, Inc. 35. Lease Agreement dated December 3, 1991 between United Broadcasting Co., d/b/a KBAY and Radio Sedaye Iran, Inc./A. Morovati, and assigned to American Radio Systems, subsequently assigned to Portland Radio, Inc. 36. Agreement dated February 19, 1987 between Audio House, Inc. d/b/a Radio Station KOME and United Broadcasting Co. d/b/a KBAY (Lessee), and assigned to American Radio Systems, subsequently assigned to Portland Radio, Inc. 37. Lease, dated July 27, 1972, and Amendment thereto, dated July 8, 1987, between KNTV Inc. and United Broadcasting Co. for transmitter tower in Santa Clara, California, subsequently assigned to Portland Radio, Inc. 38. Translator Lease Agreement, dated February 6, 1997, between American Radio Systems Corporation, American Radio Systems Radio License Corp. ("ARSLC") and United Broadcasting Co., and assigned to American Radio Systems, subsequently assigned to Portland Radio, Inc. 39. Office Building Lease, dated April 18, 1994, between Gold River Limited and Olympic Broadcasters, Inc. (Tenant), and assigned to American Radio Systems, subsequently assigned to Radio Exito, Inc. 40. Grant of Easement, dated September 22, 1997, between Brush Creek Co. and American Radio Systems, subsequently assigned to Radio Exito, Inc. 41. Radio Tower Lease Agreement, dated July 1, 1990, between Halldark Enterprises (Lessor) and Lobster Communication, Inc., as amended as of April 16, 1996 and January 31, 1997, and assigned to American Radio Systems, subsequently assigned to Latin Communications Inc. 42. Basic Commercial Lease, dated October 22, 1998, between Pacifico Broadcasting, Inc. as Lessee and Jeffrey Meeks as Lessor, for the property located at 339 Pajaro Street, Salinas, CA 93901. 43. Antenna and Equipment Space Lease, dated May 6, 1998, between EXCL Communications (KRZY) as Lessee and Son Broadcasting, Inc. as Lessor, for the property located at 4505 Montbel Place N.E, Albuquerque, NM 87107 (Sur Broadcasting of New Mexico). 44. Lease Agreement, dated June 1, 1995, between Roseville Radio, Inc. as Lessee and American Tower System/Rosebud Properties, Inc. as Lessor, for the property located at 5831 Rosebud Lane Sacramento CA (EMI Sacramento Radio, Inc.). 45. Lease Agreement, dated August 8, 1994, between Airport High Rise, Inc. and Embarcadero Media, Inc. 46. Lease Agreement, dated August 27, 1999, between EXCL Communications, Inc. and WTA Campbell Technology Park LLC. 47. Lease Agreement, dated September 24, 1989, between Colorado State Board of Land Commissioners and Century Broadcasting. Renewal Lease, dated June 26, 1996, between Colorado State Board of Land Commissioners and Norte Broadcasting of Colorado, Inc. 48. Site Agreement, dated September 30, 1999, by and between EMI Sacramento Radio, Inc. and Tom Huth d/b/a Huth Broadcasting. 49. Office Lease, dated January 12, 2000, between Tropicana Office Investments, L.L.C. and EXCL Communications, Inc. 50. Commercial Lease, between Christine Scharff, Trustee and Norte Broadcasting of Nevada, Inc. Schedule 3.5C ------------- Operating Names/Trade Names El Diario/La Prensa EXCL Radio Communications, Inc. EXCL Spanish Network Schedule 3.6 ------------ Capital Structure/Equity Ownership All of the assets of LCG (including, without limitation, all of the issued equity interests of the LCG subsidiaries) are pledged to Suntrust pursuant to: the Credit Agreement, dated October 22, 1999, among Latin Communications Inc., the lenders named there and Suntrust; the Guaranty, dated October 22, 1999, among LCG and the LCG Subsidiaries (other than Latin Communications Group Inc.) in favor of Suntrust; the Pledge Agreement, dated as of October 22, 1999, among Latin Communications Inc., LCG and the LCG Subsidiaries in favor of Suntrust; and the Security Agreement, dated October 22, 1999, among Latin Communications Inc., LCG, the LCG Subsidiaries and Suntrust. 1. Latin Communications, Inc. Authorized Common Shares: 100 Outstanding Common Shares: 100 Ownership: Latin Communications Group, Inc. (100 Shares) 2. Vea Acquisition Corp. Authorized Common Shares: 1,000 Outstanding Common Shares: 100 Ownership: Latin Communications, Inc. (100 Shares) 3. Latin Communications Group Television, Inc. Authorized Shares: 1,000 Outstanding Shares: 100 4. Latin Radio of Washington, D.C., L.L.C. N/A 5. Latin Communications EXCL Inc. Authorized Common Shares: 1,000 Outstanding Common Shares: 100 Ownership: Latin Communications, Inc. (80 Shares) Latin Communications Group, Inc. (20 Shares) 6. EXCL Holdings, Inc. Authorized Common Shares: 100,000 Issued Common Shares: 10,500 Ownership: Latin Communications EXCL, Inc (8,400 Shares) Christopher & Athena Marks (2,100 Shares) 7. EXCL Communications, Inc. Authorized Common Shares: Class A Common: 1,966,111 Class B Common: 3,195,000 Convertible Preferred: 2,150,000 Series II Preferred: 1,200,000 Issued Shares: Class A Common: 1,450,000 Class B Common: 0 Convertible Preferred: 2,150,000 Series II Preferred: 510,931 Ownership: Class A Common: EXCL Holdings, Inc. (1,450,000 Shares) Series II Preferred: Latin Communications Group, Inc. (2,150,000 Shares) Series II Preferred: Latin Communications Group, Inc. (510,931 Shares) 8. Embarcadero Media, Inc. Authorized Common Shares: 1,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. 9. EMI Los Angeles Radio, Inc. Authorized Common Shares: 100,000 Series E Preferred: 7,500 Issued Shares: Common: 100,000 Series E Preferred: 7,500 Ownership: Common: Embarcadero Media, Inc. (100,000 Shares) Series E Preferred: Embarcadero Media, Inc. (7,500 Shares) 10. EMI Sacramento Radio, Inc. Authorized Shares: Common Shares: 200,000 Series C Preferred: 5,000 Issued Shares: Common Shares: 200,000 Series C Preferred: 5,000 Ownership: Common: Embarcadero Media, Inc. (200,000 Shares) Series C Preferred: Embarcadero Media, Inc. (5,000 Shares) 11. Metro Mix, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 12. Norte Broadcasting, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 13. Norte Broadcasting of Colorado, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 14. Norte Broadcasting of New Mexico, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 15. Pacifico Broadcasting, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications Inc. (1,000 Shares) 16. Portland Radio, Inc. Authorized Common Shares: 4,500,000 Series A Preferred Stock: 7,500 Issued Shares: Common: 3,979,732 Series A Preferred: 7,500 Ownership: Common: Embarcadero Media, Inc. (3,979,732 Shares) Series A Preferred: Embarcadero Media, Inc. (7,500 Shares) 17. Radio Exito, Inc. Authorized Common Shares: 25,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. 18. Riverside Radio, Inc. Authorized Common Shares: 1,000 Series B Preferred: 2,600 Issued Shares: Common: 1,000 Series B Preferred: 2,600 Ownership: Common: Embarcadero Media, Inc. (1,000 Shares) Series B Preferred: Embarcadero Media, Inc. (2,600 Shares) 19. Sur Broadcasting Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 20. Sur Broadcasting of Colorado, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 21. Sur Broadcasting of New Mexico, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 22. Sur Broadcasting of San Diego, Inc./4/ Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. 23. Norte Broadcasting of Nevada, Inc. Authorized Common Shares: 5,000 Issued Common Shares: 1,000 Ownership: EXCL Communications, Inc. (1,000 Shares) 24. Latin Communications Group, Inc. Authorized Common Shares: 1,000 Issued Common Shares 1,000 Ownership: Entravision Communication Company, L.L.C. (1,000 Shares) 25. LCG Holdings, L.L.C. Member Capital Contribution: $1,000.00 Contributed By: Latin Communications Group, Inc. Percentage Interest: 100% - ----------------- /4/ This is an inactive corporation, which is currently in the process of being dissolved. To the best of LCG's information, a stock certificate was never issued for these shares. Schedule 3.7 ------------ Subsidiaries, Affiliates and Investments See Schedule 3.1 for subsidiary information. There are no affiliates and/or investments. Schedule 3.8 ------------ Material Contracts A. Collective Bargaining Agreements. --------------------------------- 1. Agreement, dated December 14, 1994, by and between El Diario Associates and the NMDU (incorporating consistent portions of the Agreement effective March 31, 1981 through March 30, 1984 by and between the NMDU, the News and The New York Times). 2. Agreement, dated October 26, 1999, between the Guild and El Diario Associates. 3. Agreement, dated December 14, 1994, between El Diario Associates L.P. and the NMDU (incorporating consistent portions of the Agreement affective March 31, 1981 through March 30, 1984 between NMDU, the New and The New York Times), as amended. B. Material licenses or similar agreements permitting the use of Intellectual -------------------------------------------------------------------------- Property Assets. --------------- 1. Promotion Agreement, dated August 14, 1997, by and between EXCL Communications, Inc. and Logic Communications, Incorporated. 2. Agreement, dated February 28, 1998, by and between LCG and News 12 The Bronx L.L.C. 3. NSN Network Services Satellite Service Agreement, by and between EXCL Communications, Inc. and NSN Network Services Ltd. 4. Promotional Package License Agreement, dated June 27, 1997, by and between EXCL Communications, Inc. and Celestial Mechanix Incorporated. 5. All of the radio stations have Standard License Agreements with RCS Sound. 6. Affiliation Agreement, dated June 10, 1999, between KBUF Partnership and EXCL Communications, Inc. 7. The radio stations have Network Radio Affiliate Agreements with Metro Traffic, Inc. to provide traffic and daily news reports. 8. The radio stations have local blanket radio licenses with the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), SESAC and CBSI and have licenses to receive and use Arbitron reports, including Scarborough and Maximizer reports. 9. The radio stations have programming agreements, music library licenses and production library licenses in the ordinary course of business. 10. Software Consulting Services Agreement, dated January 8, 1999, between El Diario / La Prensa and Software Consulting Services. See, Items 17, 18, 19, 20, 21, 22, 23 and 24 on Schedule 3.11 and Schedule 3.5A. C. Stock Purchase Agreement, Asset Purchase Agreement or other acquisition or --------------------------------------------------------------------------- divestiture agreement (which other agreements have not been fully ----------------------------------------------------------------- performed). --------- 1. Letter of Intent, dated February 17, 2000, between AC Communications Corp., Latin Radio of Washington, L.L.C., EXCL Communications, Inc. and Latin Communications Group. D. Employment, Consulting or Management Agreements (either written or, if ---------------------------------------------------------------------- oral, providing for over $100,000 in payments annually). -------------------------------------------------------- 1. Employment Agreement, dated November 30, 1995, by and between LCG and Athena S. Marks. This Agreement was modified by the Roll-In Agreement, dated February 28, 1997, by and among LCG, Athena S. Marks and Christopher A. Marks. 2. Option extension, dated May 6, 1999, between LCG and Athena S. Marks. 3. Option Agreement, dated May 10, 1999, between LCG and Martin Gausvik. 4. Employment Agreement, dated December 6, 1998, between EXCL Spanish Network and Alejandro Torres. 5. Employment Agreement, dated October 1, 1999, between EXCL Spanish Network and Jeffrey Liberman. 6. Employment Agreement, dated December 16, 1999, between EXCL Spanish Network and Eduardo Sotelo. 7. Compensation Plan, dated January 1, 1999, for Paul Petrilli. 8. Compensation Plan, dated February 6, 1999, for Kim Bryant. 9. Compensation Plan, dated January 7, 1999, for Rob Quin. 10. Compensation Plan, dated January 15, 1999, for Mike Murphy. 11. Compensation Plan, undated document, for David Haymore. J. Real Property Leases -------------------- See, also, Schedule 3.5B and 3.11. K. Contracts with Related Persons ------------------------------ See, Schedule (Contracts w/Related Person). L. Material Agreements. -------------------- 1. Printing Agreement, dated March 12, 1996, by and between Abitibi- Prince, Concept Press, Inc. and LCG. 2. Letter of Agreement, dated April 11, 1997, between El Diario and Concept Press Inc. for the sale of newsprint. 3. Agreement and General Release, dated June 11, 1998, between Carmen Nieves and El Diario - La Prensa. 4. Settlement Agreement, between KTNQ/KLVE, Inc. and EMI Sacramento Radio, Inc. re: LA SUPER X dispute. 5. Agreement re: Easement, effective date September 1, 1997, between Mt. Wilson FM Broadcasters, Inc., and EXCL Communications, Inc., Sur Broadcasting, Inc. and LCG. 6. Agreement, dated January 27, 1999, by and among EXCL Communications, Inc., SUR Broadcasting of New Mexico, Inc., Norte Broadcasting of New Mexico, Inc. and Citadel Broadcasting Company re: KRZY-AM Tower. 7. Settlement Agreement and Mutual Release, dated August 1999, between EXCL Communications, Inc., SUR Broadcasting of Colorado, Inc. and Western Cities Broadcasting, Inc. 8. Release and Settlement Agreement, dated January 29, 1999, by and among LCG, EXCL Communications, Inc., N.W. Incentive Partners and Lombard/Nogales Radio Partners, L.P. 9. Each of the radio stations has a Representation Agreement with Interp. 10. Non-Competition Agreement by and between LCG and Martin D. Parson. Schedule 3.9 ------------ Media Licenses See, Schedule 3.5A. Schedule 3.10 ------------- Taxes and Assessments Tax Audits - ---------- 1. On March 10, 1998, LCG received written notice from the Internal Revenue Service that its 1996 Federal tax return had been assigned to an agent for examination. LCG has provided requested information to the agent and has not received any response since providing such information. 2. On April 16, 1998, LCG received notice of an audit by the New York State Department of Taxation and Finance in connection with LCG's New York State Franchise Tax Returns (Forms CT3) filed for the years ended December 31, 1995 and 1996. After the field work was completed, the New York State Department of Taxation and Finance sent LCG an assessment for $170,000. LCG's accountants are disputing this amount. Though there have been no additional tax assessments, LCG's accountants advised LCG that customarily local tax authorities file assessments after state tax assessments have been made. 3. On May 21, 1998, Vea Acquisition Corporation received notice of a desk audit by The City of New York Department of Finance of Vea's New York City Tax Returns (Form NYC-3L) for the period ending December 31, 1996. Vea responded to the document request, and on August 20, 1998, Vea received notice from The City of New York Department of Finance that based on the information submitted to the Department, the Department had determined that no further action was necessary at that time. 4. EXCL received a notice of assessment with respect to personal property taxes on its transmitter and other personal property for KRRE, Sacramento, for taxes in the amount of approximately $5,000. In addition, the landowner is seeking to pass through an increase in the landowner's real estate taxes arising from the increased value of its land due to the antenna site rental payments. This assessment totals $17,854 per annum but the landowner's claim is being disputed by EXCL and American Radio Systems (as the prior lessee). The applicable document provides that the lessor is responsible for all real estate taxes. 5. Vea Acquisition Corp. Inc. has been audited by the New York State Department of Labor with respect to its payment of unemployment insurance taxes for the period from March 1995 through February 1997. Vea Acquisition Corp. Inc. is disputing the results of this audit. Vea Acquisition Corporation has paid $4,000 under protest to settle the matter. Schedule 3.11 ------------- Material Litigation A. Litigation ---------- 1. The National Labor Relations Board (the "NLRB") issued a formal complaint against LCG and the Guild alleging that former El Diario/ La Prensa reporter Carmen Nieves was unlawfully terminated because of her union activities, and that the Guild failed to adequately represent her. A trial commenced in November 1996 before an NLRB administrative law judge and continued in 1998. Nieves also filed a charge with the New York City Commission on Human Rights alleging discrimination based on her sex. On June 11, 1998, the NLRB claim and the New York City Commission on Human Rights claim were settled in connection with a $75,000 payment from LCG and a $15,000 payment from the Guild. In 1999, Nieves filed for arbitration under the settlement agreement with El Diario/La Prensa claiming a violation of the "no disparagement" clause and seeking $100,000 in damages. An arbitration hearing has not yet been scheduled in the matter. 2. On July 17, 1997, correspondence was received from counsel for Greg Reed, a former employee of Embarcadero Media, Inc., raising certain issues arising under the Consolidated Omnibus Budget Reconciliation Act of 1985. EMI responded on September 30, 1997 and, to date, nothing further has been communicated. On October 30, 1997, a Notice of Claim for Indemnity pursuant to Section 7.2.1 of the Stock Purchase Agreement dated September 30, 1996, was served with respect to this litigation upon Lombard/ Nogales Radio Partners, L.P. and N.W. Incentive Partners, L.P. The claim notice was rejected on November 11, 1997. 3. In 1997, the Guild filed a request for arbitration over LCG's alleged failure to properly pay 1994 wage increases to employees. A hearing in that case is scheduled to resume January 19, 2000. 4. In April 1999, the Guild filed an arbitration claim alleging that former employee, Rosa Caracal, was improperly terminated in May 1997 and seeking her reinstatement and back pay. The case is still pending in arbitration. 5. In early 1999, LCG received notice of an arbitration claim filed by the Guild alleging management performance of work under Guild jurisdiction. An arbitration hearing date has been scheduled for January 13, 2000. 6. On November 7, 1990, El Diario Associates, L.P. was named as a defendant in a civil action captioned Hayden Zambian v. El Diario --------------------------- Associates d/b/a El Diario/ La Prensa and Mario Sandoval, presently -------------------------------------------------------- pending in the Supreme Court of the County of Queens, New York. Plaintiff, representing herself pro se, seeks $1,000,000 for El Diario's publication of one or more allegedly "defamatory, libelous and prejudicial" articles and/ or letters-to-the-editor. Neither discovery nor motion practice has begun. 7. On September 22, 1993, El Diario was served with a summons and notice in an action entitled Guillermo Davila, et al. v. El Diario Associates, ------------------------------------------------ et. al., Index No. 93121648. The summons and complaint named both El ------ Diario and El Diario reporter Hector Rodriguez Villa, and sought $20 million dollars for El Diario's publication of allegedly "false, malicious and libelous" articles. On January 24, 1994, El Diario filed an answer, denying all allegations of the complaint and asserting affirmative defenses. Since the filing of the answer, LCG is unaware of any steps taken by plaintiffs to pursue the litigation. 8. In November 1995, Augustin Garcia, president of the Dominican Chamber of Commerce in New York, filed a complaint against LCG and others in New York State Supreme Court, New York Court, alleging libel in connection with the publication of an article in El Diario/ La Prensa concerning alleged wrongful conduct by plaintiff in connection with the selection for the offices of that entity. Plaintiff seeks $1,000,000, including punitive damages. In November 1996, LCG sent a letter to the plaintiff informing him that LCG planned to ask for a discontinuation based on the frivolousness of the plaintiff's claim. The plaintiff's counsel then made a motion to withdraw as counsel. LCG is unaware of any other action taken since then by the plaintiff. 9. EXCL has recently learned of the existence of "La Tricolor" Hispanic magazine in San Jose, CA and may send a cease and desist letter. 10. On August 19, 1999, EXCL Communications, Inc. filed a complaint against Spanish Broadcasting System, Inc. and Guillermo Prince alleging False Designation of Origin/Affiliation, Service Mark Infringement, Trademark Dilution, Unfair Trade Practices and Common Law Unfair Competition. This complaint stems from defendants' alleged use of EXCL's MEXICANISIMA mark and DONA KIKA name. On October 4, 1999, Spanish Broadcasting System, Inc. filed a counterclaim alleging that EXCL Communications, Inc. misappropriated the use of the "Dona Kika" character established by one of its radio personalities. 11. EXCL Communications, Inc. was served with a Civil Investigative Demand by the Department of Justice on October 22, 1996 in respect of an investigation of Citadel Communications' acquisition of certain assets of Crescent Communications. Department of Justice counsel has advised LCG that neither EXCL Communications, Inc. nor LCG is a target of the investigation. 12. On or about March 18, 1998, EXCL Communications, Inc./KBRG received a letter from counsel for Heftel Broadcasting's KSOL-FM stations in San Francisco, asserting the existence of claims of tortious interference with contract and economic advantage and conversion arising from the alleged destruction of KSOL promotional materials by EXCL Communications, Inc. employees. No further action has been taken. 13. In June 1998, EXCL Communications, Inc. received a subpoena for documents in connection with a grand jury payola investigation, and in July 1998, LCG complied with the subpoena. 14. Potential claims may exist against and on behalf of EXCL Communications, Inc. in connection with an easement that it purchased from Mount Wilson Broadcasting, Inc. for access to a radio tower in the Salinas area. The access road, which was on the easement at the time of purchase, was allegedly not in compliance with regulations and washed out during a rain storm. Various neighbors have indicated that they have lost access due to the flooding, although it is not yet clear whether they are asserting any claim against EXCL Communications, Inc. or Mount Wilson Broadcasting, Inc. EXCL Communications, Inc. may have an indemnity claim against Mount Wilson with respect to these claims. EXCL Communications, Inc. has entered into a settlement agreement with Mt. Wilson providing alternate access to the transmitter and preserving EXCL's indemnity claims. 15. LCG's landlord, The Rector, Churchwardens and Vestrymen of Trinity Church in the City of New York ("Trinity Church") filed a third-party claim against LCG d/b/a El Diario / La Prensa demanding indemnification in connection with a lawsuit filed against it by El Diario / La Prensa employee Flor Montanez. The plaintiff seeks $500,000 in damages for personal injuries arising from a fall in an internal staircase in LCG's building. On April 29,1999, Trinity Church filed a stipulation of discontinuance discontinuing its third-party action against LCG. 16. EXCL Communications, Inc. is currently involved in a dispute with Citadel Broadcasting with respect to ownership of the KRZY tower in Albuquerque, New Mexico. In May 1996, EXCL assumed the lease for the property on which the tower is located pursuant to an Assignment and Assumption Agreement by and between EXCL and Citadel. The parties reached an agreement acknowledging EXCL's uncontested right to ownership of the tower. Pursuant to the agreement, EXCL provided a sublicense of the tower with a credit against sublease rentals. 17. The owner of the land where the KRRE antenna is located is seeking to pass through an increase in the landowner's real estate taxes arising from the increased value of its land due to the antenna site rental payments. This assessment totals $17,854 per annum but the landowner's claim is being disputed by EXCL Communications, Inc. and American Radio Systems (as the prior lessee). The applicable document provides that the lessor is responsible for all real estate taxes. See, also Schedule 3.10 B. Other Matters ------------- 1. Facilities for an auxiliary antenna for use by Station KLOK-FM were constructed by the prior Licensee and are available for use. However, no application for a license to cover the construction permit was filed and the permit has expired. The permit needs to be reinstated and a license application filed in order to regularize the operation of the facility. See, also Schedule 3.10. Schedule 3.18 ------------- Fees and Commissions None. Schedule 3.19 ------------- Publications See, Schedule 3.5A. Schedule 3.21 ------------- Pending FCC Matters None. Schedule 6.2 ------------ Permitted Indebtedness None. Schedule 6.7 ------------ Permitted Additional Investments None. EX-10.10 9 0009.txt SECURITY AGREEMENT DATED APRIL 20, 2000 EXHIBIT 10.10 SECURITY AGREEMENT ------------------ This SECURITY AGREEMENT, is dated as of April 20, 2000, and made by LATIN COMMUNICATIONS GROUP INC., a Delaware corporation (the "Grantor"), in favor of ------- UNION BANK OF CALIFORNIA, N.A., a national banking association, as agent (the "Agent") for the Lenders (as defined in the Loan Agreement referred to below, - ------ the "Lenders"). ------- RECITALS -------- A. Concurrently herewith, the Agent, the Lenders and LCG Acquisition Corporation ("LCGAC") are entering into a Term Loan Agreement dated as of April ----- 20, 2000 (said Agreement, as it may hereafter be amended, modified or restated from time to time, being called the "Loan Agreement"). -------------- B. LCGAC is a wholly-owned subsidiary of Entravision Communications Company, L.L.C., a Delaware limited liability company ("Entravision"), and was ----------- formed for the purpose of consummating the Merger described below. Concurrently with the funding contemplated by the Loan Agreement, LCGAC will merge with and into the Grantor, with the Grantor being the survivor of such merger (the "Merger"). As a result of the Merger, the Grantor will assume all obligations ------ and liabilities of LCGAC under the Loan Agreement. Entravision owns and operates a number of successful Spanish language radio and television stations, and the Grantor anticipates benefiting from becoming a subsidiary of Entravision. C. It is a condition precedent to the extension of credit by the Lenders under the Loan Agreement that the Grantor shall have executed and delivered this Agreement. D. Terms defined in the Loan 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 Loan Agreement are incorporated herein by reference. AGREEMENT --------- NOW, THEREFORE, in order to induce the Lenders to enter into the Loan Agreement and for other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, the 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 Loan 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 the 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 the 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 other than the FCC licenses), 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 the Grantor or in which the Grantor may have any interest, however created or arising; (b) All present and future general intangibles, including without limitation the proprietary rights of the Grantor in all Media Licenses (including without limitation the FCC licenses for the Stations described in Schedule 3.9 attached to the Loan Agreement and including, without limitation, - ------------ goodwill, going concern value, all of the 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 the Grantor is prohibited at that time from granting a security interest therein pursuant to the Communications Act, 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 the Grantor now or hereafter may become entitled, however arising, all other refunds, all commitments to extend financing to the 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 the 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 the Grantor has any interest which are maintained with any bank, savings and loan association, credit 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 the 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 the 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 -2- equipment, videotapes, audio tapes and other recorded media, tools, molds, dies, furniture, furnishings, fixtures, trade fixtures, printing equipment, motor vehicles and all other goods used in connection with or in the conduct of the 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 the Grantor; (j) All rights, remedies, powers and/or privileges of the 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: ---------- (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 Loan Agreement (as ------------- such Schedule may be supplemented from time to time in accordance with the terms of the Loan 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 -3- 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 the Grantor's rights corresponding thereto throughout the world; (ii) rights under or interests in any copyright license agreements with any other party, whether the 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 Loan Agreement ------------- (as such Schedule may be supplemented from time to time in accordance with the terms of the Loan 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 the 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. "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 the Grantor in any Pledged Entity. "Limited Liability Company Notice" shall have the meaning ascribed to it in -------------------------------- Section 4(b) of this Agreement. "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 Loan Agreement (as such Schedule may be ------------- supplemented from time to time in accordance with the terms of the Loan Agreement), (ii) licenses pertaining to any such mark whether the Grantor is licensor or licensee including, without limitation, the licenses listed on Schedule 3.5A to the Loan Agreement (as such Schedule may be supplemented from - ------------- time to time in accordance with the terms of the Loan Agreement), (iii) all income, royalties, damages and payments now and hereafter due and/or payable with respect to any such mark or -4- 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 the 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 Loan Agreement (as such Schedule may be ------------- supplemented from time to time in accordance with the terms of the Loan Agreement), (ii) licenses pertaining to any patent whether the 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 Company Interests. "Pledged Entity" means each limited liability company set forth in Schedule -------------- -------- A attached hereto, together with any other limited liability company in which - - the Grantor may have an interest at any time. "Pledged Limited Liability Company Interests" means all interests in any ------------------------------------------- Pledged Entities held by the 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 the Grantor in respect of such Limited Liability Company Interests; (iii) all of the 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 the 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 -5- 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 the 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 the 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 the -------- Grantor or any Affiliate of the 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 the 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 The 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 the 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. 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 the Grantor now or hereafter existing under any Loan Document, whether for principal, interest, fees, expenses or otherwise, including without limitation all obligations of the 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 2.6(c) of the Loan Agreement) specified in the Loan Agreement on all or any part of any of such obligations after the filing of any petition or pleading against the 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 the 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 -6- 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 the 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 the Grantor to the relevant Pledged Entity, and the 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 the Grantor, to transfer to or to direct the Grantor or any nominee of the 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, the Grantor shall execute and deliver to the Agent, at the Grantor's expense, all such financing statements and other instruments, certificates and documents (including notices to financial institutions holding deposit accounts of the 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 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, the 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 -7- request, in order to perfect and preserve, with the required priority, the security interests granted, or purported to be granted hereby; (iv) upon the 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 the 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 the Grantor now has or hereafter acquires an interest which by its terms prohibits assignment, the 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) The 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 the 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) The 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 the Grantor's publication or registration, or application for registration, of any copyright under the Copyright Act, the 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 Loan Agreement to reflect the ------------- publication or registration of such copyright or application therefor. Upon the Grantor's obtaining any rights and interests in any additional Marks, the 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 Loan ------------- Agreement to reflect such additional Marks. Upon the Grantor's obtaining any rights and interests in any additional Patents, the 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 Loan Agreement to reflect such ------------- additional Patents. Upon the 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, the 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 the Grantor's receipt or acquisition of any additional Limited Liability Company Interest, the 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 -8- 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, the Grantor 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, the 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 the 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 Communications Act), 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 any 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), the Lenders and the 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. The 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 -9- 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 Loan Agreement or the other Loan Documents; provided, however, that the Grantor shall not exercise any such -------- ------- right if it would result in a Default. (b) Dividend and Distribution Rights. Subject to the terms of the Loan -------------------------------- Agreement, the 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 Loan 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 the Grantor, be received in trust for the benefit of Secured Party, be segregated from the other property of the 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 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: (a) Voting, Dividend and Distribution Rights. At the option of the ---------------------------------------- Agent, all rights of the Grantor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 6(a) above, and to receive the dividends and distributions that 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 that are received by the Grantor contrary to the provisions of Section 7(a) of this Agreement shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of -10- the 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 The 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) that 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 the 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 the 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. The 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 the 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 all Obligations have been indefeasibly paid in full. 9. Copyrights ---------- (a) Royalties. The 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 the Grantor. (b) Restrictions on Future Agreements. Subject to the terms hereof and --------------------------------- of the Loan Agreement, the Grantor shall be permitted to manage, license and administer its Copyrights, Patents and Marks in such manner as the Grantor in its reasonable business judgment deems desirable; provided, however, that the -------- ------- Grantor will not, 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 the Grantor. -11- (c) Duties of Grantor. The 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 the Grantor as the Agent reasonably deems appropriate, (iii) place notices of copyright on all copyrightable property produced or owned by the 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 the Grantor's rights in the Copyrights that are or shall be necessary in the operation of the 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 Grantor. 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 Grantor and shall be added to the Obligations. 10. Patents and Marks ----------------- (a) Royalties. The 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 the 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 the Grantor. (b) Restrictions on Future Agreements. The Grantor will not, without the --------------------------------- Agent's prior written consent, abandon any Patent or Mark in which the 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 the Grantor's obligations under this Agreement, and the 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 the Grantor. (c) Duties of Grantor. The 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 and no Commitment remains outstanding, (ii) upon the occurrence and during the continuance of an Event of Default, make application on unpatented but patentable inventions owned by the Grantor and on Marks, as the case may be, as the Agent reasonably deems 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 Grantor. The Grantor shall not abandon any right to file a Patent application or Mark application without the consent of the Agent. The 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. The Grantor shall notify the Agent of any suits it commences to enforce the Patents and Marks and shall -12- provide the Agent with copies of any documents reasonably requested by the Agent relating to such suits. 11. Grantor's Representations and Warranties. The 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 the Grantor, where the Grantor keeps its records concerning the Collateral and the chattel paper evidencing the Collateral, is located at the address set forth for the 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 that evidence any Account are located at the addresses listed on Schedule C attached hereto; and (iv) the Grantor has exclusive possession and - ---------- control of the Equipment and the Inventory. (b) The 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 Loan Agreement. The 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 Party will have a first-priority (except for any Liens or security interests permitted under Section 6.3 of the Loan Agreement that 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. (d) No consent of any Person, including any partner in a partnership with respect to which the Grantor has pledged its interest as a Pledged Partnership Interest or any member in a Pledged Entity, is required for the pledge by the Grantor of the Collateral other than consents required under the agreements described on Schedule 3.2 to the Loan 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 the Grantor 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 ---------- Partnership Interests described on Schedule A attached hereto constitute all of ---------- the partnerships or joint ventures in which the Grantor has an interest, and the 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 the Grantor and the Grantor's respective percentage interest in each such Pledged Entity is as set forth on Schedule A attached hereto. The Pledged ---------- -13- Limited Liability Company Interests described on Schedule A constitute (i) 100% ---------- of the Limited Liability Company Interests owned by the Grantor, and (ii) 100% of the Limited Liability Company interests of each Subsidiary directly owned by the Grantor. (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 Grantor hereby or for the execution, delivery or performance of this Agreement by the Grantor, 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) The Grantor does not now own, is not a licensee of, and has not applied for any Patents. The Grantor does not now own, is not a licensee of, and has not applied for any Marks, other than those set forth on Schedule 3.5A to the Loan Agreement, none of which have been registered with, or for which an application for registration has been made with, any Governmental Authority. (h) The Grantor does not now own, is not a licensee of, and has not 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 the Grantor [(other than any payroll 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 the Grantor to the 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, the Grantor covenants and agrees as follows: (a) The 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 the 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) The 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 -14- appropriate and applicable, will otherwise deal with the Collateral in all such ways as are considered customary practice by owners of like property. (d) The Grantor will take all reasonable steps to preserve and protect the Collateral. (e) The Grantor will maintain all insurance coverage required pursuant to the Loan Documents. (f) The Grantor will promptly notify the Agent in writing in the event of any material damage to the Collateral from any source whatsoever. (g) The Grantor will not (i) establish any location of Inventory or Equipment not listed on Schedule B hereto, (ii) move its principal place of ---------- business, chief executive office 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 Loan Agreement, except ------------- upon not less than 30 days' prior notice to the Agent and the Grantor's prior compliance with all applicable requirements of Section 5 hereof necessary to perfect the Secured Party's security interest hereunder. (h) The Grantor shall not withdraw as a member of any Pledged Entity, or file or pursue or take any action that 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. (i) Subject to the provisions of Section 16(j) hereof, the 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 the 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 the 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 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 the Grantor and its Subsidiaries with officers and employees of the Grantor and its Subsidiaries and with its Accountants or (b) if a Default has occurred and is continuing, at the expense of the Grantor, perform any obligation of the Grantor under this Agreement. At any time and from time to time, at the expense of the Grantor, the Agent (for the benefit of the 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 the Secured Party; (ii) at any time and from time to time request from obligors on the Collateral, in the name of the Grantor or in the name of the Secured Party, information concerning the Collateral and the amounts owing thereon; and (iii) after an Event of Default has occurred and is continuing, direct -15- obligors under the contracts included in the Collateral to which the Grantor is party to direct their performance to the Agent or the Lenders. The 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 the 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 the 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 the Grantor's 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. The Grantor shall continue to be liable for performance of its obligations under such contracts. 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 the Grantor has pledged its interest as a Pledged Limited Liability Company Interest or a Pledged Partnership Interest, and the Agent and the 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 the 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 the 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 the 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 Loan Agreement, the 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, the 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 the Grantor in trust for the Secured Party and immediately delivered in kind to the Agent (duly endorsed to the Agent, if required), to be -16- 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 the 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 the Grantor hereby authorizes the Agent to affix, by facsimile signature or otherwise, the general or special endorsement of the 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 the Grantor, to the same extent as though it were manually executed by the duly authorized representative of the 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 the 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, invested in investments permitted by Section 6.7(c) of the Loan Agreement. Nothing herein shall obligate the 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 the Grantor's obligations with respect thereto, or otherwise, and, subject to the terms of Section 9.7 of the Loan 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 Loan 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 Grantor, and the receipt of any of the same by the 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 the 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. -17- 16. Remedies -------- (a) Rights Upon Event of Default. Upon the occurrence and during the ---------------------------- continuance of an Event of Default, the 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 the 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 the 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 the 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 the Secured Party; (e) 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; (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 the Secured Party or in the name of the 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 the Secured Party or in the name of the 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 the 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 the 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 the Agent or the Grantor may be applied by the Agent, without notice to the 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 -18- 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 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 the Grantor for such purposes and for such periods of time as reasonably required by the Agent. The 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 the Grantor or elsewhere, and will make available to the Agent, free of cost, all premises, equipment and facilities of the 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 notice required by Section 7 of the Loan 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 the 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 the Agent, or at the 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 the 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, the Grantor hereby grants to the Agent and the Lenders a license or other right to use, without charge, the 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 the Grantor -19- 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 the Grantor at its address set forth on the signature page hereto or delivered or otherwise sent to the Grantor, at least five (5) Business Days before the date of the sale. The 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 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, the Grantor agrees to the extent permitted by applicable law that if such Collateral is sold for a price which is commercially reasonable, then (A) the Grantor 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 the Grantor in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale. The 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 the 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 Grantor or any other Person claiming through the Grantor, and the 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. The Secured -20- 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, to be paid over to the Grantor or to whomsoever may be lawfully entitled to receive such surplus. (h) Certain Waivers. To the extent permitted by applicable law, the --------------- 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. (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. ---------------------------------- (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 and the terms of each Media License, including, to the extent applicable under the Communications Act 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 Loan 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, the 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 the 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 -21- Authority, if required) any necessary prior 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. The Grantor hereby agrees to authorize (including the 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 the Grantor's approval is required by the court and the Grantor shall refuse to authorize such transfer or assignment, then, to the extent permitted by the Communications Act in effect at such time and provided that the Grantor has been given 5 Business Days' prior written notice telecopied to its telecopier number set forth on the signature page hereof, and the Grantor has not responded by executing any such applications or other instruments, the clerk of the court may execute in the place of the 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, the 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 Communications Act for approval of the transfer or assignment of any portion of the Collateral or any Media License. The 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. (k) Notice. The Agent shall use reasonable efforts to give the 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 subject to Section 16(j) hereof, the Grantor hereby irrevocably appoints the Agent as the Grantor's attorney-in-fact, effective upon and during the continuance of an Event of Default, with full authority in the place and stead of the Grantor, and in the name of the 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 that the Grantor is obligated to do under this Agreement; (c) to prepare, sign, file and record, in the 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 -22- 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 that 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. The 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. 18. Costs and Expenses The 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 the 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 Grantor on demand therefor. 19. Transfers and Other Liens The Grantor agrees that, except as ------------------------- specifically permitted under the Loan 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 Loan Agreement or any other Loan Document. 20. Understandings With Respect to Waivers and Consents The Grantor --------------------------------------------------- warrants and agrees that each of the waivers and consents set forth herein are made with full knowledge of its 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 the Grantor otherwise may have against the 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 The 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. -23- 22. Amendments, Etc No amendment or waiver of any provision of this --------------- Agreement nor consent to any departure by the 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 Loan 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 Loan Agreement, and if to the Agent, to the address set forth for it in Section 9.2 of the Loan Agreement and if to the Grantor, to the address set forth for it on the signature page hereof. 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, (ii) be binding upon the 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 Loan Agreement. Subject to the terms of the Loan Agreement, any Lender may assign or otherwise transfer any Loans, its Commitment 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. The 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 Loan -------- ---- Agreement or any other Loan Document, none of the rights or obligations of the Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Lenders. 25. Release of Grantor (a) This Agreement and all obligations of the ------------------ 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 have expired or have otherwise been terminated. Upon such release and termination of all Obligations and such expiration or termination of all Commitments and the security interest hereunder, all rights in and to the Collateral pledged or assigned by the Grantor hereunder shall automatically revert to the Grantor, and the Agent and the Lenders shall return any pledged Collateral in their possession to the 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 the Grantor, or to the Person or Persons legally entitled thereto, and to evidence or document the release of the interests of the Secured Party arising under this Agreement, all as reasonably requested by, and at the sole expense of, the Grantor. 26. GOVERNING LAW THIS AGREEMENT 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 -24- RULES), 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. 27. Covenant Not to Issue Uncertificated Securities The 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 The --------------------------------------------------------------- Grantor represents, warrants and covenants to the 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 the Grantor or as otherwise permitted under the Loan 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 ------------------------------------------------------------------ The Grantor represents, warrants and covenants to the 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 the Grantor or as otherwise permitted under the Loan 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. Alternative Dispute Resolution Section 9.12 of the Loan Agreement is ------------------------------ incorporated herein by this reference; provided, however, that all references -------- ------- therein to "Obligor" shall mean and be references to "Grantor," and all references therein to "Section 9.12" shall mean and be references to "Section 30." 31. Copies of Certificates, Etc Whenever the 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. -25- IN WITNESS WHEREOF, the Grantor has executed this Agreement by its duly authorized representative as of the date first written above. GRANTOR ------- LATIN COMMUNICATIONS GROUP INC. By: /s/ Walter F. Ulloa Name: Walter F. Ulloa Title: Chairman/CEO Address for Notices: 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Attention Walter F. Ulloa Jeanette Tully Telecopy: (310) 447-3899 S-1 STATE OF CALIFORNIA, ) ) ss. County of Los Angeles ) On April __, 2000, before me, __________________________, a Notary Public in and for the State of California, personally appeared_________________, 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 _________________________ (Seal) Latin Communications Group, Inc. Security Agreement Schedule A ---------- Pledged Collateral 1. Pledged Stock Certificates --------------------------
Number Holder* Issuer of Shares ------ ------ --------- Latin Communications Group, Inc. Latin Communications, Inc. 100
* Holder owns 100% interest in Issuer 2. Pledged Partnership Interests ----------------------------- None. 3. Pledged Limited Liability Company Interests ------------------------------------------- None Schedule B ---------- Locations of Equipment and Inventory Encumbrances ------------
- ----------------------------------------------------------------------------------------------------------------------- Secured Filing Year No. Debtor Party(ies) Collateral Location UCC No. Filed --- ------ ---------- ---------- -------- ------- ----- - ------------------------------------------------------------------------------------------------------------------------ 1 Latin Macrolease Proceeds, New York 168787 8/18/95 Communications International Corp., leases, specific Group Inc. assigned to Wasco equipment Funding Corp. (computer equipment) - ------------------------------------------------------------------------------------------------------------------------ 2 Latin Macrolease Computer New York 95PN35936 8/21/95 Communications International Corp., equipment County, NY Group Inc. assigned to Wasco Funding Corp. - ----------------------------------------------------------------------------------------------------------------------- 3 Latin Sanwa Business Specific New York 078888 4/19/96 Communications Credit Corporation equipment Group Inc. (1996 Mitsubishi Forklift) - ------------------------------------------------------------------------------------------------------------------------ 4 Latin Sanwa Business 1996 New York 17706 4/22/96 Communications Credit Corporation Mitsubishi County, NY Group Inc. Forklift - ----------------------------------------------------------------------------------------------------------------------- 5 Latin BankBoston N.A.* Products, New York 172831 8/11/98 Communications proceeds, Group Inc. contract rights, accounts - -----------------------------------------------------------------------------------------------------------------------
* Termination statements have been filed with respect to these UCC liens, but LCG has not received evidence from the relevant state authority that such terminations are effective. Schedule C ---------- Locations of Books and Records 1. Chief Executive Office ---------------------- This information will be provided post closing once the location of the Chief Executive's Office has been determined. 2. Locations of Account Records, Material Contracts and Chattel Paper ------------------------------------------------------------------ This information will be provided post closing once the location of the Chief Executive's Office has been determined. Schedule D ---------- Deposit Accounts ----------------
- ---------------------------------------------------------------------------------------------------------- Entity dba Corporate Name Bank Location Account Number - ---------------------------------------------------------------------------------------------------------- "LCCI" Latin Communications Bank of 100 12336-31894 Group Inc. America 12334-31895 - ---------------------------------------------------------------------------------------------------------- "HOLDINGS" Exel Holdings Inc. Bank of 100 -0- America - ---------------------------------------------------------------------------------------------------------- "ESN" & "CORP." Exel Communications Bank of 100 12334-20004 Inc. America 12338-20003 12331-29228 12330-20008 12338-20002 - ---------------------------------------------------------------------------------------------------------- "KSSE-FM" EMI Los Angeles Radio Bank of 375 12331-23924 Inc. America 12339-23925 12339-29229 12330-20006 - ---------------------------------------------------------------------------------------------------------- `KLOK-AM" Metre Mix Inc. Bank of 125} 12338-28007 "KBRG-FM" Portland Radio Inc. America 125} 12338-23770 12336-29230 12330-20006 - ----------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Entity dba Corporate Name Bank Location Account Number - ---------------------------------------------------------------------------------------------------------- "KMXM-AM" Norte Broadcasting of Key Bank 300} 12336-21913 Colorado Inc. 5950 South "KJMN-FM" Willow Drive 300} 12334-23772 Sur Broadcasting of 12334-29231 Colorado Inc. Englewood, 60750004685 CO 80111 (303) 694-2744 Attn: Jim Campbell - ---------------------------------------------------------------------------------------------------------- "KCAL/KSZZ" Riverside Radio Inc. Bank of 425 12338-23930 America 12336-23931 12332-29232 12330-20006 - ---------------------------------------------------------------------------------------------------------- "KRCX-FM" EMI Sacramento Radio Bank of 400} 12332-23933 Inc. America "KRRE-FM" Radio Exito Inc. 400} 12333-23928 12330-29233 12330-20006 - ---------------------------------------------------------------------------------------------------------- "KRZY-AM" Sur Broadcasting of Bank of 350} 12330-23519 New Mexico Inc. America "KRZY-FM" 350} 12332-23773 Norte Broadcasting of New Mexico Inc. 12338-29234 12330-20006 - ---------------------------------------------------------------------------------------------------------- KRNV-FM" Norte Broadcasting of Bank of 450 12333-32697 Nevada Inc. America 12331-32698 12339-32699 12330-20006 - ----------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Entity dba Corporate Name Bank Location Account Number - ---------------------------------------------------------------------------------------------------------- "KVBC-FM" Excel/Sextant Bank of 475 12334-32700 Broadcasting Company America 12332-32701 12330-32702 12330-20006 - ---------------------------------------------------------------------------------------------------------- "KSES-AM" Sur Broadcasting Inc. Bank of 225} 12338-20021 "KSES-FM" Pacifico Broadcasting America 225} 12336-23771 Inc. "KLOK-FM" Norte Broadcasting Inc. 225} 12336-29235 12330-20006 - --------------------------------------------------------------------------------------------------------
Schedule E ---------- UCC Filing Offices See Schedule B. Schedule F ---------- Form of Limited Liability Company Notice [Letterhead of Grantor] TO: [Name of Pledged Entity] Notice is hereby given that, pursuant to the Security Agreement (a true and correct copy of which is attached hereto), dated as of April ___, 2000 (as amended, modified, restated or supplemented from time to time in accordance with the terms thereof, the "Agreement"), by LATIN COMMUNICATIONS GROUP INC. (the "Grantor") in favor of Union Bank of California, N.A., as agent (the "Agent") for the lenders described therein, the Grantor has pledged and assigned to the Agent for the benefit of the Secured Party (as defined in the Agreement), and granted to the Agent for the benefit of the Secured Party a continuing security interest in, all right, title and interest of the Grantor, whether now existing or hereafter arising or acquired, as a member in [NAME OF PLEDGED ENTITY] (the "Limited Liability Company"), and in, to and under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] (the "Limited Liability Company Agreement"), as such security interest is more particularly described in the Agreement. Pursuant to the Agreement, the Limited Liability Company is hereby authorized and directed to register the Grantor's pledge to the Agent on behalf of the Secured Party of the interest of the Grantor on the Limited Liability Company's books. The Grantor hereby requests the Limited Liability Company to indicate the Limited Liability Company's acceptance of this Notice and consent to and confirmation of its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Agent on behalf of the Lender. LATIN COMMUNICATIONS GROUP INC. By:______________________________________ Name:____________________________________ Title:___________________________________ Form of Acknowledgment See attached. EX-10.11 10 0010.txt PLEDGE AGREEMENT DATED APRIL 20, 2000 EXHIBIT 10.11 PLEDGE AGREEMENT ---------------- This PLEDGE AGREEMENT, is dated as of April 20, 2000, and made by WALTER F. ULLOA and PHILIP C. WILKINSON (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 Loan Agreement referred to below, ----- the "Lenders"). ------- RECITALS -------- A. Concurrently herewith, (a) the Agent, the Lenders and LCG Acquisition Corporation are entering into a Term Loan Agreement dated as of April 20, 2000 (said Agreement, as it may hereafter be amended, modified or restated from time to time, herein referred to as the "Loan Agreement"), and (b) the Pledgors are -------------- entering into a 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"). --------- B. The Loan Agreement requires, and the Pledgors desire, that the Pledgors' obligations under the Guarantee be secured by this Agreement. C. Terms defined in the Loan 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 Loan Agreement are incorporated herein by reference. AGREEMENT --------- NOW, THEREFORE, in order to induce the Lenders to enter into the Loan Agreement and for other good and valuable consideration, the receipt and adequacy of which hereby are 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 Loan 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: "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 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 Loan 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. "Limited Liability Company Acknowledgement" shall have the meaning ascribed ----------------------------------------- to it in Section 4(a) 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 either Pledgor in any Pledged Entity. "Limited Liability Company Notice" shall have the meaning ascribed to it in -------------------------------- Section 4(a) of this Agreement. "Pledged Collateral" means the Pledged Limited Liability Interests. ------------------ "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. -2- "Secured Party" means, collectively, the Agent and the Lenders. ------------- 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. 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 2.6(c) of the Loan Agreement) specified in the Loan Agreement on all or any part of any of such obligations after the filing of any petition or pleading against the Borrower or any Pledgor for a proceeding under any bankruptcy or related law (collectively, the "Obligations"). ----------- 4. Delivery of Pledged Collateral. ------------------------------ (a) 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. - -------------- (b) 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 Limited Liability Company Interests. In addition, the Agent shall have the right at any time to exchange certificates or instruments representing or evidencing 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 -3- 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 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 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 to any necessary prior approval of the FCC, the Pledged Entities, 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 Pledged Entities 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 Limited Liability Company Interests (including, -4- but not limited to, all voting, consent, administration, management and other rights and remedies under any limited liability company agreement or otherwise with respect to the Pledged Limited Liability Company Interests), or any part thereof, for any purpose not inconsistent with the terms of this Agreement, the Loan 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 Loan -------------------------------- 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 Limited Liability Company Interests in accordance with the terms of the Loan 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 Limited Liability Company Interests, (ii) dividends and other distributions paid or payable in cash in respect of any 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 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 the 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 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: (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 that it would otherwise be entitled to exercise pursuant to Section 6(a) above, and to receive the dividends and distributions that 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 that 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 the 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). -5- 8. Irrevocable Proxy. Each Pledgor hereby revokes all previous proxies ----------------- with regard to 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 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 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 and all Obligations have been indefeasibly paid in full. 9. Pledgors' Representations and Warranties. Each Pledgor represents and ---------------------------------------- warrants as follows: (a) Each Pledgor is an individual and 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 in favor of the lenders under the Entravision Credit Agreement (the "ECC Lien")). 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, the Secured Party will have a perfected security interest in the Collateral subject only to the ECC Lien. (c) 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, is required for the pledge by any Pledgor of the Collateral. (e) 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. ---------- -6- (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 Limited Liability Company Interests or of any other rights or remedies in respect of the Collateral hereunder. 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 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 that 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 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 the 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 Pledged Entities and examine and make abstracts from any of the books and records of those Pledged Entities 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 Pledged Entity 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. -7- 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 the 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 Loan 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 the 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 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 -8- 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 Loan 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 Loan 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 Loan 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 the 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. -------- (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 the 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 -9- 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 the 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 the 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. 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 or the Entravision Stations without the prior consent of the FCC, to the extent required by law or the terms of any Media License or Entravision 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 Loan 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. -10- (c) Sale of Collateral. Any public or private sale or other disposition ------------------ of the Collateral may be held at any office of the 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 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 any Pledged Entity'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. -11- (f) Title of Purchasers. Upon consummation of any sale of Collateral ------------------- hereunder, the Agent on behalf of the 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 that 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. The 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, 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. (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. ---------------------------------- (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 that would affect the operational, voting or other control of any entity holding a Media License or an Entravision Media License shall be made in accordance with the Communications Act and the terms of each Media License or Entravision Media License, including, to the extent applicable under the Communications Act in effect at the time of a Default, any requirement that there be a public or private sale. -12- (ii) Notwithstanding anything to the contrary contained in this Agreement, or in the Loan 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 that would constitute or result in any change of control of a Subsidiary holding a Media License or an Entravision 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 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) any necessary prior consent to an involuntary transfer of control or assignment of any Media License or Entravision Media License or of any entity whose limited liability company interests are subject to this Agreement, for the purpose of seeking a bona fide purchaser to whom such Media License or Entravision 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 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 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 Entravision Media License or transfer of control of any entity holding or controlling any Media License or Entravision Media License as may be necessary or appropriate under the Communications Act for approval of the transfer or assignment of any portion of the Collateral or any Media License or Entravision 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. -13- (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 subject to Section 14(j) hereof, each Pledgor hereby irrevocably appoints the Agent as such Pledgor's attorney-in-fact, effective upon and during the 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 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 Loan 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 Liens in favor of the Agent for the benefit of the Lenders. -14- 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 the 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 Loan 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 Loan Agreement, and if to the Agent, to the address set forth for it in Section 9.2 of the Loan 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 expiration of the Commitments, (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 Loan Agreement. Subject to the terms of the Loan Agreement, any Lender may assign or otherwise transfer the Guarantee, any Loans, its Commitment or any rights in the 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 have expired or have otherwise been terminated or (ii) if the Lenders shall give their prior written consent to the transfer of the 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 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 -15- 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 the 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 BY, AND CONSTRUED AND ------------- INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES). 24. Form of Pledged Limited Liability Interests/Covenant Not to Dilute. ------------------------------------------------------------------ Each Pledgor represents, warrants and covenants to the 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 Loan 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. 25. Alternative Dispute Resolution. ------------------------------ (a) Claims Subject To Judicial Reference; Selection Of Referee. All ---------------------------------------------------------- Claims, including any and all questions of law or fact relating thereto, shall, at the written request of any Party, be determined by Reference. The Parties shall select a single neutral referee, who shall be a retired state or federal judge with at least five years of judicial experience in civil matters. In the event that the Parties cannot agree upon a referee, the referee shall be appointed by the court. The Parties shall equally bear the fees and expenses of the referee unless the referee otherwise provides in the statement of decision. (b) Waiver Of Jury Trial. In connection with a Reference or any other -------------------- action or proceeding, whether brought in state or federal court, the Parties hereby expressly, intentionally and deliberately waive any right they may otherwise have to trial by jury of any Claim. (c) Conduct Of Reference. Except as provided in this Section 25, the -------------------- Reference shall be conducted pursuant to Applicable State Law. The referee shall determine all issues relating to the applicability, interpretation, legality and enforceability of this Section 25. (d) Provisional Remedies, Self-Help And Foreclosure. No provision of this ----------------------------------------------- Section 25 shall limit the right of any party to (i) exercise self-help remedies including set-off, (ii) foreclose against or sell any Collateral, by power of sale or otherwise or (iii) obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Reference. The exercise of, or opposition to, any such remedy does not waive the right of any Party to Reference pursuant to this Section 25. -16- (e) Limitation On Damages. In the event that punitive damages are --------------------- permitted under Applicable State Law, the amount thereof shall not exceed a sum equal to three times the amount of actual damages as determined by the referee. (f) Severability. In the event that any provision of this Section 25 is ------------ to be illegal or unenforceable, the remainder of this Section 25 shall remain in full force and effect. (g) Miscellaneous. In the event that multiple Claims are asserted, some ------------- of which are found not subject to this Section 25, the Parties agree to stay the proceedings of the Claims not subject to this Section 25 until all other Claims are resolved in accordance with this Section. In the event that Claims are asserted against multiple parties, some of whom are not subject to this Section, the Parties agree to sever the Claims subject to this Section 25 and resolve them in accordance with this Section 25. In the event of any challenge to the legality or enforceability of this Section 25, 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 25. (h) Defined Terms. As used in this Section 25, the following terms shall ------------- have the respective meanings set forth below: "Applicable State Law": the law of the State of California; provided, -------------------- however, that if any Party seeks to (i) exercise self-help remedies, including set-off, (ii) foreclose against or sell any Collateral, by power of sale or otherwise or (iii) obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction before, after or during the pendency of the Reference, the law of the state where such Collateral is located shall govern the exercise of or opposition to such rights and remedies. "Claim": any claim, cause of action, action, dispute or controversy ----- between or among the Parties, whether sounding in contract, tort or otherwise, which arises out of or relates to: (i) this Agreement; (ii) any negotiations or communications relating to this Agreement, whether or not incorporated into this Agreement or any indebtedness evidenced thereby; or (iii) any alleged agreements, promises, representations or transactions in connection therewith. "Party": any Pledgor, any Lender or the Agent. ----- "Reference": a judicial reference conducted pursuant to this Section 25 in --------- accordance with Applicable State Law, as in effect at the time the referee is selected pursuant to Section 25. 26. 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. 27. 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 and be continuing, the Agent's and the Lenders' sole recourse against such Pledgor shall be to the Collateral. -17- IN WITNESS WHEREOF, each Pledgor has executed this Agreement as of the date first written above. PLEDGOR ------- /s/ Walter F. Ulloa ------------------------------------ WALTER F. ULLOA Residence: Los Angeles County, California Address for Notices: 657 Amalfi Drive Pacific Palisades, CA 90272 Telecopier: 310-454-4983 S-1 /s/ Philip C. Wilkinson ------------------------------------------- PHILIP C. WILKINSON By Walter F. Ulloa, his attorney-in-fact Residence: San Diego County, California Address for Notices: P.O. Box 2630 Rancho Santa Fe, CA 92067 Telecopier: 619-756-9438 S-2 Schedule A ---------- Pledged Collateral ------------------ A. Walter F. Ulloa 1. Pledged Limited Liability Company Interests: Only the following: Pledged Entity Percentage Membership Interest -------------- ------------------------------ Entravision Holdings, LLC 0.0005% Membership Interest B. Philip C. Wilkinson 1. Pledged Limited Liability Company Interests: Only the following: Pledged Entity Percentage Membership Interest -------------- ------------------------------ Entravision Holdings, LLC 0.0005% Membership Interest Schedule B ---------- UCC Filing Offices ------------------ Pledgor UCC Filing Offices/Secretary of State ------- ------------------------------------- Walter F. Ulloa California Philip C. Wilkinson California Schedule C ---------- Form of Limited Liability Company Notice ---------------------------------------- TO: [Name of Pledged Entity] Notice is hereby given that, pursuant to the Pledge Agreement (a true and correct copy of which is attached hereto), dated as of April __, 2000 (as amended, modified, restated or supplemented from time to time in accordance with the terms thereof, the "Agreement"), made by [NAME OF PLEDGOR] (the "Pledgor") and the other pledgor party thereto in favor of Union Bank of California, N.A., as agent (the "Agent") for the lenders described therein, the Pledgor has pledged and assigned to the Agent for the benefit of the Secured Party (as defined in the Agreement), and granted to the Agent for the benefit of the Secured Party, a continuing security interest in, all right, title and interest of the Pledgor, whether now existing or hereafter arising or acquired, as a member in [NAME OF PLEDGED ENTITY] (the "Limited Liability Company"), and in, to and under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] (the "Limited Liability Company Agreement"), as such security interest is more particularly described in the Agreement. Pursuant to the Agreement, the Limited Liability Company is hereby authorized and directed to register the Pledgor's pledge to the Agent for the benefit of the Secured Party of the interest of the Pledgor on the Limited Liability Company's books. The Pledgor hereby requests the Limited Liability Company to indicate the Limited Liability Company's acceptance of this Notice and consent to and confirmation of its terms and provisions by signing a copy hereof where indicated on the attached page and returning the same to the Agent on behalf of the Lender. _______________________________ [NAME OF PLEDGOR] Form of Acknowledgment ---------------------- [NAME OF PLEDGED ENTITY] (the "Limited Liability Company") hereby acknowledges receipt of a copy of the assignment by [NAME OF PLEDGOR] ("Pledgor") of its interest under the [TITLE OF APPLICABLE LIMITED LIABILITY COMPANY AGREEMENT] pursuant to the terms of the Pledge Agreement, dated as of April __, 2000, made by the Pledgor and the other pledgor party thereto in favor of Union Bank of California, N.A., as agent (the "Agent") for the Lenders described therein. The undersigned hereby further confirms the registration of the Pledgor's pledge of its interest to the Agent for the benefit of the Secured Party on the Limited Liability Company's books. Dated: _____________, ______ [NAME OF PLEDGED ENTITY] By:__________________________ Name:________________________ Title:_______________________ EX-10.12 11 0011.txt UNIVISION ROLL-UP AGREEMENT 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 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 $10,000,000 Los Angeles, California December 30, 1996 ------------------ 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 Ten Million Dollars ($10,000,000) 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 Amended and Restated Operating Agreement dated as of December 30, 1996 (the A "Operating Agreement"). Capitalized terms not defined herein shall have the meaning given to such terms in the Operating Agreement. 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 -2- new person, if any, resulting from any such reorganization or readjustment, and (ii) the rights 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 -3- respect to this Note and all other Subordinated Notes of the Company due at the 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; -4- provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d) of the Operating Agreement. 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 Subordinated Note Purchase and Option Agreement dated December 30, 1996 between and among the Company, Univision, et al., would require Univision's approval under the Operating Agreement. -5- 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 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. -6- 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. 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 -7- The Company: Entravision Communications Company, L.L.C. Attention: Walter F. Ulloa and Philip C. Wilkinson 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Telephone No.: (310) 820-5355 Facsimile No.: (310) 820-2445 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. 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 LEFT INTENTIONALLY 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: ______________________________________________ Walter F. Ulloa, Managing Member By: ______________________________________________ Philip C. Wilkinson, Managing Member Acknowledged and Agreed: UNIVISION COMMUNICATIONS INC. BY: _____________________________________ Title: _____________________________ [Signature Page to Non-Negotiable Subordinated Note] -9- EXHIBIT B --------- FIRST AMENDED ORIGINAL NOTE 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 -2- the new person, if any, resulting from any such reorganization or readjustment, and (ii) the rights 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 -3- 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 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 -4- 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. 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. -5- 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 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. -6- 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. 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 -7- 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. 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:_________________________________________________________ Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By:_________________________________________________________ Philip C. Wilkinson, President, Chief Operating Officer and Managing Member Acknowledged and Agreed: UNIVISION COMMUNICATIONS INC. By:______________________________ Name:____________________________ Title:___________________________ [Signature Page to First Amended and Restated Non-Negotiable Subordinated Note] EXHIBIT C --------- ORIGINAL NOTE PURCHASE AGREEMENT 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 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 2 (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:_____________________________ Name:___________________________ Title:__________________________ ________________________________ ________________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:_____________________________ Name:___________________________ Title:__________________________ ________________________________ ________________________________ BORROWERS KSMS-TV, INC. By: ______________________________ Name: ____________________________ Title: ___________________________ 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 TIERRA ALTA BROADCASTING, INC. By: ______________________________ Name: ____________________________ Title: ___________________________ 22 Commerce Center Way Henderson, Nevada 89015 Fax No.: (702) _____________ 7 CABRILLO BROADCASTING CORPORATION By: ______________________________ 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: ______________________________ Name: ____________________________ Title: ___________________________ KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Fax No.: (303) 832-3410 LAS TRES PALMAS CORPORATION By: ______________________________ Name: ____________________________ Title: ___________________________ KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Fax No.: (619) 341-0951 MANAGING MEMBERS WALTER E. ULLOA __________________________________ PHILIP C. WILKINSON __________________________________ 8 EXHIBIT A --------- NON-NEGOTIABLE SUBORDINATED NOTE AND OPTION AGREEMENT 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 $10,000,000 Los Angeles, California December 30, 1996 ------------------ 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 Ten Million Dollars ($10,000,000) 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 Amended and Restated Operating Agreement dated as of December 30, 1996 (the "Operating Agreement"). Capitalized terms not defined herein shall have the meaning given to such terms in the Operating Agreement. 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 -2- new person, if any, resulting from any such reorganization or readjustment, and (ii) the rights 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 -3- respect to this Note and all other Subordinated Notes of the Company due at the 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: (1) 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. (2) 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
(3) 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; -4- provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d) of the Operating Agreement. (4) 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; (5) 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). (6) 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. (7) 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. (8) The issuance of additional Membership Units in the Company pursuant to Section 7(c)(iii) of the Operating Agreement. (9) The dissolution and liquidation of the Company, in which case Univision may withhold its consent, in its sole discretion. The foregoing approval rights shall terminate upon the closing of Univision's sale of a majority of the principal amount of this Note to a third party. (a) So long as this Note remains outstanding, Univision shall have the right to approve any matter upon which the Members of the Company have a right to vote if, assuming -5- full exercise of the rights of Univision under that certain Subordinated Note Purchase and Option Agreement dated December 30, 1996 between and among the Company, Univision, et al., Univision's affirmative vote as a Member in favor of such matter would be required to approve such matter. (b) So long as this Note remains outstanding, Univision shall (i) have the inspection rights of a Member of the Company set forth in the Operating Agreement and (ii) shall be entitled to receive all financial reports provided to the Members of the Company pursuant to the Operating Agreement. 10. Executive Committee Representative. Univision shall be permitted to ---------------------------------- have one of its representatives attend all meetings of the Company's Executive Committee in order to assure compliance with the terms of this Note. If such representative reasonably believes that any action proposed at an Executive Committee meeting would adversely affect the interests of the Class A Non- Managing Members or Univision (with respect to its separate rights under the Operating Agreement) in any material respect or breach of the terms of this Note, Univision will be entitled to have a representative vote on any such proposal. Univision shall be notified in advance of all Executive Committee meetings including material actions proposed to be taken at such meetings. 11. 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. 12. 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 -6- (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. 13. 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: -7- 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.P. Attention: Walter F. Ulloa and Philip C. Wilkinson 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Telephone No.: (310) 820-5355 Facsimile No.: (310) 820-2445 (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. (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 LEFT INTENTIONALLY 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: ______________________________________ Walter F. Ulloa, Managing Member By: ______________________________________ Philip C. Wilkinson, Managing Member Acknowledged and Agreed: UNIVISION COMMUNICATIONS INC. BY: ____________________________ Title:______________________ [Signature Page to Non-Negotiable Subordinated Note] -9- EXHIBIT B --------- CREDIT AGREEMENT This Exhibit attaches a prior credit agreement of the registrant which has been amended and restated in its entirety and has no relevance or material connection to this contract, and accordingly, has been omitted pursuant to the direction of the staff of the Securities and Exchange Commission. EXHIBIT C --------- OPERATING AGREEMENT ================================================================================ FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ================================================================================ TABLE OF CONTENTS OF FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
page 1. Glossary of Terms........................................................................ -2- 2. Amendment/Restatement.................................................................... -2- 3. Other Qualifications..................................................................... -2- 4. Name..................................................................................... -3- 5. Registered Office; Principal Place of Business........................................... -3- 6. Purposes................................................................................. -3- (a) General......................................................................... -3- (b) Licensing....................................................................... -3- (c) Credit Facility................................................................. -3- (d) [Intentionally omitted.]........................................................ -4- (e) Formation of Subsidiary Limited Liability Company............................... -4- 7. Capital Contributions and Percentage Interests........................................... -4- (a) Initial Capital Contributions................................................... -4- (b) Equity Incentive Pool........................................................... -5- (c) Future Capital Requirements..................................................... -5- (d) Univision Transactions.......................................................... -7- (e) Las Tres Campanas Television, Inc. ............................................. -7- (f) Valley Channel Debt............................................................. -7- 8. Withdrawal of Capital; Interest on Capital............................................... -8- 9. Member Loans............................................................................. -8- 10. Determination of Profit and Loss......................................................... -8- (a) Fiscal Year..................................................................... -8- (b) Accounting...................................................................... -8- (c) Computation Conventions......................................................... -8- 11. Capital Accounts and Valuation........................................................... -9- (a) Capital Account Principles...................................................... -9-
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(b) Valuation Principles............................................................ -9- 12. Distributions and Withholding............................................................ -9- (a) Quarterly Tax Distributions..................................................... -9- (b) Distributions in the Ordinary Course of Business................................ -10- (c) Distributions Upon Sale or Liquidation.......................................... -10- (d) Withholding..................................................................... -11- (e) Certain In-Kind Distributions Within Five (5) Years............................. -11- (f) Safir Class D Units............................................................. -12- 13. Allocation of Net Income and Net Losses.................................................. -12- (a) General Allocation Scheme for Net Losses........................................ -12- (b) General Allocation Scheme for Net Income........................................ -12- (c) Special Allocations............................................................. -12- (d) Regulatory Allocations.......................................................... -13- (e) Curative Allocations............................................................ -14- (f) Depreciation Recapture.......................................................... -14- (g) Allocation Adjustments.......................................................... -14- (h) Safir Allocation Adjustments.................................................... -15- 14. Company Books, Records and Reports....................................................... -15- (a) Maintenance of Books and Records................................................ -15- (b) Inspection Rights............................................................... -15- (c) Financial and Tax Reports....................................................... -15- (d) Information Available at Principal Office....................................... -16- (e) Banking......................................................................... -17- 15. "Tax Matters Partner".................................................................... -17- 16. Management............................................................................... -17- (a) Executive Committee............................................................. -17- (b) Matters Requiring Executive Committee Approval.................................. -18- (c) Matters Requiring Univision Approval............................................ -19- (d) Like-Kind Exchange.............................................................. -20- (e) Key Man Insurance............................................................... -21- (f) Officers........................................................................ -21- 17. Managing Member -- Impasse Resolution.................................................... -21- 18. Matters Requiring Majority Approval of Members........................................... -22- 19. Fees and Reimbursements to the Managing Members/Executive Committee...................... -22- (a) Company Expenses................................................................ -22-
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(b) Managing Members Reimbursements................................................. -23- (c) Executive Committee Reimbursements.............................................. -23- (d) Managing Member Employment Agreements........................................... -23- (e) Loan to Member(s)............................................................... -23- 20. Third-Party Contracts, Instruments, Etc.................................................. -23- 21. Time Devoted to Business................................................................. -24- 22. Liability................................................................................ -24- 23. Indemnification.......................................................................... -24- 24. Non-Competing Ventures and Conflicts of Interest......................................... -25- 25. Meetings of Members...................................................................... -25- 26. Assignment by Members.................................................................... -26- (a) General Prohibition............................................................. -26- (b) Permitted Transfers............................................................. -26- (c) Income Tax Considerations....................................................... -27- (d) Right of First Offer............................................................ -27- (e) Purchase Option................................................................. -28- (f) Consent Required for Substitution............................................... -30- (g) Conditions to Substitution...................................................... -30- (h) Managing Members Signatory Authority............................................ -31- (i) Initial Public Offering......................................................... -31- 27. Death, Withdrawal, Resignation, Removal, Bankruptcy or Dissolution of a Member........... -32- (a) Effect - Non-Managing Member.................................................... -32- (b) Effect - Managing Members....................................................... -32- (c) Purchase of Membership Units on Death of Ulloa, Wilkinson or Zevnik............. -32- (d) Removal......................................................................... -34- 28. Dissolution of the Company............................................................... -34- (a) Events Causing Dissolution...................................................... -34- (b) Termination Activities.......................................................... -35- (c) Negative Capital Account Make-Up................................................ -35- 29. Member Representations................................................................... -35- 30. Notices.................................................................................. -36-
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31. Exhibits................................................................................. -36- 32. Entire Agreement; Amendments............................................................. -36- 33. Successors............................................................................... -36- 34. Executed Counterparts.................................................................... -36- 35. Captions................................................................................. -37- 36. Computation of Time Periods.............................................................. -37- 37. Gender; Statutory References............................................................. -37- 38. Severability............................................................................. -37- 39. Time of Essence.......................................................................... -37- 40. Further Acts............................................................................. -37- 41. Governing Law............................................................................ -37- 42. Attorneys' Fees.......................................................................... -37- 43. Maximum Interest Rates................................................................... -38- 44. Arbitration.............................................................................. -38- 45. No Third Party Beneficiaries............................................................. -38- 46. Consent of Spouse........................................................................ -39- 47. Signatory Authority...................................................................... -39- 48. Counsel to the Company................................................................... -39-
-iv- THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED AND SOLD UNLESS (A) REGISTERED AND/OR QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR (B) EXEMPT FROM SUCH REGISTRATION OR QUALIFICATION. THEREFORE, NO SALE, PLEDGE OR OTHER TRANSFER OF THIS SECURITY SHALL BE MADE, NO ATTEMPTED SALE, PLEDGE OR OTHER TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT AND QUALIFIED OR APPROVED UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAW, OR (B) THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED UNDER THE ACT OR STATE SECURITIES OR BLUE SKY LAWS. FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. This First Amended and Restated Operating Agreement ("Agreement") is entered into effective December 30, 1996 (the "Effective Date") by and among WALTER F. ULLOA, an individual ("Ulloa") and PHILIP C. WILKINSON, an individual, ("Wilkinson") as the managers (herein the "Managing Members"), CABRILLO BROADCASTING CORPORATION, a California corporation ("Cabrillo"), GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation ("Golden Hills"), KSMS-TV, INC., a Delaware corporation ("KSMS-TV"), LAS TRES PALMAS CORPORATION, a Delaware corporation ("Las Tres"), TIERRA ALTA BROADCASTING, INC., a Delaware corporation ("Tierra Alta"), ENTRAVISION MERGER CORP., a Delaware corporation ("Merger Corp."), EDITH SEROS, TRUSTEE OF THE WALTER F. ULLOA IRREVOCABLE TRUST OF 1996, dated October 9, 1996 ("Ulloa Trust"), and KEVIN GRENHAM AND KENNETH D. POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK TRUST, dated November 2, 1996 ("Zevnik Trust"), PHILIP C. WILKINSON AND WENDY K. WILKINSON, Trustees for THE 1994 WILKINSON CHILDREN'S GIFT TRUST (the "Wilkinson Children's Gift Trust"), who are receiving Class A Units as set forth on Exhibit "A" to this Agreement (the foregoing are collectively referred to as the "Class A Non-Managing Members" and individually as a Class A Non-Managing Member, as the context requires), and PAUL Z. ZEVNIK, an individual ("Zevnik"), and RICHARD NORTON, an individual ("Norton"), with respect to the facts that follow. A. The Company was formed pursuant to a Certificate of Formation filed on January 11, 1996 and pursuant to an Operating Agreement, dated January 11, 1996, entered into by Ulloa, Wilkinson and Paul A. Zevnik ("Zevnik") (the "Original Operating Agreement"). B. Concurrent with the addition of certain Members as provided for herein and pursuant to that certain Formation Agreement for Entravision Communications Company, L.L.C., dated January 29, 1996, entered into by and among certain of the Members, as amended by that certain Amended and Restated Formation Agreement dated December 30, 1996 (collectively, the "Formation Agreement"), the Members hereby now desire to amend and restate in its entirety the Operating Agreement for the Company under the Delaware Limited Liability Company Act, 6 Del. C. ------- (S)18-101 through (S)18-1109, as amended from time to time (herein the "Act"). C. Pursuant to that certain Acquisition Agreement and Plan of Merger dated July 12, 1996, Merger Corp. and the Company have agreed to acquire all the outstanding capital stock of Valley Channel 48, Inc., a Texas corporation ("Valley Channel") in a reverse merger pursuant to which Merger Corp. will be merged into and with Valley Channel (the "Merger"). Immediately following the consummation of the Merger, Valley Channel will execute an amendment to this Agreement to become a party hereto and shall enter into an Asset Contribution Agreement to contribute substantially all of its assets to the Company in exchange for the Class A Units set forth on Exhibit "A" hereto. D. The Company has been formed for purposes of (i) combining the operations of the television stations owned and operated by certain Class A Non- Managing Members (which stations are listed opposite the applicable Class A Non- Managing Members' name on Exhibit "A" hereto, which are engaged in the business of broadcasting in Spanish principally by and through Univision Network Affiliation Agreements entered into with Univision Network Limited Partnership, which is controlled by Univision Communications, Inc. ("Univision") (herein, each an "Univision Agreement") and are referred to collectively as the "Stations"), (ii) to operate the Stations through one entity managed and controlled by the Managing Members and (iii) to otherwise pursue opportunities in the media business, including, but not limited to, acquisitions of other media properties. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, it is agreed as follows: 1. Glossary of Terms. Except as otherwise indicated in the body of this ----------------- Agreement, all capitalized terms set forth herein shall have the meanings given such terms by the Glossary attached hereto as Exhibit "B" and incorporated herein by this reference. 2. Amendment/Restatement. By this Agreement, the parties hereto amend --------------------- and restate in its entirety the Original Operating Agreement for the Company pursuant to the Act. The term of the Company shall commence as of the date that the Certificate of Formation for the Company was filed and, subject to provisions set forth elsewhere herein and in the Act, shall terminate on the latest date for dissolution set forth in Section 28, below. 3. Other Qualifications. The parties to this Agreement agree that the -------------------- Managing Members shall cause the Company to file or record such documents and take such other actions under the laws of any jurisdiction as are necessary or desirable to permit the Company to do business in any such -2- jurisdiction as is selected by the Company and to promote the limitation of liability for the Members in any such jurisdiction. 4. Name. The name of the Company is "Entravision Communications Company, ---- L.L.C." 5. Registered Office; Principal Place of Business. The address of the ---------------------------------------------- registered office of the Company in Delaware is and the Company's registered agent at this Delaware address is Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware. The principal place of business of the Company is 11900 Olympic Boulevard, Suite 590, Los Angeles, California 90064. The principal place of business of the Company may be changed from time to time, as determined by the Managing Members. 6. Purposes. -------- (a) General. The purposes of the Company shall be: (i) to enter into ------- a Local Marketing Agreement with each of Cabrillo, KSMS-TV, Las Tres, Golden Hills and Tierra Alta relating to the Stations, each dated November 1, 1996 (collectively the "LMA Agreements"); (ii) to acquire the Stations pursuant to the Asset Contribution Agreements (as defined hereinbelow) and to operate the Stations; (iii) to acquire and to operate television station KNVO, McAllen, Texas, pursuant to the Merger and a Local Marketing Agreement; (iv) to acquire television station KINT-TV, El Paso, Texas and radio broadcast stations KINT-FM and KSVE-AM, El Paso, Texas from Paso Del Norte Broadcasting Corporation pursuant to that certain Asset Purchase Agreement, dated November 4, 1996; (v) to enter into that certain Option Agreement among Armando Navarro, La Paz Wireless Corporation, a Delaware corporation ("La Paz") and the Company; (vi) to enter into that certain Local Marketing Agreement between La Paz and the Company; (vii) to pursue, acquire and operate other media businesses, including, without limitation, the acquisition of other Spanish language radio and television properties herein "Acquisitions"); and (viii) such other activities as the Managing Members may determine to be necessary and appropriate in connection with the foregoing purposes. (b) Licensing. Each of the Class A Entities holds one or more --------- licenses and permits from the Federal Communications Commission ("FCC") which shall be assigned to Entravision Holdings, LLC, a California limited liability company ("Entravision Holdings") and a 99.999% subsidiary of the Company pursuant to an Asset Contribution Agreement between the Company and each Class A Entity (as defined below) pending FCC approval, (collectively the "FCC Licenses"). The Managing Members shall take those actions reasonably necessary to facilitate the assignment of the FCC Licenses, each Univision Agreement and all other material contracts, leases and licenses relating to the "Businesses" (as defined below) to the Company or Entravision Holdings pursuant to the Asset Contribution Agreements. (c) Credit Facility. All Members acknowledge and agree that --------------- concurrent with the execution of this Agreement, the Company and certain Class A Non-Managing Members are obtaining a $65,000,000 credit facility from the several banks and financial institutions (collectively, the "Bank") party to that certain Credit Agreement, dated December 31, 1996, with Union Bank of California, N.A., -3- as agent (the "Agent") for such banks and financial institutions (the "Credit Facility"). The Members hereby acknowledge and agree that the Company and such Class A Non-Managing Members shall each have direct primary liability and responsibility, jointly and severally, for repayment of all sums due and payable under the Credit Facility both before and after the closing of the Asset Contribution Agreements. (d) Rights of Bank Upon Foreclosure. It is hereby acknowledged by ------------------------------- each Member that certain Members have pledged all their right, title and interest in and to their interests as Members in the Company (such interests, the "Pledged Membership Interest") (specifically including a receiver or trustee appointed by a court of competent jurisdiction pursuant to the Pledge Agreement) (the "Receiver") to the Bank in connection with the Credit Facility. In connection therewith, the Bank, or its assignee, may, in the future, foreclose on some or all of the Pledged Membership Interests and become Members in the Company, provided that there shall have first been obtained all required prior consent of the FCC. Each Member agrees, for itself and for its successors and assigns, that upon any such foreclosure, and provided that any such required approval of the FCC shall have been obtained, the following shall automatically occur, without the necessity for any notice, writing or other act: (i) The Managing Members shall be removed and the Receiver shall be the sole Managing Member, with all the powers of the Managing Members set forth in this Agreement. The Executive Committee shall resign and the Receiver shall appoint the members of a new Executive Committee, subject to Univision's right to appoint one of the four Executive Committee members in accordance with Section 16(a)(i). (ii) The fourth sentence of Section 16(a)(i) shall be amended and restated to read as follows: "The Executive Committee may act on majority vote, but only with the consent of the Receiver, on behalf of the Banks," and the fifth and sixth sentences shall be deleted. In addition, with respect to any other provision of the Agreement which specifically refers to rights or powers exercisable by one or both of Messrs. Ulloa and Wilkinson, such rights of Messrs. Ulloa and Wilkinson shall be transferred to the Receiver and shall be exercisable solely by the Receiver. (iii) The reference in Section 32 to "and Class A Non-Managing Members holding at least seventy-five percent (75%) of the Class A Units" shall be deleted. (iv) Notwithstanding the foregoing, the rights of Univision under Section 16(c) of this Agreement, and any other provision of this Agreement which specifically refers to rights or powers exercisable by Univision, remain exercisable by Univision; provided that, with regard to the transfer or sale of ------------- an FCC license pursuant to Section 16(c)(iii), Univision shall have no approval rights with regard to any FCC license associated with a station which is not party to a Network Affiliation Agreement with Univision. (e) Formation of Subsidiary Limited Liability Company. All Members ------------------------------------------------- consent to the formation of Entravision Holdings for the sole purpose of owning the FCC Licenses and such other assets as may be required under the terms of the Credit Facility and/or other future bank financing. -4- 7. Capital Contributions and Percentage Interests. ---------------------------------------------- (a) Initial Capital Contributions. ----------------------------- (i) In exchange for their Class A Units and Percentage Interests set forth in Exhibit "A" hereto, Cabrillo, Golden Hills, KSMS-TV, Las Tres, Tierra Alta and Valley Channel (each a "Class A Entity" and collectively "Class A Entities") shall enter into the LMA Agreements and shall contribute to the Company their respective assets and Businesses, as going concerns, including without limitation, their FCC Licenses and Univision Agreements, indicated opposite their respective names on Exhibit "A" hereto (with respect to each Class A Entity collectively referred to as such Class A Entity's "Business" and collectively the "Businesses") and shall receive a capital account credit as set forth below. Such transfer and assignment of the Businesses shall be pursuant to Asset Contribution Agreements between the Company and each Class A Entity (each an "Asset Contribution Agreement"). The allocation of Class A Membership Units to the Class A Entities is derived from the relative net equity values of the Class A Entities set forth in revised Exhibit "D" to the Formation Agreement and upon closing of the Asset Contribution Agreements, such values as set forth on Exhibit "A" attached hereto shall be the initial amount reflected in the contributing Class A Entities capital accounts. The initial capital account of all other Members shall be as set forth on Exhibit "A" attached hereto. By execution hereof, each Member hereby consents to the issuance of Class A Units and Percentage Interest to Valley Channel following consummation of the Merger. The Class A Units, Percentage Interest, and capital account to be issued to Valley Channel shall be inserted in an amended Exhibit "A" upon closing of the Asset Contribution Agreement relating to Valley Channel. (ii) In exchange for their Class A Units and Percentage Interests, the Ulloa Trust, Zevnik Trust and Wilkinson Children's Gift Trust shall each exchange the respective membership interests held by each trust pursuant to the Original Operating Agreement in exchange for 23,900 Class A Units. (iii) The Company previously loaned $360,366.38 to Golden Hills to facilitate the purchase of a portion of the Fadem Estate ownership interest in Golden Hills (the "Fadem Interest"). Pursuant to the terms and conditions set forth in Section 1.6 of the Formation Agreement, Zevnik has delivered a Secured Promissory Note to the Company in the principal amount of $360,366.38 in exchange for 10,313 additional Class A Units as set forth on Exhibit "A" attached hereto (the "Zevnik Note"). (iv) Ulloa and Wilkinson shall receive those certain Class C Units in the Company indicated opposite their respective names on Exhibit "A" hereto in connection for services to be rendered in their capacities as Managing Members of the Company. (v) Except with respect to the execution and delivery of the LMA Agreements, each Class A Entity's initial capital contribution shall be due upon closing of the Asset Contribution Agreement relating to said entity. -5- (vi) Zevnik and Norton shall receive those certain Class C Units in the Company set forth opposite their respective names on Exhibit "A" hereto in connection with services rendered to the Company. (b) Equity Incentive Pool. The Company hereby adopts an equity --------------------- incentive plan establishing an equity incentive pool ("Equity Incentive Pool") to grant Class D Units to certain managers and employees of Company (including without limitation, the Company's officers, and members of the Executive Committee) based upon the Company's performance. The Class D Units shall, for all purposes, be the same as Class C Membership Units in all respects except that Class D Units shall be non-voting and shall not exceed a five percent (5%) ownership interest in the Company on a fully-diluted basis. The Executive Committee has the right to establish a vesting schedule for the Class D Units, which schedule shall be determined in the Executive Committee's sole discretion. The Class D Units shall be issued pursuant to an Option Agreement in a form approved by the Managing Members, which shall provide for a nominal exercise price per Class D Unit and shall only be exercisable in connection with an initial public offering of the Company's securities, the sale of substantially all of the Company's assets or substantially all of the Members' Percentage Interests in the Company or within thirty (30) days following an optionee's termination of employment with the Company or on such other terms and conditions determined by the Executive Committee. (c) Future Capital Requirements. --------------------------- (i) Third-Party Loans. The Members intend and agree that the ----------------- Company's additional cash requirements for operations will be satisfied via loans from third-party lenders on commercially reasonable terms and conditions. In addition, the Members acknowledge and agree that in connection with potential Acquisitions, the Company may borrow from third-party lenders and/or incur purchase money indebtedness in connection with such Acquisitions. Prior to incurring any third-party indebtedness, the terms and conditions of such indebtedness must be approved by the Executive Committee. The Executive Committee shall have the right to hypothecate Company Assets in connection with any third party loan approved by the Executive Committee. In the event that the Executive Committee determines in good faith that the Company requires additional funds, it shall provide written notice to the other Members of the total amount of funds required and the purpose(s) therefor. If no third-party loans are funded within sixty (60) days after such notice has been given, or if the net proceeds of any such loans is less than the amount of funds required by the Company, the Executive Committee may, but shall not be required to, request that the Members make discretionary loans to the Company in the aggregate amount necessary to cover the shortfall, which loans shall be made within thirty (30) days after a second written notice from the Executive Committee specifying the revised amount of funds required (after taking into account any third-party loan proceeds), each Member's share thereof and the anticipated use or uses of such funds. All such loans shall be voluntary and shall be made in accordance with the terms set forth in Section 9 hereof. (ii) No Member Guaranties. Notwithstanding anything in this -------------------- Agreement to the contrary and except pursuant to the terms of the Credit Facility, no Member nor any Affiliate of such Member shall be obligated to guarantee any Company indebtedness. -6- (ii) Secondary Funding Sources. In the event the Company ------------------------- requires additional funds for any reason, which funds have not been obtained (or cannot be obtained) pursuant to the above provisions, the Executive Committee may, but shall not be obligated to, obtain the required funds from the issuance of a separate class of Non-Managing Member interests ("Class B Interests"). Prior to issuing any Class B Interests to outside persons, the Executive Committee shall first give written notice of such proposed equity offering to all the existing Members of the Company, which shall contain the amount and terms and conditions pursuant to which the Company proposes to issue additional Class B Interests in the Company (herein the "Equity Notice"). In the Equity Notice, the Company shall offer to each Member (the "First Refusal Offer") the right to purchase a Proportionate share of the Class B Interests being offered by the Company on the terms and conditions set forth in said Equity Notice. The Members shall notify the Company of their respective elections within thirty (30) days of receipt of the Equity Notice. No Member shall be required to make additional capital contributions hereunder. If any Member does not wish to accept such First Refusal Offer he, she or it shall give written notice to the Company within thirty (30) days after receipt of the Equity Notice of his, her or its intention to reject the First Refusal Offer. If an existing Class A Non- Managing Member does not purchase his or its entire Proportionate share of the Class B Interests being offered to him or it, such share may be purchased by the other Class A Non-Managing Members on a Proportionate basis. This process shall be repeated until all of the Class B Interests have been purchased by the existing Class A Non-Managing Members or until no existing Class A Non-Managing Member has any further interest in purchasing the Class B Interests -- but in no event shall the process continue beyond thirty (30) days after the thirty (30) day period referred to above. If existing Class A Non-Managing Members do not purchase all of the Class B Interests, the unpurchased Interests shall then be offered to outside investors on the same terms and conditions offered to the Class A Non-Managing Members. The Members acknowledge that in connection with any issuance of Class B Interests, Univision shall have the right to make an additional long-term loan to the Company in a "Proportionate Amount," (as such term is defined on attached Exhibit "D-2"), which additional note shall be on the same terms and conditions as the Subordinated Note and shall be accompanied by additional options to acquire the Class B Interests in an amount to allow Univision to maintain an ownership interest in the Company equal to the then Option Percentage (as such term is defined in attached Exhibit "D." The rights of first refusal and Univision right to make an additional loan set forth in this Section 7(c)(v) shall terminate upon the Initial Public Offering of securities in the Company or a successor "C" Corporation pursuant to Section 26(i) hereof. (d) Univision Transactions. ---------------------- (i) Univision Subordinated Note. Univision has entered into that --------------------------- certain Subordinated Note Purchase and Option Agreement with the Company, pursuant to which Univision will acquire a Ten Million Dollar ($10,000,000) Non- Negotiable Subordinated Note (the "Subordinated Note") and a related Class A Membership Option (the "Univision Option") (collectively the "Univision Investment"). The Subordinated Note shall refinance an existing $3 million loan from Univision in its entirety. The terms of the Subordinated Note and the Univision Option are more particularly described hereinbelow. The Members hereby acknowledge and consent to the Univision Investment. -7- (ii) Univision Affiliation Agreements. Concurrent with the -------------------------------- closing of the Univision Investment, Univision shall enter into a Univision Network Affiliation Agreement relating to each station to provide for a new twenty-five (25) year term under each Univision Agreement. (iii) Terms of Subordinated Note. The Subordinated Note shall be -------------------------- in the form of that certain Non-Negotiable Subordinated Note attached hereto as Exhibit "D-1" and incorporated herein by this reference. (iv) Terms of Univision Option. The Univision Option will grant ------------------------- Univision the right to acquire an equity interest in the Company through the acquisition of Class A Non-Managing Membership Units for a total exercise price of Ten Million Dollars ($10,000,000). The Univision Option shall be on the terms set forth in the Univision Subordinated Note Purchase and Option Agreement attached hereto as Exhibit "D-2." (e) Las Tres Campanas Television, Inc. ("Campanas"), a Nevada ---------------------------------- corporation, purchased from third parties outstanding shares of common stock of Campanas. The cash portion of the purchase was advanced by the Company. Campanas is a low-power television station in Las Vegas, Nevada which broadcasts a simulcast of the Tierra Alta broadcast. In connection with said purchase, Ulloa and Alexandra Seros ("Seros") guaranteed to make the payment of a promissory note in the principal amount of $262,500 (the "Campanas Note"), delivered by Campanas in connection with the purchase of said shares. In consideration for Ulloa's and Seros' agreement to contribute all of the Campanas stock and/or substantially all the assets of Campanas to Entravision upon full repayment of the Campanas Note, the Company hereby agrees to (i) advance all payments due under the Campanas Note and (ii) defend, indemnify and hold harmless Seros and Ulloa from and against any claim, demand, liability or obligation arising out of or relating to the Campanas Note. (f) Valley Channel Debt. The Company and certain Members thereof ------------------- intend to jointly and severally borrow $25,000,000 pursuant to the Credit Facility to fund the acquisition of Valley Channel (the "Valley Channel Indebtedness"). All parties hereto acknowledge and agree that, notwithstanding the subsequent transfer of the assets of Valley Channel to the Company, Valley Channel shall retain the ultimate risk of loss with respect to the Valley Channel Indebtedness. Accordingly, Valley Channel hereby agrees that should a default exist pursuant to the terms of the Credit Facility with respect to the Valley Channel Indebtedness, Valley Channel shall be obligated to make an additional capital contribution to the Company pursuant to this Section 7(f) in an amount equal to any deficiency with respect to the Valley Channel Indebtedness after the Company has transferred, liquidated or otherwise disposed of all of its assets in satisfaction thereof. Valley Channel hereby irrevocably waives any rights of subrogation against the Company with respect to the Valley Channel Indebtedness. All parties acknowledge and agree that this Section 7(f) shall be interpreted in all respects such that Valley Channel shall retain the "economic risk of loss" with respect to the Valley Channel Indebtedness as such term is defined in Regulations Section 1.752-2, and Valley Channel agrees to take all actions and execute all documents necessary to reflect the same. -8- 8. Withdrawal of Capital; Interest on Capital. Except as may otherwise ------------------------------------------ be explicitly provided herein, a Member's capital contributions may not be withdrawn without the approval of a majority of the Executive Committee members, and no interest or similar return shall be paid on the capital contributions of any Member. 9. Member Loans. No Member may lend monies to the Company without the ------------ written approval of the Managing Members. Any permitted Member loan shall be evidenced by one or more separate agreements and instruments setting forth the terms of such loan or, absent such documentation, shall bear interest at the Prime Rate, plus two percent (2%), and shall be repaid in accordance with the applicable provisions of Section 11 hereof. The making of any Member loan shall not increase the lending Member's capital account and shall not entitle the lending Member to an increase in its Percentage Interest. This Section 9 shall not apply to the Univision Subordinated Note or loans by Univision to purchase its Proportionate Amount. 10. Determination of Profit and Loss. -------------------------------- (a) Fiscal Year. The Company's taxable year shall be December 31, ----------- unless a different year is required under applicable federal income tax laws or is permitted and is selected by the Managing Members. (b) Accounting. The Company's net profit or net loss for each fiscal ---------- year shall be determined using the accrual basis method of accounting, unless a different method is required under applicable federal income tax laws or is permitted and is selected by the Managing Members. (c) Computation Conventions. Each Member's share of the Company items ----------------------- of income, gain, loss, deduction and credit shall be determined as of the end of business on the last day of each fiscal year and allocated as provided herein. Except as may otherwise be from time to time required by applicable provisions of the Code and the Regulations, the Company's items of income, gain, loss, deduction and credit shall be deemed to have been earned or incurred ratably during each fiscal year; however, gains from sales and losses from sales, to the extent of the gain or loss recognized and taxable in the year of such sale(s), shall be allocated solely to the Members who were Members at the time of the occurrence of the taxable event(s). Additionally, any allocation of income, gains, deductions and/or losses to the Members which is to be made in accordance with their respective Percentage Interests shall reflect any changes to the Members' respective Percentage Interests which occurred during the Company's fiscal year with respect to which the allocation is being made, deter mined using the interim closing-of-the books method except that depreciation, amortization and similar items with respect to assets owned by the Company during the entire year shall be deemed to accrue ratably on a daily basis during the year. -9- 11. Capital Accounts and Valuation. ------------------------------ -10- (a) Capital Account Principles. A separate capital account shall be -------------------------- established and maintained for each Member in accordance with all applicable provisions of the Regulations under Sections 704(b), 704(c) and 752 of the Code. (b) Valuation Principles. The Members' respective capital accounts -------------------- shall be adjusted to reflect a revaluation of the Company's Assets when such revaluation is required by the Regulations under Code Section 704(b). In situations where such Regulations permit a revaluation of Company Assets, but where such revaluation is not required, such revaluation shall occur if the Managing Members so determine. For purposes of revaluing Company Assets and adjusting the Members' respective capital accounts, a Majority in Interest of the Members shall attempt in good faith to agree on a value of the Assets. If they are unable to agree on a value, they shall attempt to agree on a single appraiser with substantial experience in valuing similar Assets to value the Assets. If they are unable to agree on a single appraiser to render an appraisal, the Managing Members and a Majority in Interest of the Non-Managing Members shall each select an appraiser with substantial experience in valuing similar Assets, and the two appraisers so selected shall then agree upon a third similarly qualified appraiser. Such third appraiser shall then render the appraisal. If either the Managing Members or a Majority in Interest of the Non-Managing Members fails for any reason to select an appraiser within fifteen (15) days after being requested to do so by the other, the appraiser chosen by the other shall render the appraisal. The determinations of the appraiser selected pursuant to this Section 11(b) to value the Company's Assets shall be binding upon the Company, the Members and any other interested persons. 12. Distributions and Withholding. ----------------------------- (a) Quarterly Tax Distributions. The Company shall make distributions --------------------------- of estimated Cash Available for Distribution to the Members in proportion to and to the extent of their respective Presumed Company Tax Liabilities each of the first three calendar quarters of each year. The Company may follow the procedures described in the preceding sentence with respect to the fourth calendar quarter, or at the option of the Executive Committee, the Company's accountants shall compute the exact amount of each Member's annual tax liability with respect to allocations of income and gain, loss and deduction from the Company and the Company shall distribute to each Member out of Cash Available for Distribution an amount equal to the excess (if any) of such actual tax liability over the three previous quarterly distributions of Cash Available for Distribution pursuant to this Section 12(a). Such final distribution (if applicable) shall be made to each Member on or prior to the date payment is due with respect to such actual tax liability. Any excess distribution made pursuant to this Section 12(a) shall be offset against future distributions due the Recipient pursuant to Section 12 (b) or (c). (b) Distributions in the Ordinary Course of Business. Other than in ------------------------------------------------ connection with dissolution and termination of the Company, subject to the --- Univision Note, Cash Available for Distribution shall be distributed at such times and in such amounts as determined by the Executive Committee, in the following order of priority: -11- (i) First, to the Members in proportion to and to the extent of their respective shares of accrued but undistributed funds pursuant to Section 12(a) hereof; (ii) Second, to the Members who have made permitted loans to the Company, in proportion to and to the extent of the amounts owed such Members (including accrued but unpaid interest on such loans) and then due; (iii) Thereafter, to the Members in accordance with their respective Percentage Interests. The Members acknowledge and agree that the Executive Committee has the right to reasonably distribute amounts in excess of Reserves based on the actual and contemplated needs of the Company at the time of such distribution. (c) Distributions Upon Sale or Liquidation. Except as otherwise -------------------------------------- provided in this Section 12(c), distributions in connection with (a) the termination, liquidation, sale, merger, consolidation, or other business combination of the Company with or into another person or persons, or (b) any sale or conveyance to another person of the Assets of the Company as an entirety (with each of the transactions referred to in (a) and (b) above (herein, a "Capital Transaction"), shall be made to the Members as follows: (i) First, to establish Reserves deemed appropriate by the Managing Members to pay any known or contingent liabilities and, if appropriate, to pay the costs of winding up and liquidating the Company; (ii) Second, to the Members who have made permitted loans to the Company, in proportion to and to the extent of the amounts owed such Members (including accrued but unpaid interest on such loans); (iii) Third, to the Members with positive capital account balances, in proportion to and to the extent of such positive capital account balances; (iv) Thereafter, the Members in accordance with their respective Percentage Interests. (d) Withholding. The Company shall withhold in the manner, in the ----------- amounts, and at the times prescribed by Sections 1441 et seq. and other -- --- applicable provisions of the Code and the Treasury Regulations in connection with distributions from the Company and allocations of Company income, gain, losses and deductions. The Company shall also comply with the requirements of any applicable state laws requiring withholding on allocations of Company income, gains, losses and deductions, as well as withholding on distributions. Notwithstanding the foregoing, however, no withholding for federal income tax purposes shall be required with respect to any Member who furnishes the Managing Members with a certificate (the "Certificate") containing the following: (i) the -12- member's name, address and U.S. social security number or other U.S. taxpayer identification number; (ii) a statement under penalty of perjury that the Member is not a foreign person, but rather is a "U.S. person" within the meaning of Code Section 7701(a)(30); and (iii) an obligation to notify the Company within sixty (60) days of a change to the Member's status as a U.S. person. In the event applicable state law provides a similar safe-harbor from withholding, no withholding shall be required with respect to any Member who strictly complies with the requirements of the safe-harbor, as determined by the Managing Members in their sole discretion. Each Certificate supplied by a Member shall be effective for a period of three (3) years after it has been provided to the Managing Members, subject to earlier termination on the date the Company receives notice or otherwise learns of a change in the Member's status as a U.S. person. The Managing Members shall have no duty whatsoever to investigate the veracity of any Certificate, and any Member furnishing a Certificate shall indemnify the Managing Members and shall hold them and the Company harmless from any and all losses incurred by the Managing Members and/or the Company, including, without limitation, attorney's fees, by reason of the Company's failure to withhold. The Managing Members are hereby authorized for the purpose of satisfying a Member's indemnification obligation pursuant to this Section to withhold all or any portion of any Company distribution that would otherwise be payable to the Member. Any amount so withheld shall instead be distributed to the Members who have been assessed a penalty or penalties for failure to withhold and thereafter to the other Members on a Proportionate basis, and, notwithstanding anything in the provisions of this Agreement relating to allocations of Net Income (excepting only "regulatory allocations") to the contrary, a corresponding amount of Company gross income (and, if necessary, gains from sale) shall be allocated as quickly as possible to such Members in proportion to and to the extent of the distributions made to them pursuant to this Section. (e) Certain In-Kind Distributions Within Five (5) Years. In the event --------------------------------------------------- the Company is liquidated within five (5) years from the date an Asset with a value in excess of its tax basis is contributed to the Company and, in connection therewith, all or a portion of such Asset is to be distributed in- kind pursuant to Section 11 hereof, the Asset to be distributed shall be revalued pursuant to Section 11(b), and any increase or decrease in the value of such Asset shall be reflected in the Members' capital accounts in accordance with the applicable terms of this Agreement and the applicable principles of the Regulations under Code Sections 704(b) and (c). After such revaluation and the related capital account adjustments have occurred, subject to the provisions of Section 12(c), the Asset (or as great an interest therein as possible) shall be distributed to the Member(s) who contributed the Asset to the Company. The Members acknowledge that, to the extent permitted by applicable state and federal laws, the Member who contributed an Asset, such as a Station, has the right to require the return of such Asset upon the Company's liquidation. (f) Safir Class D Units. Notwithstanding anything to the contrary ------------------- contained herein, in no event shall the Class D Units to be held by Larry Safir and issued pursuant to the terms of his Executive Employment Agreement dated January 1, 1997 (the "Employment Date") by and between Safir and the Company receive any distributions of cash or property pursuant to this Section 12 prior to the third anniversary of the Employment Date. -13- 13. Allocation of Net Income and Net Losses. --------------------------------------- (a) General Allocation Scheme for Net Losses. Net Losses of the ---------------------------------------- Company shall be allocated to the Members in proportion to their Percentage Interests. Notwithstanding the previous sentence, loss allocations to a Member shall be made only to the extent that such loss allocations will not create a deficit Adjusted Capital Account balance for that Member. Any loss not allocated to a Member because of the foregoing provision shall be allocated to the other Members (to the extent the other Members are not limited in respect of the allocation of losses under this Section 13(a). Any loss reallocated under this Section 13(a) shall be taken into account in computing subsequent allocation of income and losses pursuant to this Section 13, so that the net amount of any item so allocated and the income and losses allocated to each Member pursuant to this Section 13, to the extent possible, shall be equal to the net amount which would have been allocated to each Member pursuant to this Section 13 if no reallocation of losses had occurred under this Section 13(a). (b) General Allocation Scheme for Net Income. Net Income of the ---------------------------------------- Company realized other than in connection with the Capital Transaction of the Company shall be allocated to the Members as follows: (i) First, to the Members with negative Adjusted Capital Account balances, in proportion to the extent of such negative Adjusted Capital Account balances; (ii) Second, to the Members in the proportion and to the extent necessary to eliminate as quickly as possible the positive difference (if any) between (1) the cumulative allocations of Net Losses to each Member, and (2) the cumulative amount of Net Income previously allocated to such Member pursuant to this Section 13(b) and Section 13(c); (iii) Thereafter, to the Members in accordance with their respective Percentage Interests. (c) Special Allocations. Before allocating any amount(s) pursuant to ------------------- Section 13(a) and/or Section 13(b), the following special allocations shall, in the order in which they appear, be made: (i) To the extent permissible under the Regulations, in the event the Company is required to realize imputed income or expense, including interest income or expense under Code Section 1272 et seq. and/or Code Section 7872 in -- --- connection with a transaction(s) between the Company and one or more Members, each item of such imputed income or expense shall be allocated to the Member(s) who is/are to report the corresponding imputed item, in proportion to and to the extent of the imputed amount required to be reported by each such Member. (ii) In the event that a Member is required to recognize income pursuant to Code Section 83 in connection with receipt of a profits interest in the Company, any corresponding deduction permitted to the Company under Code Section 83(h) shall be specially allocated to the Member required to recognize the income under Code Section 83. In the event that all or any portion -14- of a deduction pursuant to Code Section 83(h) is required to be capitalized, deductible Net Losses shall instead be allocated as soon as possible to the Member required to recognize the income under Code Section 83. This provision shall be applied retroactively (to the extent deductions to be allocated pursuant to this part (ii) can be allocated via amended Company tax returns) and retrospectively (to the extent such deductions cannot be allocated via amended Company tax returns) in the event that the Company's or any Member's return is audited and an adjustment is determined requiring any Member to recognize income under Code Section 83. (d) Regulatory Allocations. It is the intention of the Members that ---------------------- the allocation of tax attributes arising from the Company comply with applicable provisions of the Regulations under Sections 704(b), 704(c) and 752 of the Code. To conform further the allocation provisions of this Agreement to such Regulations, the Members agree that the following special allocation rules shall apply, provided, however, that in respect of any particular allocation the following rules shall supersede the provisions otherwise applicable under this Section 13 only to the extent necessary to cause such allocation to be respected under the Regulations. In the event of any inconsistency between the Regulations and the provisions of this Section 13(d), the Regulations shall govern. (i) In accordance with Code Section 704(c), and the Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes, and its fair market value on the date of contribution. Allocations pursuant to this Section 13(d)(i) are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Member's Account or share of profits, losses, or other items of distribution pursuant to any provision of this Agreement. All Members acknowledge and agree that the allocation of items pursuant to this Section 13(d)(i) shall be made utilizing the traditional method of making Section 704(c) allocations set forth in Regulation Section 1.704-3(b). (ii) In the event that a revaluation of the Company's Assets is reflected in the Members' capital accounts, depreciation, depletion, amortization and other "tax items" shall be allocated in the manner required by the Regulations Sections 1.704-1(b)(2)(iv)(g) and 1.704-1(b)(4)(i). (iii) If during any Company fiscal year there is a net decrease in the Minimum Gain or net decrease in Minimum Gain attributable to the disposition of a particular Asset, then items of income and gain of the Company shall be allocated in the manner required by the applicable "minimum gain chargeback" provisions of Regulation Section 1.704-2. (iv) If a Member receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which is unexpected within the meaning of Regulations Section 1.704-1(b)(2) (ii)(d) and which causes or increases a negative balance in such Member's Adjusted Capital Account, such Member will, to the extent required by Regulations Section 1.704-1(b)(2)(ii)(d), be allocated an amount of gross income and/or gain sufficient to eliminate such negative balance as quickly as possible. -15- (v) All deductions attributable to Member Non-Recourse Loans shall be allocated as required by the applicable provisions of Regulations Section 1.704-2. (e) Curative Allocations. Any special allocation of items pursuant to -------------------- Sections 13(c) and (d)(iii) through (v) shall be taken into account under Sections 13(a) and 13(b) in computing allocations of gain or loss on each sale of Company Assets or an interest or interests therein so that the net amount of income, gains, losses and deductions and all other items allocated to each Member pursuant to this Section 13 shall, to the extent possible, be equal to the net amount that would have been allocated to each Member if the above specified special allocations had not been made. (f) Depreciation Recapture. In determining the character (but not ---------------------- priority or amount) of Net Income allocable pursuant to Section 13(b) in connection with a sale or sales of Assets giving rise to ordinary income depreciation recapture, the Members shall be allocated ordinary income depreciation recapture to the extent of their respective shares of the Company's prior depreciation deductions. (g) Allocation Adjustments. The allocations set forth in this Section ---------------------- are intended to allocate Company income, gains, deductions and losses to the Members for federal income tax purposes in accordance with their economic interests in the Company while complying with the requirements of Code Sections 704(b), 704(c) and 752, as well as the Regulations promulgated under such Sections. If, in the opinion of the Company's tax counsel, the allocation of profits or losses pursuant to the preceding provisions of this Section 13 does not (i) satisfy the requirements of Code Section 704(b), 704(c), 752 or the Regulations underlying any of these Sections, (ii) comply with any other provisions of the Code or the Regulations, or (iii) properly take into account any expenditure or item of income or gain of the Company or the transfer of an interest in the Company, then notwithstanding anything to the contrary contained in the preceding provisions of this Section 13, the income, gains, deductions and/or losses of the Company shall be allocated in such manner as the Company's tax counsel determines to be required so as to reflect properly (i), (ii) and/or (iii) of this Section 13(g), as the case may be, and the Managing Members shall have the right to amend this Agreement without action by the Members to reflect any such change in the method of allocating Company income, gains, deductions and/or losses, provided, however, that any change in the method of allocating such income, gains, deductions and/or losses shall not materially alter the pre- tax economic arrangement among the Members. (h) Safir Allocation Adjustments. Notwithstanding anything to the ---------------------------- contrary contained herein, in no event shall the Class D Units to be held by Larry Safir and issued pursuant to the terms of his Executive Employment Agreement dated to be entered into and commence as of the closing of the Valley Channel Acquisition Agreement and Plan of Merger (the "Employment Date") by and between Safir and the Company receive any allocations of income, gain, loss or deduction pursuant to this Section 13 prior to the third anniversary of the Employment Date. -16- 14. Company Books, Records and Reports. ---------------------------------- (a) Maintenance of Books and Records. True and proper books, records, -------------------------------- reports, bank account statements, accounting records and accounts of the Company shall be maintained by the Managing Members at all times, in which shall be entered fully and accurately all Company transactions. All such items, together with this Agreement and any amendments thereto, shall at all times be kept at the principal place of business of the Company, or such other location as the Managing Members may select from time to time. (b) Inspection Rights. Upon the request of a Member or the holder of ----------------- an economic interest in the Company, for purposes reasonably related to the interest of that person as a member or holder of an economic interest, the Managing Members shall promptly deliver to the Member or holder of an economic interest, at the expense of the Company, a copy of any or all of the items listed in subparts (i), (ii) and (iv) of Section 14(d) below, as well as a copy of this Agreement. Each Member and holder of an economic interest shall also have the right, upon reasonable request, for purposes reasonably related to the interest of that person as a Member or holder of an economic interest in the Company, and at such person's sole expense, to inspect and copy during normal business hours the other items listed in Section 14(d) below, as well as any other books, records, reports, returns and the like required to be maintained at the Company's principal office pursuant to Section 17058 of the Act. (c) Financial and Tax Reports. ------------------------- (i) Annual Report. At the end of each fiscal year, the books ------------- shall be closed and statements reflecting the financial condition of the Company and its profits or losses shall be prepared by the Managing Members or, at the Managing Members' election, by an accounting firm employed at the Company's expense. If the Company has more than thirty-five (35) Members, not later than one hundred twenty (120) days after the close of the fiscal year, the Managing Members shall cause an annual report to be sent to each of the Members. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year. Additionally, if the Company has more than thirty-five (35) Members, Members representing at least five percent (5%) of the Percentage Interests, or three (3) or more Members, may make a written request to the Managing Members for an income statement of the Company for the initial 3-month, 6-month or 9-month period of the fiscal year ended more than thirty (30) days prior to the date of the request, and a balance sheet of the Company as of the end of that period. These statements shall be delivered or mailed to the Members within thirty (30) days thereafter. The financial statements referred to in this Section shall be accompanied by the report thereon, if any, of the accountants engaged by the Company or, if there is no report, the certificate of the Managing Members that the financial statements were prepared without audit from the books and records of the Company. -17- (ii) Tax Information. The Managing Members or, at the Managing --------------- Members' election, an accounting firm employed at the Company's expense, shall send to each of the Members, within ninety (90) days after the end of each taxable year, such information as is necessary to complete his or its federal, state and local income tax or information returns, and, if the Company has thirty-five (35) or fewer members, a copy of the Company's federal, state, and local income tax or information returns for the year. (d) Information Available at Principal Office. The following shall be ----------------------------------------- maintained by the Managing Members at the Company's principal place of business: (i) A current list of the full name and last known business or residence address of each Member and of each holder of an economic interest in the Company, set forth in alphabetical order, together with the contribution and the Percentage Interest of each Member and holder of an economic interest; (ii) The full names and business or residence addresses of the Managing Members; (iii) A copy of the Certificate of Formation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Formation or any amendments thereto were executed; (iv) Copies of the Company's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years; (v) A copy of this Agreement and any amendments hereto, together with any powers of attorney pursuant to which this Agreement was executed; (vi) Copies of the financial statements of the Company, if any, for the six most recent fiscal years; and (vii) The books and records of the Company as they relate to the internal affairs of the Company for at least the current and past four fiscal years. (e) Banking. The Managing Members shall open and maintain one or more ------- separate bank accounts in the Company's name in which Company funds may be deposited. The funds in such accounts shall be used solely for the Company business, and all withdrawals therefrom may be made only on the signature of one or more individuals authorized by the Managing Members. 15. "Tax Matters Partner". Walter F. Ulloa is hereby designated the "Tax --------------------- Matters Partner" for purposes of Sections 6221-6233 of the Code. The "Tax Matters Partner" may rely upon its certified public accountants or tax attorneys with respect to any election, action or determination relating to a Company audit and any proceedings arising therefrom. The "Tax Matters Partner" shall give all other -18- Members prompt notice of any communication from the IRS or any action it proposes to take as the "Tax Matters Partner." The "Tax Matters Partner" shall be reimbursed for any expenditures made or expenses incurred by it on behalf of the Company in connection with such audit or proceeding. 16. Management. Subject to the provisions of this Section 16 and except ---------- as otherwise explicitly provided herein, the Company shall be managed by the Managing Members, who are hereby designated pursuant to Section 18-401 of the Act. Pursuant to Section 16(a) the Managing Members shall establish an Executive Committee, which shall have the rights, powers and duties set forth in Sections 16(a) and (b) below. The Executive Committee shall also appoint officers of the Company, who shall be responsible for management of the day-to- day business of the Company, subject to the supervision and authority of the Executive Committee as set forth in this Section 16. The Non-Managing Members shall not participate in the management or control of the Company business. (a) Executive Committee. ------------------- (i) The Company shall have an Executive Committee, which shall consist of four (4) individuals. The Executive Committee shall consist initially of four (4) members, as follows: Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and a member designated by Messrs. Ulloa, Wilkinson and Zevnik. Upon Univision's exercise of the Univision Option, Univision shall have the right to elect one of the four Executive Committee members. The Executive Committee may act on majority vote, but only with the consent of both Messrs. Ulloa and Wilkinson. In the event of a disagreement between Ulloa and Wilkinson, such dispute shall be resolved in accordance with Section 17 of this Agreement. In the event of a deadlock vote of the Executive Committee where Messrs. Ulloa and Wilkinson vote in the same manner and Mr. Zevnik and the other Executive Committee member vote together, the vote of Messrs. Ulloa and Wilkinson shall be controlling and the Executive Committee shall be empowered to take action based upon such vote. Each member of the Executive Committee, including a member of the Executive Committee elected to fill a vacancy, shall serve until the next annual election of the Executive Committee members and until a successor has been elected and qualified, except in the case of death, resignation or removal of such member of the Executive Committee. The Executive Committee shall have regular monthly meetings by telephone or in person. The Managing Members, or any member of the Executive Committee who wishes to do so, may call a meeting of the Executive Committee by providing advance written notice to all members of the Executive Committee at least three (3) business days, and no more than thirty (30) days, prior to the meeting. Each meeting of the Executive Committee shall take place at the principal place of business of the Company or a different location otherwise agreed upon by a majority in number of the Executive Committee members. One or more members of the Executive Committee may participate in an Executive Committee meeting in person, by telephone or by proxy. (ii) [Intentionally omitted.] (b) Matters Requiring Executive Committee Approval. In addition to ---------------------------------------------- any other matters requiring the vote or approval of a Majority in Interest of the Members pursuant to provisions -19- set forth elsewhere in this Agreement, the following matters shall require approval of the Executive Committee pursuant to the rules and procedures set forth in Section 16(a)(i) above. (i) Approve budgets for the Company, including, but not limited to, capital and operating budgets; (ii) Authorize and/or issue any debt securities, equity securities and/or securities convertible into equity securities of the Company; (iii) Make any loans, guarantees or joint ventures, or invest in partially owned subsidiaries; (iv) Create any subsidiary; (v) Merge, consolidate, reorganize or dispose of all or substantially all of the Company's assets; (vi) Engage in any business other than those presented in the approved business plan of the Company; (vii) Except with respect to tax distributions, pay or declare any distribution on the Company's Membership interests or repurchase any Membership interests; (viii) Establish or modify any employee equity, stock option, pension, profit sharing or other similar plan; (ix) Any pledge, mortgage or hypothecation of any assets of the Company; (x) Except as set forth in an approved budget, any expenditure of cash or other property by the Company in excess of $75,000; (xi) Except as set forth in an approved budget and except for the compensation payable to Messrs. Ulloa and Wilkinson under their Employment Agreements with the Company (as described in Section 19(d) herein), the payment or agreement to pay salaries, wages, bonuses consulting fees and/or actual or projected commissions to any employee of the Company in excess of $200,000 per twelve (12) month period; (xii) Except as set forth in an approved budget, the execution of any promissory note, guarantee or other form of indebtedness in excess of $120,000 by the Company or the consummation of bank or financial institution loan or credit arrangement; and -20- (xiii) Except as set forth in an approved budget, the execution of any lease or other obligation for real or personal property wherein the total expected payments by the Company exceed $120,000 per twelve (12) month period. (c) Matters Requiring Univision Approval. If and only if Univision ------------------------------------ exercises the Univision Option, 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 excluding debt incurred 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) Subject to Section 6(d)(iv), any transaction involving the direct or indirect transfer or sale of any FCC License (including a 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) below, 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) 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), shall be deemed approved hereunder; provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d). (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 the Subordinated -21- 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 the Subordinated Note; B equals Univision's then existing Option Percentage (as defined in Exhibit "D"); 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 closing and scheduled in the Credit Facility). (vi) Amendments to the Operating Agreement that would adversely affect the Class A Units or Univision with respect to its rights under this 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) hereof. (ix) The dissolution and liquidation of the Company, in which case Univision may withhold its consent, in its sole discretion. The foregoing approval rights, and Univision's rights under Section 16(a), shall terminate upon the closing of Univision's sale of a majority of its Percentage Interest in the Company to a third party. (d) Like-Kind Exchange. The Executive Committee shall have the right ------------------ to approve the Company's selling, disposing of and/or exchanging any Station or other Company Asset in a like kind exchange to the extent permitted by applicable State and Federal law. (e) Key Man Insurance. The Managing Members have the right, but not ----------------- the obligation to obtain and maintain keyman life insurance on Ulloa, Wilkinson and Zevnik, for the benefit of the Company and the Company shall own such keyman life insurance policy(ies). (f) Officers. The Executive Committee may appoint officers at any -------- time. The officers of Company, if deemed necessary by the Executive Committee, may include a chief executive officer, president, executive vice president and secretary. The Managing Members may appoint a chief financial and/or chief accounting officer. The officers shall serve at the pleasure of the Executive Committee. Any individual may hold any number of offices. No officer need be a resident of the State of California or a citizen of the United States. The officers shall exercise such powers and perform such -22- duties as shall be determined from time to time by the Executive Committee. By execution of this Agreement, the Executive Committee hereby appoint the following individuals as the initial officers of the Company: Name Title ---- ----- Walter F. Ulloa Chief Executive Officer Philip C. Wilkinson President Paul A. Zevnik Secretary Jeanette Tully Chief Financial Officer/Treasurer (i) Any officer may be removed, either with or without cause, by the Executive Committee at any time. (ii) Any officer may resign at any time by giving written notice to the Executive Committee. Any resignation shall take effect at the date of the receipt of the notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. (iii) A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in this Agreement for regular appointments to that office. 17. Managing Member -- Impasse Resolution. If a dispute arises between ------------------------------------- the Managing Members with respect to a decision affecting the ordinary day-to- day operations of the Company, and the Managing Members are unable, in good faith and after reasonable effort, to agree on such matter requiring their approval and are so dead-locked that the business of the Company can no longer be conducted with advantage to the Members, such disagreement or matter shall be settled by binding arbitration in Los Angeles, California, conducted by a retired judge from the panel of Judicial Arbitration and the Mediation Services, Inc. ("JAMS") in accordance with JAMS's rules governing arbitrations conducted by JAMS in effect at the time of this Agreement. One arbitrator agreed upon by the parties hereto shall be appointed from JAMS, or if the parties cannot agree upon one arbitrator, JAMS will appoint the arbitrator itself. The decision of the arbitrator shall be final and binding on the Managing Members. The Managing Members agree to mediate any such dispute on an expedited basis and in no event later than fifteen (15) business days after filing of the arbitration proceeding. Any dispute as to whether a controversy or claim is subject to arbitration shall also be submitted as part of the arbitration proceeding. The Company shall be responsible for reasonable attorneys' fees and costs and fees of expert witnesses in connection with such proceeding; provided, however, the arbitrator may, in its sole discretion, assess such fees and costs against any Managing Member found to have acted in bad faith. -23- 18. Matters Requiring Majority Approval of Members. In addition to any ---------------------------------------------- other matters requiring approval of the Members pursuant to provisions set forth elsewhere in this Agreement, the following matters shall require the affirmative vote of a Majority in Interest of the Members: (a) Approval of the Company to merge or consolidate with one or more business entities; (b) To sell all or substantially all of the assets of the Company to dissolve the Company; (c) To issue additional membership units in the Company pursuant to Section 7(c)(i); and (d) Any material amendment to the Certificate of Formation of the Company and/or this Agreement. 19. Fees and Reimbursements to the Managing Members/Executive Committee. ------------------------------------------------------------------- (a) Company Expenses. The Company shall pay all costs and expenses ---------------- incurred in connection with the formation of the Company, the operation of the Company's business, and the management and operation of the Assets, including: (i) Costs of personnel employed by the Company and directly involved in the Company business; (ii) Costs of acquiring, owning, developing, improving, operating, and disposing of any or all of the Assets; (iii) Legal, consulting and similar fees for professional services provided to the Company; (iv) Expenses of Company administration, accounting, documentation and reporting, including, without limitation: preparation and maintenance of Company books and records, financial reports, audits, budgets, economic surveys, cash flow projections, and working capital requirements; preparation of Company state and federal tax returns; insurance expenses required in connection with the Company business; and expenses in connection with distributions and communications to Members; expenses of revising, amending, modifying, or terminating this Agreement; and (v) Costs incurred in connection with any litigation in which the Company is involved and any examination, investigation or other proceedings conducted by any regulatory agency, including legal and accounting fees. -24- (b) Managing Members Reimbursements. The Managing Members shall be ------------------------------- reimbursed by the Company for (i) actual out-of-pocket expenses paid to third parties for the review, preparation and publishing of Company financial and business reports, conduct of Company meetings, Non-Managing Members consultations, etc., (ii) other costs and expenses which are to be borne by the Company under the terms of this Agreement, and (iii) direct costs and expenses paid to third parties incurred in performing the duties and responsibilities of the Managing Members. As used herein "direct expenses" shall include transportation and lodging expenses which are reasonably and necessarily incurred in discharging the responsibilities of the Managing Members. However, no Member shall be entitled to reimbursement for any portion of its indirect overhead expenses (regardless of whether all or any portion of such expenses are allocable to the Company). (c) Executive Committee Reimbursements. The Executive Committee ---------------------------------- Members shall be reimbursed by the Company for reasonable expenses incurred by such members in attending Executive Committee meetings. (d) Managing Member Employment Agreements. The Managing Members shall ------------------------------------- each enter into written Employment Agreements with the Company concurrent with the execution of this Agreement. (e) Loan to Member(s). the Members hereby approve the Zevnik Note in ----------------- the principal amount of $360,366.38, which shall be evidenced by a Secured Promissory Note (the "Secured Note") delivered by Zevnik to the Company and shall be secured by Class A Membership Units acquired by Zevnik, subject to any prior security interest held by the Bank. The Secured Note shall bear interest at 5.625% and shall be payable in one (1) installment of principal and all accrued interest five (5) years after delivery. In addition, the Secured Note shall be due and payable in full upon the earlier of sale by Zevnik of his interest in the Company. The Company and the Members hereby acknowledge and agree that Zevnik may repay the Secured Note at any time, including, but not limited to, by means of use of funds otherwise distributable to Zevnik by the Company or by any of the Members hereto. 20. Third-Party Contracts, Instruments, Etc. Only those officers of, ---------------------------------------- and/or other individuals associated with, the Company or the Managing Members who have been given authority by the Managing Members to do so may execute on behalf of the Company any note, mortgage, evidence of indebtedness, contract, certificate, statement, conveyance or other instrument in writing, or any assignment or endorsement thereof. Any Person dealing with the Company or the Managing Members may rely upon a certificate signed by any of the Managing Members as to (a) the identity of the Managing Members or any other Member of the Company; (b) the Persons who are authorized to execute and deliver any instrument or document for or on behalf of the Company or (c) any act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member. No Member acting solely in the capacity of a Member, is an agent of the Company; nor does any Member, unless expressly and duly authorized in writing to do so by the Managing Members, have any power or authority to bind or act on behalf of the Company in any way, to pledge its credit, to execute any instrument on its behalf or to render it liable for any purpose. -25- 21. Time Devoted to Business. The Managing Members shall devote such time ------------------------ to the affairs of the Company's business as the Managing Members in each of their reasonable discretion deems to be required. 22. Liability. No Managing Member shall be liable to the Company or to --------- any other Member for any loss or damage sustained by the Company or any other Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, reckless or intentional misconduct, or a knowing violation of the law by such Managing Member. No Member nor any shareholder, officer, director, partner, member, subsidiary, employee, agent or affiliate of the Member (nor any officer, director, partner, member, subsidiary, employee, agent or any other person acting through or under authority of any of the foregoing) shall be liable, responsible or accountable in damages or otherwise to any other Member or the Company for any act performed in good faith by any or all such person(s) in connection with the affairs of the Company, where such action, inaction or failure to act is based upon the belief that such action, inaction or failure to act is reasonable under the circumstances and does not constitute gross negligence or intentional misconduct. Except as expressly required by law, no Member shall be personally liable for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise. 23. Indemnification. The Company shall defend, indemnify and hold --------------- harmless, and pay all judgments against, each Executive Committee Member and each Member and his or its shareholders, officers, directors, partners, members, subsidiaries, employees, agents and affiliates (and any stockholders, officers, directors, partners, members, subsidiaries, employees and agents of any of the foregoing) arising from any claim, loss, liability or damage incurred by reason of an act performed, or omitted to be performed, in connection with the affairs of the Company by any or all of the aforementioned persons in good faith, including attorneys' fees incurred by any of the aforementioned in connection with the defense of any action based on any such alleged act or omission, which attorneys' fees shall be paid as incurred from Company funds. All judgments against the Company and/or any of the aforementioned, wherein any of the aforementioned is entitled to indemnification, as herein provided, shall first be satisfied from Company Assets. The indemnities set forth in this Section 23 shall not require payment as a condition precedent to recovery by the indemnified party. The Company shall have the power to purchase and maintain insurance on behalf of any Person who is or was an agent of the Company against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as an agent, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Section 23 or under applicable law. 24. Non-Competing Ventures and Conflicts of Interest. Except for those ------------------------------------------------ existing business and activities set forth on attached Schedule "1", each Member, including each Managing Member, and his or its officers, directors, shareholders, partners, members, subsidiaries, employees, agents and affiliates shall not engage or invest in, independently or with others, any business activity of any type or description that is in direct competition with the Company in markets where the Company's stations then broadcast. Each Member, including each Managing Member, shall be obligated to present any investment opportunity or prospective economic advantage (an "Opportunity") relating to the -26- Company's business to the Company in writing ("Opportunity Notice"). The Company shall have thirty (30) days in which to elect to pursue the Opportunity described in the Opportunity Notice. If the Company waives its right to pursue the Opportunity described in the Opportunity Notice or fails to respond to such Opportunity Notice within the time period set forth above, then the Member presenting such Opportunity shall have the right to pursue such Opportunity in such Member's individual capacity. Provided, however, in the case of the Managing Members, pursuing such Opportunity cannot materially interfere with the Managing Member(s) duties pursuant to this Agreement. Subject to the foregoing, each Managing Member shall have the right to hold any investment opportunity or prospective economic advantage for his or its own account or to recommend such opportunity to a person or persons other than the Company. Neither the Company nor any other Member shall have any right in or to such other ventures or activities or to the income or proceeds derived therefrom. The Non-Managing Members acknowledge that the Managing Members and their respective affiliates own and/or manage other businesses, including businesses that may compete with the Company and for such Managing Members' time as set forth on Schedule "1." The Non-Managing Members hereby waive any and all rights and claims which they may otherwise have against the Managing Members and their respective officers, directors, shareholders, partners, members, subsidiaries, employees, agents and affiliates as a result of any such activities described on Schedule "1." Notwithstanding anything to the contrary contained in this Section 24, the provisions of this Section 24 shall not apply to Univision. 25. Meetings of Members. There shall be no scheduled or periodic meetings ------------------- of the Members, but meetings of the Members may be called either by the Managing Members or upon the written request of Non-Managing Members holding, in the aggregate, more than ten percent (10%) of the outstanding Percentage Interests held by all Members. All meetings shall be held at the Company's principal place of business unless a different and reasonably accessible location is specified by the Member(s) calling the meeting in the notice thereof. A Majority in Interest of the Members or, if any matter to be voted upon or approved requires more than a Majority in Interest of the Members, Members holding cumulatively at least the minimum Percentage Interest so required represented in person (or via telephone) and/or by proxy shall constitute a quorum for any Company meeting. Every Member entitled to vote on any matter shall have the right to either in person or in one or more agents authorized by a written proxy signed by the Person or filed with the Managing Members of the Company. A proxy shall be deemed signed if the Member's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, electronic transmission or otherwise) by the Member or the Member's attorney-in- fact. If the Managing Members or Non-Managing Member(s) entitled to do so elect to call a meeting, written notice of such meeting shall be given to all Members not less than ten (10), nor more than sixty (60), days prior to the date of such meeting. The notice shall state the nature of the business to be transacted and the matters, if any, upon which the Members will be requested to vote. Any notice sent by a Member may include his or its recommendation as to the proposals contained therein. If the notice has failed to state the nature of a particular item addressed at the meeting, any approvals of the Members sought in connection therewith shall require the unanimous vote of the Members. Members may vote in person (or via voice vote on the telephone) or by written proxy at any such meeting. 27 A Member may sign a written waiver of notice to the holding of a meeting, may consent to the holding of a meeting or may approve the minutes of a meeting. All waivers, consents, and approvals must be filed with the Company's records or made a part of the minutes of the meeting to which they relate. Attendance at a meeting constitutes waiver of notice of the meeting unless a Member objects, at the beginning of the meeting, if the meeting was not lawfully called or convened. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business that may have been transacted at the original meeting. If, however, the adjournment is for more than forty-five (45) 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 in the manner specified above for newly called meetings. Unless a meeting is called as provided in this Section, the consent or approval of the Members may be obtained and evidenced by the written consent (without a meeting) of Members holding the requisite outstanding Percentage Interests (as determined pursuant to the applicable terms of this Agreement), signed and delivered to the Managing Members on behalf of the Company within sixty (60) days of the record date for the consent(s) or approval(s). 26. Assignment by Members. --------------------- (a) General Prohibition. The interest of a Member in the Company may ------------------- be assigned only as permitted by the provisions of this Section 26 and, except as so permitted, no Member shall assign, sell, dispose of, give, pledge or otherwise transfer, encumber or hypothecate (collectively "assign") his or its Company interest or a part thereof, whether voluntarily, by operation of law, at judicial sale or otherwise, to any Person. This restriction against assignment shall include, but not be limited to, the transfer to or for the benefit of any Person as a result of or in connection with any property settlement or judgment incident to a divorce, dissolution of marriage or separation, the transfer by decree of distribution or other court order in proceedings arising from the death of the spouse of any Member or if the Member is a trust, the designation of a new or additional trustee of such trust. (b) Permitted Transfers. The restrictions on transfer set forth in ------------------- Sections 26(a) and 26(d) hereof shall not apply to (i) any transfer by an individual Member of all or any portion of such Member's Company interest to (A) a trust for the benefit of the transferor alone or for the benefit of the transferor and his or her beneficiaries, provided that such trust is, during the transferor's lifetime, controlled by the transferor and his spouse and is considered a so-called "grantor trust" for federal income tax purposes or (B) as an estate planning transfer where the transferor retains voting control; (ii) any transfer by a Member to a controlled affiliate (which shall mean an entity of which greater than fifty percent (50%) of the voting and ownership interests are owned by the transferring Member or its owners); (iii) any transfer to the individual stockholders of a corporate Class A Non-Managing Member in connection with a liquidation of a Class A Non-Managing Member; provided that, in each case, the transferee executes an amendment to this Agreement agreeing to be bound by all the terms and conditions of this Agreement and complies with the conditions to substitution set forth in Section 26(g) -28- below; and (iv) any transfer by a Member to the Bank pursuant to the Credit Facility, whether such transfer is pursuant to a Pledge Agreement or similar agreement in favor of the Bank, or by the Bank foreclosing on the interest conveyed by such Pledge Agreement or similar agreement. (c) Income Tax Considerations. Even if an assignment of all or any ------------------------- portion of a Member's Company interest would otherwise be permitted by the provisions of this Section 26, such assignment shall not be made if, in the opinion of counsel to the Company, such assignment, standing alone or in conjunction with other either previous or planned assignments, would result in a material risk of the Company being treated as other than a partnership for income tax purposes. Any transfer in violation of this subpart (c) shall be null and void ab initio. -- ------ (d) Right of First Offer. Except as permitted in Section 26(b), if at -------------------- any time a Member desires to transfer all (or any part) of his or its Company interest (or any owner of an indirect, direct or beneficial controlling interest in such Member desires to transfer such interest) ("Offer"), the Member shall, prior to any other action, give notice, together with a description of the terms upon which the Member would transfer such interest (the "Offer Notice"), to the Managing Members on behalf of and for the benefit of the Company. The Managing Members shall accept or reject such Offer as to the entire offered interest within thirty (30) days of receipt of the Offer Notice. Failure by the Managing Members to give notice of election within the required time period shall be deemed an election not to accept the Offer set forth in the Offer Notice. If the Managing Members elect not to exercise the Company's right of first offer, the remaining Members shall have the right to purchase a Proportionate share of the interest of the offeree pursuant to the terms of the Offer Notice. In the Offer Notice which is submitted to the remaining Members, the offeree shall offer (the "First Negotiation Offer") to each other Member the right to purchase a Proportionate share of the Company interest of the offeree for the same Proportionate price and subject to the same terms and conditions as set forth in said Offer Notice. If any affected Member does not wish to accept a First Negotiation Offer, he or it shall give written notice to the Company within thirty (30) days after the Offer Notice of his or its intention to reject the First Negotiation Offer, and each Member who has decided to accept the First Negotiation Offer shall be entitled to purchase his or its Proportionate share of the Company interest subject to the rejected First Negotiation Offer. The other Members shall notify the offeree of their respective elections within forty-five (45) days of the Offer Notice. Elections to purchase the entire Company interest of the offeree Member must be received within such forty-five (45) day period; otherwise, the offeree Member shall be free to sell his or its Company interest to any third party at a price equal to or greater than and upon the terms and conditions set forth in the Offering Notice. Any sale of an interest hereunder to a third party shall comply with the following requirements: (i) the sale documentation must contain provisions whereby any proposed transferee is obligated to comply with all provisions of this Agreement and any amendments hereto; (ii) any transferee must be a principal and not an agent acting on behalf of an undisclosed principal, and such principal may not be related to or an affiliate of the offeree or with respect to which the offeree has any direct or indirect ownership or control; and (iii) any prospective transferee must be of good business character and -29- reputation and is financially capable of carrying out all obligations of the selling Member under this Agreement and related agreements. If the other Members collectively elect to accept the First Negotiation Offer, they shall acquire the offeree's Company interest upon the terms set forth therein. Failure by the other Members to give notice of election within the required time period shall be deemed an election not to accept the First Negotiation Offer set forth in the Offer Notice. If the sale is not consummated within seventy-five (75) days from the date of the other Members' elections not to accept the First Negotiation Offer, the relevant Company interest shall then again become subject to the right of first offer set forth in this Section 26(d). This Section shall not be applicable to transfers described in Section 26(b). The right of first offer set forth in this Section 26(d) shall terminate upon the Initial Public Offering of securities in the Company or the "C" Corporation pursuant to Section 26(i) herein. (e) Purchase Option. In the event that a Member or an assignee of a --------------- Member or an assignee thereof (referred to in this Section 26(e) as the "Transferor") violates impermissibly the transfer restrictions set forth in this Agreement, withdraws without the consent of the Managing Members, assigns to one or more creditors, pledges, or otherwise directly or indirectly encumbers or hypothecates, all or any portion of such person's interest in the Company (the affected portion of such Member's interest in the Company is hereinafter referred to in this Section 26(e) as the "Option Interest"), whether such violation, withdrawal, assignment, gift, pledge, encumbrance or hypothecation is voluntary or involuntary, the persons identified as Optionees below shall have the option ("Purchase Option") to acquire all or any portion of the Option Interest, including all or any portion of the Option Interest which has been assigned or gifted to, or pledged or otherwise encumbered or hypothecated for the benefit of, a third party. Any third party who receives an interest in all or any portion of an Option Interest shall receive such interest subject to this Purchase Option. Provided, however, this Section 26(e) shall not apply and there is no Purchase Option created when such interest is (a) encumbered by an involuntary lien, (b) hypothecated with the consent of the Executive Committee or (c) hypothecated in connection with a Company loan which has been approved by the Executive Committee. The persons possessing the Purchase Option with respect to any impermissible transfer, withdrawal, assignment to one or more creditors, pledge, encumbrance or hypothecation of an interest in the Company shall be all Members whose interests are not (in whole or in part) subject to this Purchase Option ("Optionees"). Each such Member shall have the right to purchase his or its Proportionate share of the Option Interest, and any portion of the Option Interest that one or more of such persons does not elect to purchase may be purchased by the other persons wishing to do so on a Proportionate basis (counting, for this purpose, only those persons interested in purchasing an additional portion of the Option Interest), and this process shall be repeated until elections have been received to purchase the entire Option Interest or until there is no further interest in purchasing any further portion of the Option Interest. The Purchase Option may be exercised at any time within sixty (60) days following the date on which each Member receives written notice that such transfer, withdrawal, assignment, pledge, encumbrance or hypothecation has occurred, and the identity of each person holding all or a portion of the Option Interest. Each such Optionee wishing to exercise his or its Purchase Option may do so by -30- providing written notice to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) within sixty (60) days following receipt of the notice referred to in the preceding sentence, which notice to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) shall state that the Purchase Option is being exercised and shall specify the portion of the Option Interest that he or it wishes to acquire pursuant to the Purchase Option. The Managing Members (or all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) shall then take all steps necessary or appropriate to reconcile the notices (so that all interested persons acquire only that portion of the Option Interest to which they are entitled) and, once such reconciliation has occurred, shall provide written notice to any or all third parties holding all or a portion of the Option Interest specifying that the Purchase Option has been exercised and the portion of the Option Interest held by each such third party that is to be acquired pursuant to exercise of the Purchase Option. Each electing Optionee shall pay to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non- Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) who shall then pay as nominee of such Optionee to the appropriate person or persons, the value of the portion of the Option Interest (determined as provided herein) in which such person(s) has (have) an interest. Such amount shall be paid via cash, one or more certified or cashier's checks or a combination of cash and one or more certified or cashier's checks. In the event that exercise of the Purchase Option, or the purchase of all or any portion of an Option Interest pursuant thereto, is delayed or stayed for any reason pursuant to judicial order or by operation of the United States bankruptcy laws or other applicable insolvency laws, each electing Optionee may elect not to proceed with purchase of all or any portion of the Option Interest or may, within sixty (60) days after the judicial order or the U.S. bankruptcy and/or insolvency laws is (are) no longer applicable, elect to proceed with the contemplated transaction. For purposes of determining the value of an interest in the Company being acquired pursuant to the Purchase Option, the value of the Assets shall first be determined pursuant to Section 11 hereof, and the value of the Transferor's entire interest in the Company shall be equal to the amount that the Transferor would have been entitled to receive pursuant to Section 12(c) hereof assuming a cash sale of the Assets for such value had occurred immediately prior to the occurrence of the event which triggered the Purchase Option. The value of each portion of the Option Interest being acquired pursuant to the Purchase Option shall be equal to the value of the Transferor's entire interest in the Company multiplied by the percentage interest represented by such interest being acquired pursuant to the exercise of the Purchase Option less an amount equal to any loss, damage, injury, cost, expense or other -31- amount (including attorney's fees) suffered by the Company or the Members as a result of the impermissible transfer of the Option Interest by the Transferor. (f) Consent Required for Substitution. Subject to the conditions to --------------------------------- substitution set forth below, an assignee of an interest in the Company may become a Member in the place and stead of his or its assignor only if a Majority in Interest of the other Members vote in favor of the assignee's admission to the Company as a substituted Member. An assignee who has become a substituted Member shall have, to the extent assigned to him or it, the rights and powers of his or its assignor, and the assignee shall be subject to the restrictions and liabilities of such assignor. If an assignee does not comply with all of the conditions to substitution set forth below, or all of the other Members do not vote in favor of the assignee's admission as a substituted Member, the assignee shall hold a bare economic interest in the Company, with no right to vote, participate in the management and affairs of the Company or to become or exercise any rights of a Member. Unless and until an assignee becomes a substituted Member, his or its assignor shall continue to possess all rights pertinent to the assigned interest (other than the right to receive distributions and related allocations of income, gains, losses, deductions, and credits in accordance with this Agreement). Notwithstanding any provision herein to the contrary, Sections 26(f) and 26(g) shall not apply to assignments to the Bank, or an assignee of the Bank, pursuant to the Credit Facility. (g) Conditions to Substitution. -------------------------- (i) No assignee of an interest in the Company shall be entitled to become a substituted Member unless and until his or its assignor has provided the Managing Members with the assignee's name and address and all details relating to the assignment. (ii) No assignee of an interest in the Company shall be entitled to become a substituted Member unless the assignee shall consent in writing, in form satisfactory to the Managing Members, to be bound by the terms of this Agreement in the place and stead of the assigning Member. (iii) No assignee of a Non-Managing Member's Company interest shall be entitled to become a substituted Non-Managing Member unless and until it has been demonstrated to the satisfaction of the Managing Members that the assignment was pursuant to an exemption from registration under the Securities Act of 1933, as amended, and pursuant to an exemption from qualification under applicable state securities laws. (iv) If, in connection with or as a condition to the assignment of any interest in the Company, the consent or approval of the Federal Communications Commission (the "FCC"), or any other governmental authority is required under applicable law, then the Company shall forthwith take those steps required to obtain and shall use its best efforts to duly obtain at the earliest possible date such consent or approval. Any time limitation upon or requirement for such assignment shall, if necessary for the assignment, be extended by such period of time as is reasonably necessary to obtain -32- such consent or approval, all costs and expenses in obtaining such consent or approval shall be paid or reimbursed by the Company. The Members shall cooperate with the Company to the extent required to obtain such consent or approval, which shall be, if required, a condition to the substitution of any assignee of an interest in the Company. (h) Managing Members Signatory Authority. Subject to full compliance ------------------------------------ with the terms and provisions of this Agreement, any instrument reflecting the assignment of all or a portion of the interest of a Member and the admission of the assignee as a substituted Member of the Company need only be executed and acknowledged by the Managing Members, the assignor and the assignee. Upon the admission of a substituted Member, Exhibit "A" shall be amended to reflect the name, number of Units and Percentage Interest of such substituted Member and to eliminate or adjust, if necessary, the name, Units and Percentage Interest of the predecessor of such substituted Member. (i) Initial Public Offering. The Members agree that upon the vote of ----------------------- at least seventy-five percent (75%) of the Members and, subject to compliance with applicable laws, the Company shall roll up to a "C" corporation (the "C" Corporation) in connection with an initial public offering of such "C" Corporation, which is (a) pursuant to a firm underwriting commitment by a reputable investment banker, (b) has a pre-offering valuation of at least $150 million, and (c) results in the "C" Corporation's securities being listed on the American Stock Exchange, the New York Stock Exchange or NASDAQ National Market System (herein an "Initial Public Offering"). Each of the Members hereby agrees to cooperate in connection with the contribution of their membership interests in the Company to a such newly formed C-Corporation, with each existing Member to receive the common stock of the "C" Corporation in proportion to its capital account balance in the Company as of the date of the incorporation after revaluing such Member's capital account in accordance with Treasury Regulations and Section 11(b) to reflect the fair market value of the Company's assets as of the date of incorporation. As of the date of incorporation, the common stock held by all Members shall be granted standard piggyback registration rights entitling the Members to participate on a pari passu basis in registrations of the "C" Corporation's common stock under the Securities Act of 1933, as amended, other than the Initial Public Offering and subject to pro rata cut-backs at the underwriter's discretion. If Univision is a Class A Member and the Managing Members both consent to a proposed Initial Public Offering, Univision agrees to consent to such Initial Public Offering if (i) three (3) years from the execution of this Agreement shall have expired; (ii) no more than five percent (5%) of the shares to be sold in such offering may be purchased by a single Person, and (iii) no more than thirty percent (30%) of the Company will be sold in the Initial Public Offering. 27. Death, Withdrawal, Resignation, Removal, Bankruptcy or Dissolution of --------------------------------------------------------------------- a Member. -------- (a) Effect - Non-Managing Member. In the event of the death, ---------------------------- withdrawal, resignation, removal, Bankruptcy or dissolution of a Non-Managing Member, the Company shall continue. Subject to Section 26, the representative or successor in interest of the Non-Managing Member shall be vested with the same status as that of its predecessor in interest. -33- (b) Effect - Managing Members. In the event of the death, withdrawal, ------------------------- resignation, removal, Bankruptcy or purchase of a Managing Member's entire interest pursuant to the purchase Option set forth in Section 26, the remaining Managing Member shall become the sole Managing Member and shall fill the Executive Committee vacancy caused by the other Managing Member's death, withdrawal, resignation, removal, Bankruptcy or purchase of such Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26. In the event of the death, withdrawal, resignation, removal, Bankruptcy or purchase of the remaining Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26, the Company shall be dissolved unless other Members owning a Majority in Interest of (i) the Percentage Interests and (ii) the capital of the Company (as determined via reference to applicable guidelines published by the Internal Revenue Service from time to time) owned by all Members (other than the Managing Member with respect to which the dissolution event occurred) (1) elect within ninety (90) days after the death, withdrawal, resignation, removal, Bankruptcy or purchase of the Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26 to continue the Company, and (2) appoint new Managing Members (who may be an existing Non-Managing Member or an outside person) who agrees to be the new Managing Members. The Company shall take steps to amend this Agreement to convert the interest of the former Managing Member to that of a Non-Managing Member in this Company, with the same economic interest they had as the Managing Members (subject to Proportionate dilution of their Percentage Interest in connection with admission of an outside persons as the new Managing Member(s) or the increase to the Percentage Interest of an existing Non-Managing Member(s) to compensate him or it for becoming the new Managing Member(s)). (c) Purchase of Membership Units on Death of Ulloa, Wilkinson or ------------------------------------------------------------ Zevnik. - ------ (i) Transfers on Death of Ulloa, Wilkinson or Zevnik. Upon the ------------------------------------------------ death of Ulloa, Wilkinson or Zevnik (the "Deceased Member"), the Deceased Member's estate (or other lawful successor or heirs (collectively the "Estate") shall have the right to elect, at its discretion (within ninety (90) days after the death of the Deceased Member), to sell all or any portion of such Deceased Member's Membership Units to the Company at the Agreed Price provided for in Section 27(c)(iii) hereof, which shall be paid in accordance with Section 27(c)(iv) hereof. If the Deceased Member's Estate elects to sell all or any portion of the Deceased Member's Membership Units and the Company does not have "key man" insurance (as provided for in Section 27(c)(ii) hereof) or the proceeds from such "key man" insurance is less than twenty percent (20%) of the Agreed Price of the Deceased Member's Membership Units to be sold, the Company may, at its discretion, elect to allow the other Members to purchase up to twenty percent (20%) of the Deceased Member's Membership Units to be sold at the Agreed Price provided for in Section 27(c)(iii) hereof, which shall be paid in accordance with Section 27(c)(iv) hereof. Each of the other Members shall have the option to purchase a Proportionate share of the Membership Units to be sold. (ii) Key Man Insurance. The Members acknowledge that the ----------------- Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta shall collectively purchase a "key man" insurance policy on the lives of each of Ulloa, Wilkinson and Zevnik in the minimum amount of $5,000,000 per individual, which amount shall be increased from time to time to be equal to an equal -34- to the greater of (i) an amount equal to 20% of the fair market value (as determined by the Executive Committee) of Ulloa's, Wilkinson's or Zevnik's total direct and indirect ownership interest in Company or (ii) a higher amount determined by the Executive Committee; provided, however, that each of Ulloa, Wilkinson and Zevnik is insurable and that such "key man" insurance is available at commercially reasonable terms and conditions. (iii) Determination of the Agreed Price. The price per --------------------------------- membership unit ("Agreed Price") at which Membership Units may be purchased pursuant to Section 27(e) hereof shall be equal to the fair market value on a per membership unit basis of each Membership Unit as of the last day (the "Determination Date") of the most recent calendar month ending before the date notice is given exercising, or the occurrence of the event triggering, the applicable right to purchase. Said fair market value shall be determined by the mutual agreement of the Members or, in the event the Members fail to so agree (within thirty (30) business days after the later of (i) the event or the exercise of the option requiring or permitting a purchase hereunder, or (ii) the appointment of a personal representative, executor or guardian as the case may be), as determined by a qualified appraiser mutually agreed to by the Members (the "Appraiser"), the cost and expense of which shall be borne by the Company. The parties or the qualified appraiser, as appropriate, shall determine the value of each Membership Unit by first determining the fair market value of the Company and then dividing such amount by the number of then outstanding Membership Units of the Company. (iv) Payment of Agreed Price. In the event that the Company ----------------------- purchases Membership Units pursuant to Section 27(c) hereof, the Deceased Member's Estate, at its discretion, may require that payment for such Membership Units be made by (i) delivery of a promissory note in an amount equal to the Agreed Price or (ii) delivery of cash (in the form of a cashier's check) as to a portion of the Agreed Price (up to the amount as provided below) and a promissory note in an amount equal to the balance of the Agreed Price, if any. If the Deceased Member's Estate elects delivery of both cash and a promissory note, the maximum amount of cash which the Deceased Member's Estate may elect to receive shall be the greater of (i) 20% of the Agreed Price of the Deceased Member's Membership Units to be sold or (b) the amount of the proceeds from any "key man" insurance available to the Company pursuant to Section 27(c)(ii) hereof (but not greater than the amount of the Agreed Price). Any promissory note delivered to the Deceased Member's Estate pursuant to this Section 27(c)(iv) shall be (i) payable quarterly over a period no longer than five (5) years and shall accrue interest at the Prime Rate and (ii) secured by the Deceased Member's Membership Units pursuant to the form of the Membership Unit Pledge Agreement attached hereto as Exhibit "__" and incorporated herein by this reference (the "Membership Unit Pledge Agreement"). Each of the Members hereby agrees that the Deceased Member's Estate, concurrent with entering into the Membership Unit Pledge Agreement, shall enter into a subordination agreement with Company pursuant to which the Deceased Member's Estate will subordinate its security interest in the Deceased Member's Membership Units to Union Bank of California, N.A.'s security interest in the same pursuant to the Nonrecourse Guarantee and the Pledge Agreement, as well as any security interest which may be granted to any future lenders who may provide financing to the Company. -35- (v) Limitation on Transfers. This Agreement is entered into ----------------------- concurrent with (i) Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta and their respective stockholders entering into stockholders' agreements (the "Other Agreements") which contain substantially the same terms as set forth in this Section 27(c). Notwithstanding (i), the Company's obligation to purchase the Membership Units of the Deceased Member pursuant to Section 27(c) hereof and (ii) Cabrillo's, Golden Hills', KSMS-TV's, Las Tres's and Tierra ALTA's obligation to purchase a deceased member's stock in the Other Agreements, the Members hereto acknowledge and agree that the Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta shall purchase such Membership Units and or stock in a manner such that the total percentage ownership interest (both direct and indirect) of each of the stockholders of Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta remain, relative to each other, the same (i.e., within two decimal points) as just prior to the purchase of such Membership Units and stock by the Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra ALTA. (vi) Transfer of Membership Units. Upon the payment in full of ---------------------------- the Agreed Price, the Deceased Member's Estate shall deliver to the Company a receipt for the payment of the purchase and a membership unit assignment separate from certificate. (d) Removal. Either Managing Member may be removed by a vote of a ------- Majority in Interest of the other Members solely "for cause". For purposes of Section 27(c), the phrase "for cause" means: (i) conviction of a felony or (ii) upon thirty (30 ) days' written notice following the determination by the Executive Committee that the Managing Member has engaged in intentional fraud or intentional misappropriation of Company assets; provided that the Company gives Managing Member written notice specifying the grounds for "cause" termination under this Section 27(d), and Managing Member fails to cure the same within thirty (30) days following such written notice. 28. Dissolution of the Company. -------------------------- (a) Events Causing Dissolution. The Company shall be dissolved, -------------------------- liquidated and terminated: (i) In the event of the expulsion, Bankruptcy of the sole remaining Managing Member or purchase of the sole remaining Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26, absent a vote to continue the Company and, if necessary, appoint a new Managing Member pursuant to Section 27 hereof; (ii) Upon the affirmative vote of the Managing Members and a Majority in Interest of the Non-Managing Members; (iii) Thirty-five (35) years after the date of the Certificate of Formation for the Company was filed; (iv) As otherwise provided for herein or under the Act; or -36- (v) Upon the sale of all or substantially all of the Assets, payment or other satisfaction of all known Company liabilities and distribution of all or substantially all of the sales proceeds and remaining Assets to the Members. (b) Termination Activities. ---------------------- (i) Upon the dissolution of the Company, where no election is made to continue the Company pursuant to Section 27, the continuing operation of the Company's business shall be confined to those activities reasonably necessary to wind up the Company's affairs, discharge its obligations, and preserve and sell or distribute the Assets. (ii) The Members hereby acknowledge and agree that the Managing Member or, if both Managing Members have been terminated as such, a person approved by a Majority in Interest of the Non-Managing Members, shall have the sole power to execute and acknowledge and record or publish all such instruments that may be appropriate or necessary to reflect the dissolution and termination of the Company. (iii) A reasonable time shall be allowed for the orderly liquidation of the Assets and the discharge of the liabilities to creditors so as to minimize the normal losses attendant at liquidation. (iv) File a Certificate of Cancellation pursuant to (S)18-203 of the Act upon the completion of the winding up of the Company. (c) Negative Capital Account Make-Up. No Member shall be obligated -------------------------------- to contribute to the Company any negative balance in his or its capital account. 29. Member Representations. Each Member acknowledges, agrees and ---------------------- represents to the Company and the other Members that (a) he or it is an Accredited Investor, (b) he or it has been furnished with all documents and additional information requested by him or it for the purpose of evaluating whether an investment in the Company is suitable for the Member, (c) in evaluating an investment in the Company, the Member has consulted with his or its own investment and/or legal and/or tax advisor and has independently concluded that an investment by the Member in the Company is appropriate in light of his or its overall investment objectives and financial situation, (d) the Member has adequate means of providing for current needs and contingencies, has no need for liquidity with respect to his or its investment in the Company, and is able to bear the economic risk of a possible loss of the Member's entire investment in the Company, (e) the Member is purchasing his or its interest for the Member's own account for investment, and not with a view to or for resale in connection with any distribution of such security, (f) the Member has extensive experience in business and investments, and (g) the Member understands that there are no guarantees or assurances of any economic or other benefits that may accrue by virtue of holding an interest in the Company. Each Member further acknowledges, agrees and represents that he or it is not relying on any other Member, any officer, director, shareholder, partner, member, affiliate, employee, and/or agent thereof, and/or legal counsel of any other Member, -37- or on any projections and/or representation (or lack thereof) by any of the aforementioned (except as expressly made in this Agreement) in reviewing this Agreement and in deciding whether to invest or participate as a Member. 30. Notices. Any written notice to any of the Members required or ------- permitted under this Agreement shall be deemed effective when delivered personally (including transmission by facsimile or other similar device), by overnight courier service, or three (3) days after the notice is sent by U.S. mail, postage prepaid, to the address indicated below the recipient's signature hereto. Notices to the Company shall be similarly given, and addressed to its principal office (Attn: Managing Members). 31. Exhibits. All Exhibits referred to in the body of this Agreement are, -------- as such Exhibits may hereafter be amended from time to time pursuant to terms set forth in the body of this Agreement, hereby incorporated by reference. 32. Entire Agreement; Amendments. This Agreement (i) amends and restates ---------------------------- in its entirety the Operating Agreement for the Company, dated January 11, 1996;, and the Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C. dated December 30, 1996; (ii) supersedes and controls over any provisions in the Formation Agreement, as amended, and the Confidential Memorandum of Terms attached thereto as Exhibit "H" relating to this First Amended and Restated Operating Agreement and (iii) constitutes the full and complete agreement between the parties on the subject matter hereof, and, subject to Section 16(c)(vi), may be amended only by a writing executed by the Managing Members and Class A Non-Managing Members holding at least seventy- five percent (75%) of the Class A Units; provided that an amendment to admit a new Non-Managing Member pursuant to the terms of this Agreement shall only require the consent of the Managing Member and the new Members to be admitted pursuant to said amendment. 33. Successors. This Agreement shall be binding upon and inure ---------- to the benefit of the respective parties, their successors, heirs and assigns. 34. Executed Counterparts. 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, 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. 35. Captions. The section headings and captions shall in no way define, -------- limit, extend or interpret the scope of this Agreement or any particular section hereof. 36. Computation of Time Periods. All periods of time referred to in this --------------------------- Agreement shall include Saturdays, Sundays and state or national holidays, provided that if the date or last date to -38- perform any act or give any notice or approval shall fall on a Saturday, Sunday or state or national holiday, such act or notice may be timely performed or given on the next succeeding day which is not a Saturday, Sunday or state or national holiday. 37. Gender; Statutory References. All pronouns and any variations thereof ---------------------------- shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons or Member or Members or the context may require. Any reference to the Code, the Act or other statutes or laws will include all amendments, modifications, or replacements thereto. 38. Severability. Should any one or more of the provisions of this ------------ Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, then such illegal or unenforceable provision shall be modified by the proper court or arbitrator to the minimum extent necessary and possible to make such provision enforceable, and such modified provision and all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement shall be given effect separately from the provision or portion thereof determined to be illegal or unenforceable and shall not be affected thereby. 39. Time of Essence. Time is of the essence in all deadlines and time --------------- periods set forth in this Agreement. 40. Further Acts. Each Member agrees to perform such additional acts and ------------ to execute and deliver such additional documents as reasonably may be necessary to carry out promptly the intent of this Agreement. 41. Governing Law. Notwithstanding the place where this Agreement may be ------------- executed by any of the parties hereto, this Agreement, the rights and obligations of the parties hereto, and any claims and disputes relating thereto, shall be subject to and governed by the Act and the other laws of the State of Delaware as applied to agreements among Delaware residents to be entered into and performed entirely within the State of Delaware, and such laws shall govern the limited liability company aspects of this Agreement. 42. Attorneys' Fees. In case any proceeding, whether at law, in equity or --------------- in arbitration, shall be brought by any Member to enforce the terms of this Agreement, or any controversy arising therefrom, the prevailing party in each suit, as determined by the court or arbitrator, shall be entitled to the payment of reasonable attorneys' fees. 43. Maximum Interest Rates. Notwithstanding any provision in this ---------------------- Agreement to the contrary, no amount owing from any person pursuant to this Agreement or any agreement executed pursuant to the terms hereof shall accrue interest in excess of the maximum applicable rate permitted by California law. In the event that a person accepts as interest an amount which would exceed the highest lawful rate, the amount which would constitute excess interest shall be applied to the reduction of the unpaid principal balance due pursuant to the loan with respect to which such payment is being made. -39- 44. Arbitration. Subject to Section 17 above, which shall be controlling ----------- with respect to disagreement between the Managing Members on day-to-day decisions affecting the management of the Company, any disputes which arise involving all or any of the Members under this Agreement shall be subject first to mediation, and then, in the absence of a resolution, to final, binding arbitration upon written request by any Member involved in the dispute in accordance with this Section. The dispute shall be submitted before the American Arbitration Association ("AAA") within thirty (30) days after the requesting notice in accordance with the AAA's Commercial Arbitration Rules as modified by this Section; a decision shall be issued within thirty (30) days after the close of the record; and judgment upon the award may be entered in any court having jurisdiction over the judgment. Upon invocation of the mediation/arbitration procedure by a Member, each party to the dispute shall submit to each other and the mediator/arbitrator their respective proposals for resolution of the dispute, and the mediation/arbitration shall be limited to the sole question of determining which written proposal is to be accepted. The mediator/arbitrator shall have no authority to compromise between the proposals. The substantive law of California shall be applied by the mediator/arbitrator, and this requirement shall be deemed jurisdictional. This mediation/arbitration provision shall be deemed self-executing. If a party to a dispute fails to appear at any properly noticed mediation/arbitration proceeding, an award may be entered against such party notwithstanding such failure to appear. If the parties disagree on the choice for a/an mediator/arbitrator, the parties shall jointly request the AAA to furnish a list of five available attorneys, businessmen, or both, experienced generally in commercial matters. After receipt of such list and an opportunity to consider the names, each party may designate in writing to the AAA not more than two names to be eliminated from the selection process. If more than one name remains after such eliminations are made, the selection of the mediator/arbitrator shall be made by lot from the remaining names. If either party makes demand upon the other for mediation/arbitration, the arbitration shall be conducted at the AAA offices in Los Angeles, California. The parties may mutually agree to another location. The expenses, wages and other compensation of any witnesses called before the mediator/arbitrator shall be borne by the party calling the witnesses. Other expenses incurred, including wages of participants, and preparation of briefs and date to be presented to the mediator/arbitrator, shall be borne separately by the respective parties. The fee for the arbitration, the mediator's/arbitrator's fees and expenses, the cost of any hearing room, and the cost of a shorthand or similar reporter and the original transcript shall all be borne by the Company. 45. No Third Party Beneficiaries. The Members intend and agree that their ---------------------------- respective obligations set forth in this Agreement constitute an agreement solely to and for the benefit of each other and not to or for the benefit of the Company or any third party. Accordingly, except as otherwise explicitly set forth herein, no third party shall be entitled to enforce the Member's obligations set forth herein. 46. Consent of Spouse. The spouse of any individual Member who has not ----------------- executed documents as a co-owner of such Member's interest in the Company shall be required to execute a "Consent of Spouse" in the form of Exhibit "C" attached hereto. 47. Signatory Authority. The individual or individuals signing this ------------------- Agreement on behalf of each Member represents to the other Members that he or she has full authority to do so, has received -40- all required consents, and that his or her signature (together with the signature or signatures of any other individual signing below on behalf of such Member) is (are) the only signatures required to bind the Member on whose behalf he or she is signing this Agreement. 48. Counsel to the Company. Counsel to the Company may also be counsel to ---------------------- any Managing Member or any Affiliate of a Managing Member. The Managing Members may execute on behalf of the Company and the Members any consent to the representation of the Company the counsel may request pursuant to the California Rules of Professional Conduct or similar rules of any other jurisdiction ("Rules"). The Company is initially selecting Zevnik Horton Guibord & McGovern, L.L.P. ("Company Counsel") as legal counsel to the Company. Notwithstanding any adversity that may develop, in the event of any dispute or controversy arises between any Members and the Company, or between any Members or the Company on the one hand, and a Managing Member on the other hand, then each Managing Member agrees that Company Counsel may represent either the Company or such Managing Member, or both, in any such dispute or controversy to the extent permitted by the Rules, and each Member hereby consents to such representation. Each Member further acknowledges that while communications with the Company Counsel concerning the formation of the Company, its Members and Managing Members may be confidential with respect to third parties, no Member has any expectation that such communications are confidential with respect to such Member. IN WITNESS WHEREOF, the Members have executed this Agreement as of the date first shown above. "Managing Member" -------------------------------------------------- WALTER F. ULLOA 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 (310) 820-5355 FAX: (310) 979-8804 "Managing Member" -------------------------------------------------- PHILIP C. WILKINSON 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 (310) 820-5355 FAX: (310) 979-8804 [SIGNATURES CONTINUED ON NEXT PAGE] -41- APPROVED AS TO FORM AND CONTENT: Univision Communications, Inc. By: ------------------------------ Name: ---------------------------- Title: --------------------------- 1999 Avenue of the Stars, Suite 3050 Los Angeles, California 90067 Telephone No.: (310) 556-7600 [Counterpart Signature Page to First Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C.] [See Attached Non-Managing Members signature pages] --- -42- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. CABRILLO BROADCASTING CORPORATION, a California corporation By: ------------------------------------------------ Philip C. Wilkinson, President c/o: KBNT-TV, Channel 19 5764 Pacific Center Boulevard, Suite 110 San Diego, California 92121 Phone No.: (619) 597-1919 Fax No.: (619) 597-1909 Dated: _______________, 1996 -43- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation By: -------------------------------------------------- Walter F. Ulloa, President c/o: KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Phone No.: (303) 832-0050 Fax No.: (303) 832-3410 Dated: _______________, 1996 -44- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. KSMS-TV, INC., a Delaware corporation By: ----------------------------------------------- Walter F. Ulloa, President 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -45- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. ENTRAVISION MERGER CORP., a Delaware corporation By: -------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -46- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. LAS TRES PALMAS CORPORATION, a Delaware corporation By: ---------------------------------------------------- Walter F. Ulloa, President c/o: KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Phone No.: (619) 341-5837 Fax No.: (619) 341-0951 Dated: _______________, 1996 -47- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. TIERRA ALTA BROADCASTING, INC., a Delaware corporation By: -------------------------------------------------- Yrma G. Rico, President 22 Commerce Center Way Henderson, Nevada 89015 Phone No.: (702) 433-0027 Fax No.: (702) 434-0527 Dated: _______________, 1996 -48- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. EDITH SEROS, TRUSTEE OF THE WALTER F. ULLOA IRREVOCABLE TRUST dated October 9, 1996 By: --------------------------------------------------- (Signature) Its: ------------------------------------------------- Print Name: ------------------------------------------- 11900 Olympic Boulevard, Suite 590 ------------------------------------------------------ Los Angeles, California 90064 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -49- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. PHILIP C. WILKINSON AND WENDY K. WILKINSON, AS TRUSTEES OF THE 1994 WILKINSON CHILDREN'S GIFT TRUST By: --------------------------------------------------- Philip C. Wilkinson, Trustee By: --------------------------------------------------- Wendy K. Wilkinson, Trustee 11900 Olympic Boulevard, Suite 590 ------------------------------------------------------- Los Angeles, California 90064 ------------------------------------------------------- (Address) Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -50- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. KEVIN GRENHAM and KENNETH D. POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK IRREVOCABLE TRUST dated November 2, 1996 By: ---------------------------------------------------- (Signature) Its: --------------------------------------------------- Print Name: -------------------------------------------- 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------- Washington, D.C. 20004 ------------------------------------------------------- (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -51- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. PAUL A. ZEVNIK 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------ Washington, D.C. 20004 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -52- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. ------------------------------------------------------ RICHARD D. NORTON 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------ Washington, D.C. 20004 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -53- EXHIBIT "A" SCHEDULE OF MEMBERS
=============================================================================================================================== Number Description of Initial Percentage Members Class of Units* Capital Contribution Interest * =============================================================================================================================== Managing Members: - ------------------------------------------------------------------------------------------------------------------------------- WALTER F. ULLOA C 225,139 $100 20.77% - ------------------------------------------------------------------------------------------------------------------------------- PHILIP C. WILKINSON C 25,111 $100 2.32% - ------------------------------------------------------------------------------------------------------------------------------- Non-Managing Members: - ------------------------------------------------------------------------------------------------------------------------------- CABRILLO BROADCASTING A 339,475 That certain low power television station 31.31% CORPORATION, known as KBNT-TV 19 in San Diego, a California corporation California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- GOLDEN HILLS BROADCASTING A 185,633 That certain television station known as 17.12% CORPORATION, UHF-TV Channel 50 in Denver, Colorado, a Delaware corporation currently known by the call letters "KCEC", including low power television stations K43DK, Denver and K27DU, Colorado Springs /Pueblo, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- KSMS-TV, INC., A 14,413 That certain television station UHF-TV 1.33% a Delaware corporation Channel 67, Monterey, California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- LAS TRES PALMAS CORPORATION, A 14,956 KVER-TV4 in Indio/Palm Springs, 1.38% a Delaware corporation California; the escrow rights to purchase KLOB-FM in Desert Hot Springs /Palm Springs, California, and the proposed assignee of KAJB, Channel 54, Calipatria, California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - -------------------------------------------------------------------------------------------------------------------------------
A-1
=============================================================================================================================== Number Description of Initial Percentage Members Class of Units* Capital Contribution Interest * =============================================================================================================================== VALLEY CHANNEL 48, Inc., A [TO BE KNVO-TV 48 in Harlingin-McAllen, Texas [TO BE a Texas corporation PROVIDED] _____% and all related tangible and PROVIDED] intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $________________ value. ================================================================================================================================== TIERRA ALTA BROADCASTING, INC., A 171,507 KINC, Channel 15 in Las Vegas, Nevada, 15.82% a Delaware corporation and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ----------------------------------------------------------------------------------------------------------------------------------- EDITH SEROS, TRUSTEE OF THE A 23,920 Exchange of Existing Percentage Interest 2.21% WALTER F. ULLOA IRREVOCABLE TRUST dated October 9, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- PHILIP C. WILKINSON AND WENDY K. A 23,920 Exchange of Existing Percentage Interest 2.21% WILKINSON, AS TRUSTEES OF THE 1994 WILKINSON CHILDREN'S GIFT TRUST - ----------------------------------------------------------------------------------------------------------------------------------- KEVIN GRENHAM and KENNETH D. A 23,920 Exchange of Existing Percentage Interest 2.21% POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK IRREVOCABLE TRUST dated November 2, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- .95% PAUL A. ZEVNIK A 10,313 - ----------------------------------------------------------------------------------------------------------------------------------- PAUL A. ZEVNIK C 13,460 1.24% - ----------------------------------------------------------------------------------------------------------------------------------- RICHARD NORTON C 12,321 1.13% =================================================================================================================================== TOTAL 100.0000% /12/ ===================================================================================================================================
- -------------------------- /1/ Excludes Class D Units issued pursuant to the Equity Incentive Pool equal to up to 5% of the Percentage Interests of the Company on a fully diluted basis. /2/ Also excludes the Percentage Interest of Univision upon exercise of the Univision Option. A-2 EXHIBIT "B" GLOSSARY -------- 1. "Accredited Investor" means an investor who, at the time of its ------------------- purchase of an interest in the Company, falls into one of the following categories: (a) A natural person whose individual net worth or joint net worth with that person's spouse, exceeds One Million Dollars ($1,000,000) (including home, home furnishings and automobiles); (b) A natural person who had an individual income (excluding any income of his or her spouse) in excess of Two Hundred Thousand Dollars ($200,000) in each of the two most recent years, or joint income with his or her spouse in excess of Three Hundred Thousand Dollars ($300,000) in each of those years and who reasonably expects to reach the same income level in the current year; (c) An entity that (i) is a corporation, a partnership, or a Massachusetts or similar business trust; (ii) has total assets in excess of Five Million Dollars ($5,000,000), and (iii) was not formed for the specific purpose of acquiring an interest in the Company; (d) A trust with total assets in excess of Five Million Dollars ($5,000,000), not formed for the specific purpose of acquiring an interest in the Company whose purchase of an interest in the Company is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D promulgated under the Securities Act of 1933, as amended (the "1933 Act"); (e) A bank as defined in Section 3(a)(2) of the 1933 Act, or a savings and loan or other institution as defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of such Act; a private business development company, as defined in Section 202(a)(22) of the Investment Advisor's Act of 1940; or a Small Business Investment Company licensed by the U.S. Business Administration under Sections 301(c) or (d) of the Small Business Act of 1958; any plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of a State or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; (f) The Managing Members of the Company; or B-1 (g) An entity in which all the equity owners are Accredited Investors as defined in subparagraphs (a) through (f) above. 2. "Act" shall have the meaning set forth in Recital B of this Agreement. --- 3. "Adjusted Capital Account" means, with respect to any Member, such ------------------------ Member's capital account balance after increasing such capital account balance by such Member's share of Minimum Gain and decreasing such capital account balance by any items described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). 4. "Affiliate" means as to any Person, (a) any other Person 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) or 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 Person whether by contract or otherwise. 5. "Agreement" means this First Amended and Restated Operating Agreement --------- of ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., as amended from time to time in accordance with the terms hereof. 6. "Assets" mean all assets and rights of the Company, of whatever nature ------ (e.g., tangible, intangible, inchoate, contractual, claims--whether contingent ---- or liquidated, etc.). 7. "Bankruptcy" shall have the meaning given such term by the Act. ---------- 8. "Cash Available for Distribution" shall mean, with respect to any ------------------------------- fiscal period, all cash receipts during such fiscal period, less (a) the amount of cash disbursed by the Company during such period, including, without limitation, third-party debt service, expenditures required to be capitalized, and operating cash expenses such as licensing fees, taxes, utilities and telephone expenses, insurance expenses, supplies, professional expenses, rent, general and administrative expenses, costs of preparing and printing reports and communications to customers and to Members, reasonable travel expenses for Company business, and fees and distributions to Members, (b) capital contributions and other equity and debt financing, to the extent determined by the Managing Members to be necessary or appropriate to fund Reserves, and (c) excluding any Reserves. 9. "Class A Non-Managing Members" shall mean Cabrillo Broadcasting ---------------------------- Corporation, a California corporation, Golden Hills Broadcasting Corporation, a Delaware corporation, KSMS-TV, Inc., a Delaware corporation, Las Tres Palmas Corporation, a Delaware corporation, Tierra Alta Broadcasting, Inc., a Delaware corporation, Entravision Merger Corp., a Delaware corporation (which following closing of the Acquisition Agreement and Plan of Merger will become Valley Channel 48, Inc., a Texas corporation). Edith Seros, Trustee of the Walter F. Ulloa Irrevocable Trust of 1996 dated October 9, 1996, and Kevin Grenham and Kenneth D. Polin, Co-Trustees of The Paul A. Zevnik Irrevocable Trust dated November 2, 1996; Joseph Wilkinson, Trustee of the Philip C. Wilkinson Irrevocable Trust dated November 2, 1996. B-2 10. "Class C Members" shall mean Walter F. Ulloa, Philip C. Wilkinson, --------------- Paul A. Zevnik and Richard Norton. 11. "Class D Members" shall mean those persons issued Class D Non-Voting, --------------- Non-Managing Membership Units. 12. "Class A Units" shall mean membership interests in the Company which ------------- carry full voting rights, are issued in return for contributions of cash or other property to the Company, and carry an initial capital interest in the Company equal to the credit to each contributing Class A Unit Holder's capital account in connection with such holder's initial capital contribution to the Company. 13. "Class B Units" shall mean Units issued to third parties in accordance ------------- with Section 7 hereof on terms and conditions determined by the Executive Committee. 14. "Class C Units" shall mean Units in the Company which carry full ------------- voting rights and are issued to persons in connection for services to be rendered to the Company in each such person's capacity as a Member of the Company. Class C Units shall not have a capital interest in the Company upon their issuance. 15. "Class D Units" shall mean Units with no voting rights hereunder ------------- issued to persons pursuant to the terms of this Agreement or as otherwise determined by the Executive Committee. 16. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time, or any corresponding provision of succeeding law. 17. "Company" shall mean the limited liability company formed pursuant to ------- the Certificate of Formation referred to in Section 2 of this Agreement. 18. "Executive Committee" shall mean the committee described in Section 16 ------------------- of the Agreement. 19. "Initial Public Offering" shall have the meaning set forth in Section ----------------------- 26(i) of the Agreement. 20. "Majority in Interest" shall mean those Members of the group of -------------------- Members to whom reference is being made owning more than fifty percent (50%) of the outstanding Percentage Interests held by such group of Members. 21. "Managing Members" shall mean Walter F. Ulloa and Philip C. Wilkinson. ---------------- 22. "Members" shall refer collectively to the Managing Members and the ------- Non-Managing Members. Reference to a "Member" shall be to any one of the Members. 23. "Member Non-recourse Debt" shall mean a loan described in 1.704- ------------------------ 2(b)(4). B-3 24. "Minimum Gain" shall mean the amount determined by computing with ------------ respect to each nonrecourse liability of the Company, including for this purpose a Member Non-Recourse Debt, the amount of gain that would be realized by the Company if it disposed of the Asset subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed. 25. "Net Income" or "Net Losses," respectively, means all items of income ---------- ---------- as properly determined for "book" purposes, and "Net Losses" refers to all items of deductions and loss as properly determined for "book" purposes. Book income and loss shall be determined based on the value of the Company's Assets as set forth on the books of the Company in accordance with the principles of Regulations Section 1.704-1(b)(2)(iv)(g). 26. "Non-Managing Members" shall refer to all persons holding a Non- -------------------- Managing Member interest in the Company, regardless of class. 27. "Non-Recourse Deductions" has that meaning given to the term by ----------------------- Regulation Section 1.704-2. 28. "Percentage Interest" shall mean the percentage interest assigned to a ------------------- Member with respect to allocations of Net Income and Net Losses, distributions, voting rights (other than holders of Class D Units) and certain other incidents of a Member's interest in the Company, as set forth on the attached Exhibit "A". 29. "Person" means 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. 30. "Presumed Company Tax Liability(ies)" shall, as to each Member for any ----------------------------------- given fiscal year of the Company, be deemed to be equal to the product of the excess, if any, of the cumulative amount of the income and gain items reported or reportable on such Member's Schedule K-1 (IRS Form 1065) with respect to the Company for such year over the sum of the deduction and loss items reported or reportable on such Schedule K-1 for such year, and the maximum combined effective federal and California (or other state or the District of Columbia, as applicable) state corporate or individual income tax rate in effect for such year, whichever is higher. 31. "Prime Rate" shall mean the highest prime or reference rate as quoted ---------- from time to time by The Wall Street Journal, which shall be a variable rate. ----------------------- Any interest rates described in this Agreement that are described with reference to the Prime Rate shall similarly be variable interest rates and shall change immediately effective upon any change in the Prime Rate. 32. "Proportionate" and "Proportionately," means, when used with respect ------------- --------------- to the Members (or a group of them), the proportion that each such Member's outstanding Percentage Interest bears to the total outstanding Percentage Interests of all Members to whom reference is made. 33. "Regulations" means the temporary, proposed and final regulations ----------- promulgated by the Treasury Department pursuant to the Code. B-4 34. "Reserves" means, with respect to any fiscal period, funds set aside -------- or amounts allocated during such period to Reserves, which shall be maintained in a minimum amount equal to two (2) months operating expenses for the Company plus such additional amounts determined to be appropriate by the Managing Members for working capital and contingencies. B-5 EXHIBIT "C" CONSENT OF SPOUSE ----------------- I, __________________________________________, spouse of _________________________________________________, do hereby certify, acknowledge and agree as follows: 1. I have read and approve each and every provision set forth in the foregoing Agreement. 2. I accept and agree to be bound by the Agreement in all respects and in lieu of each other interest I may have in Entravision Communications Company, L.L.C. (the "Company"), whether that interest may be community property or quasi-community property under the laws of the State of California or other laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. 3. I hereby appoint my spouse as my attorney-in-fact with respect to the exercise of any rights under the Agreement. 4. I hereby consent to any amendments or modifications to the Agreement that are consented to, executed by or otherwise binding upon my spouse. Dated: _______________________, 19___. ----------------------------------- (Signature) ----------------------------------- (Please Print Name) C-1 SCHEDULE "1" LIST OF PERMISSIBLE BUSINESS ENDEAVORS MEMBER Permissible Business Endeavor ------ ----------------------------- Walter F. Ulloa Entravision Holdings, L.L.C.; Entravision Merger Corp.; Cabrillo Broadcasting Corporation; Golden Hill Broadcasting Corporation; KSMS-TV, Inc.; Las Tres Palmas Corporation; Tierra Alta Broadcasting, Inc. Philip C. Wilkinson Entravision Holdings, L.L.C.; Golden Hills Broadcasting Corporation; KSMS-TV, Inc. Cabrillo Broadcasting Cabrillo Broadcasting Corporation Corporation Golden Hills Golden Hills Broadcasting Corporation Broadcasting Corporation KSMS-TV, Inc. KSMS-TV, Inc. Las Tres Palmas Las Tres Palmas Corporation Corporation Tierra Alta Broadcasting Tierra Alta Broadcasting Corporation Corporation Entravision Merger Corp. Entravision Merger Corp. Ulloa Trust None Zevnik Trust None Wilkinson Children's Gift Trust None Paul A. Zevnik Entravision Merger Corp.; Golden Hills Broadcasting Corporation; KSMS-TV, Inc.; Las Tres Palmas Corporation; Tierra Alta Broadcasting, Inc. Richard D. Norton Entravision Merger Corp.; KSMS-TV, Inc.; Tierra Alta Broadcasting, Inc.; Golden Hills Broadcasting Corporation Schedule "I" - 1 Costa de Oro Television, Inc., a California corporation Tidewater Capital Corporation, a Delaware corporation 43 Corporation, Inc., a Delaware corporation TCC II Corporation, a Delaware corporation Beach 43 Corporation, Inc., a Delaware corporation Las Tres Campanas Television, Inc., a Nevada corporation Biltmore Broadcasting, a Delaware corporation Channel 44 Associates, a California limited partnership La Paz, Ltd., a California limited partnership La Paz Wireless, Ltd., a California limited partnership La Paz Wireless Corp., a Delaware corporation Zeus Corporation of Washington, Inc., a Delaware corporation Lomas de Oro Broadcasting Corporation Schedule "I" - 2 EXHIBIT D --------- FIRST AMENDMENT TO ORIGINAL NOTE PURCHASE AGREEMENT 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 _________ __, 199_ (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:_________________________________ Name:_______________________________ Title:______________________________ ____________________________________ ____________________________________ ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:_________________________________ Walter F. Ulloa, Managing Member By:_________________________________ Philip Wilkinson, Managing Member 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 BORROWERS KSMS-TV, INC. By: ________________________________ Name: ______________________________ Title: _____________________________ 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Fax No.: (310) 979-8804 S-1 TIERRA ALTA BROADCASTING, INC. By: ________________________________ Name: ______________________________ Title: _____________________________ 22 Commerce Center Way Henderson, Nevada 89015 Fax No.: (702) _____________ CABRILLO BROADCASTING CORPORATION By: ________________________________ 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: ________________________________ Name: ______________________________ Title: _____________________________ KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Fax No.: (303) 832-3410 LAS TRES PALMAS CORPORATION By: ________________________________ Name: ______________________________ Title: _____________________________ KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Fax No.: (619) 341-0951 S-2 MANAGING MEMBERS WALTER E. ULLOA ____________________________________ PHILIP C. WILKINSON ____________________________________ S-3 EXHIBIT E --------- SECOND AMENDMENT TO ORIGINAL NOTE PURCHASE AGREEMENT 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:___________________________________________________ Name:_________________________________________________ Title: Entravision ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:___________________________________________________ Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By:___________________________________________________ Philip C. Wilkinson, President, Chief Operating Officer and Managing Member KSMS-TV, INC., a Delaware corporation By:___________________________________________________ Walter F. Ulloa, Chief Executive Officer TIERRA ALTA BROADCASTING, INC., a Delaware corporation By:___________________________________________________ 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:___________________________________________________ Philip C. Wilkinson, President GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation By:___________________________________________________ Walter F. Ulloa, President LAS TRES PALMAS CORPORATION, a Delaware corporation By:___________________________________________________ Walter F. Ulloa, President VALLEY CHANNEL 48, INC., a Texas corporation and successor-in-interest to Entravision Merger Corp. By:___________________________________________________ Walter F. Ulloa, Chief Executive Officer ______________________________________________________ Walter F. Ulloa, an individual ______________________________________________________ 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 ------------------------------
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. - PRO FORMA DIRECT AND INDIRECT OWNERSHIP Wilkinson Wilkinson Wilkinson Ulloa Ulloa CLASS A UNITS Trust Children's Trust Trust - ---------------------------------- Cabrillo 330,816 287,517 8,660 Golden Hills 137,801 33,596 47,832 KSMS-TV 14,413 4,324 4,324 Las Tres 13,460 6,730 Tierra Alta 171,507 57,883 Ulloa Trust 23,920 23,920 Wilkinson Children's Trust 23,920 23,920 Zevnik Trust 23,920 Valley Channel 665,980 240,667 240,667 Telecorpus 149,300 26,216 28,424 26,216 28,424 TOTAL A UNITS 1,555,037 37,920 554,400 52,344 392,312 52,344 CLASS A UNITS (Univision Option) - ---------------------------------- Univision 665,289 Univision (KLUZ) 71,330 TOTAL A AND A UNITS (UNIVISION OPTION) 2,291,656 CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 286,206 25,131 225,139 TOTAL A, A (UNIVISION OPTION) & C UNITS 2,577,862 63,051 554,400 52,344 617,451 52,344 CLASS D UNITS - ---------------------------------- Lawrence E. Safir 54,284 Jeanette L. Tully 14,161 Bram Watkins (Option) 19,710 TOTAL A, A(UNIVISION OPTION), C & D UNITS 2,666,017 CLASS E UNITS - ---------------------------------- Paul A. Zevnik 10,313 TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 2,676,330 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund 5,000 The Zevnik Charitable Foundation 5,313 TOTAL F UNITS 10,313 TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS 2,676,330 Pre-Univision Ownership Percentages 1.0000 0.0325 0.2858 0.0270 0.3183 0.0270 Post-Univision Percentages 1.0000 0.0236 0.2071 0.0196 0.2307 0.0196 Zevnik Zevnik Norton Norton Rico Luery Safir CLASS A UNITS Trust Properties Trust - ---------------------------------- Cabrillo 34,639 Golden Hills 33,596 22,777 KSMS-TV 4,324 1,441 Las Tres 6,730 Tierra Alta 57,884 17,151 38,589 Ulloa Trust Wilkinson Children's Trust Zevnik Trust 23,920 Valley Channel 102,148 35,466 24,805 22,227 Telecorpus 23,178 8,058 3,734 5,050 TOTAL A UNITS 204,682 47,098 84,893 0 67,128 61,915 CLASS A UNITS (Univision Option) - ---------------------------------- Univision Univision (KLUZ) TOTAL A AND A UNITS (UNIVISION OPTION) CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 22,119 13,817 TOTAL A, A (UNIVISION OPTION) & C UNITS 226,801 47,098 84,893 13,817 67,128 61,916 CLASS D UNITS - ---------------------------------- Lawrence E. Safir 54,284 Jeanette L. Tully Bram Watkins (Option) TOTAL A, A(UNIVISION OPTION), C & D UNITS CLASS E UNITS - ---------------------------------- Paul A. Zevnik 10,313 TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 237,114 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund 5,000 The Zevnik Charitable Foundation 5,313 TOTAL F UNITS TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS Pre-Univision Ownership Percentages 0.1222 0.0243 0.0438 0.0071 0.0346 0.0319 0.0280 Post-Univision Percentages 0.0886 0.0176 0.0317 0.0052 0.0251 0.0231 0.0203 Tully Watkins Univision Percentage Percentage CLASS A UNITS w/o Univision w/Univision - ---------------------------------- Cabrillo 0.1705 0.1236 Golden Hills 0.0710 0.0515 KSMS-TV 0.0074 0.0054 Las Tres 0.0069 0.0050 Tierra Alta 0.0884 0.0641 Ulloa Trust 0.0123 0.0089 Wilkinson Children's Trust 0.0123 0.0089 Zevnik Trust 0.0123 0.0089 Valley Channel 0.3433 0.2488 Telecorpus 0.0770 0.0558 TOTAL A UNITS CLASS A UNITS (Univision Option) - ---------------------------------- Univision 665,289 0.2486 Univision (KLUZ) 71,330 0.0267 TOTAL A AND A UNITS (UNIVISION OPTION) CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 0.1476 0.1069 TOTAL A, A (UNIVISION OPTION) & C UNITS CLASS D UNITS - ---------------------------------- Lawrence E. Safir 0.0280 0.0203 Jeanette L. Tully 14,161 0.0073 0.0053 Bram Watkins (Option) 19,710 0.0102 0.0074 TOTAL A, A(UNIVISION OPTION), C & D UNITS CLASS E UNITS - ---------------------------------- Paul A. Zevnik TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 0.0053 0.0039 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund The Zevnik Charitable Foundation TOTAL F UNITS TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS 1.0000 1.0000 Pre-Univision Ownership Percentages 0.0073 0.0102 Post-Univision Percentages 0.0053 0.0074 0.2752
EXHIBIT F --------- Z-SPANISH LETTER OF INTENT ZHGMPF Draft February 24, 2000 Entravision Communications Company, L.L.C. 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 (310) 447-3870 February 24, 2000 Darryl B. Thompson, Partner TSG Capital Group, L.L.C. 177 Broad Street, 12/th/ Floor Stamford, Connecticut 06901 Amador S. Bustos, CEO Z-Spanish Media Corporation 1436 Auburn Boulevard Sacramento, California 95815 Re: Z-Spanish Media Corporation Gentlemen: This letter of intent (the "Letter of Intent") sets forth the agreement in principle pursuant to which Entravision Communications Company, L.L.C., a Delaware limited liability company ("Entravision"), or a corporation to be formed and controlled by the members of Entravision, will acquire (a) directly or by means of a merger all the outstanding capital stock on a fully diluted basis (assuming the exercise or cancellation of all warrants and options) (the "Shares") of Z-Spanish Media Corporation, a Delaware corporation ("Z-Spanish"), which owns and operates (a) the radio stations and radio programming network listed on Exhibit "A" attached hereto (the "Radio Stations") and incorporated herein by this reference, (b) the Internet sites listed on Exhibit "A," and (c) an outdoor billboard business described on Exhibit "A" (the "Outdoor Business"). The purchase of the Shares is referred to herein as the "Transaction." Entravision and Z-Spanish are sometimes collectively referred to herein as the "Parties" and singularly as a "Party." This Letter of Intent is intended to serve only as a mutual expression of the intentions of the Parties with respect to the Transaction and not as a legally binding contract or commitment. The Parties hereto shall have no legal obligation with respect to the Transaction, other than as expressly herein provided, unless and until a Definitive Agreement (as defined below) is executed by them. This Letter of Intent may be terminated by either Party at any time and without further obligation to the other Party if the Definitive Agreement has not been entered into by March 24, 2000 (the time period from execution hereof by Entravision and Z-Spanish through March 24, 2000, being referred to as the "Due Diligence Period"). CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 2 Notwithstanding anything contained herein to the contrary, however, the mutual covenants and agreements of the Parties expressed in paragraphs 7 through 16 herein shall be binding in accordance with their respective terms whether or not the Definitive Agreement is executed and whether or not the Transaction is consummated. 1. Acquisition Terms. Based on the information currently known to the ----------------- Parties, it is proposed that the structure for the acquisition of the Shares, the Transaction consideration and related terms and conditions will be in accordance with the Memorandum of Terms attached as Exhibit "B" hereto and incorporated herein by this reference. 2. Definitive Agreement. During the Due Diligence Period, each Party will -------------------- undertake its due diligence efforts with respect to the other Party, and Entravision will provide a first draft of a definitive agreement (the "Definitive Agreement"). The Parties hereto will use all reasonable efforts to complete promptly the Definitive Agreement setting forth the definitive provisions and conditions of the Transaction and containing representations, warranties, conditions, covenants and indemnities by the Parties as shall be customary in such a transaction and as shall be mutually agreed upon. The Parties will concurrently negotiate such additional agreements as they deem necessary in connection with the Transaction. The Parties will cooperate fully with each other in preparing all such agreements. Within approximately ten (10) business days after execution of this Letter of Intent, the Parties shall file an application with the FCC requesting its consent to transfer of control of Z- Spanish to Entravision Communications Corporation, the corporation formed by Entravision to effectuate its roll-up and initial public offering. Prior to, or concurrently with, the execution and delivery of the Definitive Agreement (i) Entravision will have obtained the consent of Univision; (ii) both Parties shall have obtained the approval of their respective members, Executive Committee, Board of Directors, stockholders and lenders in accordance with all applicable laws, rules and regulations; and (iii) Entravision shall have obtained commitments reasonably acceptable to Z-Spanish for permanent financing (in addition to the Univision investment) for the LCG acquisition (as described in the Memorandum of Terms) in an amount equal to at least Ninety Million Dollars ($90,000,000). The "Closing" will take place as defined in the Memorandum of Terms. 3. Hart-Scott Filings; Consents and Approvals. Promptly after the ------------------------------------------ execution of the Definitive Agreement, the Parties will cooperate with each other in the preparation of all filings required to be made with the Federal Trade Commission (the "FTC") and the Department of Justice (the "DOJ") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). HSR Act filing fees shall be borne fifty percent (50%) by Entravision, and fifty percent (50%) by Z-Spanish. In the event that the FTC or the DOJ makes a request for additional information with respect to the Transaction, the Parties will cooperate with each other in taking all reasonable steps to promptly obtain and prepare such information and deliver it to the FTC or the DOJ. In addition, the Parties will cooperate fully with each other in obtaining all other CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 3 necessary approvals, clearances, consents or waivers from third parties and governmental authorities and taking reasonable steps to comply with all governmental and regulatory requirements. 4. Conditions to Closing. The Parties' obligation to consummate the --------------------- Transaction will be subject to various conditions, including: i. The satisfactory completion of its due diligence review by expiration of the Due Diligence Period; ii. The execution and delivery of a mutually acceptable Definitive Agreement; iii. The receipt of any necessary approval, clearance, consent or waiver from the FCC, FTC, DOJ and any other necessary third parties and governmental authorities; iv. The absence of any judgment, order or injunction that restrains the Transaction contemplated hereby; v. The absence of any material adverse change in the assets, liabilities, properties, results of operations, FCC licenses and/or management of each Party; vi. The materially satisfactory completion of an engineering and environmental review of the Parties' respective businesses, which each Party agrees to complete within sixty (60) days after execution of this Letter of Intent; vii. The maintenance of the Parties' respective businesses in the ordinary course through the Closing; and viii. Such other conditions to Closing customarily provided for in similar transactions. 5. No Further Negotiations. Z-Spanish and the undersigned stockholder of ----------------------- Z-Spanish understand and acknowledge that following the mutual execution of this Letter of Intent, Entravision will incur significant expenses in connection with its review and investigation of Z-Spanish. Accordingly, Z-Spanish and the undersigned stockholder of Z-Spanish agree that during the Due Diligence Period, Z-Spanish and the undersigned stockholder will not, nor will it permit any affiliate, officer, director, stockholder, employee, attorney, accountant, financial adviser or other representative of Z-Spanish to negotiate with, solicit or participate in negotiations with any third party other than Entravision with respect to the sale of the Shares, the CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 4 sale of any assets of the Radio Stations and Outdoor Business (other than in the ordinary course), the sale of any ownership interests in Z-Spanish or any similar transaction. Similarly, from the date of execution of this Letter of Intent through the expiration of the Due Diligence Period, Entravision agrees to not take any material action inconsistent with the Transaction as contemplated pursuant to the Memorandum of Terms, including any action which would materially delay the consummation of the Transaction. Notwithstanding the foregoing, Entravision acknowledges and agrees that during the Due Diligence Period Z- Spanish may continue to prepare an S-1 Registration Statement in connection with a proposed initial public offering ("IPO") of Z-Spanish; provided, however, that (i) such activities will not delay the best efforts of Z-Spanish and its representatives to complete the due diligence and negotiations necessary to pursue in good faith consummation of a Definitive Agreement with Entravision as contemplated hereby and (ii) all work product associated with Z-Spanish's registration activities shall be made available to Entravision in connection with its due diligence and for purposes of integrating the same into a draft registration statement to be prepared by Entravision in connection with its IPO. 6. Access to Personnel, Books, Records and Properties. At all times prior -------------------------------------------------- to the consummation of the Transaction, each Party shall afford and shall use its best efforts to cause to be afforded to the other Party and its representatives, agents and employees, full access to the personnel, books and records, tangible assets, agreements and licenses of each Party (including LCG to the extent permitted under Entravision's agreement with LCG), as may be reasonably requested by the other Party or its representatives, agents or employees. Each Party agrees that prior to consummation of the Transaction, the other Party will be furnished with such accounting information and reports the other Party deems reasonably necessary to enable the other Party to satisfy disclosure requirements to its lender, or state and federal regulators. In connection with each Party's due diligence investigation of the other Party, until the termination of this Letter of Intent, the other Party will afford, and cause its officers and employees to afford, each Party and its representatives with (i) a full opportunity to examine the other Party's books and records (in connection with which the other Party will use its best efforts to cause its independent public accountants to make available to each Party and its representatives their work papers generated in connection with their review and audit of the other Party's financial statements) and the facilities, books of account, corporate records, agreements and commitments and other materials and information relating to other Party's business, assets and liabilities and (ii) reasonable access to the other Party's customers, suppliers, lenders and key personnel. 7. Confidentiality. Both Parties shall continue to be bound by Mutual --------------- Confidentiality and Non-Disclosure Agreement dated December 17, 1999, between Entravision and Z-Spanish. The Parties confidentiality obligations shall extend to the existence of and subject matter contained in this Letter Agreement and the attached Memorandum of Terms, and any discussions relating thereto. CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 5 8. Publicity. None of the Parties shall make any public announcement or --------- any press release regarding this Letter of Intent or the Transaction or the subject matter hereof or thereof without the prior written consent of the other Parties hereto. 9. Expenses. Except as otherwise specifically provided herein, each Party -------- hereto shall separately bear its own expenses incurred in connection with this Letter of Intent and the Transaction, regardless of whether or not the Transaction is consummated. 10. Brokerage Fees. No broker has been retained in connection with the -------------- Transaction. Each Party will indemnify and hold harmless the other, and its successors and assigns, from and against any and all actions, suits proceedings, damages, liabilities, losses, costs and expenses (including experts' and reasonable attorneys' fees) arising out of or in connection with any claim by a Party for brokerage or finders' fees or commissions, or similar payments or remuneration in respect of the Transaction. 11. Entire Agreement. This Letter of Intent constitutes the entire ---------------- agreement between the Parties and supersedes all prior oral or written agreements, understandings, representations and warranties and courses of conduct and dealing between the Parties on the subject matter hereof. Except as otherwise provided herein, this Letter of Intent may be amended or modified only by a writing executed by each of the Parties. 12. Governing Law. This Letter of Intent shall be governed and construed ------------- under the laws of the State of California without regard to conflicts of laws principles. 13. Jurisdiction; Service of Process. Any action or proceeding seeking to -------------------------------- enforce any provision of, or based on any right arising out of, this Letter of Intent may be brought against either of the Parties in the courts of the State of California, County of Los Angeles, or in the United States District Court for the Southern District of California, and each of the Parties consent 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. 14. Authority. Each of the undersigned has the full power and authority --------- to execute and deliver this Letter of Intent on behalf of their respective entities. 15. Attorneys' Fees. In the event any action is brought by any Party to --------------- this Letter of Intent to enforce or interpret its terms or provisions, the prevailing Party shall be entitled to reasonable attorneys' fees and costs. CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 6 16. Counterparts; Facsimile. This Letter of Intent 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. [Remainder of Page Left Intentionally Blank] CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 7 If the foregoing correctly states our mutual intention, please sign and return the enclosed copy of this letter to the undersigned. Sincerely, ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:_______________________________________________ Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By:_______________________________________________ Philip C. Wilkinson, President, Chief Operating Officer and Managing Member Acknowledged and Agreed to: Z-SPANISH MEDIA CORPORATION, a Delaware corporation Dated: February ___, 2000 By:_______________________________________________ Amador S. Bustos, Chief Executive Officer TSG CAPITAL FUND II, L.P. By: TSG ASSOCIATES II, L.P. Its General Partner By: TSG ASSOCIATES, II, INC. Its General Partner Dated: February ___, 2000 By:_____________________________________ Darryl B. Thompson Senior Vice President and Director [Signatures Continued on Next Page] CONFIDENTIAL Darryl B. Thompson ZHGMPF Draft February 24, 2000 Amador S. Bustos July 23, 2000 Page 8 TSG CAPITAL FUND III, L.P. By: TSG ASSOCIATES III, LLC Its General Partner By:__________________________________________ Darryl B. Thompson Executive Vice President and Managing Member __________________________________________________ Amador S. Bustos, Individually __________________________________________________ John Bustos, Individually [Signature Page to Z-Spanish Media Corporation Letter of Intent] CONFIDENTIAL ZHGMPF Draft February 24, 2000 EXHIBIT "A" ASSETS OWNED BY Z-SPANISH ------------------------- (a) List radio stations and describe radio programming network: (b) List Internet sites: (c) Describe outdoor billboard business: CONFIDENTIAL ZHGMPF Draft February 24, 2000 EXHIBIT "B" MEMORANDUM OF TERMS ------------------- CONFIDENTIAL EXHIBIT "B" CONFIDENTIAL MEMORANDUM OF TERMS FOR ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ACQUISITION OF Z-SPANISH MEDIA CORPORATION This Memorandum of Terms summarizes the principal terms of a proposed acquisition by Entravision Communications Company, L.L.C., a Delaware limited liability company ("ECC"), of Z-Spanish Media Corporation, a Delaware corporation ("Z-Spanish"). Structure of Acquisition: Z-Spanish will be combined with ECC (the "Combination") in conjunction with the roll-up transaction described below via contribution of all the issued and outstanding shares of Z- Spanish (which is the one hundred percent (100%) parent corporation of Vista Media Group, Inc.) to Entravision Communications Corporation, a Delaware corporation ("Entravision"), in a transaction intended to qualify for partial tax deferral under Internal Revenue Code ("IRC") Section 351. At the closing of the acquisition, Z-Spanish would be a direct or indirect wholly owned subsidiary of Entravision. The stockholders of Z-Spanish will receive seventy percent (70%) of the closing consideration in cash and thirty percent (30%) of the closing consideration in newly issued shares of Entravision Class A Common Stock as described more fully below. Alternatively, an entity controlled by Entravision's members will be merged into and with Z-Spanish in a transaction pursuant to which the Shares will be acquired for the consideration described herein. The final structure of the Combination shall be subject to reasonable adjustments based upon further tax analysis in a manner that does not adversely affect the contemplated tax consequences to any Party. At the Closing (as defined below), Entravision will purchase, free and clear of all security interests, liens, claims and encumbrances, all of the Shares. Any long-term liabilities (including, but not limited to, the long-term liabilities reflected in Z-Spanish audited balance sheet dated December 31, 1999 provided to Entravision) may be refinanced or assumed, at the election of Entravision. Covenant Not to Compete. TSG Capital Fund and ----------------------- other non-management stockholders of Z-Spanish will not be subject to covenants not to compete, although such stockholders will agree to be bound by customary confidentiality and non-solicitation provisions. The Z-Spanish management selling stockholders will deliver covenants not to compete at the Closing which provide that such individuals shall not compete with Entravision and its affiliates in the Spanish media business (including television, radio, Internet and outdoor advertising) in the areas defined by the Nielsen Media Company Designed Market Areas for the Radio Stations and Outdoor Business for a period equal to the greater of (a) three (3) years from the Closing or (b) one (1) year after termination of employment with Entravision for any reason, but in no event more than four (4) years from the Closing. Purchase Price: Z-Spanish will be acquired for total consideration of Four Hundred Seventy Five Million Dollars ($475,000,000) ("Purchase Price"). Z-Spanish Equity Purchase Price: The price paid to Z-Spanish shareholders (the "Z-Spanish Equity Purchase Price") shall be: Four Hundred Seventy Five Million Dollars ($475,000,000) less the net debt as reported on the balance sheet of Z-Spanish at Closing (estimated at One Hundred Six Million Dollars ($106,000,000). The resulting Z-Spanish Equity Purchase Price is estimated to be Three Hundred Sixty Nine Million Dollars ($369,000,000). Payment of Z-Spanish Equity Purchase Price: The Z-Spanish Equity Purchase Price shall be paid as follows: (i) Seventy percent (70%) of the Z-Spanish Equity Purchase Price in cash (estimated at Two Hundred Fifty Eight Million Three Hundred Thousand Dollars ($258,300,000) (the "Cash Consideration Value"), plus (ii) Thirty percent (30%) of the Z-Spanish Equity Purchase Price in newly issued Entravision stock (estimated 2 at One Hundred Ten Million Seven Hundred Thousand Dollars ($110,700,000) (the "Stock Consideration Value"). Number of New Shares Issues to Z-Spanish Shareholders: The number of newly issued Entravision shares issued as the Stock Consideration Value shall be calculated as follows: The Stock Consideration Value divided by the "Entravision Share Price," determined as follows: Calculation of the Entravision Share Price: (i) Eight Hundred Seventy Five Million Dollars ($875,000,000) (assumes that Univision has funded One Hundred Ten Million Dollars ($110,000,000) of new equity). (ii) Less: Net debt as reported on the most recent Entravision balance sheet at Closing (estimated at Sixty Five Million Dollars ($65,000,000). Excludes any debt related to LCG acquisition. (iii) Equals the "Entravision Equity Value" estimated at Eight Hundred Ten Million Dollars ($810,000,000). (iv) The Entravision Equity Value divided by the number of fully diluted shares outstanding just prior to the merger with Z-Spanish (estimated to be 41,112,100). (v) Equals the Entravision Share Price (estimated to be $19.70) Entravision Roll-Up: ECC is in the process of completing an IRC Section 351 incorporation transaction pursuant to which all the owners of the ECC will receive stock in Entravision. Prior to the "roll-up," Univision will invest an additional $110,000,000 in ECC and as part of the roll-up will contribute its outstanding note and option to acquire units in Entravision for Class C Common Stock of Entravision equal to an aggregate pre-"roll-up" ownership interest of forty percent (40%). 3 Public Offering: As soon as practicable following execution of a definitive agreement relating to the Combination (the "Definitive Agreement"), but in any event, no later than the later of April 14, 2000 or thirty (30) days after signing the Definitive Agreement, Entravision will file with the SEC a Registration Statement with respect to an underwritten initial public offering (the "IPO"). The lead underwriters for the offering will be DLJ and Credit Suisse First Boston. The ultimate amount of securities included in the IPO will depend upon market conditions, as determined by Entravision and the lead underwriters. Entravision contemplates certain key active principals will sell limited amounts of shares in the IPO, on terms to be mutually agreed upon (the "Limited Sales"). Latin Communications Group, Inc.: Entravision has entered into a definitive agreement to acquire all of the outstanding shares of capital stock of Latin Communications Group, Inc. ("LCG"), which transaction shall close no later than May 31,2000. Closing: The "roll-up," IPO and Combination will all close concurrently, which the Parties shall exert best efforts to complete as soon as practicable (the "Closing"). The Definitive Agreement will also provide that the Closing will occur after the FCC consent to the Combination has become a "final order," but subject to the right of the Parties to waive such requirement and close on FCC initial approval. If the Closing has not taken place by September 30, 2000 due to any reason other than Z-Spanish's failure to satisfy its closing conditions under the Definitive Agreement, Z-Spanish may elect, in its discretion, to require Entravision to close the Combination and "roll-up" on the terms set forth in the Definitive Agreement, provided that Ninety Million Dollars ($90,000,000) of the cash portion of the closing consideration will be payable in cash pursuant to the terms set forth below and the balance shall be payable in the form of a PIK preferred instrument on the terms set forth on Annex I hereto (which terms are incorporated herein by reference) (herein, the "Interim Closing"). 4 Following the Interim Closing, the Parties shall continue to cooperate to complete Entravision's IPO, at which time the PIK preferred instrument will be fully redeemed. Notwithstanding anything herein to the contrary, the roll-up and the Combination shall take place no later than the Interim Closing. In the event, (i) Entravision has not filed an S-1 Registration Statement by the later of April 14, 2000 or thirty (30) days after execution of the Definitive Agreement; (ii) the LCG transaction has not closed by May 31, 2000; or (iii) the Parties have not received all of their required FCC, FTC or DOJ approvals by September 30, 2000, Z-Spanish shall have the right to terminate its commitments under the Definitive Agreement. In consideration for Z-Spanish's agreement to make the Closing contingent upon the IPO, upon the signing of the Definitive Agreement, Entravision shall provide a third-party financial guaranty to Z-Spanish from a source reasonably acceptable to Z-Spanish, guaranteeing payment of Ninety Million Dollars ($90,000,000) of the cash portion of the closing consideration to Z-Spanish at the Interim Closing. Capital Structure:
Approximate Approx. Approx. Post-Combination, Pre-IPO Proforma Proforma Name Proforma # of Shares Value %3 Voting % - ---- ---------------------------------------- -------- -------- Class A Class B Class C Walter F. Ulloa1 -0- 8,686,700 -0- 18.6 39.5 Philip C. Wilkinson1 -0- 8,686,700 -0- 18.6 39.5 Paul A. Zevnik1 -0- 3,678,200 -0- 7.9 16.8 Other ECC 3,614,600 -0- -0- 7.7 1.6 Univision -0- -0- 16,445,900/2/ 35.2 --- Z-Spanish stockholders 5,618,654 -0- -0- 12.0 2.6
/1/ Direct and indirect combined. /2/ Class C shares elect two (2) directors and vote on certain corporate matters as a class. /3/ Does not include Class A shares issuable pursuant to an equity incentive option pool projected at approximately ten percent (10%) of outstanding shares. Financial Condition: Each of Entravision and Z-Spanish will make representations with respect to its financial condition as 5 reflected in its (or its predecessors) December 31, 1998 year-end audited financials and December 31, 1999 year-end financials in the Definitive Agreement. December 31, 1999 financial results of each Party will be audited for the IPO. Description of Capital Stock: Capital stock shall consist of (1) 200,000,000 authorized shares of Common Stock, $0.0001 par value per share, which consists of (a) 150,000,000 shares of Class A Common Stock, (b) 25,000,000 shares of Class B Common Stock, par value $0.0001 per share, and (c) 25,000,000 of Class C Common Stock, and (2) 10,000,000 authorized shares of Preferred Stock, par value $0.0001 per share, none of which will be outstanding at the Closing. The Entravision Certificate of Incorporation will contain "blank check" Preferred Stock provisions. Class A Common Stock: The holders of Class A Common Stock shall be entitled to one vote for each share held on all matters voted upon by stockholders, including the election of directors and any proposed amendment to the certificate of incorporation. The holders of Class A Common Stock are entitled to vote as a separate class to elect one (1) independent director to the Board of Directors. The holders of Class A Common Stock will be entitled to such dividends as may be declared at the discretion of the Board of Directors out of funds legally available for that purpose. The holders of Class A Common Stock will be entitled to share ratably with all other classes of Common Stock in the net assets of Entravision upon liquidation after payment or provision for all liabilities. Class B Common Stock: The holders of Class B Common Stock shall be entitled to the same rights, privileges, benefits and notices as the holders of Class A Common Stock, except that the holders of Class B Common Stock will be entitled to ten (10) votes per share. All shares of Class B Common Stock may be converted at any time into a like number of shares of Class B Common Stock at the option of the holder of such shares. The holders of Class B Common Stock will be entitled to such dividends as may be declared at the discretion of the 6 Board of Directors out of funds legally available for that purpose. The holders of Class B Common Stock will be entitled to share ratably with all other classes of Common Stock in the net assets of Entravision upon liquidation after payment or provision for all liabilities. Class C Common Stock: Univision, as the holder of Class C Common Stock, is entitled to vote as a separate class to elect two (2) directors to the Board of Directors. The holders of Class C Common Stock will be entitled to such dividends as may be declared at the discretion of the Board of Directors out of funds legally available for that purpose. The holders of Class C Common Stock will be entitled to share ratably with all other classes of Common Stock in the net assets of Entravision upon liquidation after payment or provision for all liabilities. The Class C Common Stock will have the right to vote as a class on certain material decisions, including, but not limited to, major corporate transactions. These special voting rights will terminate upon Univision selling below thirty percent (30%) of its initial ownership level. Transfer Restrictions Shares will be held subject to applicable securities laws and FCC laws and restrictions. In connection with the IPO, Entravision stockholders may be required to enter into "market stand-off" agreements as described below. Foreign Ownership: Entravision's Certificate of Incorporation shall restrict the ownership, voting and transfer of its capital stock in accordance with the Communications Act and the rules of the FCC, which prohibit certain domination or control by foreign aliens.. In addition, the Certificate of Incorporation will authorize the Board of Directors to take action to enforce these prohibitions, including placing appropriate stop transfer orders and placing a legend restricting certain foreign ownership on the certificates representing the Class A, B, and C Common Stock. Management of Entravision Board of Directors: Entravision's initial ------------------ Board of Directors shall consist of Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik, two (2) representatives of 7 Univision, Amador S. Bustos, and Darryl B. Thompson. The Parties shall enter into appropriate arrangements to ensure that either Amador S. Bustos or John Bustos (but only so long as such individuals are full-time employees of Entravision) serves on the Board of Directors on an ongoing basis. Z-Spanish Equity Participation: It is ------------------------------ anticipated that the consideration received by the Z-Spanish stockholders in the combination will be allocated among the Z-Spanish stockholders so that certain members of Z- Spanish management, including Amador S. Bustos and John Bustos, received payment entirely in Entravision Common Stock. Executive Officers: ------------------ Walter F. Ulloa, CEO and Chairman of Entravision Philip C. Wilkinson, President and COO of Entravision Jeanette Tully, CFO and Treasurer of Entravision Amador S. Bustos, President of Radio Group Conduct of Business: During the period from the execution of the Mutual Nondisclosure and Exclusive Dealing Agreement through the termination of the exclusivity period thereunder, each of Z- Spanish and Vista shall operate their business in the ordinary course and, except as agreed upon, refrain from any extraordinary transactions. Registration Rights: Entravision's existing stockholders and the stockholders of Z-Spanish participating in the roll-up (the "Holders") shall be entitled, in relation to the respective ownership interests in Entravision, to registration rights pursuant to a registration rights agreement which shall include unlimited piggy-back registration rights, unlimited S-3 registration rights and a single demand registration right (which demand right shall, in the case of Z-Spanish, be limited to non- management stockholders), on a pro rata basis, all subject to customary terms, conditions and covenants, including, but not limited to, market stand-off agreements of ninety (90) days (or such other period as reasonably 8 requested by the underwriters in the IPO), which shall equally apply to all stockholders (other than stockholders participating in the Limited Sales). Employee Equity Participation: Existing stock options will be assumed by Entravision and to the extent "in the money" and included in the relative valuations. In addition, subject to majority approval of the Board of Directors, certain key employees will receive options to purchase Class A shares in Entravision. The issuance of such additional Class A shares will dilute the interests of all existing Class A, Class B and Class C stockholders, proportionately. The aggregate additional ownership interests issued pursuant to such employee equity participation plan are expected to equal approximately ten percent (10%) of the outstanding shares. Employment Agreements: Concurrently with the formation of Entravision, Entravision will enter into and/or amend and restate existing executive employment agreements with key executives on terms approved by the Board of Directors. The Parties agree that Amador S. Bustos, John Bustos and Glenn Emmanuel will be retained by Entravision pursuant to the forms of employment agreements to be mutually agreed upon at the time of signing the Definitive Agreement. Indemnification: Entravision's Certificate of Incorporation will provide the maximum indemnification of and limitations on liability of officers and directors allowed by law. All officers and directors will also enter into standard form Indemnification Agreements with Entravision. Confidentiality Agreements: All employees of Entravision will be required to enter into a Confidentiality and Employee Inventions Agreement in a form approved by the Board. 9 ANNEX 1 SUMMARY OF PROPOSED TERMS OF ENTRAVISION COMMUNICATIONS COMPANY CORPORATION PIK PREFERRED STOCK Issuer: Entravision Communications Company Corporation (the "Corporation") Purchaser: Z-Spanish Media Corp. shareholders (the "Shareholders"). Amount: Seventy percent (70%) of the Z-Spanish Equity Purchase Price less $90 million. Type Securities: PIK Preferred Stock. Payment: Until December 31, 2000, the Corporation will pay like-kind securities at an initial rate of 700 bps over six (6) month LIBOR. After December 31, 2000, the Corporation shall pay a special dividend to the Shareholders an amount calculated to provide the Shareholders with an IRR (compounded annually) of thirty percent (30%) per annum from the Interim Closing to the date of redemption. Maturity: The PIK Preferred Stock will mature thirty six (36) months following the Interim Closing. Ranking: Subordinated to senior debt and senior subordinated debt and pari passu with senior preferred stock. Financial Covenants: Including, but not limited to: . Asset sale limitation; . Limitation on merger, consolidation or sale of assets; . Certain reporting requirements; and . Limitation on dividends and other payment restrictions. Optional Redemption: Any time after Interim Closing. 10 EXHIBIT G --------- FORM OF RESTATED CERTIFICATE OF INCORPORATION 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 ---------------- 200,000,000 shares of Common Stock, par value $0.0001 per share, divided into the following classes: (i) 150,000,000 shares of Class A Common Stock (the "Class A Common Stock"); (ii) 25,000,000 shares of Class B Common Stock (the "Class B Common Stock"); and (iii) 25,000,000 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 10,000,000 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 11.3 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 11.2 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 11.2 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 11.2 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 11.2 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 11.2 above shall be the same procedure set forth in this Section 11.3 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 _____________________________________________ ___________________________, Secretary [Signature Page to First Restated Certificate of Incorporation of Entravision Communications Corporation] EXHIBIT H --------- FORM OF BYLAWS 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 Bylaws attached hereto constitute the 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 EXHIBIT I --------- FORM OF VOTING AGREEMENT VOTING AGREEMENT ---------------- This Voting Agreement (the "Agreement") is dated ___________________, 2000 by and among Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik (each, individually, a "Stockholder" and, collectively, the "Stockholders") and Entravision Communications Corporation, a Delaware corporation (the "Company"), is entered into with reference to the following facts: WHEREAS, the Stockholders own of record all of the issued and outstanding shares of Class B Common Stock, par value $0.0001 per share, of the Company. WHEREAS, the execution and delivery of this Agreement is required by the terms of that certain Univision Roll-Up Agreement dated February ____, 2000 by and between Univision Communications Inc. and Entravision Communications Company, L.L.C. NOW, THEREFORE, the parties hereto agree as follows: 1. Voting Agreement. At any time that nominees for the election of Class ---------------- A/B Directors to the Board of Directors of the Company are submitted to the stockholders of the Company, or a proposal to remove any incumbent Class A/B Director of the Company is submitted to such stockholders, each of the Stockholders agrees to vote, or cause to be voted, all Voting Securities (as defined below) then held by such party, whether beneficially or of record, or any Voting Securities over which such party exercises voting control, in favor of the nominees designated in writing by both Walter F. Ulloa and Philip C. Wilkinson (the "Nominating Stockholders"). In addition to the foregoing, Paul A. Zevnik hereby agrees that any time a matter other than election of directors is submitted to the stockholders of the Company, he shall vote all Voting Securities then held by him, whether beneficially or of record, in the same manner as both Walter F. Ulloa and Philip C. Wilkinson. Paul A. Zevnik shall be required to vote his Voting Securities in the manner described in the preceding sentence solely in instances where both Walter F. Ulloa and Philip C. Wilkinson vote either affirmatively or negatively. In any instance in which Walter F. Ulloa and Philip C. Wilkinson vote their Voting Securities in different manners, Paul A. Zevnik will be free to vote his Voting Securities as he chooses. For the purpose of this Agreement, "Voting Securities" shall mean any and all shares of capital stock of the Company, of any class or series, which shall have the right at any time to vote in the election of the Company's directors, including without limitation, shares of the Company Class B Common Stock. 2. Designation of Nominees. The Nominating Stockholders hereby ----------------------- irrevocably designate the following individuals as nominees for election to the Board of Directors of the Company as Class B Directors: Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik. The Nominating Stockholders shall also have the power to designate additional individuals as nominees for election as Class B Directors of the Company. In the event that any of the foregoing at any time are unable to serve out their terms, resign from the Board of Directors of the Company or decline to be nominated for election or reelection, then the Nominating Stockholders shall have the right to designate in writing a replacement nominee. 3. Irrevocable Proxy. Should the provisions of this Agreement be ----------------- construed to constitute the granting of proxies, such proxies shall be deemed coupled with an interest and are irrevocable for the term of this Agreement. 4. Representations and Warranties of the Stockholders. As of the date -------------------------------------------------- hereof, each Stockholder represents and warrants to the other Stockholders as follows: (a) Ownership of Securities. The Stockholder is the record and ----------------------- beneficial owner of, or exercises voting control of, the number of shares of Voting Securities of the Company set forth on the signature page to this Agreement (the "Existing Securities"). The Holder has sole voting power and sole power to issue instructions with respect to the voting of the Existing Securities, sole power of disposition and the sole power of exercise or conversion, in each case with respect to all of the Existing Securities. As of the date hereof, the Stockholder will have sole voting power and sole power to issue instructions with respect to the voting of all of the Existing Securities, sole power of disposition and the sole power of exercise or conversion, in each case with respect to all of the Existing Securities. (b) Power; Binding Agreement. The Stockholder has full power and ------------------------ authority to enter into and perform all of the Stockholder's obligations under this Agreement. This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a valid and binding agreement of the Stockholder, enforceable against the Stockholder in accordance with its terms. (c) No Conflicts. No filing with, and no permit, authorization, ------------ consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby, other than filings which may be required pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and neither the execution and delivery of this Agreement by the Stockholder nor the consummation by the Stockholder of the transactions contemplated hereby nor compliance by the Stockholder with any of the provisions hereof shall conflict with or result in any breach of any applicable organizational documents of the Company applicable to the Stockholder, result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third-party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which the Stockholder is a party or by which the Stockholder's properties or assets may be bound or violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Stockholder or any of the Stockholder's properties or assets. 5. Transfer of Voting Securities to Permitted Transferees. During the ------------------------------------------------------ term of this Agreement, no Stockholder or any Permitted Transferee (as defined in the Company's First Restated Certificate of Incorporation) who shall become a party to or be bound this Agreement -2- shall transfer any Voting Securities, whether now or hereafter acquired, other than to any person who agrees to be bound by and be subject to the terms and conditions of this Agreement with the same force and effect as if such person were named as a party to this Agreement. 6. Assignment; Benefits. This Agreement may not be assigned by any party -------------------- hereto without the prior written consent of each of the other parties. This Agreement shall be binding upon, and shall inure to the benefit of, each of the signatories hereto and their respective successors and permitted assigns. 7. Legend on Stock Certificates. The Company and each Stockholder shall ---------------------------- submit to the Company's transfer agent certificates evidencing the Class B Common Stock and other Voting Securities now or hereafter owned by the Stockholders at any time during the term of this Agreement and the Company shall cause the transfer agent to imprint on such certificates (or replacement certificates) a restrictive legend as follows: THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A VOTING AGREEMENT DATED _______________, 2000, A COPY OF WHICH IS ON FILE WITH THE OFFICERS OF THE ISSUER OF THIS CERTIFICATE. THE SHARES ARE SUBJECT TO CERTAIN VOTING RESTRICTIONS. ANY ACTIONS TAKEN IN CONTRAVENTION TO THAT AGREEMENT SHALL BE NULL AND VOID. 8. Notices. Any notice required to be given hereunder shall be in writing ------- and shall be sent by facsimile transmission (confirmed by any of the methods that follow), courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid) to the address of such party set forth on the signature pages hereto or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so delivered. 9. Specific Performance. The parties hereto agree that irreparable harm -------------------- would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 10. Amendment. This Agreement may not be amended or modified, except by --------- an instrument in writing signed by or on behalf of each of the parties hereto. This Agreement may not be waived by any party hereto, except by an instrument in writing signed by or on behalf of the party granting such waiver. -3- 11. Governing Law. This Agreement shall be governed by, construed and ------------- enforced in accordance with the laws of the State of Delaware, without regard to its rules regarding conflict of laws. 12. Counterparts. This Agreement may be executed in counterparts, each of ------------ which shall be deemed an original, but all of which together shall constitute one and the same agreement. 13. Termination. This Agreement shall commence on the date hereof and ----------- shall terminate with respect to each particular Stockholder upon the automatic conversion of such Stockholder's Class B Common Stock of the Company to Class A Common Stock of the Company pursuant to the terms of the Company's First Restated Certificate of Incorporation (or any amendment thereto). [Remainder of Page Intentionally Left Blank] -4- IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of the parties hereto, all as of the date first above written above. Stockholders __________________________________________________ Walter F. Ulloa Existing Securities: Class B Common Stock Number of Shares:____________________________ Address: 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 __________________________________________________ Philip C. Wilkinson Existing Securities: Class B Common Stock Number of Shares:____________________________ Address: 5770 Ruffin Road San Diego, California 92123 __________________________________________________ Paul A. Zevnik Existing Securities: Class B Common Stock Number of Shares:____________________________ Address: 1299 Pennsylvania Avenue, N.W., 9/th/ Floor Washington, D.C. 20004 [Signature Page No. 1 to Voting Agreement] Company ENTRAVISION COMMUNICATIONS CORPORATION, a Delaware corporation By: --------------------------------------------- Walter F. Ulloa Chairman and Chief Executive Officer By: --------------------------------------------- Philip C. Wilkinson President and Chief Operating Officer Address: 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 [Signature Page No. 2 to Voting Agreement] EX-10.14 12 0012.txt AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE 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 EXHIBIT A --------- NON-NEGOTIABLE SUBORDINATED NOTE AND OPTION AGREEMENT 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 $10,000,000 Los Angeles, California December 30, 1996 ------------------ 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 Ten Million Dollars ($10,000,000) 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 Amended and Restated Operating Agreement dated as of December 30, 1996 (the "Operating Agreement"). Capitalized terms not defined herein shall have the meaning given to such terms in the Operating Agreement. 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 -2- new person, if any, resulting from any such reorganization or readjustment, and (ii) the rights 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 -3- respect to this Note and all other Subordinated Notes of the Company due at the 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: (1) 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. (2) 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
(3) 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; -4- provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d) of the Operating Agreement. (4) 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; (5) 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). (6) 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. (7) 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. (8) The issuance of additional Membership Units in the Company pursuant to Section 7(c)(iii) of the Operating Agreement. (9) The dissolution and liquidation of the Company, in which case Univision may withhold its consent, in its sole discretion. The foregoing approval rights shall terminate upon the closing of Univision's sale of a majority of the principal amount of this Note to a third party. (a) So long as this Note remains outstanding, Univision shall have the right to approve any matter upon which the Members of the Company have a right to vote if, assuming -5- full exercise of the rights of Univision under that certain Subordinated Note Purchase and Option Agreement dated December 30, 1996 between and among the Company, Univision, et al., Univision's affirmative vote as a Member in favor of such matter would be required to approve such matter. (b) So long as this Note remains outstanding, Univision shall (i) have the inspection rights of a Member of the Company set forth in the Operating Agreement and (ii) shall be entitled to receive all financial reports provided to the Members of the Company pursuant to the Operating Agreement. 10. Executive Committee Representative. Univision shall be permitted to ---------------------------------- have one of its representatives attend all meetings of the Company's Executive Committee in order to assure compliance with the terms of this Note. If such representative reasonably believes that any action proposed at an Executive Committee meeting would adversely affect the interests of the Class A Non- Managing Members or Univision (with respect to its separate rights under the Operating Agreement) in any material respect or breach of the terms of this Note, Univision will be entitled to have a representative vote on any such proposal. Univision shall be notified in advance of all Executive Committee meetings including material actions proposed to be taken at such meetings. 11. 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. 12. 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 -6- (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. 13. 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: -7- 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.P. Attention: Walter F. Ulloa and Philip C. Wilkinson 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Telephone No.: (310) 820-5355 Facsimile No.: (310) 820-2445 (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. (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 LEFT INTENTIONALLY 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: ______________________________________ Walter F. Ulloa, Managing Member By: ______________________________________ Philip C. Wilkinson, Managing Member Acknowledged and Agreed: UNIVISION COMMUNICATIONS INC. BY: ____________________________ Title:______________________ [Signature Page to Non-Negotiable Subordinated Note] -9- EXHIBIT B --------- CREDIT AGREEMENT This Exhibit attaches a prior credit agreement of the registrant which has been amended and restated in its entirety and has no relevance or material connection to this contract, and accordingly, has been omitted pursuant to the direction of the staff of the Securities and Exchange Commission. EXHIBIT C --------- OPERATING AGREEMENT ================================================================================ FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. ================================================================================ TABLE OF CONTENTS OF FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C.
page 1. Glossary of Terms........................................................................ -2- 2. Amendment/Restatement.................................................................... -2- 3. Other Qualifications..................................................................... -2- 4. Name..................................................................................... -3- 5. Registered Office; Principal Place of Business........................................... -3- 6. Purposes................................................................................. -3- (a) General......................................................................... -3- (b) Licensing....................................................................... -3- (c) Credit Facility................................................................. -3- (d) [Intentionally omitted.]........................................................ -4- (e) Formation of Subsidiary Limited Liability Company............................... -4- 7. Capital Contributions and Percentage Interests........................................... -4- (a) Initial Capital Contributions................................................... -4- (b) Equity Incentive Pool........................................................... -5- (c) Future Capital Requirements..................................................... -5- (d) Univision Transactions.......................................................... -7- (e) Las Tres Campanas Television, Inc. ............................................. -7- (f) Valley Channel Debt............................................................. -7- 8. Withdrawal of Capital; Interest on Capital............................................... -8- 9. Member Loans............................................................................. -8- 10. Determination of Profit and Loss......................................................... -8- (a) Fiscal Year..................................................................... -8- (b) Accounting...................................................................... -8- (c) Computation Conventions......................................................... -8- 11. Capital Accounts and Valuation........................................................... -9- (a) Capital Account Principles...................................................... -9-
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(b) Valuation Principles............................................................ -9- 12. Distributions and Withholding............................................................ -9- (a) Quarterly Tax Distributions..................................................... -9- (b) Distributions in the Ordinary Course of Business................................ -10- (c) Distributions Upon Sale or Liquidation.......................................... -10- (d) Withholding..................................................................... -11- (e) Certain In-Kind Distributions Within Five (5) Years............................. -11- (f) Safir Class D Units............................................................. -12- 13. Allocation of Net Income and Net Losses.................................................. -12- (a) General Allocation Scheme for Net Losses........................................ -12- (b) General Allocation Scheme for Net Income........................................ -12- (c) Special Allocations............................................................. -12- (d) Regulatory Allocations.......................................................... -13- (e) Curative Allocations............................................................ -14- (f) Depreciation Recapture.......................................................... -14- (g) Allocation Adjustments.......................................................... -14- (h) Safir Allocation Adjustments.................................................... -15- 14. Company Books, Records and Reports....................................................... -15- (a) Maintenance of Books and Records................................................ -15- (b) Inspection Rights............................................................... -15- (c) Financial and Tax Reports....................................................... -15- (d) Information Available at Principal Office....................................... -16- (e) Banking......................................................................... -17- 15. "Tax Matters Partner".................................................................... -17- 16. Management............................................................................... -17- (a) Executive Committee............................................................. -17- (b) Matters Requiring Executive Committee Approval.................................. -18- (c) Matters Requiring Univision Approval............................................ -19- (d) Like-Kind Exchange.............................................................. -20- (e) Key Man Insurance............................................................... -21- (f) Officers........................................................................ -21- 17. Managing Member -- Impasse Resolution.................................................... -21- 18. Matters Requiring Majority Approval of Members........................................... -22- 19. Fees and Reimbursements to the Managing Members/Executive Committee...................... -22- (a) Company Expenses................................................................ -22-
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(b) Managing Members Reimbursements................................................. -23- (c) Executive Committee Reimbursements.............................................. -23- (d) Managing Member Employment Agreements........................................... -23- (e) Loan to Member(s)............................................................... -23- 20. Third-Party Contracts, Instruments, Etc.................................................. -23- 21. Time Devoted to Business................................................................. -24- 22. Liability................................................................................ -24- 23. Indemnification.......................................................................... -24- 24. Non-Competing Ventures and Conflicts of Interest......................................... -25- 25. Meetings of Members...................................................................... -25- 26. Assignment by Members.................................................................... -26- (a) General Prohibition............................................................. -26- (b) Permitted Transfers............................................................. -26- (c) Income Tax Considerations....................................................... -27- (d) Right of First Offer............................................................ -27- (e) Purchase Option................................................................. -28- (f) Consent Required for Substitution............................................... -30- (g) Conditions to Substitution...................................................... -30- (h) Managing Members Signatory Authority............................................ -31- (i) Initial Public Offering......................................................... -31- 27. Death, Withdrawal, Resignation, Removal, Bankruptcy or Dissolution of a Member........... -32- (a) Effect - Non-Managing Member.................................................... -32- (b) Effect - Managing Members....................................................... -32- (c) Purchase of Membership Units on Death of Ulloa, Wilkinson or Zevnik............. -32- (d) Removal......................................................................... -34- 28. Dissolution of the Company............................................................... -34- (a) Events Causing Dissolution...................................................... -34- (b) Termination Activities.......................................................... -35- (c) Negative Capital Account Make-Up................................................ -35- 29. Member Representations................................................................... -35- 30. Notices.................................................................................. -36-
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31. Exhibits................................................................................. -36- 32. Entire Agreement; Amendments............................................................. -36- 33. Successors............................................................................... -36- 34. Executed Counterparts.................................................................... -36- 35. Captions................................................................................. -37- 36. Computation of Time Periods.............................................................. -37- 37. Gender; Statutory References............................................................. -37- 38. Severability............................................................................. -37- 39. Time of Essence.......................................................................... -37- 40. Further Acts............................................................................. -37- 41. Governing Law............................................................................ -37- 42. Attorneys' Fees.......................................................................... -37- 43. Maximum Interest Rates................................................................... -38- 44. Arbitration.............................................................................. -38- 45. No Third Party Beneficiaries............................................................. -38- 46. Consent of Spouse........................................................................ -39- 47. Signatory Authority...................................................................... -39- 48. Counsel to the Company................................................................... -39-
-iv- THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED AND SOLD UNLESS (A) REGISTERED AND/OR QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR (B) EXEMPT FROM SUCH REGISTRATION OR QUALIFICATION. THEREFORE, NO SALE, PLEDGE OR OTHER TRANSFER OF THIS SECURITY SHALL BE MADE, NO ATTEMPTED SALE, PLEDGE OR OTHER TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT AND QUALIFIED OR APPROVED UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAW, OR (B) THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED UNDER THE ACT OR STATE SECURITIES OR BLUE SKY LAWS. FIRST AMENDED AND RESTATED OPERATING AGREEMENT OF ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. This First Amended and Restated Operating Agreement ("Agreement") is entered into effective December 30, 1996 (the "Effective Date") by and among WALTER F. ULLOA, an individual ("Ulloa") and PHILIP C. WILKINSON, an individual, ("Wilkinson") as the managers (herein the "Managing Members"), CABRILLO BROADCASTING CORPORATION, a California corporation ("Cabrillo"), GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation ("Golden Hills"), KSMS-TV, INC., a Delaware corporation ("KSMS-TV"), LAS TRES PALMAS CORPORATION, a Delaware corporation ("Las Tres"), TIERRA ALTA BROADCASTING, INC., a Delaware corporation ("Tierra Alta"), ENTRAVISION MERGER CORP., a Delaware corporation ("Merger Corp."), EDITH SEROS, TRUSTEE OF THE WALTER F. ULLOA IRREVOCABLE TRUST OF 1996, dated October 9, 1996 ("Ulloa Trust"), and KEVIN GRENHAM AND KENNETH D. POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK TRUST, dated November 2, 1996 ("Zevnik Trust"), PHILIP C. WILKINSON AND WENDY K. WILKINSON, Trustees for THE 1994 WILKINSON CHILDREN'S GIFT TRUST (the "Wilkinson Children's Gift Trust"), who are receiving Class A Units as set forth on Exhibit "A" to this Agreement (the foregoing are collectively referred to as the "Class A Non-Managing Members" and individually as a Class A Non-Managing Member, as the context requires), and PAUL Z. ZEVNIK, an individual ("Zevnik"), and RICHARD NORTON, an individual ("Norton"), with respect to the facts that follow. A. The Company was formed pursuant to a Certificate of Formation filed on January 11, 1996 and pursuant to an Operating Agreement, dated January 11, 1996, entered into by Ulloa, Wilkinson and Paul A. Zevnik ("Zevnik") (the "Original Operating Agreement"). B. Concurrent with the addition of certain Members as provided for herein and pursuant to that certain Formation Agreement for Entravision Communications Company, L.L.C., dated January 29, 1996, entered into by and among certain of the Members, as amended by that certain Amended and Restated Formation Agreement dated December 30, 1996 (collectively, the "Formation Agreement"), the Members hereby now desire to amend and restate in its entirety the Operating Agreement for the Company under the Delaware Limited Liability Company Act, 6 Del. C. ------- (S)18-101 through (S)18-1109, as amended from time to time (herein the "Act"). C. Pursuant to that certain Acquisition Agreement and Plan of Merger dated July 12, 1996, Merger Corp. and the Company have agreed to acquire all the outstanding capital stock of Valley Channel 48, Inc., a Texas corporation ("Valley Channel") in a reverse merger pursuant to which Merger Corp. will be merged into and with Valley Channel (the "Merger"). Immediately following the consummation of the Merger, Valley Channel will execute an amendment to this Agreement to become a party hereto and shall enter into an Asset Contribution Agreement to contribute substantially all of its assets to the Company in exchange for the Class A Units set forth on Exhibit "A" hereto. D. The Company has been formed for purposes of (i) combining the operations of the television stations owned and operated by certain Class A Non- Managing Members (which stations are listed opposite the applicable Class A Non- Managing Members' name on Exhibit "A" hereto, which are engaged in the business of broadcasting in Spanish principally by and through Univision Network Affiliation Agreements entered into with Univision Network Limited Partnership, which is controlled by Univision Communications, Inc. ("Univision") (herein, each an "Univision Agreement") and are referred to collectively as the "Stations"), (ii) to operate the Stations through one entity managed and controlled by the Managing Members and (iii) to otherwise pursue opportunities in the media business, including, but not limited to, acquisitions of other media properties. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, it is agreed as follows: 1. Glossary of Terms. Except as otherwise indicated in the body of this ----------------- Agreement, all capitalized terms set forth herein shall have the meanings given such terms by the Glossary attached hereto as Exhibit "B" and incorporated herein by this reference. 2. Amendment/Restatement. By this Agreement, the parties hereto amend --------------------- and restate in its entirety the Original Operating Agreement for the Company pursuant to the Act. The term of the Company shall commence as of the date that the Certificate of Formation for the Company was filed and, subject to provisions set forth elsewhere herein and in the Act, shall terminate on the latest date for dissolution set forth in Section 28, below. 3. Other Qualifications. The parties to this Agreement agree that the -------------------- Managing Members shall cause the Company to file or record such documents and take such other actions under the laws of any jurisdiction as are necessary or desirable to permit the Company to do business in any such -2- jurisdiction as is selected by the Company and to promote the limitation of liability for the Members in any such jurisdiction. 4. Name. The name of the Company is "Entravision Communications Company, ---- L.L.C." 5. Registered Office; Principal Place of Business. The address of the ---------------------------------------------- registered office of the Company in Delaware is and the Company's registered agent at this Delaware address is Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware. The principal place of business of the Company is 11900 Olympic Boulevard, Suite 590, Los Angeles, California 90064. The principal place of business of the Company may be changed from time to time, as determined by the Managing Members. 6. Purposes. -------- (a) General. The purposes of the Company shall be: (i) to enter into ------- a Local Marketing Agreement with each of Cabrillo, KSMS-TV, Las Tres, Golden Hills and Tierra Alta relating to the Stations, each dated November 1, 1996 (collectively the "LMA Agreements"); (ii) to acquire the Stations pursuant to the Asset Contribution Agreements (as defined hereinbelow) and to operate the Stations; (iii) to acquire and to operate television station KNVO, McAllen, Texas, pursuant to the Merger and a Local Marketing Agreement; (iv) to acquire television station KINT-TV, El Paso, Texas and radio broadcast stations KINT-FM and KSVE-AM, El Paso, Texas from Paso Del Norte Broadcasting Corporation pursuant to that certain Asset Purchase Agreement, dated November 4, 1996; (v) to enter into that certain Option Agreement among Armando Navarro, La Paz Wireless Corporation, a Delaware corporation ("La Paz") and the Company; (vi) to enter into that certain Local Marketing Agreement between La Paz and the Company; (vii) to pursue, acquire and operate other media businesses, including, without limitation, the acquisition of other Spanish language radio and television properties herein "Acquisitions"); and (viii) such other activities as the Managing Members may determine to be necessary and appropriate in connection with the foregoing purposes. (b) Licensing. Each of the Class A Entities holds one or more --------- licenses and permits from the Federal Communications Commission ("FCC") which shall be assigned to Entravision Holdings, LLC, a California limited liability company ("Entravision Holdings") and a 99.999% subsidiary of the Company pursuant to an Asset Contribution Agreement between the Company and each Class A Entity (as defined below) pending FCC approval, (collectively the "FCC Licenses"). The Managing Members shall take those actions reasonably necessary to facilitate the assignment of the FCC Licenses, each Univision Agreement and all other material contracts, leases and licenses relating to the "Businesses" (as defined below) to the Company or Entravision Holdings pursuant to the Asset Contribution Agreements. (c) Credit Facility. All Members acknowledge and agree that --------------- concurrent with the execution of this Agreement, the Company and certain Class A Non-Managing Members are obtaining a $65,000,000 credit facility from the several banks and financial institutions (collectively, the "Bank") party to that certain Credit Agreement, dated December 31, 1996, with Union Bank of California, N.A., -3- as agent (the "Agent") for such banks and financial institutions (the "Credit Facility"). The Members hereby acknowledge and agree that the Company and such Class A Non-Managing Members shall each have direct primary liability and responsibility, jointly and severally, for repayment of all sums due and payable under the Credit Facility both before and after the closing of the Asset Contribution Agreements. (d) Rights of Bank Upon Foreclosure. It is hereby acknowledged by ------------------------------- each Member that certain Members have pledged all their right, title and interest in and to their interests as Members in the Company (such interests, the "Pledged Membership Interest") (specifically including a receiver or trustee appointed by a court of competent jurisdiction pursuant to the Pledge Agreement) (the "Receiver") to the Bank in connection with the Credit Facility. In connection therewith, the Bank, or its assignee, may, in the future, foreclose on some or all of the Pledged Membership Interests and become Members in the Company, provided that there shall have first been obtained all required prior consent of the FCC. Each Member agrees, for itself and for its successors and assigns, that upon any such foreclosure, and provided that any such required approval of the FCC shall have been obtained, the following shall automatically occur, without the necessity for any notice, writing or other act: (i) The Managing Members shall be removed and the Receiver shall be the sole Managing Member, with all the powers of the Managing Members set forth in this Agreement. The Executive Committee shall resign and the Receiver shall appoint the members of a new Executive Committee, subject to Univision's right to appoint one of the four Executive Committee members in accordance with Section 16(a)(i). (ii) The fourth sentence of Section 16(a)(i) shall be amended and restated to read as follows: "The Executive Committee may act on majority vote, but only with the consent of the Receiver, on behalf of the Banks," and the fifth and sixth sentences shall be deleted. In addition, with respect to any other provision of the Agreement which specifically refers to rights or powers exercisable by one or both of Messrs. Ulloa and Wilkinson, such rights of Messrs. Ulloa and Wilkinson shall be transferred to the Receiver and shall be exercisable solely by the Receiver. (iii) The reference in Section 32 to "and Class A Non-Managing Members holding at least seventy-five percent (75%) of the Class A Units" shall be deleted. (iv) Notwithstanding the foregoing, the rights of Univision under Section 16(c) of this Agreement, and any other provision of this Agreement which specifically refers to rights or powers exercisable by Univision, remain exercisable by Univision; provided that, with regard to the transfer or sale of ------------- an FCC license pursuant to Section 16(c)(iii), Univision shall have no approval rights with regard to any FCC license associated with a station which is not party to a Network Affiliation Agreement with Univision. (e) Formation of Subsidiary Limited Liability Company. All Members ------------------------------------------------- consent to the formation of Entravision Holdings for the sole purpose of owning the FCC Licenses and such other assets as may be required under the terms of the Credit Facility and/or other future bank financing. -4- 7. Capital Contributions and Percentage Interests. ---------------------------------------------- (a) Initial Capital Contributions. ----------------------------- (i) In exchange for their Class A Units and Percentage Interests set forth in Exhibit "A" hereto, Cabrillo, Golden Hills, KSMS-TV, Las Tres, Tierra Alta and Valley Channel (each a "Class A Entity" and collectively "Class A Entities") shall enter into the LMA Agreements and shall contribute to the Company their respective assets and Businesses, as going concerns, including without limitation, their FCC Licenses and Univision Agreements, indicated opposite their respective names on Exhibit "A" hereto (with respect to each Class A Entity collectively referred to as such Class A Entity's "Business" and collectively the "Businesses") and shall receive a capital account credit as set forth below. Such transfer and assignment of the Businesses shall be pursuant to Asset Contribution Agreements between the Company and each Class A Entity (each an "Asset Contribution Agreement"). The allocation of Class A Membership Units to the Class A Entities is derived from the relative net equity values of the Class A Entities set forth in revised Exhibit "D" to the Formation Agreement and upon closing of the Asset Contribution Agreements, such values as set forth on Exhibit "A" attached hereto shall be the initial amount reflected in the contributing Class A Entities capital accounts. The initial capital account of all other Members shall be as set forth on Exhibit "A" attached hereto. By execution hereof, each Member hereby consents to the issuance of Class A Units and Percentage Interest to Valley Channel following consummation of the Merger. The Class A Units, Percentage Interest, and capital account to be issued to Valley Channel shall be inserted in an amended Exhibit "A" upon closing of the Asset Contribution Agreement relating to Valley Channel. (ii) In exchange for their Class A Units and Percentage Interests, the Ulloa Trust, Zevnik Trust and Wilkinson Children's Gift Trust shall each exchange the respective membership interests held by each trust pursuant to the Original Operating Agreement in exchange for 23,900 Class A Units. (iii) The Company previously loaned $360,366.38 to Golden Hills to facilitate the purchase of a portion of the Fadem Estate ownership interest in Golden Hills (the "Fadem Interest"). Pursuant to the terms and conditions set forth in Section 1.6 of the Formation Agreement, Zevnik has delivered a Secured Promissory Note to the Company in the principal amount of $360,366.38 in exchange for 10,313 additional Class A Units as set forth on Exhibit "A" attached hereto (the "Zevnik Note"). (iv) Ulloa and Wilkinson shall receive those certain Class C Units in the Company indicated opposite their respective names on Exhibit "A" hereto in connection for services to be rendered in their capacities as Managing Members of the Company. (v) Except with respect to the execution and delivery of the LMA Agreements, each Class A Entity's initial capital contribution shall be due upon closing of the Asset Contribution Agreement relating to said entity. -5- (vi) Zevnik and Norton shall receive those certain Class C Units in the Company set forth opposite their respective names on Exhibit "A" hereto in connection with services rendered to the Company. (b) Equity Incentive Pool. The Company hereby adopts an equity --------------------- incentive plan establishing an equity incentive pool ("Equity Incentive Pool") to grant Class D Units to certain managers and employees of Company (including without limitation, the Company's officers, and members of the Executive Committee) based upon the Company's performance. The Class D Units shall, for all purposes, be the same as Class C Membership Units in all respects except that Class D Units shall be non-voting and shall not exceed a five percent (5%) ownership interest in the Company on a fully-diluted basis. The Executive Committee has the right to establish a vesting schedule for the Class D Units, which schedule shall be determined in the Executive Committee's sole discretion. The Class D Units shall be issued pursuant to an Option Agreement in a form approved by the Managing Members, which shall provide for a nominal exercise price per Class D Unit and shall only be exercisable in connection with an initial public offering of the Company's securities, the sale of substantially all of the Company's assets or substantially all of the Members' Percentage Interests in the Company or within thirty (30) days following an optionee's termination of employment with the Company or on such other terms and conditions determined by the Executive Committee. (c) Future Capital Requirements. --------------------------- (i) Third-Party Loans. The Members intend and agree that the ----------------- Company's additional cash requirements for operations will be satisfied via loans from third-party lenders on commercially reasonable terms and conditions. In addition, the Members acknowledge and agree that in connection with potential Acquisitions, the Company may borrow from third-party lenders and/or incur purchase money indebtedness in connection with such Acquisitions. Prior to incurring any third-party indebtedness, the terms and conditions of such indebtedness must be approved by the Executive Committee. The Executive Committee shall have the right to hypothecate Company Assets in connection with any third party loan approved by the Executive Committee. In the event that the Executive Committee determines in good faith that the Company requires additional funds, it shall provide written notice to the other Members of the total amount of funds required and the purpose(s) therefor. If no third-party loans are funded within sixty (60) days after such notice has been given, or if the net proceeds of any such loans is less than the amount of funds required by the Company, the Executive Committee may, but shall not be required to, request that the Members make discretionary loans to the Company in the aggregate amount necessary to cover the shortfall, which loans shall be made within thirty (30) days after a second written notice from the Executive Committee specifying the revised amount of funds required (after taking into account any third-party loan proceeds), each Member's share thereof and the anticipated use or uses of such funds. All such loans shall be voluntary and shall be made in accordance with the terms set forth in Section 9 hereof. (ii) No Member Guaranties. Notwithstanding anything in this -------------------- Agreement to the contrary and except pursuant to the terms of the Credit Facility, no Member nor any Affiliate of such Member shall be obligated to guarantee any Company indebtedness. -6- (ii) Secondary Funding Sources. In the event the Company ------------------------- requires additional funds for any reason, which funds have not been obtained (or cannot be obtained) pursuant to the above provisions, the Executive Committee may, but shall not be obligated to, obtain the required funds from the issuance of a separate class of Non-Managing Member interests ("Class B Interests"). Prior to issuing any Class B Interests to outside persons, the Executive Committee shall first give written notice of such proposed equity offering to all the existing Members of the Company, which shall contain the amount and terms and conditions pursuant to which the Company proposes to issue additional Class B Interests in the Company (herein the "Equity Notice"). In the Equity Notice, the Company shall offer to each Member (the "First Refusal Offer") the right to purchase a Proportionate share of the Class B Interests being offered by the Company on the terms and conditions set forth in said Equity Notice. The Members shall notify the Company of their respective elections within thirty (30) days of receipt of the Equity Notice. No Member shall be required to make additional capital contributions hereunder. If any Member does not wish to accept such First Refusal Offer he, she or it shall give written notice to the Company within thirty (30) days after receipt of the Equity Notice of his, her or its intention to reject the First Refusal Offer. If an existing Class A Non- Managing Member does not purchase his or its entire Proportionate share of the Class B Interests being offered to him or it, such share may be purchased by the other Class A Non-Managing Members on a Proportionate basis. This process shall be repeated until all of the Class B Interests have been purchased by the existing Class A Non-Managing Members or until no existing Class A Non-Managing Member has any further interest in purchasing the Class B Interests -- but in no event shall the process continue beyond thirty (30) days after the thirty (30) day period referred to above. If existing Class A Non-Managing Members do not purchase all of the Class B Interests, the unpurchased Interests shall then be offered to outside investors on the same terms and conditions offered to the Class A Non-Managing Members. The Members acknowledge that in connection with any issuance of Class B Interests, Univision shall have the right to make an additional long-term loan to the Company in a "Proportionate Amount," (as such term is defined on attached Exhibit "D-2"), which additional note shall be on the same terms and conditions as the Subordinated Note and shall be accompanied by additional options to acquire the Class B Interests in an amount to allow Univision to maintain an ownership interest in the Company equal to the then Option Percentage (as such term is defined in attached Exhibit "D." The rights of first refusal and Univision right to make an additional loan set forth in this Section 7(c)(v) shall terminate upon the Initial Public Offering of securities in the Company or a successor "C" Corporation pursuant to Section 26(i) hereof. (d) Univision Transactions. ---------------------- (i) Univision Subordinated Note. Univision has entered into that --------------------------- certain Subordinated Note Purchase and Option Agreement with the Company, pursuant to which Univision will acquire a Ten Million Dollar ($10,000,000) Non- Negotiable Subordinated Note (the "Subordinated Note") and a related Class A Membership Option (the "Univision Option") (collectively the "Univision Investment"). The Subordinated Note shall refinance an existing $3 million loan from Univision in its entirety. The terms of the Subordinated Note and the Univision Option are more particularly described hereinbelow. The Members hereby acknowledge and consent to the Univision Investment. -7- (ii) Univision Affiliation Agreements. Concurrent with the -------------------------------- closing of the Univision Investment, Univision shall enter into a Univision Network Affiliation Agreement relating to each station to provide for a new twenty-five (25) year term under each Univision Agreement. (iii) Terms of Subordinated Note. The Subordinated Note shall be -------------------------- in the form of that certain Non-Negotiable Subordinated Note attached hereto as Exhibit "D-1" and incorporated herein by this reference. (iv) Terms of Univision Option. The Univision Option will grant ------------------------- Univision the right to acquire an equity interest in the Company through the acquisition of Class A Non-Managing Membership Units for a total exercise price of Ten Million Dollars ($10,000,000). The Univision Option shall be on the terms set forth in the Univision Subordinated Note Purchase and Option Agreement attached hereto as Exhibit "D-2." (e) Las Tres Campanas Television, Inc. ("Campanas"), a Nevada ---------------------------------- corporation, purchased from third parties outstanding shares of common stock of Campanas. The cash portion of the purchase was advanced by the Company. Campanas is a low-power television station in Las Vegas, Nevada which broadcasts a simulcast of the Tierra Alta broadcast. In connection with said purchase, Ulloa and Alexandra Seros ("Seros") guaranteed to make the payment of a promissory note in the principal amount of $262,500 (the "Campanas Note"), delivered by Campanas in connection with the purchase of said shares. In consideration for Ulloa's and Seros' agreement to contribute all of the Campanas stock and/or substantially all the assets of Campanas to Entravision upon full repayment of the Campanas Note, the Company hereby agrees to (i) advance all payments due under the Campanas Note and (ii) defend, indemnify and hold harmless Seros and Ulloa from and against any claim, demand, liability or obligation arising out of or relating to the Campanas Note. (f) Valley Channel Debt. The Company and certain Members thereof ------------------- intend to jointly and severally borrow $25,000,000 pursuant to the Credit Facility to fund the acquisition of Valley Channel (the "Valley Channel Indebtedness"). All parties hereto acknowledge and agree that, notwithstanding the subsequent transfer of the assets of Valley Channel to the Company, Valley Channel shall retain the ultimate risk of loss with respect to the Valley Channel Indebtedness. Accordingly, Valley Channel hereby agrees that should a default exist pursuant to the terms of the Credit Facility with respect to the Valley Channel Indebtedness, Valley Channel shall be obligated to make an additional capital contribution to the Company pursuant to this Section 7(f) in an amount equal to any deficiency with respect to the Valley Channel Indebtedness after the Company has transferred, liquidated or otherwise disposed of all of its assets in satisfaction thereof. Valley Channel hereby irrevocably waives any rights of subrogation against the Company with respect to the Valley Channel Indebtedness. All parties acknowledge and agree that this Section 7(f) shall be interpreted in all respects such that Valley Channel shall retain the "economic risk of loss" with respect to the Valley Channel Indebtedness as such term is defined in Regulations Section 1.752-2, and Valley Channel agrees to take all actions and execute all documents necessary to reflect the same. -8- 8. Withdrawal of Capital; Interest on Capital. Except as may otherwise ------------------------------------------ be explicitly provided herein, a Member's capital contributions may not be withdrawn without the approval of a majority of the Executive Committee members, and no interest or similar return shall be paid on the capital contributions of any Member. 9. Member Loans. No Member may lend monies to the Company without the ------------ written approval of the Managing Members. Any permitted Member loan shall be evidenced by one or more separate agreements and instruments setting forth the terms of such loan or, absent such documentation, shall bear interest at the Prime Rate, plus two percent (2%), and shall be repaid in accordance with the applicable provisions of Section 11 hereof. The making of any Member loan shall not increase the lending Member's capital account and shall not entitle the lending Member to an increase in its Percentage Interest. This Section 9 shall not apply to the Univision Subordinated Note or loans by Univision to purchase its Proportionate Amount. 10. Determination of Profit and Loss. -------------------------------- (a) Fiscal Year. The Company's taxable year shall be December 31, ----------- unless a different year is required under applicable federal income tax laws or is permitted and is selected by the Managing Members. (b) Accounting. The Company's net profit or net loss for each fiscal ---------- year shall be determined using the accrual basis method of accounting, unless a different method is required under applicable federal income tax laws or is permitted and is selected by the Managing Members. (c) Computation Conventions. Each Member's share of the Company items ----------------------- of income, gain, loss, deduction and credit shall be determined as of the end of business on the last day of each fiscal year and allocated as provided herein. Except as may otherwise be from time to time required by applicable provisions of the Code and the Regulations, the Company's items of income, gain, loss, deduction and credit shall be deemed to have been earned or incurred ratably during each fiscal year; however, gains from sales and losses from sales, to the extent of the gain or loss recognized and taxable in the year of such sale(s), shall be allocated solely to the Members who were Members at the time of the occurrence of the taxable event(s). Additionally, any allocation of income, gains, deductions and/or losses to the Members which is to be made in accordance with their respective Percentage Interests shall reflect any changes to the Members' respective Percentage Interests which occurred during the Company's fiscal year with respect to which the allocation is being made, deter mined using the interim closing-of-the books method except that depreciation, amortization and similar items with respect to assets owned by the Company during the entire year shall be deemed to accrue ratably on a daily basis during the year. -9- 11. Capital Accounts and Valuation. ------------------------------ -10- (a) Capital Account Principles. A separate capital account shall be -------------------------- established and maintained for each Member in accordance with all applicable provisions of the Regulations under Sections 704(b), 704(c) and 752 of the Code. (b) Valuation Principles. The Members' respective capital accounts -------------------- shall be adjusted to reflect a revaluation of the Company's Assets when such revaluation is required by the Regulations under Code Section 704(b). In situations where such Regulations permit a revaluation of Company Assets, but where such revaluation is not required, such revaluation shall occur if the Managing Members so determine. For purposes of revaluing Company Assets and adjusting the Members' respective capital accounts, a Majority in Interest of the Members shall attempt in good faith to agree on a value of the Assets. If they are unable to agree on a value, they shall attempt to agree on a single appraiser with substantial experience in valuing similar Assets to value the Assets. If they are unable to agree on a single appraiser to render an appraisal, the Managing Members and a Majority in Interest of the Non-Managing Members shall each select an appraiser with substantial experience in valuing similar Assets, and the two appraisers so selected shall then agree upon a third similarly qualified appraiser. Such third appraiser shall then render the appraisal. If either the Managing Members or a Majority in Interest of the Non-Managing Members fails for any reason to select an appraiser within fifteen (15) days after being requested to do so by the other, the appraiser chosen by the other shall render the appraisal. The determinations of the appraiser selected pursuant to this Section 11(b) to value the Company's Assets shall be binding upon the Company, the Members and any other interested persons. 12. Distributions and Withholding. ----------------------------- (a) Quarterly Tax Distributions. The Company shall make distributions --------------------------- of estimated Cash Available for Distribution to the Members in proportion to and to the extent of their respective Presumed Company Tax Liabilities each of the first three calendar quarters of each year. The Company may follow the procedures described in the preceding sentence with respect to the fourth calendar quarter, or at the option of the Executive Committee, the Company's accountants shall compute the exact amount of each Member's annual tax liability with respect to allocations of income and gain, loss and deduction from the Company and the Company shall distribute to each Member out of Cash Available for Distribution an amount equal to the excess (if any) of such actual tax liability over the three previous quarterly distributions of Cash Available for Distribution pursuant to this Section 12(a). Such final distribution (if applicable) shall be made to each Member on or prior to the date payment is due with respect to such actual tax liability. Any excess distribution made pursuant to this Section 12(a) shall be offset against future distributions due the Recipient pursuant to Section 12 (b) or (c). (b) Distributions in the Ordinary Course of Business. Other than in ------------------------------------------------ connection with dissolution and termination of the Company, subject to the --- Univision Note, Cash Available for Distribution shall be distributed at such times and in such amounts as determined by the Executive Committee, in the following order of priority: -11- (i) First, to the Members in proportion to and to the extent of their respective shares of accrued but undistributed funds pursuant to Section 12(a) hereof; (ii) Second, to the Members who have made permitted loans to the Company, in proportion to and to the extent of the amounts owed such Members (including accrued but unpaid interest on such loans) and then due; (iii) Thereafter, to the Members in accordance with their respective Percentage Interests. The Members acknowledge and agree that the Executive Committee has the right to reasonably distribute amounts in excess of Reserves based on the actual and contemplated needs of the Company at the time of such distribution. (c) Distributions Upon Sale or Liquidation. Except as otherwise -------------------------------------- provided in this Section 12(c), distributions in connection with (a) the termination, liquidation, sale, merger, consolidation, or other business combination of the Company with or into another person or persons, or (b) any sale or conveyance to another person of the Assets of the Company as an entirety (with each of the transactions referred to in (a) and (b) above (herein, a "Capital Transaction"), shall be made to the Members as follows: (i) First, to establish Reserves deemed appropriate by the Managing Members to pay any known or contingent liabilities and, if appropriate, to pay the costs of winding up and liquidating the Company; (ii) Second, to the Members who have made permitted loans to the Company, in proportion to and to the extent of the amounts owed such Members (including accrued but unpaid interest on such loans); (iii) Third, to the Members with positive capital account balances, in proportion to and to the extent of such positive capital account balances; (iv) Thereafter, the Members in accordance with their respective Percentage Interests. (d) Withholding. The Company shall withhold in the manner, in the ----------- amounts, and at the times prescribed by Sections 1441 et seq. and other -- --- applicable provisions of the Code and the Treasury Regulations in connection with distributions from the Company and allocations of Company income, gain, losses and deductions. The Company shall also comply with the requirements of any applicable state laws requiring withholding on allocations of Company income, gains, losses and deductions, as well as withholding on distributions. Notwithstanding the foregoing, however, no withholding for federal income tax purposes shall be required with respect to any Member who furnishes the Managing Members with a certificate (the "Certificate") containing the following: (i) the -12- member's name, address and U.S. social security number or other U.S. taxpayer identification number; (ii) a statement under penalty of perjury that the Member is not a foreign person, but rather is a "U.S. person" within the meaning of Code Section 7701(a)(30); and (iii) an obligation to notify the Company within sixty (60) days of a change to the Member's status as a U.S. person. In the event applicable state law provides a similar safe-harbor from withholding, no withholding shall be required with respect to any Member who strictly complies with the requirements of the safe-harbor, as determined by the Managing Members in their sole discretion. Each Certificate supplied by a Member shall be effective for a period of three (3) years after it has been provided to the Managing Members, subject to earlier termination on the date the Company receives notice or otherwise learns of a change in the Member's status as a U.S. person. The Managing Members shall have no duty whatsoever to investigate the veracity of any Certificate, and any Member furnishing a Certificate shall indemnify the Managing Members and shall hold them and the Company harmless from any and all losses incurred by the Managing Members and/or the Company, including, without limitation, attorney's fees, by reason of the Company's failure to withhold. The Managing Members are hereby authorized for the purpose of satisfying a Member's indemnification obligation pursuant to this Section to withhold all or any portion of any Company distribution that would otherwise be payable to the Member. Any amount so withheld shall instead be distributed to the Members who have been assessed a penalty or penalties for failure to withhold and thereafter to the other Members on a Proportionate basis, and, notwithstanding anything in the provisions of this Agreement relating to allocations of Net Income (excepting only "regulatory allocations") to the contrary, a corresponding amount of Company gross income (and, if necessary, gains from sale) shall be allocated as quickly as possible to such Members in proportion to and to the extent of the distributions made to them pursuant to this Section. (e) Certain In-Kind Distributions Within Five (5) Years. In the event --------------------------------------------------- the Company is liquidated within five (5) years from the date an Asset with a value in excess of its tax basis is contributed to the Company and, in connection therewith, all or a portion of such Asset is to be distributed in- kind pursuant to Section 11 hereof, the Asset to be distributed shall be revalued pursuant to Section 11(b), and any increase or decrease in the value of such Asset shall be reflected in the Members' capital accounts in accordance with the applicable terms of this Agreement and the applicable principles of the Regulations under Code Sections 704(b) and (c). After such revaluation and the related capital account adjustments have occurred, subject to the provisions of Section 12(c), the Asset (or as great an interest therein as possible) shall be distributed to the Member(s) who contributed the Asset to the Company. The Members acknowledge that, to the extent permitted by applicable state and federal laws, the Member who contributed an Asset, such as a Station, has the right to require the return of such Asset upon the Company's liquidation. (f) Safir Class D Units. Notwithstanding anything to the contrary ------------------- contained herein, in no event shall the Class D Units to be held by Larry Safir and issued pursuant to the terms of his Executive Employment Agreement dated January 1, 1997 (the "Employment Date") by and between Safir and the Company receive any distributions of cash or property pursuant to this Section 12 prior to the third anniversary of the Employment Date. -13- 13. Allocation of Net Income and Net Losses. --------------------------------------- (a) General Allocation Scheme for Net Losses. Net Losses of the ---------------------------------------- Company shall be allocated to the Members in proportion to their Percentage Interests. Notwithstanding the previous sentence, loss allocations to a Member shall be made only to the extent that such loss allocations will not create a deficit Adjusted Capital Account balance for that Member. Any loss not allocated to a Member because of the foregoing provision shall be allocated to the other Members (to the extent the other Members are not limited in respect of the allocation of losses under this Section 13(a). Any loss reallocated under this Section 13(a) shall be taken into account in computing subsequent allocation of income and losses pursuant to this Section 13, so that the net amount of any item so allocated and the income and losses allocated to each Member pursuant to this Section 13, to the extent possible, shall be equal to the net amount which would have been allocated to each Member pursuant to this Section 13 if no reallocation of losses had occurred under this Section 13(a). (b) General Allocation Scheme for Net Income. Net Income of the ---------------------------------------- Company realized other than in connection with the Capital Transaction of the Company shall be allocated to the Members as follows: (i) First, to the Members with negative Adjusted Capital Account balances, in proportion to the extent of such negative Adjusted Capital Account balances; (ii) Second, to the Members in the proportion and to the extent necessary to eliminate as quickly as possible the positive difference (if any) between (1) the cumulative allocations of Net Losses to each Member, and (2) the cumulative amount of Net Income previously allocated to such Member pursuant to this Section 13(b) and Section 13(c); (iii) Thereafter, to the Members in accordance with their respective Percentage Interests. (c) Special Allocations. Before allocating any amount(s) pursuant to ------------------- Section 13(a) and/or Section 13(b), the following special allocations shall, in the order in which they appear, be made: (i) To the extent permissible under the Regulations, in the event the Company is required to realize imputed income or expense, including interest income or expense under Code Section 1272 et seq. and/or Code Section 7872 in -- --- connection with a transaction(s) between the Company and one or more Members, each item of such imputed income or expense shall be allocated to the Member(s) who is/are to report the corresponding imputed item, in proportion to and to the extent of the imputed amount required to be reported by each such Member. (ii) In the event that a Member is required to recognize income pursuant to Code Section 83 in connection with receipt of a profits interest in the Company, any corresponding deduction permitted to the Company under Code Section 83(h) shall be specially allocated to the Member required to recognize the income under Code Section 83. In the event that all or any portion -14- of a deduction pursuant to Code Section 83(h) is required to be capitalized, deductible Net Losses shall instead be allocated as soon as possible to the Member required to recognize the income under Code Section 83. This provision shall be applied retroactively (to the extent deductions to be allocated pursuant to this part (ii) can be allocated via amended Company tax returns) and retrospectively (to the extent such deductions cannot be allocated via amended Company tax returns) in the event that the Company's or any Member's return is audited and an adjustment is determined requiring any Member to recognize income under Code Section 83. (d) Regulatory Allocations. It is the intention of the Members that ---------------------- the allocation of tax attributes arising from the Company comply with applicable provisions of the Regulations under Sections 704(b), 704(c) and 752 of the Code. To conform further the allocation provisions of this Agreement to such Regulations, the Members agree that the following special allocation rules shall apply, provided, however, that in respect of any particular allocation the following rules shall supersede the provisions otherwise applicable under this Section 13 only to the extent necessary to cause such allocation to be respected under the Regulations. In the event of any inconsistency between the Regulations and the provisions of this Section 13(d), the Regulations shall govern. (i) In accordance with Code Section 704(c), and the Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes, and its fair market value on the date of contribution. Allocations pursuant to this Section 13(d)(i) are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Member's Account or share of profits, losses, or other items of distribution pursuant to any provision of this Agreement. All Members acknowledge and agree that the allocation of items pursuant to this Section 13(d)(i) shall be made utilizing the traditional method of making Section 704(c) allocations set forth in Regulation Section 1.704-3(b). (ii) In the event that a revaluation of the Company's Assets is reflected in the Members' capital accounts, depreciation, depletion, amortization and other "tax items" shall be allocated in the manner required by the Regulations Sections 1.704-1(b)(2)(iv)(g) and 1.704-1(b)(4)(i). (iii) If during any Company fiscal year there is a net decrease in the Minimum Gain or net decrease in Minimum Gain attributable to the disposition of a particular Asset, then items of income and gain of the Company shall be allocated in the manner required by the applicable "minimum gain chargeback" provisions of Regulation Section 1.704-2. (iv) If a Member receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which is unexpected within the meaning of Regulations Section 1.704-1(b)(2) (ii)(d) and which causes or increases a negative balance in such Member's Adjusted Capital Account, such Member will, to the extent required by Regulations Section 1.704-1(b)(2)(ii)(d), be allocated an amount of gross income and/or gain sufficient to eliminate such negative balance as quickly as possible. -15- (v) All deductions attributable to Member Non-Recourse Loans shall be allocated as required by the applicable provisions of Regulations Section 1.704-2. (e) Curative Allocations. Any special allocation of items pursuant to -------------------- Sections 13(c) and (d)(iii) through (v) shall be taken into account under Sections 13(a) and 13(b) in computing allocations of gain or loss on each sale of Company Assets or an interest or interests therein so that the net amount of income, gains, losses and deductions and all other items allocated to each Member pursuant to this Section 13 shall, to the extent possible, be equal to the net amount that would have been allocated to each Member if the above specified special allocations had not been made. (f) Depreciation Recapture. In determining the character (but not ---------------------- priority or amount) of Net Income allocable pursuant to Section 13(b) in connection with a sale or sales of Assets giving rise to ordinary income depreciation recapture, the Members shall be allocated ordinary income depreciation recapture to the extent of their respective shares of the Company's prior depreciation deductions. (g) Allocation Adjustments. The allocations set forth in this Section ---------------------- are intended to allocate Company income, gains, deductions and losses to the Members for federal income tax purposes in accordance with their economic interests in the Company while complying with the requirements of Code Sections 704(b), 704(c) and 752, as well as the Regulations promulgated under such Sections. If, in the opinion of the Company's tax counsel, the allocation of profits or losses pursuant to the preceding provisions of this Section 13 does not (i) satisfy the requirements of Code Section 704(b), 704(c), 752 or the Regulations underlying any of these Sections, (ii) comply with any other provisions of the Code or the Regulations, or (iii) properly take into account any expenditure or item of income or gain of the Company or the transfer of an interest in the Company, then notwithstanding anything to the contrary contained in the preceding provisions of this Section 13, the income, gains, deductions and/or losses of the Company shall be allocated in such manner as the Company's tax counsel determines to be required so as to reflect properly (i), (ii) and/or (iii) of this Section 13(g), as the case may be, and the Managing Members shall have the right to amend this Agreement without action by the Members to reflect any such change in the method of allocating Company income, gains, deductions and/or losses, provided, however, that any change in the method of allocating such income, gains, deductions and/or losses shall not materially alter the pre- tax economic arrangement among the Members. (h) Safir Allocation Adjustments. Notwithstanding anything to the ---------------------------- contrary contained herein, in no event shall the Class D Units to be held by Larry Safir and issued pursuant to the terms of his Executive Employment Agreement dated to be entered into and commence as of the closing of the Valley Channel Acquisition Agreement and Plan of Merger (the "Employment Date") by and between Safir and the Company receive any allocations of income, gain, loss or deduction pursuant to this Section 13 prior to the third anniversary of the Employment Date. -16- 14. Company Books, Records and Reports. ---------------------------------- (a) Maintenance of Books and Records. True and proper books, records, -------------------------------- reports, bank account statements, accounting records and accounts of the Company shall be maintained by the Managing Members at all times, in which shall be entered fully and accurately all Company transactions. All such items, together with this Agreement and any amendments thereto, shall at all times be kept at the principal place of business of the Company, or such other location as the Managing Members may select from time to time. (b) Inspection Rights. Upon the request of a Member or the holder of ----------------- an economic interest in the Company, for purposes reasonably related to the interest of that person as a member or holder of an economic interest, the Managing Members shall promptly deliver to the Member or holder of an economic interest, at the expense of the Company, a copy of any or all of the items listed in subparts (i), (ii) and (iv) of Section 14(d) below, as well as a copy of this Agreement. Each Member and holder of an economic interest shall also have the right, upon reasonable request, for purposes reasonably related to the interest of that person as a Member or holder of an economic interest in the Company, and at such person's sole expense, to inspect and copy during normal business hours the other items listed in Section 14(d) below, as well as any other books, records, reports, returns and the like required to be maintained at the Company's principal office pursuant to Section 17058 of the Act. (c) Financial and Tax Reports. ------------------------- (i) Annual Report. At the end of each fiscal year, the books ------------- shall be closed and statements reflecting the financial condition of the Company and its profits or losses shall be prepared by the Managing Members or, at the Managing Members' election, by an accounting firm employed at the Company's expense. If the Company has more than thirty-five (35) Members, not later than one hundred twenty (120) days after the close of the fiscal year, the Managing Members shall cause an annual report to be sent to each of the Members. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year. Additionally, if the Company has more than thirty-five (35) Members, Members representing at least five percent (5%) of the Percentage Interests, or three (3) or more Members, may make a written request to the Managing Members for an income statement of the Company for the initial 3-month, 6-month or 9-month period of the fiscal year ended more than thirty (30) days prior to the date of the request, and a balance sheet of the Company as of the end of that period. These statements shall be delivered or mailed to the Members within thirty (30) days thereafter. The financial statements referred to in this Section shall be accompanied by the report thereon, if any, of the accountants engaged by the Company or, if there is no report, the certificate of the Managing Members that the financial statements were prepared without audit from the books and records of the Company. -17- (ii) Tax Information. The Managing Members or, at the Managing --------------- Members' election, an accounting firm employed at the Company's expense, shall send to each of the Members, within ninety (90) days after the end of each taxable year, such information as is necessary to complete his or its federal, state and local income tax or information returns, and, if the Company has thirty-five (35) or fewer members, a copy of the Company's federal, state, and local income tax or information returns for the year. (d) Information Available at Principal Office. The following shall be ----------------------------------------- maintained by the Managing Members at the Company's principal place of business: (i) A current list of the full name and last known business or residence address of each Member and of each holder of an economic interest in the Company, set forth in alphabetical order, together with the contribution and the Percentage Interest of each Member and holder of an economic interest; (ii) The full names and business or residence addresses of the Managing Members; (iii) A copy of the Certificate of Formation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Formation or any amendments thereto were executed; (iv) Copies of the Company's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years; (v) A copy of this Agreement and any amendments hereto, together with any powers of attorney pursuant to which this Agreement was executed; (vi) Copies of the financial statements of the Company, if any, for the six most recent fiscal years; and (vii) The books and records of the Company as they relate to the internal affairs of the Company for at least the current and past four fiscal years. (e) Banking. The Managing Members shall open and maintain one or more ------- separate bank accounts in the Company's name in which Company funds may be deposited. The funds in such accounts shall be used solely for the Company business, and all withdrawals therefrom may be made only on the signature of one or more individuals authorized by the Managing Members. 15. "Tax Matters Partner". Walter F. Ulloa is hereby designated the "Tax --------------------- Matters Partner" for purposes of Sections 6221-6233 of the Code. The "Tax Matters Partner" may rely upon its certified public accountants or tax attorneys with respect to any election, action or determination relating to a Company audit and any proceedings arising therefrom. The "Tax Matters Partner" shall give all other -18- Members prompt notice of any communication from the IRS or any action it proposes to take as the "Tax Matters Partner." The "Tax Matters Partner" shall be reimbursed for any expenditures made or expenses incurred by it on behalf of the Company in connection with such audit or proceeding. 16. Management. Subject to the provisions of this Section 16 and except ---------- as otherwise explicitly provided herein, the Company shall be managed by the Managing Members, who are hereby designated pursuant to Section 18-401 of the Act. Pursuant to Section 16(a) the Managing Members shall establish an Executive Committee, which shall have the rights, powers and duties set forth in Sections 16(a) and (b) below. The Executive Committee shall also appoint officers of the Company, who shall be responsible for management of the day-to- day business of the Company, subject to the supervision and authority of the Executive Committee as set forth in this Section 16. The Non-Managing Members shall not participate in the management or control of the Company business. (a) Executive Committee. ------------------- (i) The Company shall have an Executive Committee, which shall consist of four (4) individuals. The Executive Committee shall consist initially of four (4) members, as follows: Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik and a member designated by Messrs. Ulloa, Wilkinson and Zevnik. Upon Univision's exercise of the Univision Option, Univision shall have the right to elect one of the four Executive Committee members. The Executive Committee may act on majority vote, but only with the consent of both Messrs. Ulloa and Wilkinson. In the event of a disagreement between Ulloa and Wilkinson, such dispute shall be resolved in accordance with Section 17 of this Agreement. In the event of a deadlock vote of the Executive Committee where Messrs. Ulloa and Wilkinson vote in the same manner and Mr. Zevnik and the other Executive Committee member vote together, the vote of Messrs. Ulloa and Wilkinson shall be controlling and the Executive Committee shall be empowered to take action based upon such vote. Each member of the Executive Committee, including a member of the Executive Committee elected to fill a vacancy, shall serve until the next annual election of the Executive Committee members and until a successor has been elected and qualified, except in the case of death, resignation or removal of such member of the Executive Committee. The Executive Committee shall have regular monthly meetings by telephone or in person. The Managing Members, or any member of the Executive Committee who wishes to do so, may call a meeting of the Executive Committee by providing advance written notice to all members of the Executive Committee at least three (3) business days, and no more than thirty (30) days, prior to the meeting. Each meeting of the Executive Committee shall take place at the principal place of business of the Company or a different location otherwise agreed upon by a majority in number of the Executive Committee members. One or more members of the Executive Committee may participate in an Executive Committee meeting in person, by telephone or by proxy. (ii) [Intentionally omitted.] (b) Matters Requiring Executive Committee Approval. In addition to ---------------------------------------------- any other matters requiring the vote or approval of a Majority in Interest of the Members pursuant to provisions -19- set forth elsewhere in this Agreement, the following matters shall require approval of the Executive Committee pursuant to the rules and procedures set forth in Section 16(a)(i) above. (i) Approve budgets for the Company, including, but not limited to, capital and operating budgets; (ii) Authorize and/or issue any debt securities, equity securities and/or securities convertible into equity securities of the Company; (iii) Make any loans, guarantees or joint ventures, or invest in partially owned subsidiaries; (iv) Create any subsidiary; (v) Merge, consolidate, reorganize or dispose of all or substantially all of the Company's assets; (vi) Engage in any business other than those presented in the approved business plan of the Company; (vii) Except with respect to tax distributions, pay or declare any distribution on the Company's Membership interests or repurchase any Membership interests; (viii) Establish or modify any employee equity, stock option, pension, profit sharing or other similar plan; (ix) Any pledge, mortgage or hypothecation of any assets of the Company; (x) Except as set forth in an approved budget, any expenditure of cash or other property by the Company in excess of $75,000; (xi) Except as set forth in an approved budget and except for the compensation payable to Messrs. Ulloa and Wilkinson under their Employment Agreements with the Company (as described in Section 19(d) herein), the payment or agreement to pay salaries, wages, bonuses consulting fees and/or actual or projected commissions to any employee of the Company in excess of $200,000 per twelve (12) month period; (xii) Except as set forth in an approved budget, the execution of any promissory note, guarantee or other form of indebtedness in excess of $120,000 by the Company or the consummation of bank or financial institution loan or credit arrangement; and -20- (xiii) Except as set forth in an approved budget, the execution of any lease or other obligation for real or personal property wherein the total expected payments by the Company exceed $120,000 per twelve (12) month period. (c) Matters Requiring Univision Approval. If and only if Univision ------------------------------------ exercises the Univision Option, 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 excluding debt incurred 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) Subject to Section 6(d)(iv), any transaction involving the direct or indirect transfer or sale of any FCC License (including a 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) below, 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) 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), shall be deemed approved hereunder; provided, further, that Univision agrees to not unreasonably withhold its approval of other potential transferees under Section 26(d). (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 the Subordinated -21- 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 the Subordinated Note; B equals Univision's then existing Option Percentage (as defined in Exhibit "D"); 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 closing and scheduled in the Credit Facility). (vi) Amendments to the Operating Agreement that would adversely affect the Class A Units or Univision with respect to its rights under this 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) hereof. (ix) The dissolution and liquidation of the Company, in which case Univision may withhold its consent, in its sole discretion. The foregoing approval rights, and Univision's rights under Section 16(a), shall terminate upon the closing of Univision's sale of a majority of its Percentage Interest in the Company to a third party. (d) Like-Kind Exchange. The Executive Committee shall have the right ------------------ to approve the Company's selling, disposing of and/or exchanging any Station or other Company Asset in a like kind exchange to the extent permitted by applicable State and Federal law. (e) Key Man Insurance. The Managing Members have the right, but not ----------------- the obligation to obtain and maintain keyman life insurance on Ulloa, Wilkinson and Zevnik, for the benefit of the Company and the Company shall own such keyman life insurance policy(ies). (f) Officers. The Executive Committee may appoint officers at any -------- time. The officers of Company, if deemed necessary by the Executive Committee, may include a chief executive officer, president, executive vice president and secretary. The Managing Members may appoint a chief financial and/or chief accounting officer. The officers shall serve at the pleasure of the Executive Committee. Any individual may hold any number of offices. No officer need be a resident of the State of California or a citizen of the United States. The officers shall exercise such powers and perform such -22- duties as shall be determined from time to time by the Executive Committee. By execution of this Agreement, the Executive Committee hereby appoint the following individuals as the initial officers of the Company: Name Title ---- ----- Walter F. Ulloa Chief Executive Officer Philip C. Wilkinson President Paul A. Zevnik Secretary Jeanette Tully Chief Financial Officer/Treasurer (i) Any officer may be removed, either with or without cause, by the Executive Committee at any time. (ii) Any officer may resign at any time by giving written notice to the Executive Committee. Any resignation shall take effect at the date of the receipt of the notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party. (iii) A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in this Agreement for regular appointments to that office. 17. Managing Member -- Impasse Resolution. If a dispute arises between ------------------------------------- the Managing Members with respect to a decision affecting the ordinary day-to- day operations of the Company, and the Managing Members are unable, in good faith and after reasonable effort, to agree on such matter requiring their approval and are so dead-locked that the business of the Company can no longer be conducted with advantage to the Members, such disagreement or matter shall be settled by binding arbitration in Los Angeles, California, conducted by a retired judge from the panel of Judicial Arbitration and the Mediation Services, Inc. ("JAMS") in accordance with JAMS's rules governing arbitrations conducted by JAMS in effect at the time of this Agreement. One arbitrator agreed upon by the parties hereto shall be appointed from JAMS, or if the parties cannot agree upon one arbitrator, JAMS will appoint the arbitrator itself. The decision of the arbitrator shall be final and binding on the Managing Members. The Managing Members agree to mediate any such dispute on an expedited basis and in no event later than fifteen (15) business days after filing of the arbitration proceeding. Any dispute as to whether a controversy or claim is subject to arbitration shall also be submitted as part of the arbitration proceeding. The Company shall be responsible for reasonable attorneys' fees and costs and fees of expert witnesses in connection with such proceeding; provided, however, the arbitrator may, in its sole discretion, assess such fees and costs against any Managing Member found to have acted in bad faith. -23- 18. Matters Requiring Majority Approval of Members. In addition to any ---------------------------------------------- other matters requiring approval of the Members pursuant to provisions set forth elsewhere in this Agreement, the following matters shall require the affirmative vote of a Majority in Interest of the Members: (a) Approval of the Company to merge or consolidate with one or more business entities; (b) To sell all or substantially all of the assets of the Company to dissolve the Company; (c) To issue additional membership units in the Company pursuant to Section 7(c)(i); and (d) Any material amendment to the Certificate of Formation of the Company and/or this Agreement. 19. Fees and Reimbursements to the Managing Members/Executive Committee. ------------------------------------------------------------------- (a) Company Expenses. The Company shall pay all costs and expenses ---------------- incurred in connection with the formation of the Company, the operation of the Company's business, and the management and operation of the Assets, including: (i) Costs of personnel employed by the Company and directly involved in the Company business; (ii) Costs of acquiring, owning, developing, improving, operating, and disposing of any or all of the Assets; (iii) Legal, consulting and similar fees for professional services provided to the Company; (iv) Expenses of Company administration, accounting, documentation and reporting, including, without limitation: preparation and maintenance of Company books and records, financial reports, audits, budgets, economic surveys, cash flow projections, and working capital requirements; preparation of Company state and federal tax returns; insurance expenses required in connection with the Company business; and expenses in connection with distributions and communications to Members; expenses of revising, amending, modifying, or terminating this Agreement; and (v) Costs incurred in connection with any litigation in which the Company is involved and any examination, investigation or other proceedings conducted by any regulatory agency, including legal and accounting fees. -24- (b) Managing Members Reimbursements. The Managing Members shall be ------------------------------- reimbursed by the Company for (i) actual out-of-pocket expenses paid to third parties for the review, preparation and publishing of Company financial and business reports, conduct of Company meetings, Non-Managing Members consultations, etc., (ii) other costs and expenses which are to be borne by the Company under the terms of this Agreement, and (iii) direct costs and expenses paid to third parties incurred in performing the duties and responsibilities of the Managing Members. As used herein "direct expenses" shall include transportation and lodging expenses which are reasonably and necessarily incurred in discharging the responsibilities of the Managing Members. However, no Member shall be entitled to reimbursement for any portion of its indirect overhead expenses (regardless of whether all or any portion of such expenses are allocable to the Company). (c) Executive Committee Reimbursements. The Executive Committee ---------------------------------- Members shall be reimbursed by the Company for reasonable expenses incurred by such members in attending Executive Committee meetings. (d) Managing Member Employment Agreements. The Managing Members shall ------------------------------------- each enter into written Employment Agreements with the Company concurrent with the execution of this Agreement. (e) Loan to Member(s). the Members hereby approve the Zevnik Note in ----------------- the principal amount of $360,366.38, which shall be evidenced by a Secured Promissory Note (the "Secured Note") delivered by Zevnik to the Company and shall be secured by Class A Membership Units acquired by Zevnik, subject to any prior security interest held by the Bank. The Secured Note shall bear interest at 5.625% and shall be payable in one (1) installment of principal and all accrued interest five (5) years after delivery. In addition, the Secured Note shall be due and payable in full upon the earlier of sale by Zevnik of his interest in the Company. The Company and the Members hereby acknowledge and agree that Zevnik may repay the Secured Note at any time, including, but not limited to, by means of use of funds otherwise distributable to Zevnik by the Company or by any of the Members hereto. 20. Third-Party Contracts, Instruments, Etc. Only those officers of, ---------------------------------------- and/or other individuals associated with, the Company or the Managing Members who have been given authority by the Managing Members to do so may execute on behalf of the Company any note, mortgage, evidence of indebtedness, contract, certificate, statement, conveyance or other instrument in writing, or any assignment or endorsement thereof. Any Person dealing with the Company or the Managing Members may rely upon a certificate signed by any of the Managing Members as to (a) the identity of the Managing Members or any other Member of the Company; (b) the Persons who are authorized to execute and deliver any instrument or document for or on behalf of the Company or (c) any act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member. No Member acting solely in the capacity of a Member, is an agent of the Company; nor does any Member, unless expressly and duly authorized in writing to do so by the Managing Members, have any power or authority to bind or act on behalf of the Company in any way, to pledge its credit, to execute any instrument on its behalf or to render it liable for any purpose. -25- 21. Time Devoted to Business. The Managing Members shall devote such time ------------------------ to the affairs of the Company's business as the Managing Members in each of their reasonable discretion deems to be required. 22. Liability. No Managing Member shall be liable to the Company or to --------- any other Member for any loss or damage sustained by the Company or any other Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, reckless or intentional misconduct, or a knowing violation of the law by such Managing Member. No Member nor any shareholder, officer, director, partner, member, subsidiary, employee, agent or affiliate of the Member (nor any officer, director, partner, member, subsidiary, employee, agent or any other person acting through or under authority of any of the foregoing) shall be liable, responsible or accountable in damages or otherwise to any other Member or the Company for any act performed in good faith by any or all such person(s) in connection with the affairs of the Company, where such action, inaction or failure to act is based upon the belief that such action, inaction or failure to act is reasonable under the circumstances and does not constitute gross negligence or intentional misconduct. Except as expressly required by law, no Member shall be personally liable for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise. 23. Indemnification. The Company shall defend, indemnify and hold --------------- harmless, and pay all judgments against, each Executive Committee Member and each Member and his or its shareholders, officers, directors, partners, members, subsidiaries, employees, agents and affiliates (and any stockholders, officers, directors, partners, members, subsidiaries, employees and agents of any of the foregoing) arising from any claim, loss, liability or damage incurred by reason of an act performed, or omitted to be performed, in connection with the affairs of the Company by any or all of the aforementioned persons in good faith, including attorneys' fees incurred by any of the aforementioned in connection with the defense of any action based on any such alleged act or omission, which attorneys' fees shall be paid as incurred from Company funds. All judgments against the Company and/or any of the aforementioned, wherein any of the aforementioned is entitled to indemnification, as herein provided, shall first be satisfied from Company Assets. The indemnities set forth in this Section 23 shall not require payment as a condition precedent to recovery by the indemnified party. The Company shall have the power to purchase and maintain insurance on behalf of any Person who is or was an agent of the Company against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as an agent, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Section 23 or under applicable law. 24. Non-Competing Ventures and Conflicts of Interest. Except for those ------------------------------------------------ existing business and activities set forth on attached Schedule "1", each Member, including each Managing Member, and his or its officers, directors, shareholders, partners, members, subsidiaries, employees, agents and affiliates shall not engage or invest in, independently or with others, any business activity of any type or description that is in direct competition with the Company in markets where the Company's stations then broadcast. Each Member, including each Managing Member, shall be obligated to present any investment opportunity or prospective economic advantage (an "Opportunity") relating to the -26- Company's business to the Company in writing ("Opportunity Notice"). The Company shall have thirty (30) days in which to elect to pursue the Opportunity described in the Opportunity Notice. If the Company waives its right to pursue the Opportunity described in the Opportunity Notice or fails to respond to such Opportunity Notice within the time period set forth above, then the Member presenting such Opportunity shall have the right to pursue such Opportunity in such Member's individual capacity. Provided, however, in the case of the Managing Members, pursuing such Opportunity cannot materially interfere with the Managing Member(s) duties pursuant to this Agreement. Subject to the foregoing, each Managing Member shall have the right to hold any investment opportunity or prospective economic advantage for his or its own account or to recommend such opportunity to a person or persons other than the Company. Neither the Company nor any other Member shall have any right in or to such other ventures or activities or to the income or proceeds derived therefrom. The Non-Managing Members acknowledge that the Managing Members and their respective affiliates own and/or manage other businesses, including businesses that may compete with the Company and for such Managing Members' time as set forth on Schedule "1." The Non-Managing Members hereby waive any and all rights and claims which they may otherwise have against the Managing Members and their respective officers, directors, shareholders, partners, members, subsidiaries, employees, agents and affiliates as a result of any such activities described on Schedule "1." Notwithstanding anything to the contrary contained in this Section 24, the provisions of this Section 24 shall not apply to Univision. 25. Meetings of Members. There shall be no scheduled or periodic meetings ------------------- of the Members, but meetings of the Members may be called either by the Managing Members or upon the written request of Non-Managing Members holding, in the aggregate, more than ten percent (10%) of the outstanding Percentage Interests held by all Members. All meetings shall be held at the Company's principal place of business unless a different and reasonably accessible location is specified by the Member(s) calling the meeting in the notice thereof. A Majority in Interest of the Members or, if any matter to be voted upon or approved requires more than a Majority in Interest of the Members, Members holding cumulatively at least the minimum Percentage Interest so required represented in person (or via telephone) and/or by proxy shall constitute a quorum for any Company meeting. Every Member entitled to vote on any matter shall have the right to either in person or in one or more agents authorized by a written proxy signed by the Person or filed with the Managing Members of the Company. A proxy shall be deemed signed if the Member's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, electronic transmission or otherwise) by the Member or the Member's attorney-in- fact. If the Managing Members or Non-Managing Member(s) entitled to do so elect to call a meeting, written notice of such meeting shall be given to all Members not less than ten (10), nor more than sixty (60), days prior to the date of such meeting. The notice shall state the nature of the business to be transacted and the matters, if any, upon which the Members will be requested to vote. Any notice sent by a Member may include his or its recommendation as to the proposals contained therein. If the notice has failed to state the nature of a particular item addressed at the meeting, any approvals of the Members sought in connection therewith shall require the unanimous vote of the Members. Members may vote in person (or via voice vote on the telephone) or by written proxy at any such meeting. 27 A Member may sign a written waiver of notice to the holding of a meeting, may consent to the holding of a meeting or may approve the minutes of a meeting. All waivers, consents, and approvals must be filed with the Company's records or made a part of the minutes of the meeting to which they relate. Attendance at a meeting constitutes waiver of notice of the meeting unless a Member objects, at the beginning of the meeting, if the meeting was not lawfully called or convened. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business that may have been transacted at the original meeting. If, however, the adjournment is for more than forty-five (45) 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 in the manner specified above for newly called meetings. Unless a meeting is called as provided in this Section, the consent or approval of the Members may be obtained and evidenced by the written consent (without a meeting) of Members holding the requisite outstanding Percentage Interests (as determined pursuant to the applicable terms of this Agreement), signed and delivered to the Managing Members on behalf of the Company within sixty (60) days of the record date for the consent(s) or approval(s). 26. Assignment by Members. --------------------- (a) General Prohibition. The interest of a Member in the Company may ------------------- be assigned only as permitted by the provisions of this Section 26 and, except as so permitted, no Member shall assign, sell, dispose of, give, pledge or otherwise transfer, encumber or hypothecate (collectively "assign") his or its Company interest or a part thereof, whether voluntarily, by operation of law, at judicial sale or otherwise, to any Person. This restriction against assignment shall include, but not be limited to, the transfer to or for the benefit of any Person as a result of or in connection with any property settlement or judgment incident to a divorce, dissolution of marriage or separation, the transfer by decree of distribution or other court order in proceedings arising from the death of the spouse of any Member or if the Member is a trust, the designation of a new or additional trustee of such trust. (b) Permitted Transfers. The restrictions on transfer set forth in ------------------- Sections 26(a) and 26(d) hereof shall not apply to (i) any transfer by an individual Member of all or any portion of such Member's Company interest to (A) a trust for the benefit of the transferor alone or for the benefit of the transferor and his or her beneficiaries, provided that such trust is, during the transferor's lifetime, controlled by the transferor and his spouse and is considered a so-called "grantor trust" for federal income tax purposes or (B) as an estate planning transfer where the transferor retains voting control; (ii) any transfer by a Member to a controlled affiliate (which shall mean an entity of which greater than fifty percent (50%) of the voting and ownership interests are owned by the transferring Member or its owners); (iii) any transfer to the individual stockholders of a corporate Class A Non-Managing Member in connection with a liquidation of a Class A Non-Managing Member; provided that, in each case, the transferee executes an amendment to this Agreement agreeing to be bound by all the terms and conditions of this Agreement and complies with the conditions to substitution set forth in Section 26(g) -28- below; and (iv) any transfer by a Member to the Bank pursuant to the Credit Facility, whether such transfer is pursuant to a Pledge Agreement or similar agreement in favor of the Bank, or by the Bank foreclosing on the interest conveyed by such Pledge Agreement or similar agreement. (c) Income Tax Considerations. Even if an assignment of all or any ------------------------- portion of a Member's Company interest would otherwise be permitted by the provisions of this Section 26, such assignment shall not be made if, in the opinion of counsel to the Company, such assignment, standing alone or in conjunction with other either previous or planned assignments, would result in a material risk of the Company being treated as other than a partnership for income tax purposes. Any transfer in violation of this subpart (c) shall be null and void ab initio. -- ------ (d) Right of First Offer. Except as permitted in Section 26(b), if at -------------------- any time a Member desires to transfer all (or any part) of his or its Company interest (or any owner of an indirect, direct or beneficial controlling interest in such Member desires to transfer such interest) ("Offer"), the Member shall, prior to any other action, give notice, together with a description of the terms upon which the Member would transfer such interest (the "Offer Notice"), to the Managing Members on behalf of and for the benefit of the Company. The Managing Members shall accept or reject such Offer as to the entire offered interest within thirty (30) days of receipt of the Offer Notice. Failure by the Managing Members to give notice of election within the required time period shall be deemed an election not to accept the Offer set forth in the Offer Notice. If the Managing Members elect not to exercise the Company's right of first offer, the remaining Members shall have the right to purchase a Proportionate share of the interest of the offeree pursuant to the terms of the Offer Notice. In the Offer Notice which is submitted to the remaining Members, the offeree shall offer (the "First Negotiation Offer") to each other Member the right to purchase a Proportionate share of the Company interest of the offeree for the same Proportionate price and subject to the same terms and conditions as set forth in said Offer Notice. If any affected Member does not wish to accept a First Negotiation Offer, he or it shall give written notice to the Company within thirty (30) days after the Offer Notice of his or its intention to reject the First Negotiation Offer, and each Member who has decided to accept the First Negotiation Offer shall be entitled to purchase his or its Proportionate share of the Company interest subject to the rejected First Negotiation Offer. The other Members shall notify the offeree of their respective elections within forty-five (45) days of the Offer Notice. Elections to purchase the entire Company interest of the offeree Member must be received within such forty-five (45) day period; otherwise, the offeree Member shall be free to sell his or its Company interest to any third party at a price equal to or greater than and upon the terms and conditions set forth in the Offering Notice. Any sale of an interest hereunder to a third party shall comply with the following requirements: (i) the sale documentation must contain provisions whereby any proposed transferee is obligated to comply with all provisions of this Agreement and any amendments hereto; (ii) any transferee must be a principal and not an agent acting on behalf of an undisclosed principal, and such principal may not be related to or an affiliate of the offeree or with respect to which the offeree has any direct or indirect ownership or control; and (iii) any prospective transferee must be of good business character and -29- reputation and is financially capable of carrying out all obligations of the selling Member under this Agreement and related agreements. If the other Members collectively elect to accept the First Negotiation Offer, they shall acquire the offeree's Company interest upon the terms set forth therein. Failure by the other Members to give notice of election within the required time period shall be deemed an election not to accept the First Negotiation Offer set forth in the Offer Notice. If the sale is not consummated within seventy-five (75) days from the date of the other Members' elections not to accept the First Negotiation Offer, the relevant Company interest shall then again become subject to the right of first offer set forth in this Section 26(d). This Section shall not be applicable to transfers described in Section 26(b). The right of first offer set forth in this Section 26(d) shall terminate upon the Initial Public Offering of securities in the Company or the "C" Corporation pursuant to Section 26(i) herein. (e) Purchase Option. In the event that a Member or an assignee of a --------------- Member or an assignee thereof (referred to in this Section 26(e) as the "Transferor") violates impermissibly the transfer restrictions set forth in this Agreement, withdraws without the consent of the Managing Members, assigns to one or more creditors, pledges, or otherwise directly or indirectly encumbers or hypothecates, all or any portion of such person's interest in the Company (the affected portion of such Member's interest in the Company is hereinafter referred to in this Section 26(e) as the "Option Interest"), whether such violation, withdrawal, assignment, gift, pledge, encumbrance or hypothecation is voluntary or involuntary, the persons identified as Optionees below shall have the option ("Purchase Option") to acquire all or any portion of the Option Interest, including all or any portion of the Option Interest which has been assigned or gifted to, or pledged or otherwise encumbered or hypothecated for the benefit of, a third party. Any third party who receives an interest in all or any portion of an Option Interest shall receive such interest subject to this Purchase Option. Provided, however, this Section 26(e) shall not apply and there is no Purchase Option created when such interest is (a) encumbered by an involuntary lien, (b) hypothecated with the consent of the Executive Committee or (c) hypothecated in connection with a Company loan which has been approved by the Executive Committee. The persons possessing the Purchase Option with respect to any impermissible transfer, withdrawal, assignment to one or more creditors, pledge, encumbrance or hypothecation of an interest in the Company shall be all Members whose interests are not (in whole or in part) subject to this Purchase Option ("Optionees"). Each such Member shall have the right to purchase his or its Proportionate share of the Option Interest, and any portion of the Option Interest that one or more of such persons does not elect to purchase may be purchased by the other persons wishing to do so on a Proportionate basis (counting, for this purpose, only those persons interested in purchasing an additional portion of the Option Interest), and this process shall be repeated until elections have been received to purchase the entire Option Interest or until there is no further interest in purchasing any further portion of the Option Interest. The Purchase Option may be exercised at any time within sixty (60) days following the date on which each Member receives written notice that such transfer, withdrawal, assignment, pledge, encumbrance or hypothecation has occurred, and the identity of each person holding all or a portion of the Option Interest. Each such Optionee wishing to exercise his or its Purchase Option may do so by -30- providing written notice to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) within sixty (60) days following receipt of the notice referred to in the preceding sentence, which notice to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) shall state that the Purchase Option is being exercised and shall specify the portion of the Option Interest that he or it wishes to acquire pursuant to the Purchase Option. The Managing Members (or all or a portion of the Managing Members' interest is the Option Interest, the Non-Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) shall then take all steps necessary or appropriate to reconcile the notices (so that all interested persons acquire only that portion of the Option Interest to which they are entitled) and, once such reconciliation has occurred, shall provide written notice to any or all third parties holding all or a portion of the Option Interest specifying that the Purchase Option has been exercised and the portion of the Option Interest held by each such third party that is to be acquired pursuant to exercise of the Purchase Option. Each electing Optionee shall pay to the Managing Members (or, if all or a portion of the Managing Members' interest is the Option Interest, the Non- Managing Member with the largest Percentage Interest of the Non-Managing Members willing to act in the place of the Managing Members pursuant to this Section) who shall then pay as nominee of such Optionee to the appropriate person or persons, the value of the portion of the Option Interest (determined as provided herein) in which such person(s) has (have) an interest. Such amount shall be paid via cash, one or more certified or cashier's checks or a combination of cash and one or more certified or cashier's checks. In the event that exercise of the Purchase Option, or the purchase of all or any portion of an Option Interest pursuant thereto, is delayed or stayed for any reason pursuant to judicial order or by operation of the United States bankruptcy laws or other applicable insolvency laws, each electing Optionee may elect not to proceed with purchase of all or any portion of the Option Interest or may, within sixty (60) days after the judicial order or the U.S. bankruptcy and/or insolvency laws is (are) no longer applicable, elect to proceed with the contemplated transaction. For purposes of determining the value of an interest in the Company being acquired pursuant to the Purchase Option, the value of the Assets shall first be determined pursuant to Section 11 hereof, and the value of the Transferor's entire interest in the Company shall be equal to the amount that the Transferor would have been entitled to receive pursuant to Section 12(c) hereof assuming a cash sale of the Assets for such value had occurred immediately prior to the occurrence of the event which triggered the Purchase Option. The value of each portion of the Option Interest being acquired pursuant to the Purchase Option shall be equal to the value of the Transferor's entire interest in the Company multiplied by the percentage interest represented by such interest being acquired pursuant to the exercise of the Purchase Option less an amount equal to any loss, damage, injury, cost, expense or other -31- amount (including attorney's fees) suffered by the Company or the Members as a result of the impermissible transfer of the Option Interest by the Transferor. (f) Consent Required for Substitution. Subject to the conditions to --------------------------------- substitution set forth below, an assignee of an interest in the Company may become a Member in the place and stead of his or its assignor only if a Majority in Interest of the other Members vote in favor of the assignee's admission to the Company as a substituted Member. An assignee who has become a substituted Member shall have, to the extent assigned to him or it, the rights and powers of his or its assignor, and the assignee shall be subject to the restrictions and liabilities of such assignor. If an assignee does not comply with all of the conditions to substitution set forth below, or all of the other Members do not vote in favor of the assignee's admission as a substituted Member, the assignee shall hold a bare economic interest in the Company, with no right to vote, participate in the management and affairs of the Company or to become or exercise any rights of a Member. Unless and until an assignee becomes a substituted Member, his or its assignor shall continue to possess all rights pertinent to the assigned interest (other than the right to receive distributions and related allocations of income, gains, losses, deductions, and credits in accordance with this Agreement). Notwithstanding any provision herein to the contrary, Sections 26(f) and 26(g) shall not apply to assignments to the Bank, or an assignee of the Bank, pursuant to the Credit Facility. (g) Conditions to Substitution. -------------------------- (i) No assignee of an interest in the Company shall be entitled to become a substituted Member unless and until his or its assignor has provided the Managing Members with the assignee's name and address and all details relating to the assignment. (ii) No assignee of an interest in the Company shall be entitled to become a substituted Member unless the assignee shall consent in writing, in form satisfactory to the Managing Members, to be bound by the terms of this Agreement in the place and stead of the assigning Member. (iii) No assignee of a Non-Managing Member's Company interest shall be entitled to become a substituted Non-Managing Member unless and until it has been demonstrated to the satisfaction of the Managing Members that the assignment was pursuant to an exemption from registration under the Securities Act of 1933, as amended, and pursuant to an exemption from qualification under applicable state securities laws. (iv) If, in connection with or as a condition to the assignment of any interest in the Company, the consent or approval of the Federal Communications Commission (the "FCC"), or any other governmental authority is required under applicable law, then the Company shall forthwith take those steps required to obtain and shall use its best efforts to duly obtain at the earliest possible date such consent or approval. Any time limitation upon or requirement for such assignment shall, if necessary for the assignment, be extended by such period of time as is reasonably necessary to obtain -32- such consent or approval, all costs and expenses in obtaining such consent or approval shall be paid or reimbursed by the Company. The Members shall cooperate with the Company to the extent required to obtain such consent or approval, which shall be, if required, a condition to the substitution of any assignee of an interest in the Company. (h) Managing Members Signatory Authority. Subject to full compliance ------------------------------------ with the terms and provisions of this Agreement, any instrument reflecting the assignment of all or a portion of the interest of a Member and the admission of the assignee as a substituted Member of the Company need only be executed and acknowledged by the Managing Members, the assignor and the assignee. Upon the admission of a substituted Member, Exhibit "A" shall be amended to reflect the name, number of Units and Percentage Interest of such substituted Member and to eliminate or adjust, if necessary, the name, Units and Percentage Interest of the predecessor of such substituted Member. (i) Initial Public Offering. The Members agree that upon the vote of ----------------------- at least seventy-five percent (75%) of the Members and, subject to compliance with applicable laws, the Company shall roll up to a "C" corporation (the "C" Corporation) in connection with an initial public offering of such "C" Corporation, which is (a) pursuant to a firm underwriting commitment by a reputable investment banker, (b) has a pre-offering valuation of at least $150 million, and (c) results in the "C" Corporation's securities being listed on the American Stock Exchange, the New York Stock Exchange or NASDAQ National Market System (herein an "Initial Public Offering"). Each of the Members hereby agrees to cooperate in connection with the contribution of their membership interests in the Company to a such newly formed C-Corporation, with each existing Member to receive the common stock of the "C" Corporation in proportion to its capital account balance in the Company as of the date of the incorporation after revaluing such Member's capital account in accordance with Treasury Regulations and Section 11(b) to reflect the fair market value of the Company's assets as of the date of incorporation. As of the date of incorporation, the common stock held by all Members shall be granted standard piggyback registration rights entitling the Members to participate on a pari passu basis in registrations of the "C" Corporation's common stock under the Securities Act of 1933, as amended, other than the Initial Public Offering and subject to pro rata cut-backs at the underwriter's discretion. If Univision is a Class A Member and the Managing Members both consent to a proposed Initial Public Offering, Univision agrees to consent to such Initial Public Offering if (i) three (3) years from the execution of this Agreement shall have expired; (ii) no more than five percent (5%) of the shares to be sold in such offering may be purchased by a single Person, and (iii) no more than thirty percent (30%) of the Company will be sold in the Initial Public Offering. 27. Death, Withdrawal, Resignation, Removal, Bankruptcy or Dissolution of --------------------------------------------------------------------- a Member. -------- (a) Effect - Non-Managing Member. In the event of the death, ---------------------------- withdrawal, resignation, removal, Bankruptcy or dissolution of a Non-Managing Member, the Company shall continue. Subject to Section 26, the representative or successor in interest of the Non-Managing Member shall be vested with the same status as that of its predecessor in interest. -33- (b) Effect - Managing Members. In the event of the death, withdrawal, ------------------------- resignation, removal, Bankruptcy or purchase of a Managing Member's entire interest pursuant to the purchase Option set forth in Section 26, the remaining Managing Member shall become the sole Managing Member and shall fill the Executive Committee vacancy caused by the other Managing Member's death, withdrawal, resignation, removal, Bankruptcy or purchase of such Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26. In the event of the death, withdrawal, resignation, removal, Bankruptcy or purchase of the remaining Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26, the Company shall be dissolved unless other Members owning a Majority in Interest of (i) the Percentage Interests and (ii) the capital of the Company (as determined via reference to applicable guidelines published by the Internal Revenue Service from time to time) owned by all Members (other than the Managing Member with respect to which the dissolution event occurred) (1) elect within ninety (90) days after the death, withdrawal, resignation, removal, Bankruptcy or purchase of the Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26 to continue the Company, and (2) appoint new Managing Members (who may be an existing Non-Managing Member or an outside person) who agrees to be the new Managing Members. The Company shall take steps to amend this Agreement to convert the interest of the former Managing Member to that of a Non-Managing Member in this Company, with the same economic interest they had as the Managing Members (subject to Proportionate dilution of their Percentage Interest in connection with admission of an outside persons as the new Managing Member(s) or the increase to the Percentage Interest of an existing Non-Managing Member(s) to compensate him or it for becoming the new Managing Member(s)). (c) Purchase of Membership Units on Death of Ulloa, Wilkinson or ------------------------------------------------------------ Zevnik. - ------ (i) Transfers on Death of Ulloa, Wilkinson or Zevnik. Upon the ------------------------------------------------ death of Ulloa, Wilkinson or Zevnik (the "Deceased Member"), the Deceased Member's estate (or other lawful successor or heirs (collectively the "Estate") shall have the right to elect, at its discretion (within ninety (90) days after the death of the Deceased Member), to sell all or any portion of such Deceased Member's Membership Units to the Company at the Agreed Price provided for in Section 27(c)(iii) hereof, which shall be paid in accordance with Section 27(c)(iv) hereof. If the Deceased Member's Estate elects to sell all or any portion of the Deceased Member's Membership Units and the Company does not have "key man" insurance (as provided for in Section 27(c)(ii) hereof) or the proceeds from such "key man" insurance is less than twenty percent (20%) of the Agreed Price of the Deceased Member's Membership Units to be sold, the Company may, at its discretion, elect to allow the other Members to purchase up to twenty percent (20%) of the Deceased Member's Membership Units to be sold at the Agreed Price provided for in Section 27(c)(iii) hereof, which shall be paid in accordance with Section 27(c)(iv) hereof. Each of the other Members shall have the option to purchase a Proportionate share of the Membership Units to be sold. (ii) Key Man Insurance. The Members acknowledge that the ----------------- Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta shall collectively purchase a "key man" insurance policy on the lives of each of Ulloa, Wilkinson and Zevnik in the minimum amount of $5,000,000 per individual, which amount shall be increased from time to time to be equal to an equal -34- to the greater of (i) an amount equal to 20% of the fair market value (as determined by the Executive Committee) of Ulloa's, Wilkinson's or Zevnik's total direct and indirect ownership interest in Company or (ii) a higher amount determined by the Executive Committee; provided, however, that each of Ulloa, Wilkinson and Zevnik is insurable and that such "key man" insurance is available at commercially reasonable terms and conditions. (iii) Determination of the Agreed Price. The price per --------------------------------- membership unit ("Agreed Price") at which Membership Units may be purchased pursuant to Section 27(e) hereof shall be equal to the fair market value on a per membership unit basis of each Membership Unit as of the last day (the "Determination Date") of the most recent calendar month ending before the date notice is given exercising, or the occurrence of the event triggering, the applicable right to purchase. Said fair market value shall be determined by the mutual agreement of the Members or, in the event the Members fail to so agree (within thirty (30) business days after the later of (i) the event or the exercise of the option requiring or permitting a purchase hereunder, or (ii) the appointment of a personal representative, executor or guardian as the case may be), as determined by a qualified appraiser mutually agreed to by the Members (the "Appraiser"), the cost and expense of which shall be borne by the Company. The parties or the qualified appraiser, as appropriate, shall determine the value of each Membership Unit by first determining the fair market value of the Company and then dividing such amount by the number of then outstanding Membership Units of the Company. (iv) Payment of Agreed Price. In the event that the Company ----------------------- purchases Membership Units pursuant to Section 27(c) hereof, the Deceased Member's Estate, at its discretion, may require that payment for such Membership Units be made by (i) delivery of a promissory note in an amount equal to the Agreed Price or (ii) delivery of cash (in the form of a cashier's check) as to a portion of the Agreed Price (up to the amount as provided below) and a promissory note in an amount equal to the balance of the Agreed Price, if any. If the Deceased Member's Estate elects delivery of both cash and a promissory note, the maximum amount of cash which the Deceased Member's Estate may elect to receive shall be the greater of (i) 20% of the Agreed Price of the Deceased Member's Membership Units to be sold or (b) the amount of the proceeds from any "key man" insurance available to the Company pursuant to Section 27(c)(ii) hereof (but not greater than the amount of the Agreed Price). Any promissory note delivered to the Deceased Member's Estate pursuant to this Section 27(c)(iv) shall be (i) payable quarterly over a period no longer than five (5) years and shall accrue interest at the Prime Rate and (ii) secured by the Deceased Member's Membership Units pursuant to the form of the Membership Unit Pledge Agreement attached hereto as Exhibit "__" and incorporated herein by this reference (the "Membership Unit Pledge Agreement"). Each of the Members hereby agrees that the Deceased Member's Estate, concurrent with entering into the Membership Unit Pledge Agreement, shall enter into a subordination agreement with Company pursuant to which the Deceased Member's Estate will subordinate its security interest in the Deceased Member's Membership Units to Union Bank of California, N.A.'s security interest in the same pursuant to the Nonrecourse Guarantee and the Pledge Agreement, as well as any security interest which may be granted to any future lenders who may provide financing to the Company. -35- (v) Limitation on Transfers. This Agreement is entered into ----------------------- concurrent with (i) Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta and their respective stockholders entering into stockholders' agreements (the "Other Agreements") which contain substantially the same terms as set forth in this Section 27(c). Notwithstanding (i), the Company's obligation to purchase the Membership Units of the Deceased Member pursuant to Section 27(c) hereof and (ii) Cabrillo's, Golden Hills', KSMS-TV's, Las Tres's and Tierra ALTA's obligation to purchase a deceased member's stock in the Other Agreements, the Members hereto acknowledge and agree that the Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta shall purchase such Membership Units and or stock in a manner such that the total percentage ownership interest (both direct and indirect) of each of the stockholders of Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra Alta remain, relative to each other, the same (i.e., within two decimal points) as just prior to the purchase of such Membership Units and stock by the Company, Cabrillo, Golden Hills, KSMS-TV, Las Tres and Tierra ALTA. (vi) Transfer of Membership Units. Upon the payment in full of ---------------------------- the Agreed Price, the Deceased Member's Estate shall deliver to the Company a receipt for the payment of the purchase and a membership unit assignment separate from certificate. (d) Removal. Either Managing Member may be removed by a vote of a ------- Majority in Interest of the other Members solely "for cause". For purposes of Section 27(c), the phrase "for cause" means: (i) conviction of a felony or (ii) upon thirty (30 ) days' written notice following the determination by the Executive Committee that the Managing Member has engaged in intentional fraud or intentional misappropriation of Company assets; provided that the Company gives Managing Member written notice specifying the grounds for "cause" termination under this Section 27(d), and Managing Member fails to cure the same within thirty (30) days following such written notice. 28. Dissolution of the Company. -------------------------- (a) Events Causing Dissolution. The Company shall be dissolved, -------------------------- liquidated and terminated: (i) In the event of the expulsion, Bankruptcy of the sole remaining Managing Member or purchase of the sole remaining Managing Member's entire interest pursuant to the Purchase Option set forth in Section 26, absent a vote to continue the Company and, if necessary, appoint a new Managing Member pursuant to Section 27 hereof; (ii) Upon the affirmative vote of the Managing Members and a Majority in Interest of the Non-Managing Members; (iii) Thirty-five (35) years after the date of the Certificate of Formation for the Company was filed; (iv) As otherwise provided for herein or under the Act; or -36- (v) Upon the sale of all or substantially all of the Assets, payment or other satisfaction of all known Company liabilities and distribution of all or substantially all of the sales proceeds and remaining Assets to the Members. (b) Termination Activities. ---------------------- (i) Upon the dissolution of the Company, where no election is made to continue the Company pursuant to Section 27, the continuing operation of the Company's business shall be confined to those activities reasonably necessary to wind up the Company's affairs, discharge its obligations, and preserve and sell or distribute the Assets. (ii) The Members hereby acknowledge and agree that the Managing Member or, if both Managing Members have been terminated as such, a person approved by a Majority in Interest of the Non-Managing Members, shall have the sole power to execute and acknowledge and record or publish all such instruments that may be appropriate or necessary to reflect the dissolution and termination of the Company. (iii) A reasonable time shall be allowed for the orderly liquidation of the Assets and the discharge of the liabilities to creditors so as to minimize the normal losses attendant at liquidation. (iv) File a Certificate of Cancellation pursuant to (S)18-203 of the Act upon the completion of the winding up of the Company. (c) Negative Capital Account Make-Up. No Member shall be obligated -------------------------------- to contribute to the Company any negative balance in his or its capital account. 29. Member Representations. Each Member acknowledges, agrees and ---------------------- represents to the Company and the other Members that (a) he or it is an Accredited Investor, (b) he or it has been furnished with all documents and additional information requested by him or it for the purpose of evaluating whether an investment in the Company is suitable for the Member, (c) in evaluating an investment in the Company, the Member has consulted with his or its own investment and/or legal and/or tax advisor and has independently concluded that an investment by the Member in the Company is appropriate in light of his or its overall investment objectives and financial situation, (d) the Member has adequate means of providing for current needs and contingencies, has no need for liquidity with respect to his or its investment in the Company, and is able to bear the economic risk of a possible loss of the Member's entire investment in the Company, (e) the Member is purchasing his or its interest for the Member's own account for investment, and not with a view to or for resale in connection with any distribution of such security, (f) the Member has extensive experience in business and investments, and (g) the Member understands that there are no guarantees or assurances of any economic or other benefits that may accrue by virtue of holding an interest in the Company. Each Member further acknowledges, agrees and represents that he or it is not relying on any other Member, any officer, director, shareholder, partner, member, affiliate, employee, and/or agent thereof, and/or legal counsel of any other Member, -37- or on any projections and/or representation (or lack thereof) by any of the aforementioned (except as expressly made in this Agreement) in reviewing this Agreement and in deciding whether to invest or participate as a Member. 30. Notices. Any written notice to any of the Members required or ------- permitted under this Agreement shall be deemed effective when delivered personally (including transmission by facsimile or other similar device), by overnight courier service, or three (3) days after the notice is sent by U.S. mail, postage prepaid, to the address indicated below the recipient's signature hereto. Notices to the Company shall be similarly given, and addressed to its principal office (Attn: Managing Members). 31. Exhibits. All Exhibits referred to in the body of this Agreement are, -------- as such Exhibits may hereafter be amended from time to time pursuant to terms set forth in the body of this Agreement, hereby incorporated by reference. 32. Entire Agreement; Amendments. This Agreement (i) amends and restates ---------------------------- in its entirety the Operating Agreement for the Company, dated January 11, 1996;, and the Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C. dated December 30, 1996; (ii) supersedes and controls over any provisions in the Formation Agreement, as amended, and the Confidential Memorandum of Terms attached thereto as Exhibit "H" relating to this First Amended and Restated Operating Agreement and (iii) constitutes the full and complete agreement between the parties on the subject matter hereof, and, subject to Section 16(c)(vi), may be amended only by a writing executed by the Managing Members and Class A Non-Managing Members holding at least seventy- five percent (75%) of the Class A Units; provided that an amendment to admit a new Non-Managing Member pursuant to the terms of this Agreement shall only require the consent of the Managing Member and the new Members to be admitted pursuant to said amendment. 33. Successors. This Agreement shall be binding upon and inure ---------- to the benefit of the respective parties, their successors, heirs and assigns. 34. Executed Counterparts. 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, 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. 35. Captions. The section headings and captions shall in no way define, -------- limit, extend or interpret the scope of this Agreement or any particular section hereof. 36. Computation of Time Periods. All periods of time referred to in this --------------------------- Agreement shall include Saturdays, Sundays and state or national holidays, provided that if the date or last date to -38- perform any act or give any notice or approval shall fall on a Saturday, Sunday or state or national holiday, such act or notice may be timely performed or given on the next succeeding day which is not a Saturday, Sunday or state or national holiday. 37. Gender; Statutory References. All pronouns and any variations thereof ---------------------------- shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons or Member or Members or the context may require. Any reference to the Code, the Act or other statutes or laws will include all amendments, modifications, or replacements thereto. 38. Severability. Should any one or more of the provisions of this ------------ Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, then such illegal or unenforceable provision shall be modified by the proper court or arbitrator to the minimum extent necessary and possible to make such provision enforceable, and such modified provision and all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement shall be given effect separately from the provision or portion thereof determined to be illegal or unenforceable and shall not be affected thereby. 39. Time of Essence. Time is of the essence in all deadlines and time --------------- periods set forth in this Agreement. 40. Further Acts. Each Member agrees to perform such additional acts and ------------ to execute and deliver such additional documents as reasonably may be necessary to carry out promptly the intent of this Agreement. 41. Governing Law. Notwithstanding the place where this Agreement may be ------------- executed by any of the parties hereto, this Agreement, the rights and obligations of the parties hereto, and any claims and disputes relating thereto, shall be subject to and governed by the Act and the other laws of the State of Delaware as applied to agreements among Delaware residents to be entered into and performed entirely within the State of Delaware, and such laws shall govern the limited liability company aspects of this Agreement. 42. Attorneys' Fees. In case any proceeding, whether at law, in equity or --------------- in arbitration, shall be brought by any Member to enforce the terms of this Agreement, or any controversy arising therefrom, the prevailing party in each suit, as determined by the court or arbitrator, shall be entitled to the payment of reasonable attorneys' fees. 43. Maximum Interest Rates. Notwithstanding any provision in this ---------------------- Agreement to the contrary, no amount owing from any person pursuant to this Agreement or any agreement executed pursuant to the terms hereof shall accrue interest in excess of the maximum applicable rate permitted by California law. In the event that a person accepts as interest an amount which would exceed the highest lawful rate, the amount which would constitute excess interest shall be applied to the reduction of the unpaid principal balance due pursuant to the loan with respect to which such payment is being made. -39- 44. Arbitration. Subject to Section 17 above, which shall be controlling ----------- with respect to disagreement between the Managing Members on day-to-day decisions affecting the management of the Company, any disputes which arise involving all or any of the Members under this Agreement shall be subject first to mediation, and then, in the absence of a resolution, to final, binding arbitration upon written request by any Member involved in the dispute in accordance with this Section. The dispute shall be submitted before the American Arbitration Association ("AAA") within thirty (30) days after the requesting notice in accordance with the AAA's Commercial Arbitration Rules as modified by this Section; a decision shall be issued within thirty (30) days after the close of the record; and judgment upon the award may be entered in any court having jurisdiction over the judgment. Upon invocation of the mediation/arbitration procedure by a Member, each party to the dispute shall submit to each other and the mediator/arbitrator their respective proposals for resolution of the dispute, and the mediation/arbitration shall be limited to the sole question of determining which written proposal is to be accepted. The mediator/arbitrator shall have no authority to compromise between the proposals. The substantive law of California shall be applied by the mediator/arbitrator, and this requirement shall be deemed jurisdictional. This mediation/arbitration provision shall be deemed self-executing. If a party to a dispute fails to appear at any properly noticed mediation/arbitration proceeding, an award may be entered against such party notwithstanding such failure to appear. If the parties disagree on the choice for a/an mediator/arbitrator, the parties shall jointly request the AAA to furnish a list of five available attorneys, businessmen, or both, experienced generally in commercial matters. After receipt of such list and an opportunity to consider the names, each party may designate in writing to the AAA not more than two names to be eliminated from the selection process. If more than one name remains after such eliminations are made, the selection of the mediator/arbitrator shall be made by lot from the remaining names. If either party makes demand upon the other for mediation/arbitration, the arbitration shall be conducted at the AAA offices in Los Angeles, California. The parties may mutually agree to another location. The expenses, wages and other compensation of any witnesses called before the mediator/arbitrator shall be borne by the party calling the witnesses. Other expenses incurred, including wages of participants, and preparation of briefs and date to be presented to the mediator/arbitrator, shall be borne separately by the respective parties. The fee for the arbitration, the mediator's/arbitrator's fees and expenses, the cost of any hearing room, and the cost of a shorthand or similar reporter and the original transcript shall all be borne by the Company. 45. No Third Party Beneficiaries. The Members intend and agree that their ---------------------------- respective obligations set forth in this Agreement constitute an agreement solely to and for the benefit of each other and not to or for the benefit of the Company or any third party. Accordingly, except as otherwise explicitly set forth herein, no third party shall be entitled to enforce the Member's obligations set forth herein. 46. Consent of Spouse. The spouse of any individual Member who has not ----------------- executed documents as a co-owner of such Member's interest in the Company shall be required to execute a "Consent of Spouse" in the form of Exhibit "C" attached hereto. 47. Signatory Authority. The individual or individuals signing this ------------------- Agreement on behalf of each Member represents to the other Members that he or she has full authority to do so, has received -40- all required consents, and that his or her signature (together with the signature or signatures of any other individual signing below on behalf of such Member) is (are) the only signatures required to bind the Member on whose behalf he or she is signing this Agreement. 48. Counsel to the Company. Counsel to the Company may also be counsel to ---------------------- any Managing Member or any Affiliate of a Managing Member. The Managing Members may execute on behalf of the Company and the Members any consent to the representation of the Company the counsel may request pursuant to the California Rules of Professional Conduct or similar rules of any other jurisdiction ("Rules"). The Company is initially selecting Zevnik Horton Guibord & McGovern, L.L.P. ("Company Counsel") as legal counsel to the Company. Notwithstanding any adversity that may develop, in the event of any dispute or controversy arises between any Members and the Company, or between any Members or the Company on the one hand, and a Managing Member on the other hand, then each Managing Member agrees that Company Counsel may represent either the Company or such Managing Member, or both, in any such dispute or controversy to the extent permitted by the Rules, and each Member hereby consents to such representation. Each Member further acknowledges that while communications with the Company Counsel concerning the formation of the Company, its Members and Managing Members may be confidential with respect to third parties, no Member has any expectation that such communications are confidential with respect to such Member. IN WITNESS WHEREOF, the Members have executed this Agreement as of the date first shown above. "Managing Member" -------------------------------------------------- WALTER F. ULLOA 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 (310) 820-5355 FAX: (310) 979-8804 "Managing Member" -------------------------------------------------- PHILIP C. WILKINSON 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 (310) 820-5355 FAX: (310) 979-8804 [SIGNATURES CONTINUED ON NEXT PAGE] -41- APPROVED AS TO FORM AND CONTENT: Univision Communications, Inc. By: ------------------------------ Name: ---------------------------- Title: --------------------------- 1999 Avenue of the Stars, Suite 3050 Los Angeles, California 90067 Telephone No.: (310) 556-7600 [Counterpart Signature Page to First Amended and Restated Operating Agreement of Entravision Communications Company, L.L.C.] [See Attached Non-Managing Members signature pages] --- -42- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. CABRILLO BROADCASTING CORPORATION, a California corporation By: ------------------------------------------------ Philip C. Wilkinson, President c/o: KBNT-TV, Channel 19 5764 Pacific Center Boulevard, Suite 110 San Diego, California 92121 Phone No.: (619) 597-1919 Fax No.: (619) 597-1909 Dated: _______________, 1996 -43- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. GOLDEN HILLS BROADCASTING CORPORATION, a Delaware corporation By: -------------------------------------------------- Walter F. Ulloa, President c/o: KCEC 777 Grant Street, Suite 110 Denver, Colorado 80203 Phone No.: (303) 832-0050 Fax No.: (303) 832-3410 Dated: _______________, 1996 -44- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. KSMS-TV, INC., a Delaware corporation By: ----------------------------------------------- Walter F. Ulloa, President 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -45- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. ENTRAVISION MERGER CORP., a Delaware corporation By: -------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -46- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. LAS TRES PALMAS CORPORATION, a Delaware corporation By: ---------------------------------------------------- Walter F. Ulloa, President c/o: KVER-TV 41601 Corporate Way Palm Desert, California 92260-1904 Phone No.: (619) 341-5837 Fax No.: (619) 341-0951 Dated: _______________, 1996 -47- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBERS. TIERRA ALTA BROADCASTING, INC., a Delaware corporation By: -------------------------------------------------- Yrma G. Rico, President 22 Commerce Center Way Henderson, Nevada 89015 Phone No.: (702) 433-0027 Fax No.: (702) 434-0527 Dated: _______________, 1996 -48- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. EDITH SEROS, TRUSTEE OF THE WALTER F. ULLOA IRREVOCABLE TRUST dated October 9, 1996 By: --------------------------------------------------- (Signature) Its: ------------------------------------------------- Print Name: ------------------------------------------- 11900 Olympic Boulevard, Suite 590 ------------------------------------------------------ Los Angeles, California 90064 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -49- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. PHILIP C. WILKINSON AND WENDY K. WILKINSON, AS TRUSTEES OF THE 1994 WILKINSON CHILDREN'S GIFT TRUST By: --------------------------------------------------- Philip C. Wilkinson, Trustee By: --------------------------------------------------- Wendy K. Wilkinson, Trustee 11900 Olympic Boulevard, Suite 590 ------------------------------------------------------- Los Angeles, California 90064 ------------------------------------------------------- (Address) Phone No.: (310) 820-5355 Fax No.: (310) 979-8804 Dated: ______________, 1996 -50- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. KEVIN GRENHAM and KENNETH D. POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK IRREVOCABLE TRUST dated November 2, 1996 By: ---------------------------------------------------- (Signature) Its: --------------------------------------------------- Print Name: -------------------------------------------- 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------- Washington, D.C. 20004 ------------------------------------------------------- (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -51- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. PAUL A. ZEVNIK 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------ Washington, D.C. 20004 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -52- SIGNATURE PAGE FOR NON-MANAGING MEMBER THE NON-MANAGING MEMBER INTERESTS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (a) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR (b) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACTS, THE AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE MANAGING MEMBER. ------------------------------------------------------ RICHARD D. NORTON 1299 Pennsylvania Avenue, N.W., Ninth Floor ------------------------------------------------------ Washington, D.C. 20004 ------------------------------------------------------ ------------------------------------------------------ (Address) Phone No.: (202) 824-0950 Fax No.: (202) 824-0955 Dated: ______________, 1996 -53- EXHIBIT "A" SCHEDULE OF MEMBERS
=============================================================================================================================== Number Description of Initial Percentage Members Class of Units* Capital Contribution Interest * =============================================================================================================================== Managing Members: - ------------------------------------------------------------------------------------------------------------------------------- WALTER F. ULLOA C 225,139 $100 20.77% - ------------------------------------------------------------------------------------------------------------------------------- PHILIP C. WILKINSON C 25,111 $100 2.32% - ------------------------------------------------------------------------------------------------------------------------------- Non-Managing Members: - ------------------------------------------------------------------------------------------------------------------------------- CABRILLO BROADCASTING A 339,475 That certain low power television station 31.31% CORPORATION, known as KBNT-TV 19 in San Diego, a California corporation California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- GOLDEN HILLS BROADCASTING A 185,633 That certain television station known as 17.12% CORPORATION, UHF-TV Channel 50 in Denver, Colorado, a Delaware corporation currently known by the call letters "KCEC", including low power television stations K43DK, Denver and K27DU, Colorado Springs /Pueblo, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- KSMS-TV, INC., A 14,413 That certain television station UHF-TV 1.33% a Delaware corporation Channel 67, Monterey, California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ------------------------------------------------------------------------------------------------------------------------------- LAS TRES PALMAS CORPORATION, A 14,956 KVER-TV4 in Indio/Palm Springs, 1.38% a Delaware corporation California; the escrow rights to purchase KLOB-FM in Desert Hot Springs /Palm Springs, California, and the proposed assignee of KAJB, Channel 54, Calipatria, California, and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - -------------------------------------------------------------------------------------------------------------------------------
A-1
=============================================================================================================================== Number Description of Initial Percentage Members Class of Units* Capital Contribution Interest * =============================================================================================================================== VALLEY CHANNEL 48, Inc., A [TO BE KNVO-TV 48 in Harlingin-McAllen, Texas [TO BE a Texas corporation PROVIDED] _____% and all related tangible and PROVIDED] intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $________________ value. ================================================================================================================================== TIERRA ALTA BROADCASTING, INC., A 171,507 KINC, Channel 15 in Las Vegas, Nevada, 15.82% a Delaware corporation and all related tangible and intangible assets, including, but not limited to, material contracts, leases, licenses, tradenames, customer lists, accounts receivable, furniture, fixtures and equipment. $___________ value. - ----------------------------------------------------------------------------------------------------------------------------------- EDITH SEROS, TRUSTEE OF THE A 23,920 Exchange of Existing Percentage Interest 2.21% WALTER F. ULLOA IRREVOCABLE TRUST dated October 9, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- PHILIP C. WILKINSON AND WENDY K. A 23,920 Exchange of Existing Percentage Interest 2.21% WILKINSON, AS TRUSTEES OF THE 1994 WILKINSON CHILDREN'S GIFT TRUST - ----------------------------------------------------------------------------------------------------------------------------------- KEVIN GRENHAM and KENNETH D. A 23,920 Exchange of Existing Percentage Interest 2.21% POLIN, CO-TRUSTEES OF THE PAUL A. ZEVNIK IRREVOCABLE TRUST dated November 2, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- .95% PAUL A. ZEVNIK A 10,313 - ----------------------------------------------------------------------------------------------------------------------------------- PAUL A. ZEVNIK C 13,460 1.24% - ----------------------------------------------------------------------------------------------------------------------------------- RICHARD NORTON C 12,321 1.13% =================================================================================================================================== TOTAL 100.0000% /12/ ===================================================================================================================================
- -------------------------- /1/ Excludes Class D Units issued pursuant to the Equity Incentive Pool equal to up to 5% of the Percentage Interests of the Company on a fully diluted basis. /2/ Also excludes the Percentage Interest of Univision upon exercise of the Univision Option. A-2 EXHIBIT "B" GLOSSARY -------- 1. "Accredited Investor" means an investor who, at the time of its ------------------- purchase of an interest in the Company, falls into one of the following categories: (a) A natural person whose individual net worth or joint net worth with that person's spouse, exceeds One Million Dollars ($1,000,000) (including home, home furnishings and automobiles); (b) A natural person who had an individual income (excluding any income of his or her spouse) in excess of Two Hundred Thousand Dollars ($200,000) in each of the two most recent years, or joint income with his or her spouse in excess of Three Hundred Thousand Dollars ($300,000) in each of those years and who reasonably expects to reach the same income level in the current year; (c) An entity that (i) is a corporation, a partnership, or a Massachusetts or similar business trust; (ii) has total assets in excess of Five Million Dollars ($5,000,000), and (iii) was not formed for the specific purpose of acquiring an interest in the Company; (d) A trust with total assets in excess of Five Million Dollars ($5,000,000), not formed for the specific purpose of acquiring an interest in the Company whose purchase of an interest in the Company is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D promulgated under the Securities Act of 1933, as amended (the "1933 Act"); (e) A bank as defined in Section 3(a)(2) of the 1933 Act, or a savings and loan or other institution as defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of such Act; a private business development company, as defined in Section 202(a)(22) of the Investment Advisor's Act of 1940; or a Small Business Investment Company licensed by the U.S. Business Administration under Sections 301(c) or (d) of the Small Business Act of 1958; any plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of a State or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; (f) The Managing Members of the Company; or B-1 (g) An entity in which all the equity owners are Accredited Investors as defined in subparagraphs (a) through (f) above. 2. "Act" shall have the meaning set forth in Recital B of this Agreement. --- 3. "Adjusted Capital Account" means, with respect to any Member, such ------------------------ Member's capital account balance after increasing such capital account balance by such Member's share of Minimum Gain and decreasing such capital account balance by any items described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). 4. "Affiliate" means as to any Person, (a) any other Person 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) or 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 Person whether by contract or otherwise. 5. "Agreement" means this First Amended and Restated Operating Agreement --------- of ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., as amended from time to time in accordance with the terms hereof. 6. "Assets" mean all assets and rights of the Company, of whatever nature ------ (e.g., tangible, intangible, inchoate, contractual, claims--whether contingent ---- or liquidated, etc.). 7. "Bankruptcy" shall have the meaning given such term by the Act. ---------- 8. "Cash Available for Distribution" shall mean, with respect to any ------------------------------- fiscal period, all cash receipts during such fiscal period, less (a) the amount of cash disbursed by the Company during such period, including, without limitation, third-party debt service, expenditures required to be capitalized, and operating cash expenses such as licensing fees, taxes, utilities and telephone expenses, insurance expenses, supplies, professional expenses, rent, general and administrative expenses, costs of preparing and printing reports and communications to customers and to Members, reasonable travel expenses for Company business, and fees and distributions to Members, (b) capital contributions and other equity and debt financing, to the extent determined by the Managing Members to be necessary or appropriate to fund Reserves, and (c) excluding any Reserves. 9. "Class A Non-Managing Members" shall mean Cabrillo Broadcasting ---------------------------- Corporation, a California corporation, Golden Hills Broadcasting Corporation, a Delaware corporation, KSMS-TV, Inc., a Delaware corporation, Las Tres Palmas Corporation, a Delaware corporation, Tierra Alta Broadcasting, Inc., a Delaware corporation, Entravision Merger Corp., a Delaware corporation (which following closing of the Acquisition Agreement and Plan of Merger will become Valley Channel 48, Inc., a Texas corporation). Edith Seros, Trustee of the Walter F. Ulloa Irrevocable Trust of 1996 dated October 9, 1996, and Kevin Grenham and Kenneth D. Polin, Co-Trustees of The Paul A. Zevnik Irrevocable Trust dated November 2, 1996; Joseph Wilkinson, Trustee of the Philip C. Wilkinson Irrevocable Trust dated November 2, 1996. B-2 10. "Class C Members" shall mean Walter F. Ulloa, Philip C. Wilkinson, --------------- Paul A. Zevnik and Richard Norton. 11. "Class D Members" shall mean those persons issued Class D Non-Voting, --------------- Non-Managing Membership Units. 12. "Class A Units" shall mean membership interests in the Company which ------------- carry full voting rights, are issued in return for contributions of cash or other property to the Company, and carry an initial capital interest in the Company equal to the credit to each contributing Class A Unit Holder's capital account in connection with such holder's initial capital contribution to the Company. 13. "Class B Units" shall mean Units issued to third parties in accordance ------------- with Section 7 hereof on terms and conditions determined by the Executive Committee. 14. "Class C Units" shall mean Units in the Company which carry full ------------- voting rights and are issued to persons in connection for services to be rendered to the Company in each such person's capacity as a Member of the Company. Class C Units shall not have a capital interest in the Company upon their issuance. 15. "Class D Units" shall mean Units with no voting rights hereunder ------------- issued to persons pursuant to the terms of this Agreement or as otherwise determined by the Executive Committee. 16. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time, or any corresponding provision of succeeding law. 17. "Company" shall mean the limited liability company formed pursuant to ------- the Certificate of Formation referred to in Section 2 of this Agreement. 18. "Executive Committee" shall mean the committee described in Section 16 ------------------- of the Agreement. 19. "Initial Public Offering" shall have the meaning set forth in Section ----------------------- 26(i) of the Agreement. 20. "Majority in Interest" shall mean those Members of the group of -------------------- Members to whom reference is being made owning more than fifty percent (50%) of the outstanding Percentage Interests held by such group of Members. 21. "Managing Members" shall mean Walter F. Ulloa and Philip C. Wilkinson. ---------------- 22. "Members" shall refer collectively to the Managing Members and the ------- Non-Managing Members. Reference to a "Member" shall be to any one of the Members. 23. "Member Non-recourse Debt" shall mean a loan described in 1.704- ------------------------ 2(b)(4). B-3 24. "Minimum Gain" shall mean the amount determined by computing with ------------ respect to each nonrecourse liability of the Company, including for this purpose a Member Non-Recourse Debt, the amount of gain that would be realized by the Company if it disposed of the Asset subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed. 25. "Net Income" or "Net Losses," respectively, means all items of income ---------- ---------- as properly determined for "book" purposes, and "Net Losses" refers to all items of deductions and loss as properly determined for "book" purposes. Book income and loss shall be determined based on the value of the Company's Assets as set forth on the books of the Company in accordance with the principles of Regulations Section 1.704-1(b)(2)(iv)(g). 26. "Non-Managing Members" shall refer to all persons holding a Non- -------------------- Managing Member interest in the Company, regardless of class. 27. "Non-Recourse Deductions" has that meaning given to the term by ----------------------- Regulation Section 1.704-2. 28. "Percentage Interest" shall mean the percentage interest assigned to a ------------------- Member with respect to allocations of Net Income and Net Losses, distributions, voting rights (other than holders of Class D Units) and certain other incidents of a Member's interest in the Company, as set forth on the attached Exhibit "A". 29. "Person" means 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. 30. "Presumed Company Tax Liability(ies)" shall, as to each Member for any ----------------------------------- given fiscal year of the Company, be deemed to be equal to the product of the excess, if any, of the cumulative amount of the income and gain items reported or reportable on such Member's Schedule K-1 (IRS Form 1065) with respect to the Company for such year over the sum of the deduction and loss items reported or reportable on such Schedule K-1 for such year, and the maximum combined effective federal and California (or other state or the District of Columbia, as applicable) state corporate or individual income tax rate in effect for such year, whichever is higher. 31. "Prime Rate" shall mean the highest prime or reference rate as quoted ---------- from time to time by The Wall Street Journal, which shall be a variable rate. ----------------------- Any interest rates described in this Agreement that are described with reference to the Prime Rate shall similarly be variable interest rates and shall change immediately effective upon any change in the Prime Rate. 32. "Proportionate" and "Proportionately," means, when used with respect ------------- --------------- to the Members (or a group of them), the proportion that each such Member's outstanding Percentage Interest bears to the total outstanding Percentage Interests of all Members to whom reference is made. 33. "Regulations" means the temporary, proposed and final regulations ----------- promulgated by the Treasury Department pursuant to the Code. B-4 34. "Reserves" means, with respect to any fiscal period, funds set aside -------- or amounts allocated during such period to Reserves, which shall be maintained in a minimum amount equal to two (2) months operating expenses for the Company plus such additional amounts determined to be appropriate by the Managing Members for working capital and contingencies. B-5 EXHIBIT "C" CONSENT OF SPOUSE ----------------- I, __________________________________________, spouse of _________________________________________________, do hereby certify, acknowledge and agree as follows: 1. I have read and approve each and every provision set forth in the foregoing Agreement. 2. I accept and agree to be bound by the Agreement in all respects and in lieu of each other interest I may have in Entravision Communications Company, L.L.C. (the "Company"), whether that interest may be community property or quasi-community property under the laws of the State of California or other laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. 3. I hereby appoint my spouse as my attorney-in-fact with respect to the exercise of any rights under the Agreement. 4. I hereby consent to any amendments or modifications to the Agreement that are consented to, executed by or otherwise binding upon my spouse. Dated: _______________________, 19___. ----------------------------------- (Signature) ----------------------------------- (Please Print Name) C-1 SCHEDULE "1" LIST OF PERMISSIBLE BUSINESS ENDEAVORS MEMBER Permissible Business Endeavor ------ ----------------------------- Walter F. Ulloa Entravision Holdings, L.L.C.; Entravision Merger Corp.; Cabrillo Broadcasting Corporation; Golden Hill Broadcasting Corporation; KSMS-TV, Inc.; Las Tres Palmas Corporation; Tierra Alta Broadcasting, Inc. Philip C. Wilkinson Entravision Holdings, L.L.C.; Golden Hills Broadcasting Corporation; KSMS-TV, Inc. Cabrillo Broadcasting Cabrillo Broadcasting Corporation Corporation Golden Hills Golden Hills Broadcasting Corporation Broadcasting Corporation KSMS-TV, Inc. KSMS-TV, Inc. Las Tres Palmas Las Tres Palmas Corporation Corporation Tierra Alta Broadcasting Tierra Alta Broadcasting Corporation Corporation Entravision Merger Corp. Entravision Merger Corp. Ulloa Trust None Zevnik Trust None Wilkinson Children's Gift Trust None Paul A. Zevnik Entravision Merger Corp.; Golden Hills Broadcasting Corporation; KSMS-TV, Inc.; Las Tres Palmas Corporation; Tierra Alta Broadcasting, Inc. Richard D. Norton Entravision Merger Corp.; KSMS-TV, Inc.; Tierra Alta Broadcasting, Inc.; Golden Hills Broadcasting Corporation Schedule "I" - 1 Costa de Oro Television, Inc., a California corporation Tidewater Capital Corporation, a Delaware corporation 43 Corporation, Inc., a Delaware corporation TCC II Corporation, a Delaware corporation Beach 43 Corporation, Inc., a Delaware corporation Las Tres Campanas Television, Inc., a Nevada corporation Biltmore Broadcasting, a Delaware corporation Channel 44 Associates, a California limited partnership La Paz, Ltd., a California limited partnership La Paz Wireless, Ltd., a California limited partnership La Paz Wireless Corp., a Delaware corporation Zeus Corporation of Washington, Inc., a Delaware corporation Lomas de Oro Broadcasting Corporation Schedule "I" - 2 EX-10.16 13 0013.txt SECOND AMENDMENT TO AMENDED SUBORDINATED NOTE 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
ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. - PRO FORMA DIRECT AND INDIRECT OWNERSHIP Wilkinson Wilkinson Wilkinson Ulloa Ulloa CLASS A UNITS Trust Children's Trust Trust - ---------------------------------- Cabrillo 330,816 287,517 8,660 Golden Hills 137,801 33,596 47,832 KSMS-TV 14,413 4,324 4,324 Las Tres 13,460 6,730 Tierra Alta 171,507 57,883 Ulloa Trust 23,920 23,920 Wilkinson Children's Trust 23,920 23,920 Zevnik Trust 23,920 Valley Channel 665,980 240,667 240,667 Telecorpus 149,300 26,216 28,424 26,216 28,424 TOTAL A UNITS 1,555,037 37,920 554,400 52,344 392,312 52,344 CLASS A UNITS (Univision Option) - ---------------------------------- Univision 665,289 Univision (KLUZ) 71,330 TOTAL A AND A UNITS (UNIVISION OPTION) 2,291,656 CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 286,206 25,131 225,139 TOTAL A, A (UNIVISION OPTION) & C UNITS 2,577,862 63,051 554,400 52,344 617,451 52,344 CLASS D UNITS - ---------------------------------- Lawrence E. Safir 54,284 Jeanette L. Tully 14,161 Bram Watkins (Option) 19,710 TOTAL A, A(UNIVISION OPTION), C & D UNITS 2,666,017 CLASS E UNITS - ---------------------------------- Paul A. Zevnik 10,313 TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 2,676,330 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund 5,000 The Zevnik Charitable Foundation 5,313 TOTAL F UNITS 10,313 TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS 2,676,330 Pre-Univision Ownership Percentages 1.0000 0.0325 0.2858 0.0270 0.3183 0.0270 Post-Univision Percentages 1.0000 0.0236 0.2071 0.0196 0.2307 0.0196 Zevnik Zevnik Norton Norton Rico Luery Safir CLASS A UNITS Trust Properties Trust - ---------------------------------- Cabrillo 34,639 Golden Hills 33,596 22,777 KSMS-TV 4,324 1,441 Las Tres 6,730 Tierra Alta 57,884 17,151 38,589 Ulloa Trust Wilkinson Children's Trust Zevnik Trust 23,920 Valley Channel 102,148 35,466 24,805 22,227 Telecorpus 23,178 8,058 3,734 5,050 TOTAL A UNITS 204,682 47,098 84,893 0 67,128 61,915 CLASS A UNITS (Univision Option) - ---------------------------------- Univision Univision (KLUZ) TOTAL A AND A UNITS (UNIVISION OPTION) CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 22,119 13,817 TOTAL A, A (UNIVISION OPTION) & C UNITS 226,801 47,098 84,893 13,817 67,128 61,916 CLASS D UNITS - ---------------------------------- Lawrence E. Safir 54,284 Jeanette L. Tully Bram Watkins (Option) TOTAL A, A(UNIVISION OPTION), C & D UNITS CLASS E UNITS - ---------------------------------- Paul A. Zevnik 10,313 TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 237,114 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund 5,000 The Zevnik Charitable Foundation 5,313 TOTAL F UNITS TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS Pre-Univision Ownership Percentages 0.1222 0.0243 0.0438 0.0071 0.0346 0.0319 0.0280 Post-Univision Percentages 0.0886 0.0176 0.0317 0.0052 0.0251 0.0231 0.0203 Tully Watkins Univision Percentage Percentage CLASS A UNITS w/o Univision w/Univision - ---------------------------------- Cabrillo 0.1705 0.1236 Golden Hills 0.0710 0.0515 KSMS-TV 0.0074 0.0054 Las Tres 0.0069 0.0050 Tierra Alta 0.0884 0.0641 Ulloa Trust 0.0123 0.0089 Wilkinson Children's Trust 0.0123 0.0089 Zevnik Trust 0.0123 0.0089 Valley Channel 0.3433 0.2488 Telecorpus 0.0770 0.0558 TOTAL A UNITS CLASS A UNITS (Univision Option) - ---------------------------------- Univision 665,289 0.2486 Univision (KLUZ) 71,330 0.0267 TOTAL A AND A UNITS (UNIVISION OPTION) CLASS C UNITS - ---------------------------------- Managing Members and Service Providers 0.1476 0.1069 TOTAL A, A (UNIVISION OPTION) & C UNITS CLASS D UNITS - ---------------------------------- Lawrence E. Safir 0.0280 0.0203 Jeanette L. Tully 14,161 0.0073 0.0053 Bram Watkins (Option) 19,710 0.0102 0.0074 TOTAL A, A(UNIVISION OPTION), C & D UNITS CLASS E UNITS - ---------------------------------- Paul A. Zevnik TOTAL A, A (UNIVISION OPTION), C, D & E UNITS 0.0053 0.0039 CLASS F UNITS - ---------------------------------- Zevnik Harvard Fund The Zevnik Charitable Foundation TOTAL F UNITS TOTAL A, A (UNIVISION OPTION), C, D, E & F UNITS 1.0000 1.0000 Pre-Univision Ownership Percentages 0.0073 0.0102 Post-Univision Percentages 0.0053 0.0074 0.2752
EX-10.19 14 0014.txt CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT EXHIBIT 10.19 CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT This Convertible Subordinated Note Purchase Agreement is made as of the 20/th/ day of April, 2000 (this "Agreement"), by and among Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), Entravision Communications Corporation, a Delaware corporation (the "Corporation") (with the Company and the Corporation jointly referred to herein as "Entravision"), and the investor listed on Schedule "A" hereto, herein ------------ referred to as an "Investor," with reference to the following facts: WHEREAS, the Investor wishes to purchase Ninety Million Dollars ($90,000,000) in the principal amount of a Convertible Subordinated Note (the "Note") from the Company. WHEREAS, the Company operates a diverse Hispanic-oriented media business. WHEREAS, it is contemplated that the Corporation will become the successor in interest to the Company in accordance with the terms of that certain Exchange Agreement by and among Entravision Communications Company, L.L.C., its members and Univision Communications Inc., a copy of which is attached hereto as Exhibit ------- "A", in an exchange transaction (the "Roll-Up"). - --- WHEREAS, the Company is party to that certain Acquisition Agreement and Plan of Merger dated December 21, 1999, (the "LCG Acquisition Agreement") pursuant to which it is contemplated that the Company will acquire Latin Communications Group, Inc. (the "LCG Acquisition"). WHEREAS, Entravision, ZSPN Acquisition Corporation, Z-Spanish Media Corporation and its stockholders have entered into that certain Acquisition Agreement and Plan of Merger (the "Z-Spanish Agreement") effective April 20, 2000, pursuant to which it is contemplated that the Corporation will acquire Z- Spanish Media Corporation (the "Z-Spanish Merger") concurrently with the Roll- Up. WHEREAS, the Corporation plans to consummate an underwritten initial public offering of its Class A Common Stock (the "IPO"). WHEREAS, the Note is mandatorily exchangeable into Series A Convertible Preferred Stock of the Corporation (the "Series A Preferred Stock") concurrently with the closing of the Roll-Up. WHEREAS, the Corporation has provided to the Investor, and the Investor has thoroughly reviewed, the Corporation's draft registration statement on Form S-1 as prepared on April 18, 2000 to be filed with the Securities and Exchange Commission (the "Registration Statement"). WHEREAS, the Company and the Corporation wish to sell the Note to the Investor on the terms set forth herein and enter into the Investor Rights Agreement substantially in the form attached hereto as Exhibit "B" and ----------- incorporated herein by this reference (the "Investor Rights Agreement"). The parties hereby agree as follows: 1. Purchase and Sale of Convertible Promissory Note. ------------------------------------------------ 1.1. Sale and Issuance of Convertible Promissory Note. Subject to ------------------------------------------------ the terms and conditions of this Agreement, the Investor agrees to purchase at the Closing and the Company agrees to sell and issue to the Investor a Note in substantially the form attached hereto as Exhibit "C" in the principal amount ----------- specified with respect to the Investor on Schedule "A" to this Agreement. The ------------ purchase price of the Note shall be equal to 100% of the principal amount of such Note. 1.2. Closing. The purchase and sale of the Note shall take place at ------- the offices of Proskauer Rose LLP 1585 Broadway, New York, New York 10036 at 1:00 p.m. (local time) on the day before the closing of the LCG Acquisition (assuming that all conditions to closing have been satisfied), or at such other time and place as the Company and the Investor mutually agree upon orally or in writing (which time and place are designated as the "Closing"). At the Closing, the Company shall deliver to the Investor the Note to be purchased by the Investor against payment of the purchase price therefor by wire transfer in same day funds. 2. Representations and Warranties of Entravision. All representations --------------------------------------------- made by Entravision in this Section 2 shall be made jointly and severally by both the Company and the Corporation and references to Entravision shall apply to both the Company and the Corporation. Entravision hereby represents and warrants to the Investor that, except as set forth in the Registration Statement or as set forth on the Schedule of Exceptions attached hereto as Schedule "B" ------------ (the "Schedule of Exceptions"), which exceptions shall be deemed to be representations and warranties as if made hereunder: 2.1. Organization, Good Standing and Qualification. The Company is a --------------------------------------------- limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties. Copies of the Company's Certificate of Formation and Operating Agreement (as amended) and Corporation's First Amended and Restated Certificate of Incorporation (the "Restated Certificate"), Bylaws, minutes and consents of stockholders and of the Board of Directors are available for inspection at the Company's -2- offices and true, correct and complete copies of such documents have been previously made available to the Investor or the Investor's special counsel. 2.2. Authority; No Conflict; Consents. -------------------------------- (a) This Agreement constitutes the legal, valid and binding obligation of the Company and the Corporation, enforceable against the Company and the Corporation 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 and is subject to general principles of equity. Except for third party consents which have already been obtained, the Company and the Corporation have the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement, the Note, the Investor Rights Agreement and to perform their respective obligations thereunder. (b) Neither the execution and delivery of this Agreement by the Company or the Corporation nor the consummation or performance of any of the transactions contemplated by this Agreement by the Company or the Corporation will give any Person the right to prevent, delay or otherwise interfere with any of the transactions contemplated by this Agreement pursuant to: (i) any material provision of the respective organizational documents of the Company and the Corporation; (ii) any resolution adopted by the members, stockholders or the Board of Directors of the Company or the Corporation, as the case may be; (iii) any material legal requirement or material order to which the Company or the Corporation may be subject; or (iv) any material contract to which the Company or the Corporation is a party or by which the Company or the Corporation may be bound. (c) Except as set forth on Schedule 2.2(c), the Company and the --------------- Corporation are not and will not be required to give any notice to or obtain any third-party consents from any Person in connection with the execution and delivery of this Agreement, the Note or the Investor Rights Agreement or the consummation or performance of any of the transactions contemplated by this Agreement. 2.3. Broker's or Finder's Fees. Neither the Company, the ------------------------- Corporation, 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. 2.4. Capitalization. -------------- (a) The authorized capital stock of the Corporation as of the Roll-Up shall consist of (i) 305,000,000 shares of Class A Common Stock, $0.0001 par value per share, none of which are issued and outstanding, (ii) 60,000,000 shares of Class B Common Stock, $0.0001 par value per share, none of which are issued and outstanding, (iii) 50,000,000 shares of Class C Common Stock, $0.0001 par value per share, none of which are issued and outstanding and (iv) -3- 50,000,000 shares of Preferred Stock $0.0001 par value per share, none of which are issued and outstanding. (b) Schedule 2.4(b) sets forth a pro forma fully-diluted --------------- capitalization of the Corporation as of the closing of the Roll-Up. The fully- diluted capitalization of the Corporation as of the closing of the Roll-Up shall be as set forth on Schedule 2.4(b), subject only to any adjustment in the --------------- Exchange Number (as defined in the Exchange Agreement). (c) The outstanding units of membership interest in the Company (the "Units") consist of an aggregate of 2,019,879 Units, 1,555,037 of which are designated Class A Units, none of which are designated Class B Units, 286,206 of which are designated Class C Units, 168,323 of which are designated Class D Units, 10,313 of which are designated Class E Units and 10,313 of which are designated Class F Units. (d) Except as set forth on Schedule 2.4(d), (i) there are no --------------- other options, warrants, stock appreciation rights, subscriptions, convertible debentures or other rights, commitments or any other similar agreements for the purchase of any securities of Entravision, (ii) there are no material contracts relating to the issuance, sale, registration or transfer of any equity securities or other securities of Entravision and (iii) there are no voting trust agreements or other material contracts, agreements or arrangements restricting voting rights or transferability with respect to Entravision. 2.5. Entravision Subsidiaries. ------------------------ (a) Schedule 2.5 sets forth a list of all of the direct or ------------ indirect subsidiaries of Entravision (the "Entravision Subsidiaries"). Except as set forth on Schedule 2.5, Entravision owns, either directly or indirectly ------------ through one or more of the Entravision Subsidiaries, all of the capital stock or membership interests of each of the Entravision Subsidiaries free and clear of any material encumbrance. (b) The authorized capital stock and number of outstanding shares or membership interests of each of the Entravision Subsidiaries is set forth on Schedule 2.5 (the "Entravision Subsidiary Shares"). Entravision is and ------------ will be on the Closing Date the record and beneficial owner and holder of all of the Entravision Subsidiary Shares, which will be at Closing free and clear of all material encumbrances. No legend or other reference to any purported encumbrance appears upon any stock certificate representing the Entravision Subsidiary Shares. All of the Entravision Subsidiary Shares have been duly authorized and validly issued and are fully paid and nonassessable. None of the Entravision Subsidiary Shares were issued in violation of the Securities Act or any other material legal requirement. (c) Except as set forth on Schedule 2.5, (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 Entravision Subsidiaries, (ii) there are no material contracts relating to the issuance, -4- sale or transfer of any equity securities or other securities of any of the Entravision Subsidiaries and (iii) there are no voting trust agreements or other material contracts, agreements or arrangements restricting voting rights or transferability with respect to any of the Entravision Subsidiaries. 2.6. Entravision Financial Statements. Entravision has delivered to -------------------------------- the Investor true, complete and correct copies of the audited balance sheets of Entravision as of December 31, 1999, and the related statements of income and cash flows for the period then ended (including notes thereto), included in the Registration Statement as audited by McGladrey & Pullen, LLP, certified public accountants (the "Entravision Financial Statements"). Except as set forth on Schedule 2.6, the Entravision Financial Statements fairly present in all - ------------ material respects the consolidated financial condition of Entravision and the Entravision Subsidiaries and the assets and liabilities of Entravision and the Entravision Subsidiaries as of the 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 Entravision and the Entravision Subsidiaries in accordance with generally accepted accounting principles, applied on a consistent basis ("GAAP"). The Entravision 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 Entravision 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. 2.7. No Undisclosed Liabilities. Except as set forth on -------------------------- Schedule 2.7, Entravision and the Entravision Subsidiaries do not have any - ------------ material liabilities, either accrued or contingent (whether or not required to be reflected in financial statements in accordance with GAAP), and whether due or to become due, which individually or in the aggregate could reasonably be expected to have a material adverse effect on the assets, liabilities or properties of Entravision and the Entravision Subsidiaries collectively, excluding matters affecting the broadcasting or print industries generally and excluding general economic condition (an "Entravision Material Adverse Effect"), other than (i) liabilities reflected in the Entravision Financial Statements, (ii) liabilities specifically described in this Agreement or in the Entravision Schedules or (iii) normal or recurring liabilities incurred since the date of the Entravision Financial Statements in the ordinary course of business. 2.8. Taxes. ----- (a) Each of Entravision and the Entravision Subsidiaries have accurately prepared and timely filed (or will so file) all material tax returns required to be filed at or before the Closing relating to any and all taxes concerning or attributable to Entravision or any of the Entravision Subsidiaries or to their operations, and such tax returns are true and correct in all material respects and have been completed in all material respects in accordance with applicable law. Entravision has made available to the Investor true, complete and correct copies of all such tax returns filed by Entravision and the Entravision Subsidiaries in the past five (5) years. -5- (b) There is no tax sharing agreement that will require any payment by Entravision or any of the Entravision Subsidiaries after the date of this Agreement. (c) Each of Entravision and the Entravision Subsidiaries as of the Closing: (i) will have paid all material taxes it is required to pay prior to the Closing and (ii) will have withheld with respect to its employees all material federal and state income taxes, FICA, FUTA and other taxes required to be withheld, except in each case for taxes contested in good faith by appropriate proceedings for which adequate reserves have been taken and except where the failure (if any) to pay or withhold such taxes could not reasonably be expected to have an Entravision Material Adverse Effect. (d) There is no material tax deficiency outstanding, proposed or assessed against Entravision or any of the Entravision Subsidiaries that is not reflected as a liability on the most recently prepared balance sheet of Entravision nor has Entravision or any of the Entravision Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any tax. (e) Neither Entravision nor any of the Entravision Subsidiaries has any material liability for unpaid federal, state, local or foreign taxes that has not been accrued for or reserved on the Entravision Financial Statements, whether asserted or unasserted, contingent or otherwise. 2.9. Employee Benefit Plans. ---------------------- (a) Entravision has made available to the Investor or its special counsel all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Entravision or any of the Entravision Subsidiaries or any trade or business (whether or not incorporated) which is a member or which is under common control with Entravision within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended ("IRC") (together, the "Entravision Employee Plans"). Entravision does not maintain and has never maintained or contributed to any employee benefit plan subject to Title IV of ERISA (including a multiemployer plan as defined in Section 3(37) of ERISA). (b) With respect to each Entravision Employee Plan, Entravision has made available to the Investor or its special counsel, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS with respect to an Entravision Employee Plan subject to such filing requirement, (ii) such Entravision Employee Plan, (iii) each trust agreement and group annuity contract, if any, relating to such Entravision Employee Plan, and (iv) the most recent determination letter issued with respect to any plan which is intended to be qualified under Section 401(a) of the IRC. -6- (c) With respect to the Entravision Employee Plans, individually and in the aggregate, no event has occurred, and to the Knowledge of Entravision there exists no condition or set of circumstances, in connection with which Entravision or any of the Entravision Subsidiaries could be subject to any material liability under ERISA, the IRC or any other applicable law. (d) With respect to the Entravision Employee Plans, individually and in the aggregate, there are no material funded benefit obligations for which contributions have not been made or properly accrued and there are no material unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with GAAP, on the Entravision Financial Statements. (e) Except as set forth in Schedule 2.9, and except as provided for in ------------ this Agreement, neither Entravision nor any of the Entravision Subsidiaries is a party to any oral or written (i) union or collective bargaining agreement, (ii) material agreement with any officer or other key employee of Entravision or any of the Entravision Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Entravision of the nature contemplated by this Agreement or a Change in Control (as defined in the Note), (iii) agreement with any officer of Entravision or any of the Entravision Subsidiaries providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof or for the payment of compensation in excess of One Hundred Thousand Dollar ($100,000.00) per annum, or (iv) material agreement or plan, including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or a Change of Control [as defined in the Note] or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. 2.10. Compliance with Legal Requirements. Except as set forth on Schedule ---------------------------------- -------- 2.10: (i) Entravision and the Entravision Subsidiaries are in compliance in all - ---- material respects with each material legal requirement that is or was applicable to them; (ii) to the knowledge of Entravision, no event has occurred or circumstance exists that (with or without notice or lapse of time) constitutes or results in a material violation by Entravision of, or a material failure on the part of Entravision or the Entravision Subsidiaries to comply with, any material legal requirement or gives rise to any obligation on the part of Entravision or the Entravision Subsidiaries to undertake, or to bear all or any material portion of the cost of, any remedial action of any material nature; and (iii) neither Entravision nor any of the Entravision Subsidiaries has received any written notice or other written communication from any governmental body or any other person regarding any actual or alleged 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 Entravision or any of the Entravision Subsidiaries to undertake, or to bear all or any portion of the cost of, any remedial action of any material nature. -7- 2.11. Legal Proceedings. There is no action, suit or proceeding, claim, ----------------- arbitration or, to the knowledge of Entravision, investigation against Entravision or any of the Entravision Subsidiaries pending or, to the knowledge of Entravision, threatened, or as to which Entravision or any of the Entravision Subsidiaries has received any written notice of assertion, which, if decided adversely to Entravision or such Subsidiary, could reasonably be expected to have an Entravision Material Adverse Effect or a material adverse effect on the ability of Entravision to consummate the transactions contemplated by this Agreement. 2.12. Applicable Contracts; No Defaults. --------------------------------- (a) Entravision has made available to the Investor or its special counsel, true, complete and correct copies of each contract under which Entravision or the Entravision Subsidiaries has any material rights or have become subject to any material obligation or liability or by which Entravision, the Entravision Subsidiaries or any of the material assets owned or used by them are bound (an "Applicable Contract"). Each Applicable Contract is in full force and effect and is valid and enforceable in all material respects in accordance with its terms. (b) Except as set forth on Schedule 2.12: (i) Entravision or the ------------- Entravision Subsidiaries, as the case may be, are, and at all times during the last twelve (12) months have been, in material compliance with the applicable terms and requirements of each Applicable Contract; (ii) to the knowledge of Entravision, no event has occurred or circumstance exists that (with or without notice or lapse of time) would be reasonably likely to contravene, conflict with or result in a material violation or material breach of, or give Entravision or the Entravision Subsidiaries, as the case may be, or other Person the right to declare a default or exercise any materially adverse remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Applicable Contract; and (iii) Entravision and the Entravision 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, which has not been cured, waived or otherwise resolved in full. 2.13. Compliance with Environmental Laws. Except as set forth on ---------------------------------- Schedule 2.13, (i) all of the operations Entravision and the Entravision - ------------- Subsidiaries are and have been in compliance with all environmental laws as currently in effect, (ii) neither Entravision, the Entravision Subsidiaries nor 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, (iii) none of the property owned, leased or operated by Entravision or the Entravision Subsidiaries is contaminated by any hazardous substance, and (iv) none of the property owned, leased or operated by Entravision or the Entravision Subsidiaries is affected by any condition that could reasonably be expected to result in liability under any environmental law as currently in effect. 2.14. Intellectual Property. --------------------- -8- (a) The term "Entravision Intellectual Property Assets" includes the following proprietary items of Entravision and the Entravision Subsidiaries: (i) the name and FCC call letters listed on Schedule 2.14, all fictional business ------------- names, trading names, domain names or URLs, registered and unregistered trademarks, service marks and applications; (ii) all patents, patent applications and inventions and discoveries that may be patentable; (iii) all copyrights in both published works and unpublished works; (iv) all rights in mask works; (v) all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings and blue prints owned, used or licensed by Entravision or the Entravision Subsidiaries as licensee or licensor. (b) There are no outstanding and, to the knowledge of Entravision, no Threatened material disputes or disagreements with respect to the Entravision Intellectual Property Assets or any Applicable Contract related to the Entravision Intellectual Property Assets. The Entravision Intellectual Property Assets are all those necessary for the operation of the businesses of the Entravision media properties as they are currently conducted in all material respects. Entravision and the Entravision Subsidiaries are the owners of all right, title and interest in and to each of the Entravision Intellectual Property Assets, free and clear of all material encumbrances, and have the right to use without payment to a third-party all of the Entravision Intellectual Property Assets. 2.15. Relationships With Related Persons. Except as set forth in Schedule ---------------------------------- -------- 2.15, no "affiliate" (as such term is defined in the rules promulgated under the - ---- Securities Exchange Act of 1934, as amended (the "Exchange Act")) of a Person (a "Related Person") of Entravision or the Entravision Subsidiaries has had any interest in any property (whether real, personal or mixed and whether tangible or intangible), used in or pertaining to the businesses of the Entravision media properties. No Related Person of Entravision or the Entravision Subsidiaries has owned (of record or as a beneficial owner) an equity interest or any other financial or profit interest in, a Person that has (i) had business dealings or a material financial interest in any transaction with the Entravision media properties other than business dealings or transactions conducted in the ordinary course of business with the Entravision media properties at substantially prevailing market prices and on substantially prevailing market terms or (ii) engaged in competition with the businesses of the Entravision media properties (a "Competing Business") in any market presently served by the Entravision media properties except for less than five percent (5%) of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. Except as set forth on Schedule 2.15, no Related Person of Entravision or the Entravision ------------- Subsidiaries is a party to any Applicable Contract with, or has any claim or right against, the Entravision media properties. 2.16. Disclosure. None of the representations or warranties made by ---------- Entravision (as modified by the Schedules), nor any statement made in the Registration Statement or any other schedule or certificate furnished by Entravision pursuant to this Agreement, (to the extent such documents were prepared by or include information provided by Entravision), contains or will contain at the Closing, any material untrue statement or omits, or will omit at the Closing to state -9- any material fact necessary in order to make the statements contained therein not materially misleading. 2.17. Valid Issuance of Note. The Note that is being purchased by the ---------------------- Investor hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement, the Note, the Investor Rights Agreement and applicable state and federal securities laws. The units of membership interest issuable upon conversion of the Note purchased under this Agreement have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Operating Agreement of the Company, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and the Operating Agreement and under applicable state and federal securities laws. The Series A Preferred Stock that may be issued to the Investor upon exchange of the Note, when issued and delivered in accordance with the terms thereof, will be duly and validly issued, fully paid and nonassessable, and free of restrictions on transfer other than restrictions on transfer under this Agreement, the Investor Rights Agreement and applicable state and federal securities laws. The Class A Common Stock issuable upon conversion of the Series A Preferred Stock purchased under this Agreement has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Restated Certificate, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and the Investor Rights Agreement and under applicable state and federal securities laws. 2.18. Registration Rights. Except as provided in the Investor Rights ------------------- Agreement or the Registration Rights Agreement to be entered into in connection with the Z-Spanish Agreement, the Corporation has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. 2.19. Ownership Condition and Sufficiency of Assets. The material assets --------------------------------------------- of Entravision are structurally sound, are of reasonable good operating condition and repair and are reasonably adequate for the uses to which they are being put, 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. The assets of Entravision taken as a whole are sufficient for the continued conduct of its media business in substantially the same manner as conducted prior to the Closing. 3. Representations and Warranties of the Investor. The Investor hereby ---------------------------------------------- represents and warrants that: 3.1. Authorization. The Investor has full power and authority to ------------- enter into this Agreement and the Investor Rights Agreement and each such Agreement constitutes its valid and legally binding obligation, enforceable in accordance with their respective terms, except (a) as -10- limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (c) to the extent the indemnification provisions contained in the Investor Rights Agreement may be limited by applicable federal or state securities laws. 3.2. Purchase Entirely for Own Account. This Agreement is made with --------------------------------- the Investor in reliance upon the Investor's representation to the Company, which by the Investor's execution of this Agreement the Investor hereby confirms, that the Note, the Series A Preferred Stock to be received by the Investor upon exchange of the Note, the Class A Units issuable upon conversion of the Note, and the Common Stock issuable upon conversion of the Series A Preferred Stock (collectively, the "Securities") will be acquired for investment for the Investor's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. 3.3. Disclosure of Information. The Investor believes it has ------------------------- received all the information it considers necessary or appropriate for deciding whether to purchase the Note. The Investor further represents that it has reviewed the Registration Statement and had an opportunity to ask questions and receive answers from Entravision regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of Entravision. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Investor to rely thereon. 3.4. Investment Experience. The Investor is an investor in --------------------- securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Note. If other than an individual, Investor also represents it has not been organized for the purpose of acquiring the Securities. 3.5. Investor Suitability. The Investor represents that it qualifies -------------------- as an "accredited investor" as such term is defined in Rule 501(a) or Regulation D under the Securities Act. To be an accredited investor, the Investor understands that it must fall within one of the following categories at the time of the sale of Securities to the Investor: (a) any bank as defined in Section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; any broker or dealer -11- registered pursuant to Section 13 of the Exchange Act; any insurance company as defined in Section 2(13) of the Securities Act; any broker or dealer registered pursuant to Section 15 of the Exchange Act: any investment company registered under the Investment Company Act of 1940 or any business development company as defined in Section 2(a)(48) of the Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefits of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self- directed plan, with investment decisions made solely by persons that are accredited investors; (b) any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (c) any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Note, with total assets in excess of $5,000,000; (d) any Executive Committee member or executive officer of the Company; (e) any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; (f) any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and who has a reasonable expectation of reaching the same income level in the current year; (g) any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; or (h) any entity in which all the equity owners are accredited investors as defined above. 3.6. Restricted Securities. The Investor understands that the Note --------------------- it is purchasing is characterized as "restricted securities" under the federal securities laws inasmuch as it is being acquired from the Company in a transaction not involving a public offering and that -12- under such laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances. In this connection, the Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 3.7. Further Limitations on Disposition. Without in any way limiting ---------------------------------- the representations set forth above, the Investor further agrees not to make any disposition of all or any portion of the Note unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 3 and the Investor Rights Agreement provided and to the extent this Section and such agreement are then applicable, and: (a) There is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (b) (i) The Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a reasonably detailed statement of the circumstances surrounding the proposed disposition, and (ii) if reasonably requested by the Company, the Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances. (c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such Registration Statement or opinion of counsel shall be necessary for a transfer by an Investor that is a partnership to an Affiliate, a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse, or by an Investor that is a trust to any affiliate or successor trust or trustee if the transferee agrees in writing to be subject to the terms hereof to the same extent as if he or she were an original Investor hereunder. 3.8. Legends. It is understood that the certificates evidencing the ------- Note may bear legends in substantially the following forms: (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT." -13- (b) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. 4. Conditions of Investor's Obligations at Closing. The obligations of ----------------------------------------------- the Investor under subsection 1.1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against the Investor unless consented to in writing: 4.1. Representations and Warranties. The representations and ------------------------------ warranties of Entravision contained in Section 2 shall be true in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing. 4.2. Performance. The Company shall have performed and complied with ----------- all agreements, obligations and conditions contained in this Agreement in all material respects that are required to be performed or complied with by it on or before the Closing. 4.3. Compliance Certificate. The Chief Financial Officer of the ---------------------- Company shall deliver to the Investor at the Closing a certificate stating that the conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating that, except as set forth in the Registration Statement, there shall not have been any material adverse change in the assets, liabilities or properties of the Company since January 1, 2000. 4.4. Qualifications. All authorizations, approvals, or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Note pursuant to this Agreement shall be duly obtained and effective as of the Closing. 4.5. Proceedings and Documents. All corporate and other proceedings ------------------------- in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investor or to the Investor's special counsel, as the case may be, and they shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request. 4.6. Opinion of Company Counsel. The Investor shall have received -------------------------- from Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel for the Company, an opinion, dated as of the Closing, in the form attached hereto as Exhibit "D." - ----------- 4.7. Investor Rights Agreement. The Company and the Investor shall ------------------------- have entered into the Investor Rights Agreement. 4.8. Consents and Waivers. The Company shall have obtained on or -------------------- before Closing any and all consents, permits and waivers necessary for consummation of the -14- transactions contemplated by this Agreement, including, without limitation, consent of the Company's senior lender and Univision Communications, Inc. 4.9. LCG Acquisition. The LCG Acquisition Agreement shall be in full --------------- force and effect and Entravision shall be proceeding diligently to close the LCG Acquisition within forty-eight (48) hours of the Closing. 4.10. Z-Spanish Merger Agreement. The Z-Spanish Merger Agreement -------------------------- shall have been executed and shall be in full force and effect. 4.11. Management Rights Letter. Entravision will execute and ------------------------ deliver a Management Rights Letter substantially in the form of Exhibit "E" ----------- attached hereto to TSG Capital Fund III, L.P. 5. Conditions of the Company's Obligations at Closing. The obligations -------------------------------------------------- of the Company to the Investor under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by that Investor: 5.1. Representations and Warranties. The representations and ------------------------------ warranties of the Investor contained in Section 3 shall be true and correct on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 5.2. Payment of Purchase Price. The Investor shall have delivered ------------------------- the purchase price as specified in Section 1.2. 5.3. Qualifications. All authorizations, approvals, or permits, if -------------- any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 6. Certificate of Designation. Prior to the automatic exchange of the -------------------------- Note for Series A Preferred Stock as provided for in Section 8 of the Note, the Company shall file the Certificate of Designation of Series A Preferred Stock in the form attached hereto as Exhibit "F." ---------- 7. Miscellaneous. ------------- 7.1. Termination by the Investor. If the Company does not timely --------------------------- satisfy the conditions to closing set forth in Section 4.9 and 4.10 above, the Investor may terminate its commitment to purchase the Note by delivery of written notice to Company. 7.2. Survival of Warranties. The warranties, representations and ---------------------- covenants of Entravision and the Investor contained in or made pursuant to this Agreement shall survive the -15- execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company. 7.3. 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 and assigns of the parties (including transferees of any Securities). Nothing in this Agreement, express or implied, is intended to confer upon any 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. 7.4. Governing Law; Submission to Jurisdiction; Venue. This ------------------------------------------------ Agreement shall be governed by, and construed in accordance with, the law of the State of New York. All judicial proceedings brought against Entravision or the Investor with respect to this Agreement shall be brought exclusively in any state or federal court of competent jurisdiction in New York County, New York, and by execution and delivery of this Agreement Entravision accepts, the exclusive jurisdiction of the aforesaid courts for such purpose. Entravision hereby waives any claim that New York County, New York is an inconvenient forum or an improper forum based on lack of venue. The exclusive choice of forum for Entravision as set forth in this Section 7.4 will not be deemed to preclude the enforcement by the Investor of any judgment obtained in any other forum or the taking by the Investor of any action to enforce the same in any other appropriate jurisdiction. 7.5. 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. 7.6. Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 7.7. Notices. Unless otherwise provided, any notice required or ------- permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon delivery by facsimile or by overnight courier or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. -16- 7.8. Finder's Fee. Each party represents that it neither is nor will ------------ be obligated for any finder's fee or commission in connection with this transaction. The Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Investor or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Investor from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 7.9. Expenses. Each party shall pay all costs and expenses that it -------- incurs with respect to the negotiation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing, (a) if the Company does not satisfy the conditions of closing contained in Section 4.9 and 4.10 above, and the Investor terminates its commitment pursuant to Section 7.1 above, the Company shall reimburse the Investor for documented costs reasonably incurred up to a maximum of Fifty Thousand Dollars ($50,000); and (b) if the transactions contemplated hereby are completed, the Company will pay the reasonable fees and disbursements of one special counsel for the Investor, in connection with the preparation, negotiation, execution and delivery of this Agreement, the Note and the other Transaction Agreements and any amendment, waiver or consent, or request therefor, under this Agreement, the Note or any Transaction Agreement. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the Investor Rights Agreement, or the Restated Certificate, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 7.10. Amendments and Waivers. Any term of this Agreement may be ---------------------- amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the principal amount of the Note. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities, and the Company. 7.11. Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. -17- 7.12. Entire Agreement. This Agreement and the documents referred to ---------------- herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. [Remainder of Page Intentionally Left Blank] -18- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 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/ Jeanette L. Tully -------------------------------------------------------- Jeanette L. Tully, Chief Financial Officer Corporation ENTRAVISION COMMUNICATIONS CORPORATION, a Delaware corporation By: /s/ Walter F. Ulloa -------------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer By: /s/ Jeanette L. Tully -------------------------------------------------------- Jeanette L. Tully, Chief Financial Officer Investor TSG CAPITAL FUND III, L.P. By: TSG Associates III, LLC, its General Partner By: /s/ Darryl B. Thompson --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ [Signature Page to Convertible Subordinated Note Purchase Agreement] SCHEDULE A INVESTOR -------- TSG Capital Fund III, L.P. Attention: Darryl B. Thompson 177 Broad Street, 12/th/ Floor Stamford, Connecticut 06901 Facsimile: (203) 541-1590 SCHEDULE "B" SCHEDULE OF EXCEPTIONS ---------------------- SCHEDULE 2.2(c) REQUIRED THIRD PARTY CONSENTS None. SCHEDULE 2.4(b) PRO FORMA FULLY-DILUTED CAPITALIZATION TABLE SCHEDULE 2.4 (d) OPTIONS, CONVERTIBLE DEBENTURES, CONTRACTS FOR SALE OF SECURITIES AND VOTING TRUSTS 1. See Schedule 2.4(b). 2. See proposed Voting Agreement relating to Corporation by and among Messrs. Ulloa, Wilkinson and Zevnik ("Voting Agreement"). SCHEDULE 2.5 CORPORATE STRUCTURE AND CAPITALIZATION 1. Entravision Communications Company, L.L.C., a Delaware limited liability ------------------------------------------------------------------------ company ------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Jeanette L. Tully Executive Committee: Walter F. Ulloa Philip C. Wilkinson Paul A. Zevnik Managing Members: Walter F. Ulloa Philip C. Wilkinson Membership Interests: Cabrillo Broadcasting Corporation 330,816 A Units Golden Hills Broadcasting Corporation 137,801 A Units KSMS-TV, Inc. 14,413 A Units Las Tres Palmas Corporation 13,460 A Units Tierra Alta Broadcasting, Inc. 171,507 A Units Valley Channel 48, Inc. 665,980 A Units Telecorpus, Inc. 149,300 A Units The Walter F. Ulloa Irrevocable Trust of 1996 23,920 A Units The Paul A. Zevnik Irrevocable Trust of 1996 23,920 A Units The 1994 Wilkinson Children's Gift Trust 23,920 A Units Walter F. Ulloa 225,139 C Units Philip C. Wilkinson 25,131 C Units Paul A. Zevnik 22,119 C Units Norton Properties Limited Partnership 13,817 C Units Lawrence E. Safir 54,284 D Units Paul A. Zevnik 10,313 E Units The Zevnik-Harvard Fund 5,000 F Units The Zevnik Charitable Foundation 5,313 F Units * Additional D Units (or options to purchase D Units) to be issued) (See Schedule 2.4(b)) Qualified: Arizona; California; Colorado; District of Columbia (in process); Florida; Nevada; New Mexico; Texas MEMBER ENTITIES --------------- 2. KSMS-TV, Inc., a Delaware corporation ------------------------------------- Officers: Chief Executive Officer: Walter F. Ulloa President: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Jeanette L. Tully Directors: Walter F. Ulloa Philip C. Wilkinson Paul A. Zevnik Stockholders: (authorized: 10,000 Common Stock, no par value) Walter F. Ulloa 3,000 Common Stock Philip C. Wilkinson 3,000 Common Stock Paul A. Zevnik 3,000 Common Stock Richard D. Norton 1,000 Common Stock Qualified: California 3. Cabrillo Broadcasting Corporation, a California corporation ----------------------------------------------------------- Officers: President: Philip C. Wilkinson Vice President: Wendy K. Wilkinson Secretary: Walter F. Ulloa Chief Financial Officer: Philip C. Wilkinson Directors: Walter F. Ulloa Wendy K. Wilkinson Philip C. Wilkinson Shareholders: (authorized: 9,445.7 Common Stock, no par value) Walter F. Ulloa 481.9 Common Stock The Wilkinson Family Trust 8,000 Common Stock Carol K. Luery Revocable Trust 963.8 Common Stock Qualified: None 4. Tierra Alta Broadcasting, Inc., a Delaware corporation ------------------------------------------------------ Officers: President: Paul A. Zevnik Chief Executive Officer: Walter F. Ulloa Secretary: Paul A. Zevnik Chief Financial Officer: Philip C. Wilkinson Directors: Walter F. Ulloa Richard D. Norton Paul A. Zevnik Stockholders: (authorized: 20,000 Common Stock, $0.01 par value) Yrma G. Rico 4,500 Common Stock Richard D. Norton 2,000 Common Stock Walter F. Ulloa 6,750 Common Stock Paul A. Zevnik 6,750 Common Stock Qualified: Nevada 5. Las Tres Palmas Corporation, a Delaware corporation --------------------------------------------------- Officers: President: Walter F. Ulloa Secretary: Paul A. Zevnik Treasurer: Walter F. Ulloa Directors: Walter F. Ulloa Paul A. Zevnik Stockholders: (authorized: 10,000 Common Stock, no par value) Walter F. Ulloa 5,000 Common Stock Paul A. Zevnik 5,000 Common Stock Qualified: California 6. Golden Hills Broadcasting Corporation, a Delaware corporation ------------------------------------------------------------- Officers: President: Walter F. Ulloa Vice President: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Walter F. Ulloa Directors: Philip C. Wilkinson Walter F. Ulloa Richard D. Norton Paul A. Zevnik Stockholders: (authorized: 10,000 Common Stock, $0.01 par value) Walter F. Ulloa 2,100 Common Stock Philip C. Wilkinson 1,475 Common Stock Paul A. Zevnik 1,475 Common Stock Richard D. Norton 1,000 Common Stock Qualified: Colorado 7. Valley Channel 48, Inc., a Texas corporation -------------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Chief Financial Officer and Treasurer: Jeanette L. Tully Directors: Walter F. Ulloa Philip C. Wilkinson Paul A. Zevnik Shareholders: (authorized: 10,000 Common Stock, $0.0001 par value) Walter F. Ulloa 3,454 Common Stock The Wilkinson Family Trust 3,454 Common Stock Paul A. Zevnik 1,466 Common Stock Richard D. Norton 509 Common Stock Yrma G. Rico 356 Common Stock Carol K. Luery Revocable Trust 319 Common Stock 8. Telecorpus, Inc., a Texas corporation ------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Chief Financial Officer and Treasurer: Jeanette L. Tully Secretary: Paul A. Zevnik Directors: Walter F. Ulloa Philip W. Wilkinson Paul A. Zevnik Shareholders: (authorized: 10,000 Common Stock, no par value) The Walter F. Ulloa Irrevocable Trust of 1996 1,880 Common Stock The 1994 Wilkinson Children's Gift Trust 1,880 Common Stock Walter F. Ulloa 1,734 Common Stock The Wilkinson Family Trust 1,734 Common Stock The Paul A. Zevnik Trust 1,533 Common Stock Richard D. Norton 533 Common Stock Carol K. Luery Revocable Trust 334 Common Stock Yrma G. Rico 122 Common Stock SUBSIDIARY ENTITIES ------------------- 9. Entravision Holdings, LLC, a California limited liability company ----------------------------------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Chief Financial Officer: Jeanette L. Tully Managing Member: Entravision Communications Company, L.L.C. Non-Managing Walter F. Ulloa Members Philip C. Wilkinson Membership Entravision Communications Company, L.L.C. 99.999% Interests: Walter F. Ulloa 0.0005% Philip C. Wilkinson 0.0005% 10. Entravision, L.L.C., a Delaware limited liability company --------------------------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Jeanette L. Tully Managing Member: Entravision Communications Company, L.L.C. Membership Entravision Communications Company, 100% Interests: L.L.C. 11. Entravision-El Paso, L.L.C., a Delaware limited liability company ----------------------------------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Jeanette L. Tully Managing Member: Entravision Communications Company, L.L.C. Membership Entravision Communications Company, 100% Interests: L.L.C. 12. Entravision Communications of Midland, LLC, a Delaware limited liability ------------------------------------------------------------------------ company ------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Board of Managers: Walter F. Ulloa Philip C. Wilkinson Judy Querio Membership Interests: Entravision Communications Company, L.L.C. 80% New Century Communications 20% Qualified: Texas 13. Entravision Midland Holdings, LLC, a Delaware limited liability company ----------------------------------------------------------------------- Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Managing Member: Entravision Communications of Midland, L.L.C. Membership Interests: Entravision Communications of Midland, L.L.C. 100% Qualified: Texas 14. Los Cerezos Television Company, a Delaware corporation ------------------------------------------------------ Officers: Chairman and Chief Executive Officer: Walter F. Ulloa President and Chief Operating Officer: Philip C. Wilkinson Secretary: Paul A. Zevnik Treasurer: Jeanette L. Tully Directors: Walter F. Ulloa Philip C. Wilkinson Paul A. Zevnik Stockholders: (authorized: 10,000 Class A Common Stock, $0.01 par value per share, and 30,000 Class B Common Stock, $0.01 par value) Entravision Communications Company, L.L.C. 1,000 Common Stock Organized: Delaware Qualified: District of Columbia; Maryland 15. Comercializadora Frontera Norte S.A. de C.V., a Mexico corporation ------------------------------------------------------------------ Stockholders: Entravision Communications Company, L.L.C. 100% 16. Televisora Alco, S.A. de C.V., a Mexico corporation --------------------------------------------------- Stockholders: Entravision Communications Company, L.L.C. 40%* *Remainder owned by other parties. SHARED APPRECIATION RIGHT United Paramount Network ("UPN") holds a 20% interest in the appreciation of XUPN-TV above an agreed-upon $35 million value. See: Voting Agreement Investor Rights Agreement (TSG) Investor Rights Agreement (ZSPN) SCHEDULE 2.6 FINANCIAL STATEMENTS Company financial statements are prepared in accordance with GAAP. See April 13, 2000 draft S-1 Registration Statement (the "S-1 Registration Statement") for Entravision's Management's Discussion and Analysis of Financial Condition and Results of Operations. SCHEDULE 2.7 POTENTIAL LIABILITIES See the S-1 Registration Statement. SCHEDULE 2.9 EMPLOYEE BENEFIT PLANS 1. The Newspaper and Mail Deliverers' Union of New York and Vicinity and the Newspaper Guild of New York represent the Company's publishing employees. The collective bargaining agreement with the Newspaper and Mailer Deliverers' Union of New York and Vicinity expires on March 30, 2004 and the collective bargaining agreement with the Newspaper Guild of New York expires on June 30, 2002. 2. The Company offers a 401(k) Savings and Retirement Plan to all of its 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. The Company currently matches 25% of the amounts contributed by each participant up to a maximum of $1,000 per year. 3. Various Latin Communications Group Inc. executives, including Athena Marks, may have certain rights upon a Change in Control. 4. See employment agreements with Walter F. Ulloa, Philip C. Wilkinson and Bram Watkins. 5. See employment agreements proposed for Jeanette Tully and Larry Safir. SCHEDULE 2.10 COMPLIANCE WITH LEGAL REQUIREMENTS Entravision is in compliance with all legal requirements. SCHEDULE 2.12 MATERIAL CONTRACTS None. SCHEDULE 2.13 ENVIRONMENTAL LAW COMPLIANCE None. SCHEDULE 2.14 INTELLECTUAL PROPERTY Certain subsidiaries of Entravision have been granted the exclusive right to use the call signs listed on this Schedule 2.14 to identify stations under allocations granted by the FCC. Certain common law trademark rights to the call sign letter combinations have subsequently arisen from the use of such call signs in commerce. 1. Call Sign: KBNT-LP Frequency: Channel 19 Location: San Diego, California 2. Call Sign: KCEC-TV Frequency: Channel 50 Location: Denver, Colorado 3. Call Sign: KGHB-LP Frequency: Channel 27 Location: Colorado Springs and Pueblo, Colorado 4. Call Sign: K43DK Frequency: Channel 43 Location: Denver, Colorado 5. Call Sign: KSMS-TV Frequency: Channel 67 Location: Monterey, California 6. Call Sign: KVER-LP Frequency: Channel 4 Location: Indio, California 7. Call Sign: KLOB(FM) Frequency: 94.7 MHz Location: Thousand Palms, California 8. Call Sign: K05JY Frequency: Channel 5 Location: Indio, California 9. Call Sign: K28ET Frequency: Channel 28 Location: Palm Springs, California 10. Call Sign: KINC (TV) Frequency: Channel 15 Location: Las Vegas, Nevada 11. Call Sign: KNVO (TV) Frequency: Channel 48 Location: McAllen, Texas 12. Call Sign: KINT-TV Frequency: Channel 26 Location: El Paso, Texas 13. Call Sign: KSVE (AM) Frequency: 1650 KHz Location: El Paso, Texas 14. Call Sign: KINT-FM Frequency: 93.9 MHz Location: El Paso, Texas 15. Call Sign: KLDO (TV) Frequency: Channel 27 Location: Laredo, Texas 16. Call Sign: K03EM (temporary call sign K43FN, Fort Collins, Colorado) Frequency: Channel 3 Location: Glen Haven, Colorado 17. Call Sign: KORO (TV) Frequency: Channel 28 Location: Corpus Christi, Texas 18. Call Sign: KVYE (TV) Frequency: Channel 7 Location: El Centro, California 19. Call Sign: WMDO-LP Frequency: Channel 48 Location: Washington, D.C. 20. Call Sign: WVEN-LP Frequency: Channel 63 Location: Orlando, Florida 21. Call Sign: WVEA-LP Frequency: Channel 61 Location: Tampa, Florida 22. Call Sign: KLUZ-TV Frequency: Channel 26 Location: Albuquerque, New Mexico 23. Call Sign: KUPB-TV Frequency: Channel 18 Location: Midland, Texas SCHEDULE 2.15 RELATIONSHIPS WITH RELATED PERSONS See S-1 Registration Statement and, in particular, the section entitled "Certain Relationships and Related Transactions." EXHIBIT "A" EXCHANGE AGREEMENT ------------------ EXCHANGE AGREEMENT ------------------ This Exchange Agreement (the "Agreement") is dated as of April 19, 2000 by and among Entravision Communications Corporation, a Delaware corporation (the "Corporation"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), each of the individual, trust and/or other entity members of the Company listed on Schedule "A" attached hereto and ------------ incorporated herein by this reference (each, an "Exchanging Member" and collectively, the "Exchanging Members"), each of the stockholders of the Member Companies (as defined below) of the Company listed on Schedule "A" attached ------------ hereto (each, an "Exchanging Stockholder" and collectively, the "Exchanging Stockholders") and Univision Communications Inc., a Delaware corporation ("Univision"). The Exchanging Members, the Exchanging Stockholders and Univision are individually referred to herein as an "Exchanging Party" and collectively as the "Exchanging Parties." WHEREAS, the Company is a duly formed Delaware limited liability company engaged in the ownership and operation of television and radio stations. WHEREAS, each of the Exchanging Members is an individual, trust and/or other entity that owns a direct membership interest in the Company as set forth on Schedule "A" attached hereto. ------------ WHEREAS, each of Cabrillo Broadcasting Corporation, a California corporation ("Cabrillo"), Golden Hills Broadcasting Corporation, a Delaware corporation ("Golden Hills"), KSMS-TV, Inc., a Delaware corporation ("KSMS"), Las Tres Palmas Corporation, a Delaware corporation ("Las Tres"), Tierra Alta Broadcasting, Inc., a Delaware corporation ("Tierra Alta"), Valley Channel 48, Inc., a Texas corporation ("Valley"), and Telecorpus, Inc., a Texas corporation ("Telecorpus"), (collectively, the "Member Companies"), is a corporation that owns a direct membership interest in the Company as set forth on Schedule "A" ------------ attached hereto. WHEREAS, each of the Exchanging Stockholders is an individual, trust and/or other entity that owns an indirect membership interest in the Company by virtue of his, her or its respective stockholdings in the Member Companies as set forth on Schedule "A" attached hereto. ------------ WHEREAS, the Exchanging Members together with the Member Companies own all of the outstanding membership interests in the Company. WHEREAS, Univision is the holder of that certain First Amended and Restated Non-Negotiable Subordinated Note (the "Note") dated March 2, 2000 from the Company in the principal amount of $120,000,000, and the Company, certain of the Member Companies, the Managing Members of the Company and Univision are parties to that certain Second Amendment to Amended and Restated Subordinated Note Purchase and Option Agreement (as amended, the "Option Agreement") dated as of March 2, 2000, pursuant to which Univision holds an option to acquire a 40.0% equity interest in the Company for a total exercise price of $120,000,000. WHEREAS, the Corporation is a duly incorporated Delaware corporation formed by the Company for the purpose of effecting the Roll-Up (as defined below) contemplated by this Agreement. WHEREAS, in accordance with Section 26(i) of the First Amended and Restated Operating Agreement of the Company, as amended (the "Operating Agreement"), (i) each of the Exchanging Members is obligated to transfer to the Corporation his or its respective membership interests in the Company in exchange for newly- issued shares of Class A Common Stock or Class B Common Stock as provided for herein, (ii) each of the Exchanging Stockholders is obligated to transfer his, her or its respective stockholdings in the Member Companies to the Corporation in exchange for newly-issued shares of Class A Common Stock or Class B Common Stock and (iii) Univision desires to contribute to the Corporation its entire interest in and to the Note and the Option Agreement in exchange for newly- issued shares of Class C Common Stock, all pursuant to the terms and conditions of this Agreement (with such transactions collectively referred to herein as the "Roll-Up"). The Class A Common Stock, Class B Common Stock and Class C Common Stock are referred to collectively herein as the "Common Stock." WHEREAS, the Exchanging Members and the Member Companies executed that certain Sixth Amendment to the Operating Agreement effective as of March 31, 2000 (the "Sixth Amendment"). WHEREAS, the Corporation contemplates filing a Registration Statement with the Securities and Exchange Commission (the "Registration Statement") pursuant to which it intends to consummate the initial underwritten public offering of its Class A Common Stock (the "IPO") concurrently with the closing of the Roll- Up. WHEREAS, the Corporation and the Company have entered into that certain Acquisition Agreement and Plan of Merger (the "Merger Agreement") by and among the Corporation, the Company, ZSPN Acquisition Corporation, a wholly-owned subsidiary of the Corporation ("Acquisition Co."), on one hand, and Z-Spanish Media Corporation ("ZSPN") and its stockholders, on the other hand, pursuant to which the Corporation will acquire ZSPN pursuant to a merger of Acquisition Co. with and into ZSPN (the "Merger"). WHEREAS, pursuant to Section 3.2 of the Merger Agreement, if the closing of the Merger has not taken place by the Interim Closing Deadline (as defined in the Merger Agreement) ZSPN, in certain instances, may elect to waive the IPO as a condition to the closing of the Merger and to require the Corporation to proceed with the closing of the Merger and the Roll-Up (with such closing referred to herein as the "Interim Closing"). WHEREAS, counsel for the Corporation and the Company has previously filed certain applications with the Federal Communications Commission (the "FCC") requesting its written consent (the "FCC Consent") to the assignment of the beneficial ownership of the FCC licenses held by Entravision Holdings, LLC, a California limited liability company and a subsidiary of the -2- Company and its Managing Members, to the Corporation in accordance with the Roll-Up contemplated by this Agreement. WHEREAS, all the parties hereto intend for the Roll-Up as set forth in this Agreement to be tax-free to all parties pursuant to Section 351(a) of the Internal Revenue Code of 1986, as amended (the "Code"). WHEREAS, concurrently with the execution of this Agreement, the Company is consummating a financing pursuant to that certain Note Purchase Agreement of even date herewith between TSG Capital Fund III, L.P. ("TSG") and the Company involving the issuance of a Convertible Subordinated Promissory Note in the principal amount of $90,000,000 (the "TSG Note") by the Company in favor of TSG (the "TSG Financing"). NOW, THEREFORE, in consideration of the premises and of the mutual agreements, covenants and provisions herein contained and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. EXCHANGE AND CLOSING 1.1. Exchange. -------- (a) Subject only to the terms and conditions of this Agreement, each Exchanging Member shall as of the Closing assign, transfer and convey to the Corporation all right, title and interest in and to the entire direct membership interest in the Company held by such Exchanging Member, all as set forth opposite each such Exchanging Member's name on Schedule "A" attached hereto, ------------ (ii) each Exchanging Stockholder shall as of the Closing assign, transfer and convey to the Corporation all right, title and interest in and to the entire indirect membership interest in the Company held by such Exchanging Stockholder by virtue of his, her or its stockholdings in each of the Member Companies, all as set forth opposite each such Exchanging Stockholder's name on Schedule "A" ------------ attached hereto and (iii) Univision shall as of the Closing assign, transfer and convey to the Corporation all right, title and interest in and to the entire interest of Univision in the Note and the Option Agreement. (b) The Corporation shall as of the Closing accept the assignment and transfer by (i) each Exchanging Member of his or its entire direct membership interest in the Company and hereby assumes and agrees to perform and be bound by any and all of the conditions, covenants and obligations of such Exchanging Member pursuant to the Operating Agreement, (ii) each Exchanging Stockholder of his, her or its respective stockholdings in each of the Member Companies and hereby assumes and agrees to perform and be bound by any and all of the conditions, covenants and obligations of such Exchanging Stockholder pursuant to the organizational documents of each respective Member Company and (iii) Univision of its entire interest in and to the Note and the Option Agreement and hereby assumes and agrees to perform -3- and be bound by any and all of the conditions, covenants and obligations of Univision pursuant to the Note and the Option Agreement. (c) At the Closing, each Exchanging Party shall receive, in consideration for the Roll-Up, that number of shares of that class of Common Stock set forth on Schedule "B" attached hereto and incorporated herein by this ------------ reference computed by multiplying the fully-diluted as-converted Units held by each such Exchanging Party times thirty-four (34) (the "Exchange Number"). The rights, privileges, preferences and restrictions of the Common Stock shall be as set forth in the First Restated Certificate of Incorporation of the Corporation, substantially in the form attached hereto as Exhibit "A" and incorporated herein ----------- by this reference, which shall be filed with the Delaware Secretary of State by counsel to the Corporation and the Company prior to the Closing. (d) Each Exchanging Party acknowledges and agrees that the number of shares of Common Stock to be received by such Exchanging Party in the Roll-Up represent the amount due and owing each such Exchanging Party on a liquidation of the Company and a distribution of proceeds after allocations of Net Income and Net Loss as provided for in the Sixth Amendment. (e) Each Exchanging Member or Exchanging Stockholder further acknowledges and agrees that the number of shares of the Common Stock received by such Exchanging Party in the Roll-Up contemplated by this Agreement is good and valuable consideration for the interests being exchanged hereunder, and is an accurate reflection of the fair market value of such interests as of the date hereof. 1.2. Termination of Rights. From and after the Closing: --------------------- (a) the entire capital account and share of profits and losses of each Exchanging Member in the Company shall be deemed to be the capital account and share of profits and losses of the Corporation, such Exchanging Member shall have no further interest or rights of any kind in or with respect to his or its membership interest in the Company or under the Operating Agreement and such Exchanging Member shall be released from all further obligations under the Operating Agreement; (b) all of the rights and obligations of Univision under the Note and the Option Agreement shall be deemed to be rights and obligations of the Corporation, Univision shall have no further interest or rights of any kind in or with respect to the Note or the Option Agreement and Univision shall be released from all further obligations under the Note and the Operating Agreement; and (c) 1,000 shares of Common Stock of the Corporation held by the Company shall be deemed canceled for all purposes and the Company shall promptly submit the applicable share certificate to the Corporation for cancellation. -4- 1.3. Consent of Executive Committee. By their respective execution hereof ------------------------------ in any capacity, the Company and each member of the Executive Committee acknowledges that the Executive Committee of the Company (i) has approved the form of this Agreement, (ii) acknowledges receipt of a duly executed copy of this Agreement and (iii) in accordance with the provisions of the LLC Agreement, consents to the assignment and transfer of the membership interests of the Exchanging Members to the Corporation and to the admission of the Corporation as a new member of the Company. 1.4. Consent of Exchanging Parties. By its execution hereof, each ----------------------------- Exchanging Party (i) approves the form of this Agreement, (ii) acknowledges that it has received and reviewed in full the Registration Statement, (iii) approves and consents to the consummation of the Roll-Up, the IPO, the Merger and the TSG Financing in accordance with the documentation made available to each Exchanging Party (with such changes as the management of the Company and the Corporation may determine in its reasonable discretion), and (iv) waives any right of consent or approval, any preemptive right, right of first refusal or anti- dilution protection, or any other restriction by or privilege in favor of such Exchanging Party of any kind to prevent, restrict, delay, adversely effect or hinder the consummation of the Roll-Up, the IPO, the Merger and/or the Note Financing. Each Exchanging Party agrees to promptly execute all documents requested by the Company or Corporation reflecting the terms of this Section 1.4. 1.5. Closing. The closing of the Roll-Up and the other transactions ------- contemplated by 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) upon the earlier to occur of: (i) the execution of the underwriting agreement by the Corporation in connection with the IPO, (ii) the consummation of the Interim Closing as defined in the Merger Agreement or (iii) ten (10) days after written notice from the Corporation to the Exchanging Parties, provided, that the FCC Consent has become a Final Order (as defined below), which requirement may be waived by the Corporation in its discretion at any time after initial issuance of the FCC Consent, or on such other date as the parties may mutually agree, or at such other time and place as the parties may mutually agree. For purposes of this Agreement, "Final Order" shall mean 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. 1.6. Closing Obligations of Corporation. At the Closing, the Corporation ---------------------------------- will deliver or cause to be delivered to each Exchanging Party: (a) a duly executed stock certificate representing the number of shares of the Common Stock set forth opposite each Exchanging Party's name on Schedule "B" attached hereto (subject to the obligation of each Exchanging Party - ------------ pursuant to Section 2.4(b) below); -5- (b) the closing certificate required by Section 5.2(c) below; (c) a certificate of the Secretary of the Corporation attesting to (i) the incumbency of the officers executing the Agreement and the other agreements and certificates delivered by the Corporation at the Closing and (ii) the authenticity of the Certificate of Incorporation and Bylaws of the Corporation; (d) written resolutions of the Board of Directors of the Corporation authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of the Corporation; (e) a certificate of good standing for the Corporation issued by the Delaware Secretary of State not more than ten (10) days prior to the date of the Closing; and (f) such other documents as may be reasonably requested by the Exchanging Parties as necessary to consummate the transactions contemplated by this Agreement. 1.7. Closing Obligations of Exchanging Parties. At the Closing, each of ----------------------------------------- the Exchanging Parties will deliver or cause to be delivered to the Corporation: (a) to the extent applicable to each Exchanging Party, signature pages to the documents referred to in Section 2.3 and Section 2.4 below; (b) the closing certificate required by Section 5.1(c) below; (c) in the case of Univision, a certificate of the Secretary of Univision attesting to the incumbency of the officers executing the Agreement and the other agreements and certificates delivered by Univision at the Closing; (d) in the case of Univision, written resolutions or minutes of the Board of Directors of Univision authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of Univision; and (e) such other documents as may be reasonably requested by counsel for the Corporation and the Company as necessary to consummate the transactions contemplated hereby. ARTICLE 2. ADDITIONAL INFORMATION AND AGREEMENTS 2.1. Corporation. Each Exchanging Party understands and acknowledges that ----------- the Corporation is a Delaware corporation organized to be the direct or indirect owner of all of the equity interests in the Company. -6- 2.2. Amendment to Operating Agreement. Each Exchanging Party acknowledges -------------------------------- and agrees that, effective as of the Closing, this Agreement shall constitute an amendment of those provisions of the Operating Agreement which are inconsistent with the provisions of this Agreement. Each Exchanging Party consents to and approves such amendment, subject to its effectiveness. The provisions of the Operating Agreement as in effect on the date hereof will continue to apply to each Exchanging Party until the Closing. 2.3. First Amended and Restated Bylaws. The First Amended and Restated --------------------------------- Bylaws of the Corporation at Closing shall be substantially in the form attached hereto as Exhibit "B" and incorporated herein by this reference. ----------- 2.4. Stockholders' Agreement. Solely in the event the Roll-Up is triggered ----------------------- by the occurrence of the Interim Closing or at the Corporation's option not in connection with the IPO, at the Closing, each Exchanging Party shall execute and deliver to the Corporation a counterpart signature page to a Stockholders' Agreement, in form and substance to be determined in good faith and reasonably acceptable to the parties hereto and consistent with the covenants, limitations and restrictions contained in the Operating Agreement, pursuant to which such Exchanging Party will be subject to customary certain transfer restrictions and a right of first refusal on the Common Stock, and each Exchanging Party agrees to be bound by and subject to any and all restrictions set forth therein. Such Stockholders' Agreement shall terminate as of the IPO. 2.5. Tax Distributions. Notwithstanding anything to the contrary herein, ----------------- the Company shall continue making distributions after the Closing to the Exchanging Members and Member Companies in accordance with Section 12(a) of the Operating Agreement with respect to any tax liability incurred by such persons by reason of membership in the Company through and including the Closing. 2.6. Senior Lender Matters. --------------------- (a) Solely in the event the Roll-Up is triggered by the occurrence of the Interim Closing or at the Corporation's option not in connection with the IPO, each Exchanging Party acknowledges and agrees that all of the equity interests in the Company and the Member Companies held by the Exchanging Parties have been pledged to Union Bank of California, N.A. ("Union Bank") in accordance with the terms of that certain Amended and Restated Credit Agreement (as amended, the "Credit Agreement") dated November 10, 1998 by and among the Company, the Member Companies, Union Bank and certain lenders, and each Exchanging Party hereby agrees to execute any documents and take such acts as are reasonably necessary to cause Union Bank to release to the Corporation all indicia of ownership in the Company and the Member Companies, including, without limitation, all original stock certificates and pledges. Each Exchanging Stockholder hereby further agrees, if necessary, to execute a new stock power for the shares in the Member Companies held by such Exchanging Stockholder, endorsed in blank, in favor of the Corporation. -7- (b) Each Exchanging Party other than Univision acknowledges and agrees that all shares of the Common Stock issued to such Exchanging Party in accordance with this Agreement are subject to the terms of the Credit Agreement, and that such shares must be pledged to Union Bank concurrently with the Closing. In connection therewith, each Exchanging Party agrees to execute any document and to take any act reasonably required by Union Bank at or following the Closing in order to perfect the pledge of such shares in favor of Union Bank. 2.7. Release. Each Exchanging Party other than Univision hereby ------- irrevocably releases the Corporation, the Company and each and every affiliate, stockholder, subsidiary, partner, officer, member, director and employee of the Corporation and the Company in their capacities as such, and each other Exchanging Party (each, a "Releasee") from any claims, liabilities, costs, expenses, actions, suits or demands however arising, whether at law or in equity, contingent, known or unknown, which such Exchanging Party may have or assert, in respect of any equity or membership interest in the Company or arising out of any membership in the Company that such Releasor or such Releasor's heirs, successors or assigns had with any such Releasee on or prior to the Closing; provided that this release shall not extend to (i) indebtedness owing to such Exchanging Party by any Releasee, (ii) representations or warranties made, or agreements entered into by, a Releasee in connection with this Agreement and (iii) any conduct that resulted from a Releasee's bad faith, fraud or criminal act or omission. 2.8. Waiver. Each of the Company and the Exchanging Parties acknowledges ------ and agrees that the provisions of Section 24 of the Operating Agreement shall not apply to TSG upon conversion of the TSG Note into Class A Units of the Company. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND THE COMPANY The Corporation and the Company (where applicable) hereby make the following representations and warranties to each Exchanging Party, each of which is deemed to be a separate representation and warranty by the Corporation and the Company (where applicable), and this Agreement is made in reliance on same: 3.1. Organization, Good Standing, Corporate Power and Qualification. The -------------------------------------------------------------- Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 3.2. Authority; Enforceability. All corporate action on the part of the ------------------------- Corporation, its officers and directors necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of the Corporation hereunder and the authorization, issuance and delivery of the shares of the Common Stock being issued to the Exchanging Parties hereunder has been or will be taken prior to the Closing, and each of this Agreement and the other documents contemplated hereby has been duly executed and delivered by the Corporation -8- and constitutes a legal, valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 3.3. No Conflicts. Subject to compliance with the federal and state ------------ securities laws, the execution, delivery and performance of this Agreement and the other documents contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, will not (i) result in a material violation or breach of any term or provision of the Certificate of Incorporation or Bylaws of the Corporation or the Certificate of Formation or Operation Agreement of the Company, or of any material statute, rule or regulation applicable to the Corporation or the Company, or (ii) conflict with in a material fashion, contravene in a material fashion, result in a material violation or breach of or default under (with or without the giving of notice or the lapse of time or both), permit any party to terminate, amend or accelerate the provisions of, or result in the imposition of any material lien upon any of the property or assets of the Corporation or the Company under any material contract, agreement, indenture, letter of credit, mortgage, security agreement, pledge agreement, deed of trust, bond, note, guarantee, surety obligation, warranty, license, franchise, permit, power of attorney, lease, instrument or other agreement to which the Corporation or the Company is a party or by which any of its material property or material assets may be bound. 3.4. Consents and Approvals. Except for the FCC Consent, the consent of ---------------------- the senior lenders of the Company in accordance with the terms of the Credit Agreement and the filings under applicable federal and state securities laws which filings are required to be made by the Corporation after the Roll-Up contemplated hereunder, no material consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority or any other third party on the part of the Corporation is required in connection with the consummation of the transactions contemplated by this Agreement. 3.5. Capitalization. The authorized capital of the Corporation shall as of -------------- the Roll-Up consist of two classes of stock designated "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is 415,000,000 shares, $0.0001 par value per share, as follows: (i) 415,000,000 shares of Common Stock, $0.0001 par value per share, consisting of 305,000,000 shares of Class A Common Stock, $0.0001 par value per share, 60,000,000 shares of Class B Common Stock, par value $0.0001 per share, 50,000,000 shares of Class C Common Stock, $0.0001 par value per share, and (ii) 50,000,000 shares shall be Preferred Stock, $0.0001 par value per share. There are 1,000 shares of Common Stock issued and outstanding as of the date hereof. No shares of Preferred Stock are issued and outstanding on the date hereof. The capitalization of the Corporation immediately after the Roll-Up shall be as set forth in Schedule "B". The rights, preferences, privileges and restrictions of ------------ the Common Stock are as stated in the Certificate of Incorporation of the Corporation. Except as contemplated -9- by this Agreement or the Merger Agreement, no subscription, warrant, option, convertible security or other right (contingent or other) to purchase or otherwise acquire from the Corporation any equity securities of the Corporation is authorized or outstanding, and there is no commitment by the Corporation to issue shares, subscriptions, warrants, options, convertible securities or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. 3.6. Issuance of Common Stock. The shares of the Common Stock that are ------------------------ being acquired by the Exchanging Parties hereunder, when issued in accordance with the terms of this Agreement and for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable. 3.7. Litigation. There is no material action, suit, claim, proceeding or ---------- investigation pending against the Corporation or the Company at law or equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, arbitration proceeding relating to the Corporation or the Company pending under collective bargaining agreements or otherwise, or governmental inquiry pending or, to the knowledge of the Corporation or the Company, threatened against the Corporation or the Company (including, without limitation, any inquiry as to the qualification of the Corporation or the Company to hold or receive any license or permit), which questions the validity of this Agreement or the right of the Corporation or the Company to enter into it, or to consummate the transactions contemplated hereby, nor is either the Corporation or the Company aware that there is any basis for the foregoing. Neither the Corporation or the Company is a party or subject to the provisions of any material order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Corporation or the Company currently pending. 3.8. Compliance with Law. Neither the Corporation nor the Company is in ------------------- material violation or default of any material instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or of any provision of material federal or state statute, rule or regulation applicable to the Corporation or the Company. 3.9. Disclosure. The Corporation has fully provided each Exchanging Party ---------- with all the information which he, she or it has requested for deciding whether to participate in the Roll-Up hereunder and all information which the Corporation believes is reasonably necessary to enable such Exchanging Party to make such decision including, without limitation, its draft Form S-1 Registration Statement (the "Registration Statement"). Neither this Agreement, the Registration Statement nor any other statements or certificates made or delivered in connection herewith contains any material untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not materially misleading. 3.10. Brokers and Finders. Neither the Corporation nor any or its ------------------- officers, directors, employees or agents or any affiliate thereof have employed any broker or finder, or incurred any -10- liability for any brokerage fees, commissions or finders' fees in connection with the transaction contemplated hereby. 3.11. Representations Expire at Closing. The Company hereby acknowledges --------------------------------- and agrees that all representations and warranties contained in this Article 3 shall be true and correct in all material respects as of the Closing, except to the extent any inaccuracy would not have a material adverse effects on the assets, liabilities or properties of the Corporation, the Company and all of their respective subsidiaries taken as a whole, and that the representations and warranties of the Company shall expire as of the Closing and shall not survive the Closing. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF EXCHANGING PARTIES Each of the Exchanging Parties, severally and only with respect to himself, herself or itself, hereby makes the following representations and warranties to the Corporation, each of which is deemed to be a separate representation and warranty by such parties, and this Agreement is made in reliance on same: 4.1. Authority; Enforceability. Such Exchanging Party has the right, ------------------------- authority and legal capacity to enter into, execute and deliver this Agreement and the other documents contemplated hereby and perform his, her or its obligations hereunder and thereunder, and each of this Agreement and the other documents contemplated hereby has been duly executed and delivered by such Exchanging Party and constitutes a legal, valid and binding obligation of such Exchanging Party enforceable against such Exchanging Party in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 4.2. No Conflicts. Subject to compliance with the federal and state ------------ securities laws, the execution, delivery and performance of this Agreement and the other documents contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, will not conflict with, contravene, result in a material violation or breach of or material default under (with or without the giving of notice or the lapse of time or both), permit any party to terminate, amend or accelerate the provisions of, or result in the imposition of any material lien (or any obligation to create any material lien) upon any of the property or assets of such Exchanging Party under any contract, agreement, indenture, letter of credit, mortgage, security agreement, pledge agreement, deed of trust, bond, note, guarantee, surety obligation, warranty, license, franchise, permit, power of attorney, lease, instrument or other agreement to which such Exchanging Party is a party or by which any of his, her or its property or assets may be bound. 4.3. Consents and Approvals. No consent, approval, order or authorization ---------------------- of, or registration, qualification, designation, declaration or filing with, any federal, state, local or -11- provincial governmental authority or any other third party on the part of such Exchanging Party is required in connection with the consummation of the transactions contemplated by this Agreement. 4.4. Title. ----- (a) Each Exchanging Member owns, beneficially and of record, his or its membership interest in the Company set forth opposite his or its name on Schedule "A" attached hereto, this is the only membership interest in the - ------------ Company owned by such Exchanging Member and this membership interest is held by such Exchanging Member free and clear of any claim, lien, pledge, deed of trust, option, charge, security interest, hypothecation, encumbrance, right of first offer, voting trust, proxy, right of third parties or other restriction or limitation of any nature whatsoever (each, a "Lien" and collectively, "Liens") other than in the Credit Agreement. At the Closing, the Corporation will acquire good and valid title to such membership interest, free and clear of any Liens other than any Lien created under the Credit Agreement. (b) Each Exchanging Stockholder owns, beneficially and of record, his, her or its stockholdings in each of the Member Companies set forth opposite his, her or its name on Schedule "A" attached hereto, these are the only shares in ------------ the Member Companies owned by such Exchanging Stockholder and these shares is membership interest is held by such Exchanging Member free and clear of any Liens. At the Closing, the Corporation will acquire good and valid title to such shares, free and clear of any Liens other than any Lien created under the Credit Agreement. (c) Univision's rights under the Note and the Option Agreement are the only rights to equity ownership in the Company owned by Univision and such rights are held by Univision free and clear of any Liens other than any Lien created under the Credit Agreement. 4.5. Accredited Investor. Such Exchanging Party is an "accredited ------------------- investor," as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). 4.6. Restricted Securities. Such Exchanging Party understands that the --------------------- shares of the Common Stock are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Corporation in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act, only in certain limited circumstances. In this connection, such Exchanging Party represents that he, she or it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. 4.7. Investment Purpose. Such Exchanging Party is acquiring the Common ------------------ Stock under this Agreement for his, her or its own account for investment purposes, and not with a -12- view to, or for resale in connection with, any distribution thereof other than in compliance with the Securities Act and other applicable securities laws. Such Exchanging Party acknowledges that he, she or it must bear the economic risk of an investment in the Common Stock for an indefinite period of time because, among other reasons, the shares of the Common Stock received by such Exchanging Party have not been registered under the Securities Act and, therefore, such securities cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. Such Exchanging Party also acknowledges that transfers of the shares of the Common Stock received are further restricted by applicable federal and state securities laws. 4.8. Access to Information. Such Exchanging Party understands the risks --------------------- of, and other considerations relating to his, her or its acquisition and ownership of the Common Stock received. Such Exchanging Party has been provided an opportunity to ask questions of, and has received answers satisfactory to him, her or it from, the Corporation, the Company and their representatives regarding the Common Stock received, has received the Registration Statement in its entirety and has obtained any and all additional information from the Corporation and its representatives that such Exchanging Party deems necessary regarding the Common Stock received. 4.9. Evaluation of and Ability to Bear Risks. Such Exchanging Party has --------------------------------------- such knowledge and experience in financial affairs that he, she or it is capable of evaluating the merits and risks of, and other considerations relating to, the ownership of the Common Stock received, and has not relied in connection with his, her or its acquisition of the Common Stock received upon any representations, warranties or agreements other than those set forth in this Agreement. Such Exchanging Party's financial situation is such that he, she or it can afford to bear the economic risk of holding the Common Stock for an indefinite period of time, and such Exchanging Party can afford to suffer the complete loss of his, her or its investment in such securities. 4.10. No Dispositions. Except as set forth in the Registration Statement, --------------- such Exchanging Party does not currently have, and at the Closing will not have, any plan, agreement, commitment, intention or arrangement, whether written or oral, to dispose of any of the shares of the Common Stock to be received by such Exchanging Party. For purposes of this representation, a "disposition" shall include any direct or indirect offer, offer to sell, sale, contract of sale or grant of any option to purchase, gift, transfer, pledge or other disposition, including any disposition of the economic or other risks of ownership through hedging transactions or derivatives and any other transaction that would constitute a "constructive sale" within the meaning of Section 1259 of the Code, including, without limitation, a short-sale, forward sale, equity swap or other derivative contract with respect to the Common Stock or substantially identical property, or other transaction having substantially the same effect as the foregoing. 4.11. Further Limitations on Disposition. Without in any way limiting the ---------------------------------- representations set forth above, such Exchanging Party further agrees not to make any disposition -13- of all or any portion of the Common Stock unless and until: (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) such Exchanging Party shall have notified the Corporation of the proposed disposition and shall have furnished the Corporation with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if requested by the Corporation, such Exchanging Party shall have furnished the Corporation with an opinion of counsel, reasonably satisfactory to the Corporation, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Corporation will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances. 4.12. Legends. Such Exchanging Party understands and acknowledges that ------- the certificates evidencing shares of the Common Stock shall bear the following legend: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. 4.13. Brokers and Finders. Neither such Exchanging Party nor any of his, ------------------- her or its officers, directors, employees or agents or any affiliate thereof have employed any broker or finder, or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transaction contemplated hereby. 4.14. Representations Survive Closing. Each party hereby acknowledges and ------------------------------- agrees that all representations and warranties contained in this Article 4 shall be true and correct in all respects as of the Closing and shall survive the Closing. ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING 5.1. Conditions Precedent to Obligation of Corporation to Close. The ---------------------------------------------------------- obligation of the Corporation to effect the transactions contemplated by this Agreement and to take the other actions required to be taken by the Corporation 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 the Corporation, in whole or in part, where permissible): (a) Accuracy of Representations and Warranties. All of the ------------------------------------------ representations and warranties of the Exchanging Parties in this Agreement, considered collectively, must be accurate in all material respects when made, and as of the date of the Closing as if made on the date of the Closing, except where any inaccuracy would not have a material adverse effect on the assets, liabilities and properties of the Corporation, the Company and their respective subsidiaries -14- taken as a whole. (b) Performance. All of the covenants and obligations that the ----------- Exchanging Parties are required to perform or to comply with pursuant to this Agreement at or prior to the Closing, considered collectively, and each of these covenants and obligations, considered individually, must have been duly performed and complied with in all respects, including, without limitation, the obligations of the Exchanging Parties pursuant to Section 1.6 above. (c) Consents. The FCC Consent shall have become a Final Order, and -------- all other consents, approvals, authorizations, exemptions and waivers that shall be required in order to enable the Corporation to consummate the transactions contemplated by this Agreement shall have been obtained, including, without limitation, the consent of the senior lenders of the Company in accordance with the terms of the Credit Agreement. (d) No Proceedings. Since the date of this Agreement, there must not -------------- have been commenced or threatened against any of the Exchanging Parties any proceeding involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement or that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated by this Agreement. 5.2. Conditions Precedent to Obligation of Exchanging Parties to Close. ----------------------------------------------------------------- The obligation of the Exchanging Parties to effect the transactions contemplated by this Agreement and to take the other actions required to be taken by the Exchanging Parties 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 the Exchanging Parties, in whole or in part, where permissible): (a) Performance. All of the covenants and obligations that the ----------- Corporation are required to perform or to comply with pursuant to this Agreement at or prior to the Closing, considered collectively, and each of these covenants and obligations, considered individually, must have been performed and complied with in all respects, including, without limitation, the obligations of the Corporation pursuant to Section 1.5 above. (b) No Proceedings. Since the date of this Agreement, there must not -------------- have been commenced or threatened against the Corporation or the Company any proceeding involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement or that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated by this Agreement. ARTICLE 6. TERMINATION 6.1. Termination Events. This Agreement may, by written notice given prior ------------------ to or at -15- the Closing, only be terminated: (a) by any party (i) if the FCC dismisses or denies the application for the FCC Consent and such order is a Final Order or (ii) if there shall be any final decree or order that would prevent or make unlawful the Closing; or (b) by the Corporation solely in the event the Merger Agreement has been terminated in accordance with its terms. 6.2. Rights of Parties Upon Termination. If this Agreement is terminated ---------------------------------- as provided in Section 6.1 above, the transactions contemplated by this Agreement 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. 6.3. Power of Attorney. The Exchanging Parties do hereby constitute and ----------------- appoint Walter F. Ulloa as their true and lawful attorney-in-fact and agent to act for them in their names, place and stead, and for his use and benefit in any and all capacities, for the limited purpose of executing any and all documentation to be executed by the Exchanging Parties in connection with the Roll-Up and the other transactions contemplated by this Agreement. The Exchanging Parties do further acknowledge and agree that the signature of Walter F. Ulloa alone on any document to be executed by any of the Exchanging Parties in connection with the transactions contemplated by this Agreement shall be effective to bind each of the Exchanging Parties and the Exchanging Parties hereby ratify and confirm the binding authority of the signature of Walter F. Ulloa on any such document. ARTICLE 7. GENERAL PROVISIONS 7.1. Tax Matters. The parties hereto intend the Roll-Up to qualify under ----------- Section 351(a) of the Code and will use all reasonable efforts to cause the Roll-Up to so qualify. Each party hereto will not take, and will cause such party's affiliates and representatives not to take, any actions or positions which may be expected to cause the Roll-Up not to so qualify. Each of the exchanging parties agrees to take all actions and execute all documents deemed reasonably necessary to effectuate such qualification, including, without limitation, acquisition of the Member Companies via merger. 7.2. 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 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 -16- understandings, both written and oral, among the parties with respect to such subject matter. 7.3. Incorporation by Reference. The recitals set forth above, and all -------------------------- exhibits and schedules attached hereto, are hereby incorporated by reference into this Agreement. 7.4. Headings. The headings of the articles and sections of this Agreement -------- are inserted as a matter of convenience and for reference purposes only, are of no binding effect, and in no respect define, limit, extend or interpret the scope of this Agreement or the intent of any section, and are not to be considered in construing or interpreting this Agreement. 7.5. Gender; Statutory References. All pronouns and any variations thereof ---------------------------- shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons or the context may require. Any reference to the Securities Act or other statutes or laws will include all amendments, modifications or replacements thereto. 7.6. 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 the Corporation and members of the Company holding a majority of the voting power therein. 7.7. 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. 7.8. Severability. Each term, covenant, condition and provision of this ------------ Agreement shall be viewed as separate and distinct, and in the event that any such term, covenant, condition or provision shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable under applicable law, such term, covenant, condition or provision shall be excluded from this Agreement and the remaining terms, covenants, conditions and provisions shall continue in full force and effect to the maximum extent permitted by applicable law as if such term, covenant, condition or provision were excluded. 7.9. 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 the Corporation via facsimile shall be deemed to be an original and may be relied on by the parties hereto as such. -17- 7.10. Necessary Acts. Each party to this Agreement agrees to perform any -------------- further acts, and to execute and deliver any further documents, that may be reasonably necessary to give effect to the provisions of this Agreement and the transactions contemplated herein, whether before or after the Closing. 7.11. Representation of Corporation and Company. Each Exchanging Party ----------------------------------------- hereby acknowledges and agrees that Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., as corporate counsel to the Corporation and the Company, have represented the interests of the Corporation and the Company in the preparation of this Agreement, without regard to the individual interests of the Exchanging Parties. Each Exchanging Party has been urged to, and has been given the opportunity to, utilize independent legal and tax counsel in connection with this Agreement, and the rights and obligations of each Exchanging Party hereunder. Each Exchanging Party, by execution of this Agreement where indicated below, gives his, her or its informed consent to and waives any potential conflict with respect to the representation of the Corporation and the Company by Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P. 7.12. 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. 7.13. Joint Effort. The provisions of this Agreement have been examined, ------------ negotiated and revised by counsel for each party and no implication shall be drawn against any party hereto by virtue of the drafting of this Agreement. 7.14. Attorney's Fees. In case any proceeding, whether at law, in equity --------------- or in arbitration, shall be brought by any party to enforce or interpret the terms or provisions of this Agreement, or any controversy arising therefrom, the prevailing party, as determined by the court or arbitrator, shall be entitled to the payment of reasonable attorney's fees and costs. 7.15. Expenses. Each party hereto shall be responsible for all expenses -------- of such party incurred in connection with the transactions contemplated by this Agreement. 7.16. Notices. All notices, requests, demands, waivers and other ------- communications to be given by any 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 (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 then-current records of the Corporation or the Company (and in the case of the Corporation and the Company, 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), or, in each case, 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 or -18- facsimile, 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. 7.17. Signatory Authority. The individual or individuals signing this ------------------- Agreement on behalf of any party hereto represents to the other parties hereto that he or she has full authority to do so, has received all required consents, and that his or her signature (together with the signature or signatures of any other individual signing below on behalf of such party) is (are) the only signatures required to bind the party on whose behalf he or she is signing this Agreement. 7.18. Consent of Spouse. In connection with the execution and delivery of ----------------- this Agreement, each married Exchanging Member or Exchanging Stockholder residing in a community property jurisdiction agrees to deliver a consent of spouse, substantially in the form attached hereto as Exhibit "D" and ----------- incorporated herein by this reference. 7.19. 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 Delaware, 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. 7.20. Specific Performance. Each of the Exchanging Parties acknowledges -------------------- and agrees that any refusal to perform under this Agreement will cause irreparable injury to the Company and the Corporation and their respective members and stockholders and that the Corporation shall be entitled to obtain injunctive relief for specific performance of the obligations set forth herein. Accordingly, if any Exchanging Party refuses to close the transactions contemplated by this Agreement or seeks to prevent the closing hereunder due to a breach of this Agreement, the Corporation shall have the right to obtain specific performance of the obligations of such Exchanging Party. 7.21. Additional Parties. The parties hereto agree that additional ------------------ parties holding Units in the Company may execute this Agreement and such additional parties shall, after executing counterpart copies of this Agreement as Exchanging Parties hereunder, shall be parties hereto and have all rights and obligations of the Exchanging Parties hereunder. The Company covenants to use best efforts to obtain the signatures of all members of the Company to this Agreement. [Remainder of Page Intentionally Left Blank] -19- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. Corporation ENTRAVISION COMMUNICATIONS CORPORATION, a Delaware corporation By:________________________________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer By: _______________________________________________________ Jeanette L. Tully, Chief Financial Officer Company ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: _______________________________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer By: _______________________________________________________ Jeanette L. Tully, Chief Financial Officer Univision UNIVISION COMMUNICATIONS INC., a Delaware corporation By: _______________________________________________________ Name: _____________________________________________________ Title _____________________________________________________ [Signature Page No. 1 to Exchange Agreement] -20- Exchanging Members THE WALTER F. ULLOA IRREVOCABLE TRUST OF 1996 (DATED OCTOBER 9, 1996) By: _______________________________________________________ Edith Seros, Trustee Number of Units: 24,647 Class A Units THE 1994 WILKINSON CHILDREN'S GIFT TRUST (DATED SEPTEMBER 30, 1994) By: _______________________________________________________ Philip C. Wilkinson, Trustee By: _______________________________________________________ Wendy K. Wilkinson, Trustee Number of Units: 24,647 Class A Units THE PAUL A. ZEVNIK IRREVOCABLE TRUST OF 1996 (DATED NOVEMBER 2, 1996) By: ________________________________________________________ Kevin Grenham, Trustee By: ________________________________________________________ Steven G. Rowles, Trustee Number of Units: 24,647 Class A Units ____________________________________________________________ Paul A. Zevnik, individually Number of Units: 22,791 Class C Units 10,627 Class E Units [Signature Page No. 2 to Exchange Agreement] -21- ____________________________________________________________ Walter F. Ulloa, individually Number of Units: 231,983 Class C Units ____________________________________________________________ Philip C. Wilkinson, individually Number of Units: 25,895 Class C Units NORTON PROPERTIES LIMITED PARTNERSHIP, a Nevada limited partnership By: Norton Investments, Inc., a Nevada corporation Its General Partner and Managing Partner By: ___________________________________________________ Name: _________________________________________________ Title: ________________________________________________ Number of Units: 14,237 Class C Units ____________________________________________________________ Lawrence E. Safir, individually Number of Units: 54,284 Class D Units THE ZEVNIK-HARVARD FUND (DATED DECEMBER 31, 1997) By: ________________________________________________________ Steven G. Rowles, Trustee Number of Units: 5,152 Class F Units [Signature Page No. 3 to Exchange Agreement] -22- THE ZEVNIK CHARITABLE FOUNDATION, a California nonprofit public benefit corporation By: ________________________________________________________ Paul A. Zevnik, Chairman and President By: ________________________________________________________ Steven G. Rowles, Chief Financial Officer and Secretary Number of Units: 5,475 Class F Units ____________________________________________________________ Jeanette L. Tully, individually Number of Units: 14,161 Class D Units ____________________________________________________________ Bram Watkins, individually Number of Units: 4,835 Class D Units Exchanging THE WILKINSON FAMILY TRUST (DATED JUNE 2, 1988) Stockholders By:_________________________________________________________ Philip C. Wilkinson, Trustee By: ________________________________________________________ Wendy K. Wilkinson, Trustee Number of Shares: 8,000 Common Stock (Cabrillo) 3,454 Common Stock (Valley) 1,734 Common Stock (Telecorpus) [Signature Page No. 4 to Exchange Agreement] -23- THE CAROL K. LUERY REVOCABLE TRUST (U/A/D 7/27/89) By: ________________________________________________________ Carol K. Luery, Trustee Number of Shares: 963.8 Common Stock (Cabrillo) 319 Common Stock (Valley) 334 Common Stock (Telecorpus) ____________________________________________________________ Walter F. Ulloa, individually Number of Shares: 481.9 Common Stock (Cabrillo) 2,100 Common Stock (Golden Hills) 3,000 Common Stock (KSMS) 5,000 Common Stock (Las Tres) 6,750 Common Stock (Tierra Alta) 3,454 Common Stock (Valley) 1,734 Common Stock (Telecorpus) ____________________________________________________________ Philip C. Wilkinson, individually Number of Shares: 1,475 Common Stock (Golden Hills) 3,000 Common Stock (KSMS) ____________________________________________________________ Paul A. Zevnik, individually Number of Shares: 1,475 Common Stock (Golden Hills) 3,000 Common Stock (KSMS) 5,000 Common Stock (Las Tres) 6,750 Common Stock (Tierra Alta) [Signature Page No. 5 to Exchange Agreement] -24- ____________________________________________________________ Richard D. Norton, individually Number of Shares: 1,000 Common Stock (Golden Hills) 1,000 Common Stock (KSMS) 2,000 Common Stock (Tierra Alta) 509 Common Stock (Valley) 533 Common Stock (Telecorpus) ____________________________________________________________ Yrma G. Rico, individually Number of Shares: 4,500 Common Stock (Tierra Alta) 356 Common Stock (Valley) 247 Common Stock (Telecorpus) THE WALTER F. ULLOA IRREVOCABLE TRUST OF 1996 (DATED OCTOBER 9, 1996) By: ________________________________________________________ Edith Seros, Trustee Number of Units: 1,880 Common Stock (Telecorpus) THE 1994 WILKINSON CHILDREN'S GIFT TRUST (DATED SEPTEMBER 30, 1994) By: ________________________________________________________ Philip C. Wilkinson, Trustee By: ________________________________________________________ Wendy K. Wilkinson, Trustee Number of Shares: 1,880 Common Stock (Telecorpus) [Signature Page No. 6 to Exchange Agreement] -25- THE PAUL A. ZEVNIK IRREVOCABLE TRUST OF 1996 (DATED NOVEMBER 2, 1996) By:________________________________________________________ Kevin Grenham, Trustee By:________________________________________________________ Steven G. Rowles, Trustee Number of Shares: 1,533 Common Stock (Telecorpus) THE ZEVNIK FAMILY L.L.C. By:________________________________________________________ Paul A. Zevnik, Manager Number of Shares: 1,466 Common Stock (Valley) [Signature Page No. 7 to Exchange Agreement] -26- SCHEDULE "A" EXCHANGING `MEMBERS ------------------- Name Number of Units - ---- --------------- The Walter F. Ulloa Irrevocable Trust of 1996 24,647 Class A Units The 1994 Wilkinson Children's Gift Trust 24,647 Class A Units The Paul A. Zevnik Irrevocable Trust of 1996 24,647 Class A Units Walter F. Ulloa 231,983 Class C Units Philip C. Wilkinson 25,895 Class C Units Paul A. Zevnik 22,791 Class C Units Norton Properties Limited Partnership 14,237 Class C Units Lawrence E. Safir 54,284 Class D Units Jeanette L. Tully 14,161 Class D Units Bram Watkins 4,835 Class D Units Paul A. Zevnik 10,627 Class E Units The Zevnik-Harvard Fund 5,152 Class F Units The Zevnik Charitable Foundation 5,475 Class F Units Additional Persons Listed on Schedule "C" 38,775 Class D Units EXCHANGING STOCKHOLDERS ----------------------- Member Company/Stockholders Number and Class of Shares - --------------------------- -------------------------- Cabrillo Broadcasting Corporation, a California corporation The Wilkinson Family Trust 8,000 Common Stock The Carol K. Luery Revocable Trust 963.8 Common Stock Walter F. Ulloa 481.9 Common Stock Golden Hills Broadcasting Corporation, a Delaware corporation Walter F. Ulloa 2,100 Common Stock Philip C. Wilkinson 1,475 Common Stock Paul A. Zevnik 1,475 Common Stock Richard D. Norton 1,000 Common Stock KSMS-TV, Inc., a Delaware corporation Walter F. Ulloa 3,000 Common Stock Philip C. Wilkinson 3,000 Common Stock Paul A. Zevnik 3,000 Common Stock Richard D. Norton 1,000 Common Stock Las Tres Palmas Corporation, a Delaware corporation Walter F. Ulloa 5,000 Common Stock Paul A. Zevnik 5,000 Common Stock Tierra Alta Broadcasting, Inc., a Delaware corporation Walter F. Ulloa 6,750 Common Stock Paul A. Zevnik 6,750 Common Stock Yrma G. Rico 4,500 Common Stock Richard D. Norton 2,000 Common Stock Valley Channel 48, Inc., a Texas corporation Walter F. Ulloa 3,454 Common Stock The Wilkinson Family Trust 3,454 Common Stock The Zevnik Family L.L.C. 1,466 Common Stock Richard D. Norton 509 Common Stock Yrma G. Rico 356 Common Stock The Carol K. Luery Revocable Trust 319 Common Stock Telecorpus, Inc., a Texas corporation The Walter F. Ulloa Irrevocable Trust of 1996 1,880 Common Stock The 1994 Wilkinson Children's Gift Trust 1,880 Common Stock Walter F. Ulloa 1,734 Common Stock The Wilkinson Family Trust 1,734 Common Stock The Paul A. Zevnik Irrevocable Trust of 1996 1,533 Common Stock Richard D. Norton 533 Common Stock The Carol K. Luery Revocable Trust 334 Common Stock Yrma G. Rico 247 Common Stock SCHEDULE "B" FULLY-DILUTED EQUITY OWNERSHIP OF CORPORATION ---------------------------------------------
Exchanging Party Units Shares* - ---------------- ----- ------- Walter F. Ulloa 636,226 21,631,684 The Walter F. Ulloa Irrevocable Trust of 1996 53,935 1,833,790 Philip C. Wilkinson 64,972 2,209,048 The Wilkinson Family Trust 571,254 19,422,636 The 1994 Wilkinson Children's Gift Trust 53,935 1,833,790 Paul A. Zevnik 128,445 4,367,130 The Paul A. Zevnik Irrevocable Trust of 1996 48,530 1,650,020 Richard D. Norton 87,475 2,974,150 Norton Properties Limited Partnership 14,239 484,126 Yrma G. Rico 69,170 2,351,780 The Carol K. Luery Revocable Trust 63,800 2,169,200 Lawrence E. Safir 54,284 1,845,656 Jeanette L. Tully 14,161 481,474 Bram Watkins 4,835 164,390 The Zevnik-Harvard Fund 5,152 175,168 The Zevnik-Charitable Foundation 5,457 185,538 The Zevnik Family L.L.C. 105,253 3,578,602 Additional Persons on Schedule "C" 38,756 1,317,704 Univision Communications Inc. 1,293,141 43,966,783
* Assumes exchange of 1 Unit for 34 Shares of Common Stock in the Roll-Up and is subject to adjustment based upon the final exchange ratio. SCHEDULE "C" ADDITIONAL MEMBERS HOLDING D UNITS ---------------------------------- EXHIBIT "A" FIRST RESTATED CERTIFICATE OF INCORPORATION ------------------------------------------- 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 ---------------- 200,000,000 shares of Common Stock, par value $0.0001 per share, divided into the following classes: (i) 150,000,000 shares of Class A Common Stock (the "Class A Common Stock"); (ii) 25,000,000 shares of Class B Common Stock (the "Class B Common Stock"); and (iii) 25,000,000 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 10,000,000 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 11.3 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 11.2 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 11.2 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 11.2 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 11.2 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 11.2 above shall be the same procedure set forth in this Section 11.3 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 _____________________________________________ ___________________________, Secretary [Signature Page to First Restated Certificate of Incorporation of Entravision Communications Corporation] EXHIBIT "B" FIRST AMENDED AND RESTATED BYLAWS --------------------------------- 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 Bylaws attached hereto constitute the 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 EXHIBIT "D" CONSENT OF SPOUSE ----------------- I, _____________________, spouse of _______________________, do hereby certify, acknowledge and agree as follows: 1. I have read and approve each and every provision set forth in the foregoing Exchange Agreement (the "Agreement") dated as of April _____, 2000 by and among Entravision Communications Corporation, a Delaware corporation (the "Corporation"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), each of the individual, trust and/or other entity members of the Company listed on Schedule "A" attached thereto, each of ------------ the stockholders of the Members Companies (as defined therein) of the Company listed on Schedule "A" attached thereto, and Univision Communications Inc., a ------------ Delaware corporation. 2. I accept and agree to be bound by the Agreement in all respects and in connection with any interest I may have in either the Corporation, the Company or any of the Member Companies, whether that interest may be community property or quasi-community property under the laws or other laws relating to marital property in effect in the state of our residence as of the date of the signing of the Agreement. 3. I hereby appoint my spouse as my attorney-in-fact with respect to the exercise of any rights under the Agreement. 4. I hereby consent to any amendments or modifications to the Agreement that are consented to, executed by or otherwise binding upon my spouse. Dated:_______________________. -------------------------------------------------- [Signature] -------------------------------------------------- [Print Name] EXHIBIT "B" INVESTOR RIGHTS AGREEMENT ------------------------- INVESTOR RIGHTS AGREEMENT This Investor Rights Agreement (this "Agreement") is made as of April 19, 2000 (the "Effective Date"), by and among Entravision Communications Corporation, a Delaware corporation (the "Corporation"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), TSG Capital Fund III, L.P. (the "Investor"), and the other principal equityholders of the Company and their affiliates and the Corporation set forth on the signature pages hereto (the "Major Stockholders"). WHEREAS, the Company, the Corporation and the Investor are parties to that certain Convertible Subordinated Note Purchase Agreement (the "Purchase Agreement") providing for, among other things, the purchase and sale of a Convertible Subordinated Note of the Company (the "Note") which are automatically exchangeable into Series A Convertible Preferred Stock of the Corporation (the "Series A Preferred Stock") concurrently with the Roll-Up (as defined in the Purchase Agreement). WHEREAS, the Major Stockholders are the principal holders of the membership units in the Company (the "Units") and will become the principal holders of common stock of the Corporation ("Common Stock") concurrently with the Roll-Up (as defined in the Purchase Agreement). WHEREAS, the Company and the Corporation desire to grant to the Investor certain registration, co-sale, voting, right of first refusal, information and other rights as set forth herein. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties hereto hereby agree as follows: 1. Registration Rights. The Corporation covenants and agrees as follows ------------------- (capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Purchase Agreement): 1.1. Definitions. For purposes of this Section 1: ----------- 1.1.1. The term "1934 Act" means the Securities Exchange Act of l934, as amended. 1.1.2. The term "Act" means the Securities Act of 1933, as amended. 1.1.3. The term "Closing" has the meaning ascribed to it in the Purchase Agreement. 1.1.4. The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Corporation with the SEC. 1.1.5. The term "Holder" means the Investor and its respective permitted successors and assigns. 1.1.6. The terms "register," registered and registration refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document by the SEC. 1.1.7. The term "Registrable Securities" means (i) Common Stock issuable or issued upon conversion of the Series A Preferred Stock which the Investor currently has the right to acquire by conversion or exchange of the Note, and (ii) any Common Stock of the Corporation issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clause (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's rights under this Section 1 are not duly assigned as provided herein or any Registrable Securities after such securities have been sold to the public or sold pursuant to Rule 144 promulgated under the Act. 1.1.8. The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. 1.1.9. The term "SEC" shall mean the Securities and Exchange Commission. 1.2. Request for Registration ------------------------ 1.2.1. Registration Rights. If the Corporation shall receive at ------------------- any time after one (1) year after the effective date (the "IPO Date") of the first registration statement for a public offering of securities of the Corporation (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan), a written request from Holders of fifty percent (50%) or more of the Registrable Securities then outstanding ("Initiating Holders"), requesting that the Corporation file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $20 million, then the Corporation shall: (a) within twenty (20) days of the receipt thereof, give written notice of such request to all Holders; and -2- (b) use reasonable and diligent efforts to cause such shares to be registered under the Act as soon as practicable, subject to the limitations of subsection 1.2.2. 1.2.2. Underwriting: Requirements. If the Initiating Holders intend -------------------------- to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to subsection 1.2.1 and the Corporation shall include such information in the written notice referred to in subsection 1.2.1.(a). The underwriter will be selected by the Corporation from among the lead underwriters in its initial public offering or from another investment banking firm of national repute and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder or other holder of securities of the Corporation to include securities in such registration shall be conditioned upon such Holder's or holders' participation in such underwriting and the inclusion of such Holder's or holders' securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder or holder) to the extent provided herein. All Holders and other holders of securities of the Corporation proposing to distribute their securities through such underwriting shall (together with the Corporation as provided in subsection 1.5.5) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Corporation shall so advise all Holders of Registrable Securities and other holders of registration rights which would otherwise be underwritten pursuant hereto, and the number of securities that may be included in the underwriting on behalf of each Holder or other holder shall be allocated on a pro-rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement with the Corporation; provided, however, that the numbers of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting and registration. For purposes of allocating securities to be included in any offering, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. To facilitate the allocation of shares in accordance with the above provisions, the Corporation may round the number of shares allocated to any Holder to the nearest 100 shares. 1.2.3. Notwithstanding the foregoing, if the Corporation shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of -3- Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Corporation shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Corporation may not utilize this right more than once in any twelve-month period. 1.2.4. In addition, the Corporation shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (a) Of more than fifty percent (50%) of the Registrable Securities eligible to make a demand pursuant to Section 1.2.1 in the two (2) year period following the IPO Date. (b) Of more than one (1) demand registration in the two (2) year period following the IPO Date. (c) After the Corporation has effected two (2) such registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective. (d) During the period starting with the date sixty (60) days prior to the Corporation's good faith estimate of the date of filing of, and ending on a date one hundred eighty (I80) days after the effective date of, (x) the Corporation's initial registered offering of its securities to the general public (other than a registration statement relating to either the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), (y) a previous registration subject to this Section 1.2 or (z) a previous registration subject to Section 1.3 hereof; provided, that, the Corporation is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (e) In any particular jurisdiction in which the Corporation would be required to execute a general consent to service of process, unless the Corporation is already subject to service in such jurisdiction and except as required by the Act; or (f) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below. 1.3. Corporation Registration. ------------------------ 1.3.1. Registration Rights. If (but without any obligation to do ------------------- so) the Corporation proposes to register (including for this purpose a registration effected by the -4- Corporation for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than the initial public offering of its securities or a registration relating solely to the sale of securities to participants in a Corporation stock plan, a registration pursuant to a Rule 145 transaction, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Corporation shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within fifteen (15) days after mailing of such notice by the Corporation in accordance with Section 4.5, the Corporation shall, subject to the provisions of paragraph 1.3.2 below, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 1.3.2. Underwriting Requirements. In connection with any offering ------------------------- involving an underwriting of shares of the Corporation's capital stock, the Corporation shall not be required under this Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Corporation and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Corporation. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Corporation that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Corporation shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering. Allocation of securities to be sold in any such offering shall be made on a pro- rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement now or hereafter entered into with the Corporation. For purposes of allocation of securities to be included in any offering, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. 1.4. Form S-3 Registration. In case the Corporation shall receive --------------------- from any Holder or Holders of Registrable Securities a written request or requests that the Corporation effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Corporation will: -5- 1.4.1. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and 1.4.2. as soon as practicable, effect such registration and all such qualifications and compliance as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Corporation; provided, however, that the Corporation shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: (1) if the Registrable Securities requested by all Holders to be registered pursuant to this Section 1.4 have an anticipated aggregate offering price to the public (before deducting any underwriter discounts, concessions or commissions) of less than $1,000,000; (2) if Form S-3 is not available for such offering by the Holders; (3) if the Corporation shall furnish to the Holders a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Corporation shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Corporation shall not utilize this right more than once in any twelve-month period; (4) if the Corporation has, within the twelve (12) month period preceding the date of such request, already effected one (1) or more registrations on Form S-3 pursuant to this Section 1.4; or (5) in any particular jurisdiction in which the Corporation would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. 1.4.3. Subject to the foregoing, the Corporation shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration pursuant to Sections 1.2. 1.5. Obligations of the Corporation. Whenever required under this ------------------------------ Section 1 to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible: 1.5.1. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to ninety (90) days or until the distribution contemplated in the Registration Statement has been completed; provided, however, that such 90-day period shall be extended -6- for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Corporation. 1.5.2. Prepare and file with the SEC such amendments including post-effective amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. 1.5.3. Furnish (at no cost) to the Holders such numbers of copies of a prospectus, including a preliminary prospectus and each amendment and supplement thereto, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 1.5.4. Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 1.5.5. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and performs its obligations under such an agreement. 1.5.6. Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 1.5.7. Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Corporation are then listed. 1.5.8. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 1.5.9. In the event of any underwritten public offering, cooperate with the selling Holders, the underwriters participating in the offering and their counsel in any due -7- diligence investigation reasonably requested by the selling Holders or the underwriters in connection therewith, and participate, to the extent reasonably requested by the managing underwriter for the offering or the selling Holder, in efforts to sell the Registrable Securities under the offering (including, without limitation, participating in "roadshow" meetings with prospective investors at reasonable times) that would be customary for underwritten primary offerings of a comparable amount of equity securities by the Corporation. 1.5.10. Notify each Holder of Registrable Securities covered by such registration statement: (i) when such registration statement or any post- effective amendment to the registration statement has been declared effective by the SEC, (ii) of any request by the SEC for amendments or supplements to such registration statement or prospectus or for additional information; and (iii) of the receipt by the Corporation of any notification from any public board or body with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. 1.5.11. Notify each Holder of Registrable Securities of the issuance of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose and the Corporation shall use its reasonable best efforts to prevent the issuance of any stop order, or if any order is issued, to obtain the withdrawal thereof. 1.5.12. Take all actions necessary to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities and the transfer thereof upon resale by the Holder of such Registrable Securities in accordance with the applicable prospectus. 1.5.13. Otherwise use its reasonable and diligent efforts in its performance of its obligations hereunder to comply with all applicable rules and regulations of the SEC and of state securities commissions and nay stock exchange or automated quotation system. 1.6. Furnish Information. ------------------- 1.6.1. It shall be a condition precedent to the obligations of the Corporation to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Corporation such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6.2. The Corporation shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 if, due to the operation of subsection 1.6.1, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of -8- shares or the anticipated aggregate offering price required to originally trigger the Corporation's obligation to initiate such registration as specified in subsection 1.2.1 or subsection 1.4.2, whichever is applicable. 1.7. Expenses of Demand, Corporation or S-3 Registration. All expenses --------------------------------------------------- (exclusive of underwriting discounts and commissions and stock transfer taxes) incurred in connection with registrations, filings or qualifications pursuant to this Section 1 including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Corporation and the reasonable fees and disbursements of one counsel for all selling Holders of Registrable Securities shall be borne by the Corporation. 1.8. Delay of Registration. No Holder shall have any right to obtain --------------------- or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.9. Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 1: 1.9.1. To the extent permitted by law, the Corporation will indemnify and hold harmless each Holder, the constituent partners and members, or officers, directors employees and affiliates of each Holder and, if such holder is a natural person his or her heirs, personal representatives and assigns, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Corporation of the Act, any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Corporation will pay to each such Holder, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action, as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 1.9.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Corporation (which consent shall not be unreasonably withheld), nor shall the Corporation be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance -9- upon and in conformity with written information fumished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, from whom the person asserting such losses, claims, damages, or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Corporation shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. 1.9.2. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Corporation, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Corporation within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, severally but not jointly, against any losses, claims, damages, or liabilities joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.9.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall Holder's cumulative, aggregate liability under this subsection 1.9.2, under Section 1.9.4, or under such sections together, exceed. the net proceeds received by such Holder from the offering out of which such Violation arises. 1.9.3. Promptly after receipt by an indemnified party under this Section l.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with one counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of -10- such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, except to the extent the failure to deliver notice prejudices its ability to defend such action. Any omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9. 1.9.4. If the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand, and of the indemnified party on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 1.9.5. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. In addition, any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party. 1.9.6. The obligations of the Corporation and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.10. Reports under Securities Exchange Act of 1934. With a view to --------------------------------------------- making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Corporation to the public without registration or pursuant to a registration on Form S-3, the Corporation agrees to: -11- 1.10.1. make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Corporation for the offering of its securities to the general public; 1.10.2. take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Corporation for the offering of its securities to the general public is declared effective; 1.10.3. file with the SEC in a timely manner all reports and other documents required of the Corporation under the Act and the 1934 Act; and 1.10.4. furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Corporation that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Corporation), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Corporation and such other reports and documents so filed by the Corporation, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.11. Assignment of Registration Rights. The rights to cause the --------------------------------- Corporation to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to, (i) in the case of any Holder that is a partnership, limited liability company or corporation, any current and former constituent partners, members, stockholders, affiliate funds and affiliates of that Holder, or (ii) in the case of any Holder, (x) a transferee or assignee of such securities who, after such assignment or transfer, holds at least twenty percent (20%) (as appropriately adjusted for all stock splits, dividends, combinations, reclassifications and other like transactions) of the Registrable Securities originally held by such transferring Holder, (y) a transferee or assignee who is a spouse, lineal descendant, adopted child, father, mother, brother or sister (each, a "Family Member") of Holder or (z) or to a trust, the beneficiaries of which are exclusively the Holder and/or Family Members, provided, in each case, that: (a) the Corporation is, within a reasonable time after such transfer, fumished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.12 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of -12- determining the number of shares of Registrable Securities held by a transferee or assignee of a holder of Registrable Securities, the holdings of "affiliates" (as defined in Rule 405 under the Act) of such holder, affiliated partnerships, constituent or retired partners of such partnerships (as well as Family Members of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with such partnership and its affiliated partnerships and other entities; provided, that, all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.12. "Market Stand-Off" Agreement. Each Holder hereby agrees that, ---------------------------- for a period of one (1) year following the IPO Date, it shall not directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Securities of the Corporation held by it at any time during such period. During such one (1) year period, each Holder agrees to provide to the underwriters of any public offering such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 1.12. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such one (1) year period. Notwithstanding the foregoing, the obligations described in this Section 1.12 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction. 1.13. Termination of Registration Rights. The right of any Holder to ---------------------------------- request registration or to include Registrable Securities in any registration pursuant to this Section 1 shall terminate upon the earlier of (i) the date which is five (5) years after the IPO Date, or (ii) such date as a public trading market shall exist for the Corporation's Common Stock and all shares of Registrable Securities beneficially owned and subject to Rule 144 aggregation by such Holder may immediately be sold under Rule 144 (without regard to Rule 144(k)) during any 90-day period, provided that such Holder is not then an "affiliate" of the Corporation within the meaning of Rule 144 and such Holder owns less than 1% of the then outstanding shares of Common Stock. 1.14. Limitations on Subsequent Registration Rights. From and after --------------------------------------------- the date of this Agreement, the Corporation shall not, without the prior written consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter into any agreement with any Holder or prospective holder of any securities of the Corporation granting registration -13- rights with respect to such securities, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included. 2. Covenants. --------- 2.1. Delivery of Financial Statements. The Corporation and the -------------------------------- Company shall deliver to each Holder of at least $10 million in principal amount of Notes and/or at least 1,200,000 shares as appropriately adjusted for all stock splits, dividends, combinations, reclassifications and other like transactions of Series A Preferred Stock and/or Common Stock (each, a "Major Holder"): 2.1.1. as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company or the Corporation commencing with the fiscal year ending December 31, 2000, an income statement for such fiscal year, a balance sheet of the Company or the Corporation and statement of stockholders' equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited by independent public accountants of nationally recognized standing selected by the Corporation; 2.1.2. as soon as practicable, but in any event within forty- five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company or the Corporation, if available, an unaudited profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter; 2.1.3. as soon as practicable, any written reports to the members or stockholders of the Company or the Corporation; or 2.1.4. such other information relating to the financial condition, business or corporate affairs of the Company or the Corporation as the Holder or any assignee of the Holder may from time to time request, provided, however, that the Corporation shall not be obligated under this subsection 2.1.4 or any other subsection of Section 2.1 to provide information which it deems in good faith to be a trade secret or similar confidential information. 2.2. Termination of Information Covenant. Unless otherwise ----------------------------------- specifically provided, the covenants set forth in this Section 2.1 shall terminate and be of no further force or effect (i) upon consummation of a public offering of the Corporation's Common Stock with total gross offering proceeds to the Corporation in excess of $50 million (a "Qualified Public Offering"), or (ii) as to the Investor, or transferee or assignee of the Investor, who holds less than $10 million in principal amount of Notes and/or 1,200,000 of the then outstanding shares -14- of the Series A Preferred Stock (or Common Stock issued upon conversion thereof). 2.3. Entravision Issuances. --------------------- 2.3.1. Right to Maintain Proportionate Ownership. ----------------------------------------- (a) In the event (i) the Company desires to sell and issue units of its membership interests or rights, options or other securities exercisable for or convertible into units of its membership interests (directly or indirectly) and whether or not such right or option or other security is immediately exercisable or convertible ("Units"), or (ii) the Corporation desires to sell and issue shares of its capital stock or rights, options or other securities exercisable for or convertible into shares of its capital stock (directly or indirectly) and whether or not such right or option or other security is immediately exercisable or convertible ("Shares") (with Units and Shares referred to collectively as the "Equity Securities" and the Company and the Corporation referred to herein collectively as "Entravision"), then Entravision shall first notify each Holder of the material terms of the proposed sale (including price and number of Equity Securities to be offered) and shall permit each Holder to acquire, at the time of consummation of such proposed issuance and sale and on such terms as are specified in Entravision's notice pursuant hereto, such number of Equity Securities proposed for issuance and sale as would be required to enable each to maintain its ownership rights in Entravision following such issuance, on an as-converted, and/or exercised, fully diluted percentage basis (without regard to reserved but unissued options), at the level maintained by it immediately prior to such proposed issuance. The Holders shall each have fifteen (15) days after the date of any such notice to elect by notice to Entravision to purchase such Equity Securities on such terms and at the time the proposed sale is consummated. For the purposes of determining the number of Equity Securities held by a Holder, transferee or assignee of Equity Securities the holdings of "affiliates" (as defined in Rule 405 under the Act), affiliated partnerships and other entities, constituent or retired partners of such partnerships (as well as Family Members of such partners or spouses who acquire Equity Securities by gift, will or intestate succession) shall be aggregated together with such affiliates, partnership and its affiliated partnerships and other entities. Each Holder shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates (or to assign such right of first offer to such partners and affiliates) in such proportions as it deems appropriate. (b) The right to maintain proportionate ownership set forth in this Section 2.3.1 shall not be applicable (A) to the issuance or sale of Equity Securities (or options or warrants therefor) approved by Entravision's Executive Committee, Board of Directors or Compensation Committee thereof to officers, directors, executive committee members, employees or consultants (pursuant to equity purchase, equity option or similar plans) for the primary purpose of soliciting or retaining their services, (B) to the issuance of Equity Securities upon conversion of Entravision's Equity Securities, provided such Equity Securities are outstanding on the date hereof or the issuance or sale was effected in accordance with this Section 2.3, (C) to the issuance of securities in connection with a bona fide business acquisition -15- of or by Entravision approved by the Executive Committee or the Board of Directors with a non-affiliated third party, whether by merger, consolidation, sale or transfer of assets, sale or exchange of Equity Securities or otherwise, (D) to the issuance of Equity Securities to financial institutions or lessors in connection with bona fide, arm's-length commercial credit arrangements, equipment financings or similar transactions approved by the Executive Committee or the Board of Directors, (E) to the issuance of Equity Securities in connection with any Equity Security split, Equity Security dividend or recapitalization by Entravision, (F) to the issuance of Equity Securities of Entravision (or options or warrants therefor) pursuant to strategic transactions with a non-affiliated third party approved by the Executive Committee or the Board of Directors with a primary purpose other than equity financing, (G) the issue of Equity Securities in connection with the conversion of convertible subordinated debt held by Univision Communications Inc., as of the date hereof or (H) securities issued in the IPO. (c) The right to maintain proportionate ownership set forth in this Section 2.3.1 shall terminate upon the earlier of immediately prior to the closing of a Qualified Public Offering or immediately prior to the closing of a "Qualified Acquisition" (defined below). For purposes of this Agreement, a "Qualified Acquisition" shall mean: (i) any consolidation or merger of Entravision with or into any other corporation or corporations following which the holders of Entravision's outstanding Equity Securities immediately before such consolidation or merger do not, immediately after such consolidation or merger, retain Equity Securities representing a majority of the voting power of the surviving corporation of such consolidation or merger or stock representing a majority of the voting power of an entity that wholly owns, directly or indirectly, the surviving entity of such consolidation or merger; (ii) the sale, transfer or assignment of Equity Securities of Entravision representing a majority of the voting power of all Entravision's outstanding voting Equity Securities by the holders thereof to an acquiring party in a single transaction or series of related transactions; (iii) any other sale, transfer or assignment of Equity Securities of Entravision representing over fifty percent (50%) of the voting power of Entravision's then outstanding voting Equity Securities by the holders thereof to an acquiring party; or (iv) the sale or transfer of all or substantially all of Entravision's assets. 2.4. Co-Sale Rights. -------------- 2.4.1. Transfer Notice. If at any time a Major Stockholder --------------- proposes to transfer Equity Securities to any person pursuant to an understanding with such person (a "Transfer"), then such Major Stockholder shall give Entravision and each Holder written notice of the Major Stockholder's intention to make the Transfer (the "Transfer Notice"), which Transfer Notice shall include (i) a description of the Equity Securities to be transferred (the "Offered Equity Securities"), (ii) the identity of the prospective transferee(s) and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall include a copy of any written proposal, term sheet or letter of intent or other agreement related to the proposed Transfer. -16- 2.4.2. Right to Participate. Each Holder which notifies the -------------------- Major Stockholder proposing to make a Transfer in writing within fifteen (15) days after receipt of the Transfer Notice shall have the right to participate in the sale of the Equity Securities on the same terms and conditions as specified in the Transfer Notice (such proposed terms and conditions, a "Purchase Offer"). To the extent a Holder exercises such right of participation in accordance with the terms and conditions set forth below, the number of Equity Securities that the Major Stockholder may sell pursuant to such Purchase Offer shall be correspondingly reduced. The right of participation of the Holders shall be subject to the following terms and conditions: (a) Each Holder may sell all or any part of that number of Holder Equity Securities equal to the product obtained by multiplying the aggregate number of Equity Securities covered by the Purchase Offer by a fraction, (x) the numerator of which shall be the number of Equity Securities (on an as-converted, as-exercised fully diluted basis) at the time owned by such Holder and (y) the denominator of which shall be the number of shares of Equity Securities (on an as converted, as-exercised fully diluted basis) at the time owned by all Holders electing to participate in the sale and all Major Stockholders participating in the sale. (b) Each Holder may effect its participation in the sale by first taking all steps necessary to convert the securities of Entravision currently held by such Holder into Class A Units, in the case of a Purchase Offer with respect to Units or Class A Common Stock, in the case of a Purchase Offer of Class A Common Stock or Class B Common Stock of the Corporation. Such Holder shall also deliver to the Major Stockholder, for transfer to the purchase offeror, an assignment separate from certificate, in the case of Class A Units, or one or more certificates, properly endorsed for transfer, in the case of Class A Common Stock, that represents the number of Equity Securities that the Holder elects to sell pursuant to Section 2.4.2. (c) To the extent that any prospective purchaser or purchasers prohibit such exercise of co-sale right or otherwise refuse to purchase Equity Securities from a Holder exercising its co-sale right hereunder, the Major Stockholder shall not sell to such prospective purchaser or purchasers any Equity Securities unless and until, simultaneously with such sale, the Major Stockholder shall purchase such Equity Securities from such Holder for the same consideration and on the same terms and conditions as the proposed transfer described in the Major Stockholder's Notice. 2.4.3. Mechanics of Transfer. The assignment or stock --------------------- certificates that the Holders deliver to the Major Stockholders pursuant to Section 2.4.2 shall be transferred by such Major Stockholder to the purchase offeror in consummation of the sale of the Major Stockholder's Equity Securities pursuant to the terms and conditions specified in the Transfer Notice, and the Major Stockholders shall promptly thereafter remit to each of the Holders that portion of the sale proceeds to which each Holder is entitled by reason of its participation in such sale. In the event that less than all the Equity Securities represented by such assignment -17- separate from certificate or the shares represented by such a stock certificate are sold pursuant to Section 2.4.1, the Seller shall instruct the Corporation or the Company to issue a new certificate to the Holder representing the shares not sold. 2.4.4. No Effect on Subsequent Rights. The exercise or non- ------------------------------ exercise of the rights of any Holder hereunder to participate in one or more sales of the Major Stockholders' Equity Securities made by a Major Stockholder shall not adversely affect the Holder's rights to participate in subsequent sales of Equity Securities by a Major Stockholder. Any person who acquires Equity Securities from a Major Stockholder must prior to or concurrently with any such transfer execute and deliver a written agreement satisfactory in form and substance to the Holders agreeing to be bound by the provisions of this Agreement. 2.5. Prohibited Transfers. -------------------- 2.5.1. Agreement Not to Transfer. Any attempt by a Major ------------------------- Stockholder to transfer any Equity Securities in violation of Section 2.4 shall be void and Entravision agrees that it will not effect such a transfer nor will it treat any alleged transferee in violation of Section 2.4 as the holder of such shares. 2.5.2. Repurchase. In the event a Major Stockholder should sell ---------- any Equity Securities in contravention of the participation rights of the Holders under Section 2.4 (a "Prohibited Transfer"), each Holder shall have the option to sell to such Major Stockholder a number of Registrable Securities equal to such Holder's pro rata share (as determined pursuant to Section 2.4.2(a) above), provided, that, the date of the Transfer Notice (if any) shall be understood to mean the date of the Prohibited Transfer, on the following terms and conditions: (a) The price per share at which such Equity Securities are to be sold to such Major Stockholder under this Section 2.5.2 shall be equal to the price per share paid by the third-party purchaser or purchasers of the Equity Securities (the "Contingent Purchaser") to such Major Stockholder. (b) Such Holder shall deliver to such Major Stockholder as applicable within ninety (90) days after such Holder has received notice from a Major Stockholder or otherwise become aware of the Prohibited Transfer, the assignment separate from certificate or the certificate or certificates representing Equity Securities to be sold, each certificate to be properly endorsed for transfer. (c) Such Major Stockholder shall, immediately upon receipt of the assignment or certificates for the Shares, pay the aggregate purchase price therefor, by certified check or bank draft made payable to the order of such Holder, and shall reimburse such Holder for any reasonable additional expenses, including reasonable legal fees and expenses, incurred in effecting such purchase and sale. -18- 2.5.3. Exclusions. The participation rights of the Holders set ---------- forth in Section 2.4 shall not pertain or apply to (i) any pledge of Equity Securities made by a Major Stockholder that creates only a security interest, (ii) any bona fide gift or estate planning transaction, (iii) any distribution by a Major Stockholder that is a partnership to the current or former partners or other interest holders of such Major Stockholder or (iv) any distribution or transfer by a Major Stockholder to any other Major Stockholders or to affiliate (as defined in Rule 405 under the Act) of such Major Stockholder or any other Major Stockholder, provided, that, in each case, the pledgee, transferee or donee shall furnish the Holders with a written agreement to be bound by and comply with all provisions of this Agreement applicable to the Major Stockholders. 2.6. Termination. The provisions of Sections 2.4 and 2.5 shall ----------- terminate immediately prior to the closing of a Qualified Public Offering or a Qualified Acquisition. 3. Series A Designee. In the period that at least fifty percent (50%) of ----------------- the shares of Series A Preferred Stock remain outstanding, each Major Stockholder shall vote (or shall cause to be voted) all shares of Equity Securities owned or controlled by such Major Stockholder (including any Equity Securities hereafter acquired), at any regular or special meeting of shareholders of the Corporation, shall take all action by written consent in lieu of such meeting of shareholders, and shall take all other actions necessary, to ensure that there shall be elected as a director and member of the Board of Directors of the Corporation one (1) individual (the "Series A Designee") designated by the holders of a majority of the outstanding Series A Preferred Stock. The Series A Designee shall be removed (with or without cause), if holders of a majority of the outstanding Series A Preferred Stock so request such removal by written notice to the Corporation. If stockholder approval is required for any removal hereunder, such removal shall be effected upon the affirmative vote or action by written consents of holders of a majority of the outstanding Series A Preferred Stock, and each Major Stockholder hereby agrees to vote all such shares then owned or held of record by him, or to take action by written consent, to effect such removal. In the event that a vacancy is created on the Board of Directors of the Corporation by the death, disability, retirement, resignation or removal (with or without cause) of the Series A Designee, each Major Stockholder hereby agrees to vote or take action by written consent, in each case, to the extent such Major Stockholder shall be entitled to do so, and to use his reasonable and diligent efforts to cause the remaining directors to vote or take action by written consent, for the election of a nominee to be designated by the holders of a majority of the outstanding Series A Preferred Stock. Each Major Stockholder covenants and agrees that, except as a result of transfers expressly permitted by, and pursuant to and in accordance with, this Agreement, such Major Stockholder will have sole voting power with respect to such Major Stockholder's Equity -19- Securities and will not grant any proxy with respect to such Equity Securities, enter into any voting trust or other voting agreement or arrangement with respect to such Equity Securities, enter into any voting trust or other voting agreement or arrangement with respect to such Equity Securities or grant any other rights to vote such Equity Securities inconsistent with the agreement to vote such Equity Securities as set forth herein. 4. Negative Covenants. ------------------ 4.1. Without the consent of Holders of the majority of the Registrable Securities, neither the Company nor the Corporation shall: (a) declare or pay any dividend, or make any other distribution or payment, on any Equity Securities (except on the Corporation's Series A Preferred Stock, dividends or distributions payable by the Company or the Corporation in their respective Equity Securities or dividends or distributions payable to the Company or the Corporation by any subsidiary thereof); (b) purchase, redeem or otherwise retire for value any Equity Securities of the Company or the Corporation (other than repurchase of Equity Securities from employees, officers, directors, consultants or other persons performing services for the Company or the Corporation or any subsidiary pursuant to arrangements approved by the Executive Committee of the Company or the Board of Directors of the Corporation, as the case may be, and in no event shall such arrangements include the purchase or acquisition of Equity Securities of the Company or the Corporation held by Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik or any affiliates or transferees thereof without the prior written consent of the holders of the majority of the Registrable Securities, which consent shall not be unreasonably withheld); (c) liquidate, dissolve or wind-up the Company or the Corporation; (d) enter into or engage in any transaction with an affiliate (as defined in the 1934 Act) on terms less advantageous to the Company or the Corporation than would be the case if such transaction had been effected with a non-affiliate; (e) issue or incur any indebtedness which violates the terms of that certain Amended and Restated Credit Agreement dated November 10, 1998, as amended from time to time, between the Company and Union Bank of California, N.A. or any successor agreement with the lead lender upon refinancing of such debt; (f) the Company shall not amend its Certificate of Formation or Operating Agreement and the Corporation shall not amend its Certificate of Incorporation or Bylaws in any fashion which will adversely affect the rights of the Investor; or -20- (g) the Company shall not consent to the amendment of the Exchange Agreement (or the First Restated Certificate of Incorporation or the First Amended and Restated Bylaws of the Corporation attached as exhibits to the Exchange Agreement) in a fashion that in adversely affect the rights of the Investor. 4.2. The provisions of this Section 4 shall terminate immediately prior to the closing of a Qualified Public Offering or Qualified Acquisition. 5. Affirmative Covenants. --------------------- 5.1. The Company and the Corporation will, and will cause each of their subsidiaries to, preserve and maintain its existence and its material rights, franchises, leases, licenses and privileges in the state of its incorporation or organization, except where the failure to do so would not have a material adverse effect on the assets, liabilities or properties of the Company or the Corporation and their subsidiaries taken as a whole (a "Material Adverse Effect"). 5.2. The Company and the Corporation will, and will cause each of their subsidiaries to, comply in all material respects with the requirements of all applicable laws, regulations, contracts and licenses, except where the failure to do so would not have a Material Adverse Effect. 5.3. The Company and the Corporation will file and pay all taxes and assessments when due (except in the case of a bona fide dispute), except where the failure to do so would not have a Material Adverse Effect. 5.4. The Company and the Corporation will complete the Roll-Up in accordance with the Exchange Agreement no later than the Interim Closing Deadline as defined in that certain Acquisition Agreement and Plan of Merger by and among the Company, the Corporation, ZSPN Acquisition Corporation and Z- Spanish Media Corporation and its stockholders of even date herewith. 5.5. The provisions of this Section 5 shall terminate immediately prior to the closing of a Qualified Public Offering or Qualified Acquisition. 6. Miscellaneous. ------------- 6.1. 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 and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any 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 -21- expressly provided in this Agreement. 6.2. Governing Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions of the State of Delaware or any other state. 6.3. Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6.4. Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.5. Notices. Except as otherwise provided herein, all notices and ------- other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of confirmed facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to a Holder or Major Stockholder, at such Holder's or Major Stockholder's address as set forth on Exhibit "A" hereto and (ii) if to the Corporation, at the address ----------- of its principal corporate offices (attention: Secretary), or at such other address as a party may designate by ten (10) days' advance written notice to the other party pursuant to the provisions above. 6.6. Expenses. Except as otherwise provided herein, if any action at -------- law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 6.7. Amendments and Waivers. Any term of this Agreement may be ---------------------- amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Corporation, the holders of a majority of the Registrable Securities then outstanding, and the holders of a majority of the Major Stockholders' Equity Securities then outstanding; provided, further, that the provisions of Section 3 hereof relating to the Series A Director Designee shall not be amended without the written consent of TSG for so long as TSG has the right to designate such Designee. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Corporation and each Major -22- Stockholder. 6.8. Aggregation of Stock. All Shares held or acquired by entities, -------------------- partnerships, former partnerships or "affiliates" (as defined in Rule 405 under the Act) of a Holder or Family Members of such Holder, or trusts the beneficiaries of which are affiliated entities or persons and/or Family Members of such Holder (collectively, "Affiliates") shall be aggregated together for the purpose of determining the availability or discharge of any rights of such Holder under this Agreement. Any Affiliate or Affiliate group shall be entitled to designate one person as representative of such group for the purpose of exercising any right or undertaking any obligation of such group hereunder (including without limitation voting any Shares held by any such Affiliate or member of any such Affiliate group), and the Company and the Corporation shall be entitled to rely on the representative for such purposes. 6.9. Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.10. Entire Agreement: Amendment: Waiver. This Agreement (including ----------------------------------- the Exhibits hereto, if any) constitutes the full and entire understanding and Agreement between the parties with regard to the subjects hereof and thereof. 6.11. Specific Performance: Proxies. The parties hereto agree that ----------------------------- irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with these specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, if any provision in this Agreement shall constitute the granting of a proxy, the parties hereto agree that such proxy shall be deemed to be coupled with an interest. [Remainder of Page Intentionally Left Blank] -23- IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. ENTRAVISION COMMUNICATIONS CORPORATION By:_________________________________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer By:_________________________________________________________ Jeanette L. Tully, Chief Financial Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By:_________________________________________________________ Walter F. Ulloa, Chairman and Chief Executive Officer By:_________________________________________________________ Jeanette L. Tully, Chief Financial Officer TSG CAPITAL FUND III, L.P. By:_________________________________________________________ Name:_______________________________________________________ Title:______________________________________________________ ____________________________________________________________ Walter F. Ulloa ____________________________________________________________ Philip C. Wilkinson ____________________________________________________________ Paul A. Zevnik [Counterpart Signature Page to Investor Rights Agreement] EXHIBIT "C" CONVERTIBLE PROMISSORY NOTE --------------------------- THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. SUBORDINATED CONVERTIBLE PROMISSORY NOTE $90,000,000 April 20, 2000 New York, New York FOR VALUE RECEIVED, Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), promises to pay to TSG Capital Fund III, L.P., a Delaware limited partnership (the "Holder"), or its registered assigns, the principal sum of Ninety Million Dollars ($90,000,000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this subordinated convertible promissory note ("Note") on the unpaid principal balance calculated in accordance with Section 2 hereof. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder from the date of this Note as set forth above (the "Effective Date"), shall be due and payable on the earlier of (i) the fourth (4/th/) anniversary of the Effective Date, or (ii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by the Holder or become automatically due and payable in accordance with Section 4 hereof. This Note is issued pursuant to the Note Purchase Agreement (as defined below). All payments of principal and interest hereunder shall be made by wire transfer to the account set forth on Schedule "A" or another bank account designated in writing by Holder. 1. Definitions. As used in this Note, the following capitalized terms ----------- have the following meanings: (a) "Company" includes the limited liability company initially executing this Note and any Person which shall succeed to or assume the obligations of the Company under this Note. (b) "Certificate" shall mean the First Amended and Restated Certificate of Incorporation of the Corporation as amended and/or restated and effective immediately prior to the exchange of this Note. (c) "Change of Control" means the occurrence of any event whereby a person or group of persons acting in concert (other than current owners) shall (i) become (whether by merger, consolidation, or transfer, redemption or issuance of capital stock, limited liability company interests, other Equity Securities or otherwise) the beneficial owners (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities constituting more than fifty percent (50%) of the combined voting power of or the economic equity interest in the then-outstanding Equity Securities of the Company (or any surviving or resulting Person) or (ii) acquire assets constituting all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. (d) "Class A Units" shall mean the Class A Units evidencing a membership interest in the Company in accordance with the terms of the Certificate of Formation and operating agreement of the Company, as amended from time to time. (e) "Corporation" shall mean Entravision Communications Corporation, a Delaware corporation. (f) "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, membership or partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. (g) "Event of Default" has the meaning given in Section 5 hereof. (h) "Holder" shall mean the person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note. (i) "Indebtedness" means all amounts owing with respect to indebtedness for borrowed money (but excluding the deferred purchase price of property or assets and accounts receivable or similar items arising in the ordinary course of business). (j) "IPO" means a public offering of common stock of the Corporation, pursuant to a registration statement that is declared effective under the Securities Act that results in net proceeds to the Corporation of not less than Fifty Million Dollars ($50,000,000). (k) "Make-Whole Premium" shall be an additional amount of interest payable by the Company to the Holder solely in the event of a default pursuant to Section 5(c) below in an amount equal to the difference between (i) interest otherwise paid pursuant to the terms of this Note and (ii) an amount equal to a thirty percent (30%) return, compounded annually, on the principal amount of this Note for the period between the Effective Date and the date all amounts due under this Note are paid. (l) "Note Purchase Agreement" shall mean the Note Purchase Agreement dated April 20, 2000 between the Company and the Holder (as amended, modified or supplemented from time to time). (m) "Obligations" shall mean and include all loans, advances, debts, liabilities and financial obligations, howsoever arising, owed by the Company to the Holder, now existing -2- or hereafter arising under or pursuant to the terms of this Note, including, without limitation, all interest, fees, charges, expenses, and attorneys' fees and costs. (n) "Operating Agreement" shall mean the Operating Agreement of the Company, as amended from time to time. (o) "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority. (p) "Roll-Up" means the closing of that certain exchange transaction contemplated by the Exchange Agreement dated April 20, 2000, by and among the Company, its members and Univision Communications, Inc. (q) "Securities Act" shall mean the Securities Act of 1933, as amended. (r) "Senior Indebtedness" shall mean, unless expressly subordinated to or made on a parity with the amounts due under this Note, the principal of (and premium, if any), unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement and other amounts due in connection with, (i) secured or unsecured indebtedness or financial obligation of the Company or its Subsidiaries, to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending or financial institutions regularly engaged in the business of lending money or for reimbursement obligations, or letters of credit (excluding debt that is convertible or exercisable into equity through venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), and (ii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or (iii) any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor. (s) "Subsidiary" shall mean (a) any corporation of which more than fifty percent (50%) of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation is at the time directly or indirectly owned or controlled by the Company, (b) any partnership, limited liability company, joint venture, or other association of which more than fifty percent (50%) of the Equity Securities having the power to vote, direct or control the management of such partnership, limited liability company, joint venture or other association is at the time directly or indirectly owned and controlled by the Company, (c) any other entity included in the financial statements of the Company on a consolidated basis. (t) "Transaction Documents" shall mean this Note and the Note Purchase Agreement, and any other documents that may be exchanged between the Company and the Holder in connection with the issuance of the Note. -3- 2. Interest. The interest rate to be applied to the unpaid principal -------- balance of this Note shall be eight and one-half percent (8.5%) per annum and all accrued interest shall be payable annually in cash on each anniversary of the Effective Date and on each date on which a payment of principal is due hereunder. In the event this Note is converted into Class A Units of the Company or automatically exchanged into Series A Preferred Stock of the Corporation in accordance with Section 8, all interest accrued under this Note shall be payable at the option of the Company (or the Corporation) either in cash or in additional Class A Units or Series A Preferred Stock, valued as set forth in Section 8 below and shall be paid at the time of conversion or exchange. In the event of an occurrence of an Event of Default pursuant to Section 5(c) below, the Company shall be obligated to pay the Holder additional interest in an amount equal to the Make-Whole Premium. 3. Prepayment. Upon twenty (20) days prior written notice to the Holder ---------- and on a date which is at least twelve (12) months after the Effective Date of this Note, the Company may prepay this Note in whole or in part, unless the Holder elects to convert the Note in accordance with Section 8(a) of this Note. No prepayment of this Note may be made at any time prior to the date twelve (12) months after the Effective Date. 4. Certain Covenants. While any amount is outstanding under the Note, ----------------- without the prior written consent of the Holder: (a) Dividends, Redemptions, Etc. Neither the Company nor the Corporation nor any of their Subsidiaries shall (i) pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities, other than the repurchase of shares of common stock under option agreements or restricted stock purchase agreements with employees, directors or consultants pursuant to arrangements approved by the Executive Committee of the Company or the Board of Directors of the Corporation, as the case may be, and in no event shall such arrangements include the purchase or acquisition of Equity Securities of the Company or the Corporation held by Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik or any affiliates or transferees thereof without the prior written consent of the Holder, which consent shall not be unreasonably withheld; (iii) return any capital to any holder of its Equity Securities; (iv) make any distribution of assets to any holder of its Equity Securities; or (v) set apart any sum for any such purpose; provided, however, that any Subsidiary may pay cash dividends to the Company. (b) Incur Indebtedness. The Company or any Subsidiaries shall not incur any Indebtedness which violates the terms of that certain Amended and Restated Credit Agreement dated November 10, 1998, as amended from time to time, between the Company and Union Bank of California, N.A. or any successor agreement with the lead lender upon refinancing of such debt. (c) Liquidation. The Company shall not liquidate, dissolve or wind-up its affairs. -4- (d) Amend Organizational Documents. The Company shall not amend its Certificate of Formation or Operating Agreement and the Corporation will not amend its Certificate of Incorporation or Bylaws in a fashion which will adversely affect the rights of the Holder of this Note or the holders of the Series A Preferred Stock issuable upon conversion or exchange of this Note. (e) Amend the Exchange Agreement. The Company shall not consent to the amendment of the Exchange Agreement (or the First Restated Certificate of Incorporation or First Amended and Restated Bylaws of the Corporation attached as exhibits to the Exchange Agreement) in a fashion which will adversely affect the rights of the Holder of this Note or the holders of the Series A Preferred Stock issuable upon conversion or exchange of this Note. 5. Events of Default. The occurrence of any of the following shall ----------------- constitute an "Event of Default" under this Note and the other Transaction Documents. Promptly upon the occurrence thereof, the Company shall provide the Holder with written notice of the occurrence of any Event of Default hereunder or any event of default with respect to any Senior Indebtedness. (a) Failure to Pay. The Company shall fail to pay (i) when due any principal payment on the due date hereunder or (ii) any interest or other payment required under the terms of this Note or any other Transaction Document on the date due and such failure continues for five (5) days; or (b) Voluntary Bankruptcy or Insolvency Proceedings. The Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, (vii) becomes subject to an involuntary bankruptcy case or other proceedings seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect which is not dismissed within ninety (90) days after the commencement thereof, or (viii) take any action for the purpose of effecting any of the foregoing; or (c) Closing of Roll-Up. The Company shall fail to close the Roll-Up by the Interim Closing Deadline, as defined in that certain Acquisition Agreement and Plan of Merger by and among the Company, the Corporation, ZSPN Acquisition Corporation, Z-Spanish Media Corporation and its stockholders of even date herewith (the "Merger Agreement"). -5- 6. Rights of the Holder Upon Default. Upon the occurrence or existence --------------------------------- of any Event of Default other than as described in Section 5(b) above, and at any time thereafter during the continuance of such Event of Default, the Holder may, by written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding; provided that if an Event of Default under Section 5(b) shall occur no declaration or notice by the Holder shall be necessary and such Event of Default shall occur automatically. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both. 7. Subordination. The indebtedness evidenced by this Note is hereby ------------- expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all of Senior Indebtedness of the Company or its Subsidiaries. (a) Insolvency Proceedings. If there shall occur any receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the Company, (i) no amount shall be paid by the Company in respect of the principal of, interest on or other amounts due with respect to this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the Holder of this Note which shall assert any right to receive any payments in respect of the principal of and interest on all of the Senior Indebtedness then outstanding. (b) Default on Senior Indebtedness. If there shall occur an event of default which has been declared in writing with respect to any Senior Indebtedness, as defined therein, or in the instrument under which it is outstanding, permitting the holder to accelerate the maturity thereof and the Holder shall have received written notice thereof from the holder of such Senior Indebtedness or the Company, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note. (c) Further Assurances. By acceptance of this Note, the Holder agrees to execute and deliver customary forms of subordination agreements requested from time to time by the holders of Senior Indebtedness, and as a condition to the Holder's rights hereunder, the Company may require that Holder execute such forms of subordination agreements; provided that such forms shall not impose on the Holder terms less favorable than those provided herein. The Holder undertakes and agrees for the benefit of the holders of the Senior Indebtedness to execute, verify, deliver and file any proofs of claim that such holders may at any time require to -6- prove and realize upon any rights or claims pertaining to the Note and to effectuate the full benefit of the subordination contained herein. Upon the failure of the Holder to do so, such holders of Senior Indebtedness shall be deemed to be irrevocably appointed as the agent and attorney-in-fact of the Holder to execute, verify, deliver and file any such proofs of claim. (d) No Impairment. Subject to the rights, if any, of the holders of Senior Indebtedness under this Section 7 to receive cash, securities or other properties otherwise payable or deliverable to the Holder, nothing contained in this Section 7 shall impair, as between the Company and the Holder, the obligation of the Company, subject to the terms and conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the same become due and payable, or shall prevent the Holder, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law. The provisions of this Section 7 shall not apply to or in any manner restrict a conversion or exchange of the Notes under Section 8 hereof. (e) Reliance of the Holders of Senior Indebtedness. The Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of each holder of Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the creation of the Indebtedness evidenced by this Note, and each such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness. A right of the holders of the Senior Indebtedness to enforce subordination as herein provided shall not at any time or in any way be affected or impaired by any failure to act on the part of the Company with the holders of the Senior Indebtedness, or by any non-compliance by the Company or any of its Subsidiaries with any of the terms, provisions or covenants of the Transaction Documents, regardless of any knowledge thereof, the holders of the Senior Indebtedness may have or otherwise be charged with. 8. Conversion. ---------- (a) Voluntary Conversion. The Holder has the right, at the Holder's option at any time following December 31, 2000 (or at any time prior to December 31, 2000, solely in connection with the exercise of the Holder's co-sale rights pursuant to Section 2.4 of the Investor Rights Agreement), at any time prior to payment in full of this Note or exchange pursuant to Section 8(b) below to convert the Note at the office of the Company, into the number of Class A Units of the Company which is equal to the quotient obtained by dividing (i) the entire unpaid principal amount of this Note by (ii) the Note Conversion Price. For purposes of this Section 8(a), the "Note Conversion Price" shall be $198.37. (b) Automatic Exchange. The entire unpaid principal amount of this Note shall be automatically exchanged into Series A Preferred Stock of the Corporation concurrently with the closing of the Roll-Up. The number of shares of Series A Preferred Stock into which -7- this Note shall be exchanged in the event of an automatic exchange pursuant to this Section 8(b) shall be equal to the entire unpaid principal amount of this Note divided by an amount equal to the lower of (i) 115% of the Entravision Share Consideration (as defined in the Merger Agreement) or (ii) the greater of ninety three percent (93%) of the price per share of Class A Common Stock of the Corporation issued in the IPO, or the Entravision Share Price (as defined in the Merger Agreement). (c) Note Conversion Price Adjustments for Certain Dilutive Issuances, Splits and Combinations. The Note Conversion Price shall be subject to adjustment from time to time as follows: (i) (1) If the Company shall issue, after the Effective Date, any Additional Units (as defined below) without consideration or for a consideration per share less than the Note Conversion Price in effect immediately prior to the issuance of such Additional Units, the Note Conversion Price in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Note Conversion Price by a fraction, the numerator of which shall be the number of Units outstanding immediately prior to such issuance plus the number of Units that the aggregate consideration received by the Company for such issuance (including Units deemed to be issued pursuant to Sections 8(c)(i)(5)(a) or (b)) would purchase at such Note Conversion Price; and the denominator of which shall be the number of Units outstanding immediately prior to such issuance (including Units deemed to be issued pursuant to Sections 8(c)(i)(5)(a) or (b)) plus the number of such Additional Units. (2) No adjustment of the Note Conversion Price shall be made in an amount less than One Cent ($0.01), provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Sections 8(c)(i)(5)(c) and (5)(d) below, no adjustment of such Note Conversion Price pursuant to this Section 8(c)(i) shall have the effect of increasing the Note Conversion Price above the Note Conversion Price in effect immediately prior to such adjustment. (3) In the case of the issuance of Units for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof. (4) In the case of the issuance of the Units for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Executive Committee of the Company in good faith irrespective of any accounting treatment. -8- (5) In the case of the issuance (whether before, on or after the Effective Date) of options to purchase or rights to subscribe for Units, securities by their terms convertible into or exchangeable for Units or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this Section 8(c)(i) and Section 8(c)(ii) below: (a) The aggregate maximum number of Units deliverable upon exercise (to the extent then exercisable) of such options to purchase or rights to subscribe for Units shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 8(c)(i)(3) and 8(c)(i)(4) above), if any, received by the Company upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights for the Units covered thereby. (b) The aggregate maximum number of Units deliverable upon conversion of or in exchange (to the extent then convertible or exchangeable) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections 8(c)(i)(3) and 8(c)(i)(4) above). (c) In the event of any change in the number of Units deliverable or in the consideration payable to the corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, without limitation, a change resulting from the antidilution provisions thereof, the Note Conversion Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Units or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. (d) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Note Conversion Price, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of Units (and convertible or exchangeable securities which remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. -9- (e) The number of Units deemed issued and the consideration deemed paid therefor pursuant to Sections 8(c)(i)(5)(a) and (b) above shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Section 8(c)(i)(5)(c) or (d) above. (ii) "Additional Units" shall mean any Units issued (or deemed to have been issued pursuant to Section 8(c)(i)(5) above) by the Company after the Effective Date other than: (1) Units issued pursuant to a transaction described in Section 8(c)(iii) below; (2) Units issued upon conversion of the Note; (3) Units issued to banks, lenders and equipment lessors in connection with debt financings or equipment leases; (4) Units issued for consideration other than cash in connection with mergers, consolidations, acquisitions of assets and other acquisitions or strategic transactions with non-affiliated third parties as approved by the Executive Committee of the Company; (5) Units issued to members, Executive Committee members, officers, employees and consultants pursuant to an equity incentive plan or arranged approval by the Company's Executive Committee up to a maximum of fifteen percent (15%) of the equity of the Company on a fully-diluted basis; or (6) Units issued by way of dividend or other distribution on Units for which an adjustment is made under Section 8(c)(iii) below. (iii) In the event the Company should at any time or from time to time after the Effective Date fix a record date for the effectuation of a split or subdivision of the outstanding Units or the determination of the holders of Units entitled to receive a dividend or other distribution payable in additional Units or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional Units (hereinafter referred to as "Unit Equivalents") without payment of any consideration by such holder for the additional Units or the Unit Equivalents (including the additional Units issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Note Conversion Price shall be appropriately decreased so that the number of Units issuable on conversion of the Note shall be increased in proportion to such increase of the aggregate number of Units outstanding and those issuable with respect to such Unit Equivalents with the number of Units issuable with respect to Unit -10- Equivalents determined from time to time in the manner provided for deemed issuances in Section 8(c)(i)(5) above. (iv) If the number of Units outstanding at any time after the Effective Date is decreased by a combination of the outstanding Units, then, following the record date of such combination, the Note Conversion Price shall be appropriately increased so that the number of Units issuable on conversion of the Note shall be decreased in proportion to such decrease in outstanding Units. (d) Recapitalizations. If at any time or from time to time there shall be a recapitalization, reclassification of the Units, or a merger, transfer, consolidation or exchange in respect of the Units and does not constitute a Change in Control (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 8 or Section 9) provision shall be made so that the Holders of the Note shall thereafter be entitled to receive upon conversion of the Note the number of Units or other securities or property of the Company or otherwise, to which a Holder of Units deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 8 with respect to the rights of the Holders of the Note after the recapitalization to the end that the provisions of this Section 8 (including adjustment of the Note Conversion Price then in effect and the number of Units purchasable upon conversion of the Note) shall be applicable after that event as nearly equivalent as may be practicable. (e) Conversion Procedure. (i) Conversion Pursuant to Section 8(a). Before the Holder shall be entitled to convert this Note into Class A Units, it shall surrender this Note, duly endorsed, at the office of the Company and shall give written notice by registered or certified mail, postage prepaid, to the Company at its principal corporate office, of the election to convert the same pursuant to Section 8(a), and shall state therein the name or names in which the Class A Units are to be issued. The Company shall, as soon as practicable thereafter, issue the Class A Units to which the Holder shall be entitled upon conversion. The conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of this Note, and the Person or Persons entitled to receive the Class A Units upon such conversion shall be treated for all purposes as the record holder or the Holders of such Class A Units as of such date. Upon such conversion, the Holder shall be deemed to be admitted as a member of the Company concurrently with such conversion, subject to the execution by the Holder of the Operating Agreement of the Company, as amended, evidencing such Holder's agreement to be bound by the terms, conditions and restrictions of such Operating Agreement, as amended. The Company will take all other actions and execute all other documents as reasonably necessary to admit the Holder as a member of the Company. -11- (ii) Exchange Pursuant to Section 8(b). If this Note is automatically exchanged, the Company shall give at least five (5) days written notice which shall be delivered to the Holder at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the exchange to be effected, the amount of Series A Preferred Stock to be issued upon exchange, the date on which such exchange is expected to occur and calling upon the Holder to surrender to the Company, in the manner and at the place designated, the Note. Upon receipt of such notice, the Holder shall surrender this Note on the date of the Exchange, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to the Holder at such principal office a certificate or certificates for the Series A Preferred Stock to which the Holder shall be entitled upon such exchange (bearing such legends as are required by the Note Purchase Agreement and applicable state and federal securities laws in the reasonable opinion of counsel to the Company), together with any other securities and property to which the Holder is entitled upon such exchange under the terms of this Note, including, without limitation, all accrued and unpaid interest. Any exchange of this Note pursuant to Section 8(b) shall be deemed to have been made immediately prior to the close of business on the date of surrender of the Note, and on and after such date the Persons entitled to receive the Series A Preferred Stock issuable upon such exchange shall be treated for all purposes as the record holder of such Series A Preferred Stock. (f) Fractional Shares; Effect of Conversion or Exchange. The Company may, but shall not be obligated to, issue any fractional Class A Units or shares of Series A Preferred Stock upon conversion or exchange of this Note. In the event that the Company elects not to issue fractional shares, the Company shall round the number of Units or shares to the nearest whole Unit or share, provided that if such rounding would result in the Holder receiving less than ninety nine point nine percent (99.9%) of the amount of such Common Stock to which he is entitled, pursuant to this Section 8, such fractional shall be rounded up to the next whole Unit or share. (g) No Impairment. The Company will not, by amendment of its Operating Agreement or Certificate of Formation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of Equity Securities or other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times, in good faith, assist in carrying out all of the provisions of this Section 8 and the undertaking of all action as may be necessary or appropriate in order to protect the conversion or exchange rights of the Holder against impairment. 9. Change of Control. Upon the occurrence of a Change of Control, the ----------------- Holder shall have the right to require the Company to repurchase all or any part (equal to One Thousand Dollars ($1,000) or an integral multiple thereof) of the Note pursuant to the offer described below (the "Change of Control Offer") at an offer price equal to the greater of: (i) the aggregate -12- principal amount of Note plus accrued and unpaid interest thereon or (ii) the amount the Holder would have received if the Holder had converted this Note into Class A Units of the Company pursuant to the provisions of Section 8(a) above immediately prior to such Change of Control. At least thirty (30) days prior to any Change of Control, the Company shall mail a notice (the "Change of Control Notice") to the Holder describing the transaction to constitute the Change of Control offering to repurchase the Note concurrently with the completion of the Change of Control (the "Payment Date"). The Holder shall provide written notice to the Company detailing the extent to which it accepts such repurchase offer within twenty-five days of the Change of Control Notice. Upon surrender of the Note, duly endorsed and delivered to the Company's principal office, the Company shall pay all amounts due the Holder pursuant to such repurchase offer on the Payment Date. 10. Successors and Assigns. Subject to the restrictions on transfer ---------------------- described in the Note Purchase Agreement, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 11. Assignment by the Company. Neither this Note nor any of the rights, ------------------------- interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Holder. 12. Waiver. The Company hereby waives presentment, demand, or protest and ------ any notice of any kind in connection with the delivery, acceptance, performance, default, acceleration, or collection of this Note. 13. Notices. Any notice, request or other communication required or ------- permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by recognized overnight courier or personal delivery at the respective addresses of the parties as set forth in the Note Purchase Agreement or on the register maintained by the Company. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when received. 14. No Intent of Usury. Nothing contained in this Note or in the ------------------ Agreement shall be deemed to require the payment by the Company or the retention by the Holder of interest in excess of the maximum legal rate (the "Maximum Legal Rate"). All agreements between the Holder and the Company pertaining to the obligation evidenced hereby (the "Loan") are expressly limited so that in no contingency or event, whether by reason of acceleration of the maturity of the Loan or otherwise, shall the amount paid or agreed to be paid to the Holder for the use, forbearance, or detention of money to be loaned hereunder exceed the Maximum Legal Rate. If, under any circumstance whatsoever, the fulfillment of any provision of this Note or the Note Purchase Agreement shall involve transcending the limits of validity prescribed by law, then, ipso facto, the obligation to be fulfilled by the Company shall be reduced to the limit of such validity. This provision shall control every provision of all agreements between the -13- Company and the Holder. In the event at any time the interest paid shall exceed the Maximum Legal Rate, the excess amount shall be deemed to be held in trust by the Holder for the exclusive use and benefit of the Company; provided, however, that such amounts held in trust may be applied to interest or other lawful consideration payable under the terms of this Note and the Note Purchase Agreement if such amounts can be so applied without violating applicable laws and without exceeding the Maximum Legal Rate. The Holder may commingle any such amounts with its own funds. If at the time the Note is paid, the total amount deemed to be interest under applicable laws exceeds the Maximum Legal Rate, the maximum liability of the Company shall be expressly limited to the legal maximum amounts, and in the event any excess sums have been paid or are payable such amounts shall be promptly repaid or credited to the Company. In the event the interest or other consideration payable by the Company hereunder is exempt from applicable usury statutes, or for any other reason is not limited by law, none of the provisions of this paragraph shall be construed so as to limit the interest or other consideration payable under the terms of this Note or the Agreement. 15. Payment. Payment shall be made in lawful tender of the United States. ------- 16. Expenses. If any action of law or in equity is necessary to enforce -------- or interpret the terms of this Note, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which said party may be entitled. 17. Governing Law; Submission to Jurisdiction; Venue. This Note shall be ------------------------------------------------ governed by, and construed in accordance with, the law of the State of New York. All judicial proceedings brought against the Company or any Holder with respect to this Note shall be brought exclusively in any state or federal court of competent jurisdiction in New York County, New York, and by execution and delivery of this Note the Company accepts, the exclusive jurisdiction of the aforesaid courts for such purpose. The Company hereby waives any claim that New York County, New York is an inconvenient forum or an improper forum based on lack of venue. The exclusive choice of forum for the Company as set forth in this Section 17 will not be deemed to preclude the enforcement by the Holder of any judgment obtained in any other forum or the taking by the Holder of any action to enforce the same in any other appropriate jurisdiction. [Remainder of Page Intentionally Left Blank] -14- IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above. "Company" ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By:__________________________________________________ Walter F. Ulloa Chairman and Chief Executive Officer By:__________________________________________________ Jeanette L. Tully, Chief Financial Officer [Signature Page to Subordinated Convertible Promissory Note] -15- SCHEDULE "A" All payments under the Promissory Note shall be made as follows: The Chase Manhattan Private Bank 1211 Avenue of the Americas, 38/th/ Floor New York, New York 10036 Contact: James Burke (phone: 212-789-6239) ABA# 021000021 Account: TSG Capital Fund III, L.P. Account number 967-737850 -16- EXHIBIT "D" OPINION OF COUNSEL ------------------ April 20, 2000 TSG Capital Fund III, L.P. 177 Broad Street, 12/th/ Floor Stamford, Connecticut 06901 Ladies and Gentlemen: Reference is made to that certain Convertible Subordinated Note Purchase Agreement of even date herewith (the "Agreement"), complete with all listed schedules and exhibits to the Agreement (collectively, the "Transaction Documents"), by and between Entravision Communications Company, L.L.C. a Delaware limited liability company (the "Company"), Entravision Communications Corporation, a Delaware corporation (the "Corporation," collectively, the Company and the Corporation are referred to herein as "Entravision"), and TSG Capital Fund, III, L.P., a Delaware limited partnership, ("TSG" or "Investor"). This opinion is rendered to you pursuant to Section 4.6 of the Agreement, and all terms used herein have the meanings defined for them in the Agreement unless otherwise defined herein. We have acted as counsel for Entravision in connection with the negotiation of the Transaction Documents, including the Entravision Communications Subordinated Convertible Promissory Note, of even date herewith (the "Note"), by and between the Company and TSG. As such counsel, we have made such legal and factual examinations and inquiries as we have deemed advisable or necessary for the purpose of rendering this opinion. In addition, we have examined originals or copies of such corporate records of Entravision, certificates of public officials and such other documents which we consider necessary or advisable for the purpose of rendering this opinion. In such examination we have assumed the genuineness of all signatures on original documents, the authenticity and completeness of all documents submitted to us as originals, the conformity to original documents of all copies submitted to us and the due execution and delivery of all documents (except as to due execution and delivery by Entravision) where due execution and delivery are a prerequisite to the effectiveness thereof. As used in this opinion, the expressions "to our knowledge," "known to us" or similar language with reference to matters of fact mean that, after an examination of documents made TSG Capital Fund III, L.P. April 20, 2000 Page 2 available to us by Entravision, and after inquiries of officers of Entravision, but without any further independent factual investigation, we find no reason to believe that the opinions expressed herein are factually incorrect. Further, the expressions "to our knowledge," "known to us" or similar language with reference to matters of fact refer to the current actual knowledge of attorneys of this firm who have worked on matters for Entravision. Except to the extent expressly set forth herein or as we otherwise believe to be necessary to our opinion, we have not undertaken any independent investigation to determine the existence or absence of any fact, and no inference as to our knowledge of the existence or absence of any fact should be drawn from our representation of Entravision or the rendering of the opinion set forth below. For purposes of this opinion, we are assuming that you have all requisite power and authority, and have taken any and all necessary corporate or partnership action, to execute and deliver the Transaction Documents, and we are assuming that the representations and warranties made by the Investor in the Transaction Documents and pursuant thereto are true and correct. We are also assuming that the Investor has purchased the Note for value, in good faith and without notice of any adverse claims within the meaning of the New York Uniform Commercial Code. The opinions hereinafter expressed are subject to the following qualifications: (a) We express no opinion as to the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar federal or state laws affecting the rights of creditors. (b) We express no opinion as to the effect of rules of law governing specific performance, injunctive relief or other equitable remedies (regardless of whether any such remedy is considered in a proceeding at law or in equity). (c) We express no opinion as to compliance with the anti-fraud provisions of applicable securities laws. (d) We express no opinion as to the enforceability of the indemnification provisions of Section 1.9 of that certain Investor Rights Agreement which is attached as Exhibit "D" to the Agreement to the extent the provisions thereof may be subject to limitations of public policy and the effect of applicable statutes and judicial decisions. (e) We express no opinions as to usury laws or any similar such laws of any state. (f) We are members of the Bar of the State of New York and the State of California and we express no opinion as to any matter relating to the laws of any jurisdiction other than the federal laws of the United States of America and the laws of the States of New York, California and Delaware. To the extent this opinion addresses applicable securities laws of states other than TSG Capital Fund III, L.P. April 20, 2000 Page 3 the State of New York, we have not retained nor relied on the opinion of counsel admitted to the bar of such states, but rather have relied on compilations of the securities laws of such states contained in reporting services presently available to us. Based upon and subject to the foregoing, we are of the opinion that: 1. The Company is a limited liability company duly organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has requisite power to own and operate its properties and assets, and to carry on its business as presently conducted. 2. The Corporation is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Corporation has requisite corporate power to own and operate its properties and assets, and to carry on its business as presently conducted. 3. The Company has all requisite legal and corporate power to execute and deliver the Transaction Documents, to sell and issue the Note thereunder, to issue the Class A Units issuable upon voluntary conversion of the Note and to carry out and perform its obligations under the terms of the Transaction Documents. 4. The Corporation has all requisite legal and corporate power to execute and deliver the Transaction Documents, to issue the Series A Preferred Stock issuable upon automatic exchange of the Note and the Common Stock issuable on conversion of the Series A Preferred Stock and to carry out and perform its obligations under the terms of the Transaction Documents. 5. The Exchange Agreement has been duly authorized by the Company and the Corporation and is valid and enforceable against them in accordance with its terms. 6. (a) The rights, preferences, privileges and restrictions of a holder of a Note are as set forth in such Note. (b) Immediately prior to the Closing, the outstanding units of membership interest in the Company (the "Units") consist of an aggregate of 2,019,879 Units, 1,555,037 of which are designated as Class A Units, none of which are designated Class B Units, 286,206 of which are designated as Class C Units, 168,323 of which are designated Class D Units, 10,313 of which are designated Class E Units and 10,313 of which are designated Class F Units. The Class A Units issuable upon voluntary conversion of the Note when issued in accordance with the Agreement of the Company will be validly issued, fully paid and nonassessable. 7. All limited liability company or corporate action on the part of Entravision, its TSG Capital Fund III, L.P. April 20, 2000 Page 4 directors, executive committee members, stockholders and members, as applicable, necessary for the authorization, execution and delivery of the Transaction Documents by Entravision, the authorization, sale, issuance and delivery of the Note (and the Series A Preferred Stock or Class A Units issuable upon exchange thereof and the Common Stock issuable upon the conversion of the Series A Preferred Stock) and the performance of the obligations of Entravision under the Transaction Documents has been taken. The Transaction Documents have been duly and validly executed and delivered by Entravision and constitute a valid and binding obligation of Entravision, enforceable against Entravision in accordance with their terms. 8. Subject to the accuracy of the representations and warranties of the Investor in Section 3 of the Agreement and their responses (if any) to the inquiries of Entravision, we are of the opinion that the offer, sale and issuance of the Note in conformity with the terms of the Transaction Documents constitute transactions exempt from the registration requirements of Securities Act of 1933, as amended, and the issuance of Series A Preferred Stock or the issuance of Class A Units, as applicable, to the Investor upon conversion of the Note would also be exempt from such registration and qualification requirements. 9. The execution, delivery and performance by Entravision of the Transaction Documents and the consummation by Entravision of the transactions contemplated by the Transaction Documents, do not (a) conflict with or violate the Certificate of Incorporation or Bylaws or Operating or Limited Liability Company Agreement of Entravision, or any United States federal, California, New York statute, rule or regulation, (b) violate any order, writ, injunction or decree of any court or governmental authority actually known to us or any arbitral award actually known to us, (c) result in a material breach of, constitute a default under, or require any consent under any material agreement or instrument known to us (it being understood, however, that we express no opinion with respect to any financial covenant in any agreement or instrument insofar as the covenant requires a computation) or (d) result in the creation or imposition of any lien upon any property of Entravision or any subsidiary pursuant to any agreement or instrument known to us. This opinion is furnished to the Investor solely for its benefit in connection with the purchase of the Note, and may not be relied upon by any other person or for any other purpose without our prior written consent. Very truly yours, ZEVNIK HORTON GUIBORD McGOVERN PALMER & FOGNANI, L.L.P. EXHIBIT "E" MANAGEMENT RIGHTS LETTER ------------------------ TSG Capital Fund III LP 177 Broad Street, 12/th/ Floor Stamford, Connecticut 06901 Re: Management Rights Ladies and Gentlemen: This letter will confirm our agreement that in connection with your acquisition of Subordinated Convertible Promissory Note of Entravision Communications Company, L.L.C. (the "Company"), and/or any securities issuable on conversion or exchange thereof, including, without limitation, Class A Units of the Company or Series A Preferred Stock of Entravision Communications Corporation ("ECC") (or common stock of ECC issuable on conversion thereof) (the "Securities") you will be entitled to the following contractual management rights, in addition to rights to certain nonpublic financial information, inspection rights and other rights specifically provided to you under the Convertible Subordinated Note Purchase Agreement of even date herewith or agreements delivered in connection therewith. ECC and the Company are collectively referred to as Entravision and it is understood that the rights set forth herein will apply, subject to the last paragraph hereof, so long as you own Securities. (1) If and for so long as you do not have a representative ("Unrepresented Party") on Entravision's Board of Directors or equivalent body such as the Executive Committee of the Company (the "Entravision Board"), you shall be permitted to select one representative ("Representative") to consult with and advise management of Entravision on significant business issues, including management's proposed annual operating plans, and management will make itself available to meet with your Representative regularly during each year at Entravision's facilities at mutually agreeable times for such consultation and advice and to review progress in achieving said plans. (2) If and for so long as you are an Unrepresented Party, your Representative may examine the books and records of Entravision and inspect its facilities and may request information at reasonable times and intervals concerning the general status of Entravision's financial condition and operations, provided that access to highly confidential proprietary information and facilities need not be provided and access may be denied to preserve attorney-client privilege. TSG Capital Fund III LP Page 2 (3) If and for so long as you are an Unrepresented Party, Entravision shall invite you to send your Representative to attend in a nonvoting observer capacity all meetings of the Entravision Board and, in this respect, shall give your Representative copies of all notices, minutes, consents, and other material that it provides to the Entravision Board; provided, however, that Entravision reserves the right to exclude your Representative from access to any material or meeting or portion thereof if Entravision believes upon advice of counsel that such exclusion is reasonably necessary to preserve the attorney-client privilege or to protect highly confidential proprietary information. Your Representative may participate in discussions of matters brought to the Entravision Board. The rights described herein shall terminate and be of no further force or effect upon the earliest to occur of (a) the closing of a public offering of shares of the Company's capital stock pursuant to a registration statement filed by the Company under the Securities Act of 1933 which has become effective thereunder (other than a registration statement relating solely to employee benefit plans), or (b) such time as the Company becomes required to file reports with the Securities and Exchange Commission under Sections 12(g) or 15(d) of the Securities Exchange Act of 1934. Very truly yours, ENTRAVISION COMMUNICATIONS COMPANY, LLC By: ------------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer ENTRAVISION COMMUNICATIONS CORPORATION By: ------------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer EXHIBIT "F" FORM OF CERTIFICATE OF DESIGNATION ---------------------------------- CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK Pursuant to Section 151 of the General Corporation Law of the State of Delaware Entravision Communications Corporation, a corporation organized and existing under the laws of the State of Delaware, does hereby certify that, pursuant to the authority conferred on the Board of Directors of this corporation by the First Restated Certificate of Incorporation of this corporation in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of this corporation adopted the following resolution establishing a series of Preferred Stock of this corporation designated "Series A Convertible Preferred Stock": RESOLVED, that pursuant to the authority conferred on the Board of Directors of this corporation by Article 4 of the First Restated Certificate of Incorporation, as amended, a series of Preferred Stock, par value $.0001 per share, of this corporation is hereby established and created, and that the designation of the number of shares thereof and the voting and other powers, preferences and other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows: Series A Convertible Preferred Stock 1. Designation; Rank. An amount of shares of the Preferred Stock shall be ----------------- designated "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"), par value $.0001 per share and the number of shares constituting such series shall be [$90,000,000 divided by price at which Subordinated Note is exchanged for Series A Preferred Stock pursuant to Section 8(b) of the Subordinated Convertible Promissory Note issued by Entravision Communications Company, L.L.C. to TSG Capital Fund III, L.P.]. The Series A Preferred Stock will rank junior, with respect to dividend rights and rights on liquidation, winding up and dissolution to other classes of series of preferred stock to be established by the Board of Directors of the Corporation if such preferred stock is not convertible to common stock or other securities convertible into common stock of the Corporation and the aggregate liquidation preference of such preferred stock (exclusive of accrued but unpaid dividends) is less than or equal to One Hundred Million Dollars ($100,000,000) or, in addition, to the extent such classes or series of preferred stock are issued in connection with a financial undertaking set forth in Section 3.3 of that certain Acquisition Agreement and Plan of Merger dated April 20, 2000 by and among the Corporation, Entravision Communications Company, L.L.C., Z-Spanish Media Corporation and other persons (the "Merger Agreement") (collectively, the "Senior Preferred Stock"). The Series A Preferred Stock shall rank pari passu with respect to any Series B Redeemable Pay-in-Kind Preferred Stock issuable pursuant to the terms of the Merger Agreement (the "Series B Preferred Stock") with respect to dividend rights and rights upon liquidation, winding-up and dissolution. The Series A Preferred Stock will rank senior to all other classes of preferred stock of the Corporation and the common stock of the Corporation (collectively, "Junior Securities"), with respect to dividend rights and rights upon liquidation, winding up and dissolution,. 2. No Issuance of Additional Shares. The number of authorized shares of -------------------------------- Series A Preferred Stock may be reduced or eliminated by the Board of Directors of this corporation or a duly authorized committee thereof in compliance with the General Corporation Law of the State of Delaware stating that such reduction has been authorized, and the number of authorized shares of Series A Preferred Stock shall not be increased without the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. 3. Dividends. --------- (a) Dividends and Distributions. Subject to the terms set forth --------------------------- herein and the rights of the Senior Preferred Stock, the holders of shares of Series A Preferred Stock shall be entitled to receive out of assets legally available for that purpose, an annual cumulative dividend equal to 8.5% of the then applicable Liquidation Preference (as defined in Section 4(a) below) (i.e., 8.5% per annum compounded annually) from the date of issuance of the shares of Series A Preferred Stock. (b) The Series A Preferred Stock and the Series B Preferred Stock (collectively, the "Preferred Stock") shall rank pari passu with respect to dividends, and in the event the Corporation fails to pay full dividends accrued on outstanding shares of Series A Preferred Stock and Series B Preferred Stock, any partial amounts which are paid as dividends by the Corporation with respect to Series A Preferred Stock and Series B Preferred Stock shall be paid to the holders of such shares of Preferred Stock in proportion (as nearly as practicable) to the amounts such holders would be entitled to receive if they were to be paid the full accrued and unpaid dividends on such Preferred Stock. (c) All dividends or distributions declared upon the Series A Preferred Stock shall be declared pro rata per share. (d) The holders of the Series A Preferred Stock shall be entitled to payments of accrued and unpaid dividends upon liquidation of the corporation as set forth in Section 4 below or the redemption of the Series A Preferred Stock as set forth in Section 5 below, and in each such case shall be entitled to all accrued and unpaid dividends whether or not declared by the corporation, or as otherwise required under this Section 3. (e) The corporation shall not declare or pay any dividend on shares of Junior Securities until the holders of the Series A Preferred Stock have received the full cumulative dividends accrued thereon pursuant to clause (a). (f) In computing accrued and unpaid dividends on the Series A Preferred Stock, such dividends shall be computed on a daily basis through the date as of which such dividends are required to be paid by the terms hereof. -2- 4. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the rights of the Senior Preferred Stock and the rights of series of Preferred Stock that may from time to time come into existence in accordance with and subject to the terms hereof, including, without limitation, Section 8(b) hereof, the holders of Series A Preferred Stock shall be entitled to receive after any distribution with respect to Senior Preferred Stock and, prior and in preference to any distribution of any of the assets of this corporation to the holders of any Junior Securities by reason of their ownership thereof, an amount per share (the "Liquidation Preference") equal to the sum of (i) [$8.4746]/1/ for each outstanding share of Series A Preferred Stock (the "Original Series A Issue Price") and (ii) accrued but unpaid dividends on such share (subject to adjustment of such fixed dollar amounts for any stock splits, stock dividends, combinations, recapitalizations or the like). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Preferred Stock and Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amounts to which the holders of the Series A Preferred Stock and Series B Preferred Stock are entitled, then, the entire assets and funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock and Series B Preferred Stock in proportion to the amount payable to such holders. If the Corporation issues the Series B Preferred Stock in accordance with the Merger Agreement, the Series A Preferred Stock and the Series B Preferred Stock shall rank pari passu with respect to distributions on liquidation. (b) Upon completion of the distribution required by subsection (a) of this Section 4, all of the remaining assets of this corporation available for distribution to stockholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each. (c) (i) For purposes of this Section 4, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include (unless the holders of at least a majority of the Series A Preferred Stock then outstanding shall determine otherwise) a transaction whereby a person or group of persons acting in concert (other than current stockholders) shall: (A) become (whether by merger, consolidation, or transfer, redemption or issuance of capital stock or otherwise) the beneficial owners (within the meaning of Rule 13d-3 under the Securities and Exchange Act of 1934, as amended) of securities constituting more than fifty percent (50%) of the combined voting power of or the economic equity interests in the then outstanding securities of the corporation (or any surviving or resulting person) or (B) acquire assets constituting all or substantially all of the assets of the corporation ______________________ /1/ As calculated pursuant to Section 8(b) of the Subordinated Convertible Promissory Note issued by the Entravision Communications Company to TSG Capital Fund III, L.P. -3- and its subsidiaries on a consolidated basis (with (A) and/or (B) constituting a "Change in Control"). (ii) In any of such events, if the consideration received by this corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the outstanding shares of Series A Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the outstanding shares of such Series A Preferred Stock. (iii) In the event the requirements of this Section 4 are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 4 have been complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 4(c)(iv) hereof. (iv) This corporation shall give each holder of record of Series A Preferred Stock written notice of such impending transaction not later than twenty (20) days prior -4- to the stockholders' meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 4, and this corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after this corporation has given the first notice provided for herein or sooner than ten (10) days after this corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series A Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the outstanding shares of such Series A Preferred Stock. 5. Redemption. ---------- (a) At any time, or from time to time, after April 19, 2001, and after such time as the closing price of the corporation's common stock as quoted on the New York Stock Exchange or the Nasdaq National Market equals or exceeds, for fifteen (15) consecutive trading days, one hundred thirty percent (130%) of the initial trading price of the corporation's common stock immediately following the initial public offering of the corporation, the corporation shall have the option, exercisable upon the expiration of the fifteen (15) day period after written notice delivered to the holders of Series A Preferred Stock by hand (the "Corporate Redemption Date") to the holders of the Series A Preferred Stock, to redeem all or any portion of the Series A Preferred Stock specified in such notice by paying in cash therefor a sum per share equal to the Original Series A Issue Price per share of Series A Preferred Stock (as adjusted for any stock splits, stock dividends, recapitalizations or the like) plus all accrued but unpaid dividends on such share (the "Series A Redemption Price"). At any time, or from time to time, after April 19, 2006, but within ninety (90) days after the receipt by this corporation of a written request from the holders of not less than a majority of the then outstanding shares of Series A Preferred Stock that all or, if less than all, a specified percentage of such holders' shares of Series A Preferred Stock be redeemed ("Optional Redemption Request"), and concurrently with surrender by such holders of the certificates representing such shares, this corporation shall, to the extent it may lawfully do so, redeem in full (referred to herein as an "Optional Redemption Date") the shares specified in such request by paying in cash therefor the Series A Redemption Price. If the corporation receives an Optional Redemption Request, it will, within fifteen (15) days of receipt, provide written notice to each holder of Series A Preferred Stock who did not submit such request of its receipt thereof and will offer all such holders the opportunity to direct that their shares be redeemed concurrently with the redemption pursuant to the Optional Redemption Request. On April 19, 2010, this corporation shall, to the extent it may lawfully do so, redeem all outstanding Series A Preferred Stock for an amount equal to the Series A Redemption Price on that date (the "Mandatory Redemption Date"). The Corporate Redemption Date, the Optional Redemption Date and the Mandatory Redemption Date are referred to collectively herein as the "Redemption Date"). Any redemption of Series A Preferred Stock effected pursuant to this subsection 5(a) shall be made on a pro rata basis among the holders of the Series A Preferred -5- Stock in proportion to the number of shares of Series A Preferred Stock proposed to be redeemed from such holders. (b) At least fifteen (15) but no more than thirty (30) days prior to each of the Corporation Redemption Date, the Optional Redemption Date and the Mandatory Redemption Date written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A Preferred Stock to be redeemed, at the address last shown on the records of this corporation for such holder, notifying such holder of the redemption to be effected on the applicable Redemption Date, specifying the number of shares to be redeemed from such holder, the applicable Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to this corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed (the "Redemption Notice"). Except as provided in subsection (5)(c), on or after each Redemption Date, each holder of Series A Preferred Stock to be redeemed on such Redemption Date shall surrender to this corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the applicable Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (c) From and after each Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of shares of Series A Preferred Stock designated for redemption on such Redemption Date in the Redemption Notice as holders of Series A Preferred Stock (except the right to receive the applicable Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of this corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of this corporation legally available for redemption of shares of Series A Preferred Stock on a Redemption Date are insufficient to redeem the total number of shares of Series A Preferred Stock to be redeemed on such date, those funds that are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed such that each holder of a share of Series A Preferred Stock receives the same percentage of the applicable Series A Redemption Price. The shares of Series A Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of this corporation are legally available for the redemption of shares of Series A Preferred Stock, such funds will immediately be used to redeem the balance of the shares that this corporation has become obliged to redeem on any Redemption Date but that it has not redeemed. 6. Conversion. The holders of the Series A Preferred Stock shall have ---------- conversion rights as follows (the "Conversion Rights"): -6- (a) Right to Convert. Each share of Series A Preferred Stock shall ---------------- be convertible, at the option of the holder thereof, at any time after the date of issuance of such share and on or prior to the date such shares are redeemed, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series A Issue Price by the Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share for shares of Series A Preferred Stock shall be the Original Series A Issue Price; provided, however, that until the closing of a firmly underwritten public offering of the corporation's securities, which results in net proceeds to the corporation of at least $50,000,000 (the "IPO"), the Conversion Price for the Series A Preferred Stock shall be subject to adjustment as set forth in subsection 6(d). Upon conversion of each share of Series A Preferred Stock into Common Stock, all accrued but unpaid dividends with respect to such share of Series A Preferred Stock shall be waived and forgiven and the corporation shall have no further obligation with respect to such dividends. (b) Mechanics of Conversion. Before any holder of Series A Preferred ----------------------- Stock shall be entitled to convert the same into shares of Common Stock, he or she shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, the conversion may, at the option of any holder tendering Series A Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the persons entitled to receive the Common Stock upon conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until immediately prior to the closing of such sale of securities. (c) Conversion Price Adjustments of Preferred Stock for Certain ----------------------------------------------------------- Dilutive Issuances, Splits and Combinations. Until the IPO, the Conversion Price - ------------------------------------------- of the Series A Preferred Stock shall be subject to adjustment from time to time as follows: (i) (A) If this corporation shall issue, after the date upon which any shares of Series A Preferred Stock were first issued (the "Purchase Date"), any Additional Stock (as defined below) without consideration or for a consideration per share less than the -7- Conversion Price in effect immediately prior to the issuance of such Additional Stock, the Conversion Price in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to subsection 6(c)(i)(E)(1) or(2)) plus the number of shares of Common Stock that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to subsection 6(c)(i)(E)(1) or (2)) plus the number of shares of such Additional Stock. (B) No adjustment of the Conversion Price for the Series A Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 6(c)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment. (C) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (D) In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Board of Directors in good faith irrespective of any accounting treatment. (E) In the case of the issuance (whether before, on or after the applicable Purchase Date) of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this subsection 4(c)(i) and subsection 4(c)(ii): (1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (to the extent then exercisable) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 6(c)(i)(C) and (c)(i)(D)), if any, received by -8- this corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby. (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange (to the extent then convertible or exchangeable) for, any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by this corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by this corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 6(c)(i)(C) and (d)(i)(D)). (3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price of the Series A Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. (4) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Series A Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 6(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 6(c)(i)(E)(3) or (4). (ii) "Additional Stock" shall mean any shares of Common Stock issued -9- (or deemed to have been issued pursuant to subsection 6(c)(i)(E)) by this corporation after the Purchase Date other than: (A) Common Stock issued pursuant to a transaction described in subsection 6(d) hereof; or (B) Shares of Common Stock issuable or issued to employees, consultants, directors or vendors (if in transactions with primarily non-financing purposes) of this corporation directly or pursuant to a stock option plan or restricted stock plan approved by the Board of Directors of this corporation in an amount not to exceed fifteen percent (15%) of the capital stock of the corporation on a fully-diluted basis. (C) shares of Common Stock issued as an equity kicker to banks, lenders and equipment lessors in connection with debt financings or equipment leases; (D) shares of Common Stock issued for consideration other than cash in connection with mergers, consolidations, acquisitions of assets and other acquisitions or strategic transactions with non-affiliated third parties as approved by the Board of Directors; (E) shares of Common Stock issued pursuant to the terms of that certain Exchange Agreement dated April 19, 2000 by and among the corporation, Entravision Communications Company, L.L.C. (the "LLC"), the individual and/or trust members of the LCC and Univision Communications Inc. (F) shares of Common Stock issued pursuant to the IPO; or (iii) any right of the Series A Preferred Stock to adjust the Conversion Price pursuant to this Section 6(c) shall terminate concurrently with the closing of the IPO. (d) Stock Splits. ------------ (i) In the event this corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series A Preferred Stock shall be appropriately decreased so that the number of shares of -10- Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time in the manner provided for deemed issuances in subsection 6(c)(i)(E). (ii) If the number of shares of Common Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series A Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares. (e) Recapitalizations. If at any time or from time to time there ----------------- shall be a recapitalization or reclassification of the Common Stock (or a merger, transfer, consolidation, or exchange in respect to Units which does not constitute a Change in Control, other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 6 or Section 4) provision shall be made so that the holders of the Series A Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Preferred Stock the number of shares of stock or other securities or property of this corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Series A Preferred Stock after the recapitalization to the end that the provisions of this Section 6 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (f) No Impairment. This corporation will not, by amendment of its ------------- Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment. (g) No Fractional Shares and Certificate as to Adjustments. ------------------------------------------------------ (i) No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A -11- Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series A Preferred Stock pursuant to this Section 6, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for such series of Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Series A Preferred Stock. (h) Notices of Record Date. In the event of any taking by this ---------------------- corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Series A Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (i) Reservation of Stock Issuable Upon Conversion. This corporation --------------------------------------------- shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to this Restated Certificate of Incorporation. (j) Notices. Any notice required by the provisions of this Section 6 ------- to be given to the holders of shares of Series A Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this corporation. 7. Voting Rights. Except as set forth in Section 8 below or required by ------------- Delaware -12- law, the Series A Preferred Stock shall have no voting rights. 8. Protective Provisions. So long as any shares of Series A Preferred --------------------- Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock: (a) amend the Certificate of Incorporation (as amended) of this corporation or the bylaws of this corporation in any manner (including, without limitation, by means of a merger or consolidation) which adversely affects the rights of the Series A Preferred Stock; (b) authorize or issue, or obligate itself to issue, any other equity security having a preference over, or being on a parity with, the Series A Preferred Stock with respect to dividends, liquidation, redemption or voting, including any other security convertible into or exercisable for any equity security other than Senior Preferred Stock shares of Series B Preferred Stock issued pursuant to the Merger Agreement; or (c) enter into or engage in any transaction with an affiliate (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) on terms materially less advantageous to the Corporation or its stockholders and would be the case if such transaction had been effected with a non-affiliate. 9. Status of Redeemed or Converted Stock. In the event any shares of ------------------------------------- Series A Preferred Stock shall be redeemed or converted pursuant to Section 5 or Section 6 hereof, the shares so redeemed or converted shall be canceled and shall not be issuable by this corporation. The Restated Certificate of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in this corporation's authorized capital stock. [Remainder of Page Intentionally Left Blank] -13- IN WITNESS WHEREOF, Entravision Communications Corporation has caused this certificate to be signed duly executed by its duly authorized officers and attested by its secretary this ____ day of __________, 2000. ENTRAVISION COMMUNICATIONS CORPORATION By:________________________________________ Walter F. Ulloa Chairman and Chief Executive Officer By:________________________________________ Jeanette L. Tully Chief Financial Officer ATTEST: __________________________________ Paul A. Zevnik Secretary [Signature Page to Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock] EX-10.20 15 0015.txt SUBORDINATED CONVERTIBLE PROMISSORY NOTE EXHIBIT 10.20 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. SUBORDINATED CONVERTIBLE PROMISSORY NOTE $90,000,000 April 20, 2000 New York, New York FOR VALUE RECEIVED, Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), promises to pay to TSG Capital Fund III, L.P., a Delaware limited partnership (the "Holder"), or its registered assigns, the principal sum of Ninety Million Dollars ($90,000,000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this subordinated convertible promissory note ("Note") on the unpaid principal balance calculated in accordance with Section 2 hereof. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder from the date of this Note as set forth above (the "Effective Date"), shall be due and payable on the earlier of (i) the fourth (4/th/) anniversary of the Effective Date, or (ii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by the Holder or become automatically due and payable in accordance with Section 4 hereof. This Note is issued pursuant to the Note Purchase Agreement (as defined below). All payments of principal and interest hereunder shall be made by wire transfer to the account set forth on Schedule "A" or another bank account designated in writing by Holder. 1. Definitions. As used in this Note, the following capitalized terms ----------- have the following meanings: (a) "Company" includes the limited liability company initially executing this Note and any Person which shall succeed to or assume the obligations of the Company under this Note. (b) "Certificate" shall mean the First Amended and Restated Certificate of Incorporation of the Corporation as amended and/or restated and effective immediately prior to the exchange of this Note. (c) "Change of Control" means the occurrence of any event whereby a person or group of persons acting in concert (other than current owners) shall (i) become (whether by merger, consolidation, or transfer, redemption or issuance of capital stock, limited liability company interests, other Equity Securities or otherwise) the beneficial owners (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities constituting more than fifty percent (50%) of the combined voting power of or the economic equity interest in the then-outstanding Equity Securities of the Company (or any surviving or resulting Person) or (ii) acquire assets constituting all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. (d) "Class A Units" shall mean the Class A Units evidencing a membership interest in the Company in accordance with the terms of the Certificate of Formation and operating agreement of the Company, as amended from time to time. (e) "Corporation" shall mean Entravision Communications Corporation, a Delaware corporation. (f) "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, membership or partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. (g) "Event of Default" has the meaning given in Section 5 hereof. (h) "Holder" shall mean the person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note. (i) "Indebtedness" means all amounts owing with respect to indebtedness for borrowed money (but excluding the deferred purchase price of property or assets and accounts receivable or similar items arising in the ordinary course of business). (j) "IPO" means a public offering of common stock of the Corporation, pursuant to a registration statement that is declared effective under the Securities Act that results in net proceeds to the Corporation of not less than Fifty Million Dollars ($50,000,000). (k) "Make-Whole Premium" shall be an additional amount of interest payable by the Company to the Holder solely in the event of a default pursuant to Section 5(c) below in an amount equal to the difference between (i) interest otherwise paid pursuant to the terms of this Note and (ii) an amount equal to a thirty percent (30%) return, compounded annually, on the principal amount of this Note for the period between the Effective Date and the date all amounts due under this Note are paid. (l) "Note Purchase Agreement" shall mean the Note Purchase Agreement dated April 20, 2000 between the Company and the Holder (as amended, modified or supplemented from time to time). -2- (m) "Obligations" shall mean and include all loans, advances, debts, liabilities and financial obligations, howsoever arising, owed by the Company to the Holder, now existing or hereafter arising under or pursuant to the terms of this Note, including, without limitation, all interest, fees, charges, expenses, and attorneys' fees and costs. (n) "Operating Agreement" shall mean the Operating Agreement of the Company, as amended from time to time. (o) "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority. (p) "Roll-Up" means the closing of that certain exchange transaction contemplated by the Exchange Agreement dated April 20, 2000, by and among the Company, its members and Univision Communications, Inc. (q) "Securities Act" shall mean the Securities Act of 1933, as amended. (r) "Senior Indebtedness" shall mean, unless expressly subordinated to or made on a parity with the amounts due under this Note, the principal of (and premium, if any), unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement and other amounts due in connection with, (i) secured or unsecured indebtedness or financial obligation of the Company or its Subsidiaries, to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending or financial institutions regularly engaged in the business of lending money or for reimbursement obligations, or letters of credit (excluding debt that is convertible or exercisable into equity through venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), and (ii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or (iii) any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor. (s) "Subsidiary" shall mean (a) any corporation of which more than fifty percent (50%) of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation is at the time directly or indirectly owned or controlled by the Company, (b) any partnership, limited liability company, joint venture, or other association of which more than fifty percent (50%) of the Equity Securities having the power to vote, direct or control the management of such partnership, limited liability company, joint venture or other association is at the time directly or indirectly owned and controlled by the Company, (c) any other entity included in the financial statements of the Company on a consolidated basis. -3- (t) "Transaction Documents" shall mean this Note and the Note Purchase Agreement, and any other documents that may be exchanged between the Company and the Holder in connection with the issuance of the Note. 2. Interest. The interest rate to be applied to the unpaid principal -------- balance of this Note shall be eight and one-half percent (8.5%) per annum and all accrued interest shall be payable annually in cash on each anniversary of the Effective Date and on each date on which a payment of principal is due hereunder. In the event this Note is converted into Class A Units of the Company or automatically exchanged into Series A Preferred Stock of the Corporation in accordance with Section 8, all interest accrued under this Note shall be payable at the option of the Company (or the Corporation) either in cash or in additional Class A Units or Series A Preferred Stock, valued as set forth in Section 8 below and shall be paid at the time of conversion or exchange. In the event of an occurrence of an Event of Default pursuant to Section 5(c) below, the Company shall be obligated to pay the Holder additional interest in an amount equal to the Make-Whole Premium. 3. Prepayment. Upon twenty (20) days prior written notice to the Holder ---------- and on a date which is at least twelve (12) months after the Effective Date of this Note, the Company may prepay this Note in whole or in part, unless the Holder elects to convert the Note in accordance with Section 8(a) of this Note. No prepayment of this Note may be made at any time prior to the date twelve (12) months after the Effective Date. 4. Certain Covenants. While any amount is outstanding under the Note, ----------------- without the prior written consent of the Holder: (a) Dividends, Redemptions, Etc. Neither the Company nor the Corporation nor any of their Subsidiaries shall (i) pay any dividends or make any distributions on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities, other than the repurchase of shares of common stock under option agreements or restricted stock purchase agreements with employees, directors or consultants pursuant to arrangements approved by the Executive Committee of the Company or the Board of Directors of the Corporation, as the case may be, and in no event shall such arrangements include the purchase or acquisition of Equity Securities of the Company or the Corporation held by Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik or any affiliates or transferees thereof without the prior written consent of the Holder, which consent shall not be unreasonably withheld; (iii) return any capital to any holder of its Equity Securities; (iv) make any distribution of assets to any holder of its Equity Securities; or (v) set apart any sum for any such purpose; provided, however, that any Subsidiary may pay cash dividends to the Company. (b) Incur Indebtedness. The Company or any Subsidiaries shall not incur any Indebtedness which violates the terms of that certain Amended and Restated Credit Agreement dated November 10, 1998, as amended from time to time, between the Company and Union -4- Bank of California, N.A. or any successor agreement with the lead lender upon refinancing of such debt. (c) Liquidation. The Company shall not liquidate, dissolve or wind- up its affairs. (d) Amend Organizational Documents. The Company shall not amend its Certificate of Formation or Operating Agreement and the Corporation will not amend its Certificate of Incorporation or Bylaws in a fashion which will adversely affect the rights of the Holder of this Note or the holders of the Series A Preferred Stock issuable upon conversion or exchange of this Note. (e) Amend the Exchange Agreement. The Company shall not consent to the amendment of the Exchange Agreement (or the First Restated Certificate of Incorporation or First Amended and Restated Bylaws of the Corporation attached as exhibits to the Exchange Agreement) in a fashion which will adversely affect the rights of the Holder of this Note or the holders of the Series A Preferred Stock issuable upon conversion or exchange of this Note. 5. Events of Default. The occurrence of any of the following shall ----------------- constitute an "Event of Default" under this Note and the other Transaction Documents. Promptly upon the occurrence thereof, the Company shall provide the Holder with written notice of the occurrence of any Event of Default hereunder or any event of default with respect to any Senior Indebtedness. (a) Failure to Pay. The Company shall fail to pay (i) when due any principal payment on the due date hereunder or (ii) any interest or other payment required under the terms of this Note or any other Transaction Document on the date due and such failure continues for five (5) days; or (b) Voluntary Bankruptcy or Insolvency Proceedings. The Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, (vii) becomes subject to an involuntary bankruptcy case or other proceedings seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect which is not dismissed within ninety (90) days after the commencement thereof, or (viii) take any action for the purpose of effecting any of the foregoing; or -5- (c) Closing of Roll-Up. The Company shall fail to close the Roll-Up by the Interim Closing Deadline, as defined in that certain Acquisition Agreement and Plan of Merger by and among the Company, the Corporation, ZSPN Acquisition Corporation, Z-Spanish Media Corporation and its stockholders of even date herewith (the "Merger Agreement"). 6. Rights of the Holder Upon Default. Upon the occurrence or existence --------------------------------- of any Event of Default other than as described in Section 5(b) above, and at any time thereafter during the continuance of such Event of Default, the Holder may, by written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding; provided that if an Event of Default under Section 5(b) shall occur no declaration or notice by the Holder shall be necessary and such Event of Default shall occur automatically. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both. 7. Subordination. The indebtedness evidenced by this Note is hereby ------------- expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all of Senior Indebtedness of the Company or its Subsidiaries. (a) Insolvency Proceedings. If there shall occur any receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the Company, (i) no amount shall be paid by the Company in respect of the principal of, interest on or other amounts due with respect to this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the Holder of this Note which shall assert any right to receive any payments in respect of the principal of and interest on all of the Senior Indebtedness then outstanding. (b) Default on Senior Indebtedness. If there shall occur an event of default which has been declared in writing with respect to any Senior Indebtedness, as defined therein, or in the instrument under which it is outstanding, permitting the holder to accelerate the maturity thereof and the Holder shall have received written notice thereof from the holder of such Senior Indebtedness or the Company, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note. (c) Further Assurances. By acceptance of this Note, the Holder agrees to execute and deliver customary forms of subordination agreements requested from time to time by -6- the holders of Senior Indebtedness, and as a condition to the Holder's rights hereunder, the Company may require that Holder execute such forms of subordination agreements; provided that such forms shall not impose on the Holder terms less favorable than those provided herein. The Holder undertakes and agrees for the benefit of the holders of the Senior Indebtedness to execute, verify, deliver and file any proofs of claim that such holders may at any time require to prove and realize upon any rights or claims pertaining to the Note and to effectuate the full benefit of the subordination contained herein. Upon the failure of the Holder to do so, such holders of Senior Indebtedness shall be deemed to be irrevocably appointed as the agent and attorney-in-fact of the Holder to execute, verify, deliver and file any such proofs of claim. (d) No Impairment. Subject to the rights, if any, of the holders of Senior Indebtedness under this Section 7 to receive cash, securities or other properties otherwise payable or deliverable to the Holder, nothing contained in this Section 7 shall impair, as between the Company and the Holder, the obligation of the Company, subject to the terms and conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the same become due and payable, or shall prevent the Holder, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law. The provisions of this Section 7 shall not apply to or in any manner restrict a conversion or exchange of the Notes under Section 8 hereof. (e) Reliance of the Holders of Senior Indebtedness. The Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of each holder of Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the creation of the Indebtedness evidenced by this Note, and each such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Indebtedness. A right of the holders of the Senior Indebtedness to enforce subordination as herein provided shall not at any time or in any way be affected or impaired by any failure to act on the part of the Company with the holders of the Senior Indebtedness, or by any non-compliance by the Company or any of its Subsidiaries with any of the terms, provisions or covenants of the Transaction Documents, regardless of any knowledge thereof, the holders of the Senior Indebtedness may have or otherwise be charged with. 8. Conversion. ---------- (a) Voluntary Conversion. The Holder has the right, at the Holder's option at any time following December 31, 2000 (or at any time prior to December 31, 2000, solely in connection with the exercise of the Holder's co-sale rights pursuant to Section 2.4 of the Investor Rights Agreement), at any time prior to payment in full of this Note or exchange pursuant to Section 8(b) below to convert the Note at the office of the Company, into the number of Class A Units of the Company which is equal to the quotient obtained by dividing (i) the entire unpaid -7- principal amount of this Note by (ii) the Note Conversion Price. For purposes of this Section 8(a), the "Note Conversion Price" shall be $198.37. (b) Automatic Exchange. The entire unpaid principal amount of this Note shall be automatically exchanged into Series A Preferred Stock of the Corporation concurrently with the closing of the Roll-Up. The number of shares of Series A Preferred Stock into which this Note shall be exchanged in the event of an automatic exchange pursuant to this Section 8(b) shall be equal to the entire unpaid principal amount of this Note divided by an amount equal to the lower of (i) 115% of the Entravision Share Consideration (as defined in the Merger Agreement) or (ii) the greater of ninety three percent (93%) of the price per share of Class A Common Stock of the Corporation issued in the IPO, or the Entravision Share Price (as defined in the Merger Agreement). (c) Note Conversion Price Adjustments for Certain Dilutive Issuances, Splits and Combinations. The Note Conversion Price shall be subject to adjustment from time to time as follows: (i) (1) If the Company shall issue, after the Effective Date, any Additional Units (as defined below) without consideration or for a consideration per share less than the Note Conversion Price in effect immediately prior to the issuance of such Additional Units, the Note Conversion Price in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Note Conversion Price by a fraction, the numerator of which shall be the number of Units outstanding immediately prior to such issuance plus the number of Units that the aggregate consideration received by the Company for such issuance (including Units deemed to be issued pursuant to Sections 8(c)(i)(5)(a) or (b)) would purchase at such Note Conversion Price; and the denominator of which shall be the number of Units outstanding immediately prior to such issuance (including Units deemed to be issued pursuant to Sections 8(c)(i)(5)(a) or (b)) plus the number of such Additional Units. (2) No adjustment of the Note Conversion Price shall be made in an amount less than One Cent ($0.01), provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in Sections 8(c)(i)(5)(c) and (5)(d) below, no adjustment of such Note Conversion Price pursuant to this Section 8(c)(i) shall have the effect of increasing the Note Conversion Price above the Note Conversion Price in effect immediately prior to such adjustment. (3) In the case of the issuance of Units for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any -8- reasonable discounts, commissions or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof. (4) In the case of the issuance of the Units for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Executive Committee of the Company in good faith irrespective of any accounting treatment. (5) In the case of the issuance (whether before, on or after the Effective Date) of options to purchase or rights to subscribe for Units, securities by their terms convertible into or exchangeable for Units or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this Section 8(c)(i) and Section 8(c)(ii) below: (a) The aggregate maximum number of Units deliverable upon exercise (to the extent then exercisable) of such options to purchase or rights to subscribe for Units shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 8(c)(i)(3) and 8(c)(i)(4) above), if any, received by the Company upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights for the Units covered thereby. (b) The aggregate maximum number of Units deliverable upon conversion of or in exchange (to the extent then convertible or exchangeable) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections 8(c)(i)(3) and 8(c)(i)(4) above). (c) In the event of any change in the number of Units deliverable or in the consideration payable to the corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, without limitation, a change resulting from the antidilution provisions thereof, the Note Conversion Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Units or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. -9- (d) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Note Conversion Price, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of Units (and convertible or exchangeable securities which remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (e) The number of Units deemed issued and the consideration deemed paid therefor pursuant to Sections 8(c)(i)(5)(a) and (b) above shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either Section 8(c)(i)(5)(c) or (d) above. (ii) "Additional Units" shall mean any Units issued (or deemed to have been issued pursuant to Section 8(c)(i)(5) above) by the Company after the Effective Date other than: (1) Units issued pursuant to a transaction described in Section 8(c)(iii) below; (2) Units issued upon conversion of the Note; (3) Units issued to banks, lenders and equipment lessors in connection with debt financings or equipment leases; (4) Units issued for consideration other than cash in connection with mergers, consolidations, acquisitions of assets and other acquisitions or strategic transactions with non-affiliated third parties as approved by the Executive Committee of the Company; (5) Units issued to members, Executive Committee members, officers, employees and consultants pursuant to an equity incentive plan or arranged approval by the Company's Executive Committee up to a maximum of fifteen percent (15%) of the equity of the Company on a fully-diluted basis; or (6) Units issued by way of dividend or other distribution on Units for which an adjustment is made under Section 8(c)(iii) below. (iii) In the event the Company should at any time or from time to time after the Effective Date fix a record date for the effectuation of a split or subdivision of the outstanding Units or the determination of the holders of Units entitled to receive a dividend or other distribution payable in additional Units or other securities or rights convertible into, or -10- entitling the holder thereof to receive directly or indirectly, additional Units (hereinafter referred to as "Unit Equivalents") without payment of any consideration by such holder for the additional Units or the Unit Equivalents (including the additional Units issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Note Conversion Price shall be appropriately decreased so that the number of Units issuable on conversion of the Note shall be increased in proportion to such increase of the aggregate number of Units outstanding and those issuable with respect to such Unit Equivalents with the number of Units issuable with respect to Unit Equivalents determined from time to time in the manner provided for deemed issuances in Section 8(c)(i)(5) above. (iv) If the number of Units outstanding at any time after the Effective Date is decreased by a combination of the outstanding Units, then, following the record date of such combination, the Note Conversion Price shall be appropriately increased so that the number of Units issuable on conversion of the Note shall be decreased in proportion to such decrease in outstanding Units. (d) Recapitalizations. If at any time or from time to time there shall be a recapitalization, reclassification of the Units, or a merger, transfer, consolidation or exchange in respect of the Units and does not constitute a Change in Control (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 8 or Section 9) provision shall be made so that the Holders of the Note shall thereafter be entitled to receive upon conversion of the Note the number of Units or other securities or property of the Company or otherwise, to which a Holder of Units deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 8 with respect to the rights of the Holders of the Note after the recapitalization to the end that the provisions of this Section 8 (including adjustment of the Note Conversion Price then in effect and the number of Units purchasable upon conversion of the Note) shall be applicable after that event as nearly equivalent as may be practicable. (e) Conversion Procedure. (i) Conversion Pursuant to Section 8(a). Before the Holder shall be entitled to convert this Note into Class A Units, it shall surrender this Note, duly endorsed, at the office of the Company and shall give written notice by registered or certified mail, postage prepaid, to the Company at its principal corporate office, of the election to convert the same pursuant to Section 8(a), and shall state therein the name or names in which the Class A Units are to be issued. The Company shall, as soon as practicable thereafter, issue the Class A Units to which the Holder shall be entitled upon conversion. The conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of this Note, and the Person or Persons entitled to receive the Class A Units upon such conversion shall be treated for all purposes as the record holder or the Holders of such Class A Units as of such date. -11- Upon such conversion, the Holder shall be deemed to be admitted as a member of the Company concurrently with such conversion, subject to the execution by the Holder of the Operating Agreement of the Company, as amended, evidencing such Holder's agreement to be bound by the terms, conditions and restrictions of such Operating Agreement, as amended. The Company will take all other actions and execute all other documents as reasonably necessary to admit the Holder as a member of the Company. (ii) Exchange Pursuant to Section 8(b). If this Note is automatically exchanged, the Company shall give at least five (5) days written notice which shall be delivered to the Holder at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the exchange to be effected, the amount of Series A Preferred Stock to be issued upon exchange, the date on which such exchange is expected to occur and calling upon the Holder to surrender to the Company, in the manner and at the place designated, the Note. Upon receipt of such notice, the Holder shall surrender this Note on the date of the Exchange, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to the Holder at such principal office a certificate or certificates for the Series A Preferred Stock to which the Holder shall be entitled upon such exchange (bearing such legends as are required by the Note Purchase Agreement and applicable state and federal securities laws in the reasonable opinion of counsel to the Company), together with any other securities and property to which the Holder is entitled upon such exchange under the terms of this Note, including, without limitation, all accrued and unpaid interest. Any exchange of this Note pursuant to Section 8(b) shall be deemed to have been made immediately prior to the close of business on the date of surrender of the Note, and on and after such date the Persons entitled to receive the Series A Preferred Stock issuable upon such exchange shall be treated for all purposes as the record holder of such Series A Preferred Stock. (f) Fractional Shares; Effect of Conversion or Exchange. The Company may, but shall not be obligated to, issue any fractional Class A Units or shares of Series A Preferred Stock upon conversion or exchange of this Note. In the event that the Company elects not to issue fractional shares, the Company shall round the number of Units or shares to the nearest whole Unit or share, provided that if such rounding would result in the Holder receiving less than ninety nine point nine percent (99.9%) of the amount of such Common Stock to which he is entitled, pursuant to this Section 8, such fractional shall be rounded up to the next whole Unit or share. (g) No Impairment. The Company will not, by amendment of its Operating Agreement or Certificate of Formation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of Equity Securities or other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times, in good faith, assist in carrying out all of the provisions of this Section 8 and the undertaking of all action as may be necessary or -12- appropriate in order to protect the conversion or exchange rights of the Holder against impairment. 9. Change of Control. Upon the occurrence of a Change of Control, the ----------------- Holder shall have the right to require the Company to repurchase all or any part (equal to One Thousand Dollars ($1,000) or an integral multiple thereof) of the Note pursuant to the offer described below (the "Change of Control Offer") at an offer price equal to the greater of: (i) the aggregate principal amount of Note plus accrued and unpaid interest thereon or (ii) the amount the Holder would have received if the Holder had converted this Note into Class A Units of the Company pursuant to the provisions of Section 8(a) above immediately prior to such Change of Control. At least thirty (30) days prior to any Change of Control, the Company shall mail a notice (the "Change of Control Notice") to the Holder describing the transaction to constitute the Change of Control offering to repurchase the Note concurrently with the completion of the Change of Control (the "Payment Date"). The Holder shall provide written notice to the Company detailing the extent to which it accepts such repurchase offer within twenty- five days of the Change of Control Notice. Upon surrender of the Note, duly endorsed and delivered to the Company's principal office, the Company shall pay all amounts due the Holder pursuant to such repurchase offer on the Payment Date. 10. Successors and Assigns. Subject to the restrictions on transfer ---------------------- described in the Note Purchase Agreement, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 11. Assignment by the Company. Neither this Note nor any of the rights, ------------------------- interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Holder. 12. Waiver. The Company hereby waives presentment, demand, or protest and ------ any notice of any kind in connection with the delivery, acceptance, performance, default, acceleration, or collection of this Note. 13. Notices. Any notice, request or other communication required or ------- permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by recognized overnight courier or personal delivery at the respective addresses of the parties as set forth in the Note Purchase Agreement or on the register maintained by the Company. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when received. 14. No Intent of Usury. Nothing contained in this Note or in the ------------------ Agreement shall be deemed to require the payment by the Company or the retention by the Holder of interest in excess of the maximum legal rate (the "Maximum Legal Rate"). All agreements between the Holder and the Company pertaining to the obligation evidenced hereby (the "Loan") are -13- expressly limited so that in no contingency or event, whether by reason of acceleration of the maturity of the Loan or otherwise, shall the amount paid or agreed to be paid to the Holder for the use, forbearance, or detention of money to be loaned hereunder exceed the Maximum Legal Rate. If, under any circumstance whatsoever, the fulfillment of any provision of this Note or the Note Purchase Agreement shall involve transcending the limits of validity prescribed by law, then, ipso facto, the obligation to be fulfilled by the Company shall be reduced to the limit of such validity. This provision shall control every provision of all agreements between the Company and the Holder. In the event at any time the interest paid shall exceed the Maximum Legal Rate, the excess amount shall be deemed to be held in trust by the Holder for the exclusive use and benefit of the Company; provided, however, that such amounts held in trust may be applied to interest or other lawful consideration payable under the terms of this Note and the Note Purchase Agreement if such amounts can be so applied without violating applicable laws and without exceeding the Maximum Legal Rate. The Holder may commingle any such amounts with its own funds. If at the time the Note is paid, the total amount deemed to be interest under applicable laws exceeds the Maximum Legal Rate, the maximum liability of the Company shall be expressly limited to the legal maximum amounts, and in the event any excess sums have been paid or are payable such amounts shall be promptly repaid or credited to the Company. In the event the interest or other consideration payable by the Company hereunder is exempt from applicable usury statutes, or for any other reason is not limited by law, none of the provisions of this paragraph shall be construed so as to limit the interest or other consideration payable under the terms of this Note or the Agreement. 15. Payment. Payment shall be made in lawful tender of the United States. ------- 16. Expenses. If any action of law or in equity is necessary to enforce -------- or interpret the terms of this Note, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which said party may be entitled. 17. Governing Law; Submission to Jurisdiction; Venue. This Note shall be ------------------------------------------------ governed by, and construed in accordance with, the law of the State of New York. All judicial proceedings brought against the Company or any Holder with respect to this Note shall be brought exclusively in any state or federal court of competent jurisdiction in New York County, New York, and by execution and delivery of this Note the Company accepts, the exclusive jurisdiction of the aforesaid courts for such purpose. The Company hereby waives any claim that New York County, New York is an inconvenient forum or an improper forum based on lack of venue. The exclusive choice of forum for the Company as set forth in this Section 17 will not be deemed to preclude the enforcement by the Holder of any judgment obtained in any other forum or the taking by the Holder of any action to enforce the same in any other appropriate jurisdiction. [Remainder of Page Intentionally Left Blank] -14- IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above. "Company" ENTRAVISION COMMUNICATIONS COMPANY, L.L.C., a Delaware limited liability company By: /s/ Walter F. Ulloa --------------------------------------------------- Walter F. Ulloa Chairman and Chief Executive Officer By: /s/ Jeanette L. Tully --------------------------------------------------- Jeanette L. Tully, Chief Financial Officer [Signature Page to Subordinated Convertible Promissory Note] -15- SCHEDULE "A" All payments under the Promissory Note shall be made as follows: The Chase Manhattan Private Bank 1211 Avenue of the Americas, 38/th/ Floor New York, New York 10036 Contact: James Burke (phone: 212-789-6239) ABA# 021000021 Account: TSG Capital Fund III, L.P. Account number 967-737850 -16- EX-10.21 16 0016.txt INVESTOR RIGHTS AGREEMENT EXHIBIT 10.21 INVESTOR RIGHTS AGREEMENT This Investor Rights Agreement (this "Agreement") is made as of April 19, 2000 (the "Effective Date"), by and among Entravision Communications Corporation, a Delaware corporation (the "Corporation"), Entravision Communications Company, L.L.C., a Delaware limited liability company (the "Company"), TSG Capital Fund III, L.P. (the "Investor"), and the other principal equityholders of the Company and their affiliates and the Corporation set forth on the signature pages hereto (the "Major Stockholders"). WHEREAS, the Company, the Corporation and the Investor are parties to that certain Convertible Subordinated Note Purchase Agreement (the "Purchase Agreement") providing for, among other things, the purchase and sale of a Convertible Subordinated Note of the Company (the "Note") which are automatically exchangeable into Series A Convertible Preferred Stock of the Corporation (the "Series A Preferred Stock") concurrently with the Roll-Up (as defined in the Purchase Agreement). WHEREAS, the Major Stockholders are the principal holders of the membership units in the Company (the "Units") and will become the principal holders of common stock of the Corporation ("Common Stock") concurrently with the Roll-Up (as defined in the Purchase Agreement). WHEREAS, the Company and the Corporation desire to grant to the Investor certain registration, co-sale, voting, right of first refusal, information and other rights as set forth herein. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties hereto hereby agree as follows: 1. Registration Rights. The Corporation covenants and agrees as follows ------------------- (capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Purchase Agreement): 1.1. Definitions. For purposes of this Section 1: ----------- 1.1.1. The term "1934 Act" means the Securities Exchange Act of l934, as amended. 1.1.2. The term "Act" means the Securities Act of 1933, as amended. 1.1.3. The term "Closing" has the meaning ascribed to it in the Purchase Agreement. 1.1.4. The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Corporation with the SEC. 1.1.5. The term "Holder" means the Investor and its respective permitted successors and assigns. 1.1.6. The terms "register," registered and registration refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document by the SEC. 1.1.7. The term "Registrable Securities" means (i) Common Stock issuable or issued upon conversion of the Series A Preferred Stock which the Investor currently has the right to acquire by conversion or exchange of the Note, and (ii) any Common Stock of the Corporation issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clause (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's rights under this Section 1 are not duly assigned as provided herein or any Registrable Securities after such securities have been sold to the public or sold pursuant to Rule 144 promulgated under the Act. 1.1.8. The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. 1.1.9. The term "SEC" shall mean the Securities and Exchange Commission. 1.2. Request for Registration ------------------------ 1.2.1. Registration Rights. If the Corporation shall receive at ------------------- any time after one (1) year after the effective date (the "IPO Date") of the first registration statement for a public offering of securities of the Corporation (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan), a written request from Holders of fifty percent (50%) or more of the Registrable Securities then outstanding ("Initiating Holders"), requesting that the Corporation file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $20 million, then the Corporation shall: -2- (a) within twenty (20) days of the receipt thereof, give written notice of such request to all Holders; and (b) use reasonable and diligent efforts to cause such shares to be registered under the Act as soon as practicable, subject to the limitations of subsection 1.2.2. 1.2.2. Underwriting: Requirements. If the Initiating Holders -------------------------- intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to subsection 1.2.1 and the Corporation shall include such information in the written notice referred to in subsection 1.2.1.(a). The underwriter will be selected by the Corporation from among the lead underwriters in its initial public offering or from another investment banking firm of national repute and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder or other holder of securities of the Corporation to include securities in such registration shall be conditioned upon such Holder's or holders' participation in such underwriting and the inclusion of such Holder's or holders' securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder or holder) to the extent provided herein. All Holders and other holders of securities of the Corporation proposing to distribute their securities through such underwriting shall (together with the Corporation as provided in subsection 1.5.5) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Corporation shall so advise all Holders of Registrable Securities and other holders of registration rights which would otherwise be underwritten pursuant hereto, and the number of securities that may be included in the underwriting on behalf of each Holder or other holder shall be allocated on a pro-rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement with the Corporation; provided, however, that the numbers of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting and registration. For purposes of allocating securities to be included in any offering, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. To facilitate the allocation of shares in accordance with the above provisions, the Corporation may round the number of shares allocated to any Holder to the nearest 100 shares. -3- 1.2.3. Notwithstanding the foregoing, if the Corporation shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Corporation shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Corporation may not utilize this right more than once in any twelve-month period. 1.2.4. In addition, the Corporation shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (a) Of more than fifty percent (50%) of the Registrable Securities eligible to make a demand pursuant to Section 1.2.1 in the two (2) year period following the IPO Date. (b) Of more than one (1) demand registration in the two (2) year period following the IPO Date. (c) After the Corporation has effected two (2) such registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective. (d) During the period starting with the date sixty (60) days prior to the Corporation's good faith estimate of the date of filing of, and ending on a date one hundred eighty (I80) days after the effective date of, (x) the Corporation's initial registered offering of its securities to the general public (other than a registration statement relating to either the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), (y) a previous registration subject to this Section 1.2 or (z) a previous registration subject to Section 1.3 hereof; provided, that, the Corporation is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (e) In any particular jurisdiction in which the Corporation would be required to execute a general consent to service of process, unless the Corporation is already subject to service in such jurisdiction and except as required by the Act; or (f) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below. 1.3. Corporation Registration. ------------------------ -4- 1.3.1. Registration Rights. If (but without any obligation to ------------------- do so) the Corporation proposes to register (including for this purpose a registration effected by the Corporation for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than the initial public offering of its securities or a registration relating solely to the sale of securities to participants in a Corporation stock plan, a registration pursuant to a Rule 145 transaction, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Corporation shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within fifteen (15) days after mailing of such notice by the Corporation in accordance with Section 4.5, the Corporation shall, subject to the provisions of paragraph 1.3.2 below, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered . 1.3.2. Underwriting Requirements. In connection with any ------------------------- offering involving an underwriting of shares of the Corporation's capital stock, the Corporation shall not be required under this Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Corporation and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Corporation. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Corporation that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Corporation shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering. Allocation of securities to be sold in any such offering shall be made on a pro- rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement now or hereafter entered into with the Corporation. For purposes of allocation of securities to be included in any offering, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. 1.4. Form S-3 Registration. In case the Corporation shall receive --------------------- from any Holder or Holders of Registrable Securities a written request or requests that the Corporation -5- effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Corporation will: 1.4.1. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and 1.4.2. as soon as practicable, effect such registration and all such qualifications and compliance as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Corporation; provided, however, that the Corporation shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: (1) if the Registrable Securities requested by all Holders to be registered pursuant to this Section 1.4 have an anticipated aggregate offering price to the public (before deducting any underwriter discounts, concessions or commissions) of less than $1,000,000; (2) if Form S-3 is not available for such offering by the Holders; (3) if the Corporation shall furnish to the Holders a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Corporation shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Corporation shall not utilize this right more than once in any twelve-month period; (4) if the Corporation has, within the twelve (12) month period preceding the date of such request, already effected one (1) or more registrations on Form S-3 pursuant to this Section 1.4; or (5) in any particular jurisdiction in which the Corporation would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. 1.4.3. Subject to the foregoing, the Corporation shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration pursuant to Sections 1.2. 1.5. Obligations of the Corporation. Whenever required under this ------------------------------ Section 1 to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible: 1.5.1. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the -6- Registrable Securities registered thereunder, keep such registration statement effective for a period of up to ninety (90) days or until the distribution contemplated in the Registration Statement has been completed; provided, however, that such 90-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Corporation. 1.5.2. Prepare and file with the SEC such amendments including post-effective amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. 1.5.3. Furnish (at no cost) to the Holders such numbers of copies of a prospectus, including a preliminary prospectus and each amendment and supplement thereto, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 1.5.4. Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 1.5.5. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and performs its obligations under such an agreement. 1.5.6. Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 1.5.7. Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Corporation are then listed. 1.5.8. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. -7- 1.5.9. In the event of any underwritten public offering, cooperate with the selling Holders, the underwriters participating in the offering and their counsel in any due diligence investigation reasonably requested by the selling Holders or the underwriters in connection therewith, and participate, to the extent reasonably requested by the managing underwriter for the offering or the selling Holder, in efforts to sell the Registrable Securities under the offering (including, without limitation, participating in "roadshow" meetings with prospective investors at reasonable times) that would be customary for underwritten primary offerings of a comparable amount of equity securities by the Corporation. 1.5.10. Notify each Holder of Registrable Securities covered by such registration statement: (i) when such registration statement or any post- effective amendment to the registration statement has been declared effective by the SEC, (ii) of any request by the SEC for amendments or supplements to such registration statement or prospectus or for additional information; and (iii) of the receipt by the Corporation of any notification from any public board or body with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. 1.5.11. Notify each Holder of Registrable Securities of the issuance of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose and the Corporation shall use its reasonable best efforts to prevent the issuance of any stop order, or if any order is issued, to obtain the withdrawal thereof. 1.5.12. Take all actions necessary to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities and the transfer thereof upon resale by the Holder of such Registrable Securities in accordance with the applicable prospectus. 1.5.13. Otherwise use its reasonable and diligent efforts in its performance of its obligations hereunder to comply with all applicable rules and regulations of the SEC and of state securities commissions and nay stock exchange or automated quotation system. 1.6. Furnish Information. ------------------- 1.6.1. It shall be a condition precedent to the obligations of the Corporation to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Corporation such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6.2. The Corporation shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 if, due to the operation of -8- subsection 1.6.1, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Corporation's obligation to initiate such registration as specified in subsection 1.2.1 or subsection 1.4.2, whichever is applicable. 1.7. Expenses of Demand, Corporation or S-3 Registration. All --------------------------------------------------- expenses (exclusive of underwriting discounts and commissions and stock transfer taxes) incurred in connection with registrations, filings or qualifications pursuant to this Section 1 including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Corporation and the reasonable fees and disbursements of one counsel for all selling Holders of Registrable Securities shall be borne by the Corporation. 1.8. Delay of Registration. No Holder shall have any right to obtain --------------------- or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.9. Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 1: 1.9.1. To the extent permitted by law, the Corporation will indemnify and hold harmless each Holder, the constituent partners and members, or officers, directors employees and affiliates of each Holder and, if such holder is a natural person his or her heirs, personal representatives and assigns, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Corporation of the Act, any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Corporation will pay to each such Holder, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action, as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 1.9.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Corporation (which consent shall not be unreasonably withheld), nor -9- shall the Corporation be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information fumished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, from whom the person asserting such losses, claims, damages, or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Corporation shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. 1.9.2. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Corporation, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Corporation within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, severally but not jointly, against any losses, claims, damages, or liabilities joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.9.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall Holder's cumulative, aggregate liability under this subsection 1.9.2, under Section 1.9.4, or under such sections together, exceed. the net proceeds received by such Holder from the offering out of which such Violation arises. 1.9.3. Promptly after receipt by an indemnified party under this Section l.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with one counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which -10- may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, except to the extent the failure to deliver notice prejudices its ability to defend such action. Any omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9. 1.9.4. If the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand, and of the indemnified party on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 1.9.5. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. In addition, any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party. 1.9.6. The obligations of the Corporation and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.10. Reports under Securities Exchange Act of 1934. With a view to --------------------------------------------- making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the -11- Corporation to the public without registration or pursuant to a registration on Form S-3, the Corporation agrees to: 1.10.1. make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Corporation for the offering of its securities to the general public; 1.10.2. take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Corporation for the offering of its securities to the general public is declared effective; 1.10.3. file with the SEC in a timely manner all reports and other documents required of the Corporation under the Act and the 1934 Act; and 1.10.4. furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Corporation that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Corporation), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Corporation and such other reports and documents so filed by the Corporation, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.11. Assignment of Registration Rights. The rights to cause the --------------------------------- Corporation to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to, (i) in the case of any Holder that is a partnership, limited liability company or corporation, any current and former constituent partners, members, stockholders, affiliate funds and affiliates of that Holder, or (ii) in the case of any Holder, (x) a transferee or assignee of such securities who, after such assignment or transfer, holds at least twenty percent (20%) (as appropriately adjusted for all stock splits, dividends, combinations, reclassifications and other like transactions) of the Registrable Securities originally held by such transferring Holder, (y) a transferee or assignee who is a spouse, lineal descendant, adopted child, father, mother, brother or sister (each, a "Family Member") of Holder or (z) or to a trust, the beneficiaries of which are exclusively the Holder and/or Family Members, provided, in each case, that: (a) the Corporation is, within a reasonable time after such transfer, fumished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, -12- including without limitation the provisions of Section 1.12 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee of a holder of Registrable Securities, the holdings of "affiliates" (as defined in Rule 405 under the Act) of such holder, affiliated partnerships, constituent or retired partners of such partnerships (as well as Family Members of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with such partnership and its affiliated partnerships and other entities; provided, that, all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.12. "Market Stand-Off" Agreement. Each Holder hereby agrees that, ---------------------------- for a period of one (1) year following the IPO Date, it shall not directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Securities of the Corporation held by it at any time during such period. During such one (1) year period, each Holder agrees to provide to the underwriters of any public offering such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 1.12. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such one (1) year period. Notwithstanding the foregoing, the obligations described in this Section 1.12 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction. 1.13. Termination of Registration Rights. The right of any Holder to ---------------------------------- request registration or to include Registrable Securities in any registration pursuant to this Section 1 shall terminate upon the earlier of (i) the date which is five (5) years after the IPO Date, or (ii) such date as a public trading market shall exist for the Corporation's Common Stock and all shares of Registrable Securities beneficially owned and subject to Rule 144 aggregation by such Holder may immediately be sold under Rule 144 (without regard to Rule 144(k)) during any 90-day period, provided that such Holder is not then an "affiliate" of the Corporation within the meaning of Rule 144 and such Holder owns less than 1% of the then outstanding shares of Common Stock. 1.14. Limitations on Subsequent Registration Rights. From and after --------------------------------------------- the date -13- of this Agreement, the Corporation shall not, without the prior written consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter into any agreement with any Holder or prospective holder of any securities of the Corporation granting registration rights with respect to such securities, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included. 2. Covenants. --------- 2.1. Delivery of Financial Statements. The Corporation and the -------------------------------- Company shall deliver to each Holder of at least $10 million in principal amount of Notes and/or at least 1,200,000 shares as appropriately adjusted for all stock splits, dividends, combinations, reclassifications and other like transactions of Series A Preferred Stock and/or Common Stock (each, a "Major Holder"): 2.1.1. as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company or the Corporation commencing with the fiscal year ending December 31, 2000, an income statement for such fiscal year, a balance sheet of the Company or the Corporation and statement of stockholders' equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited by independent public accountants of nationally recognized standing selected by the Corporation; 2.1.2. as soon as practicable, but in any event within forty- five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company or the Corporation, if available, an unaudited profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter; 2.1.3. as soon as practicable, any written reports to the members or stockholders of the Company or the Corporation; or 2.1.4. such other information relating to the financial condition, business or corporate affairs of the Company or the Corporation as the Holder or any assignee of the Holder may from time to time request, provided, however, that the Corporation shall not be obligated under this subsection 2.1.4 or any other subsection of Section 2.1 to provide information which it deems in good faith to be a trade secret or similar confidential information. 2.2. Termination of Information Covenant. Unless otherwise ----------------------------------- specifically provided, the covenants set forth in this Section 2.1 shall terminate and be of no further force or effect (i) upon consummation of a public offering of the Corporation's Common Stock with -14- total gross offering proceeds to the Corporation in excess of $50 million (a "Qualified Public Offering"), or (ii) as to the Investor, or transferee or assignee of the Investor, who holds less than $10 million in principal amount of Notes and/or 1,200,000 of the then outstanding shares of the Series A Preferred Stock (or Common Stock issued upon conversion thereof). 2.3. Entravision Issuances. --------------------- 2.3.1. Right to Maintain Proportionate Ownership. ----------------------------------------- (a) In the event (i) the Company desires to sell and issue units of its membership interests or rights, options or other securities exercisable for or convertible into units of its membership interests (directly or indirectly) and whether or not such right or option or other security is immediately exercisable or convertible ("Units"), or (ii) the Corporation desires to sell and issue shares of its capital stock or rights, options or other securities exercisable for or convertible into shares of its capital stock (directly or indirectly) and whether or not such right or option or other security is immediately exercisable or convertible ("Shares") (with Units and Shares referred to collectively as the "Equity Securities" and the Company and the Corporation referred to herein collectively as "Entravision"), then Entravision shall first notify each Holder of the material terms of the proposed sale (including price and number of Equity Securities to be offered) and shall permit each Holder to acquire, at the time of consummation of such proposed issuance and sale and on such terms as are specified in Entravision's notice pursuant hereto, such number of Equity Securities proposed for issuance and sale as would be required to enable each to maintain its ownership rights in Entravision following such issuance, on an as-converted, and/or exercised, fully diluted percentage basis (without regard to reserved but unissued options), at the level maintained by it immediately prior to such proposed issuance. The Holders shall each have fifteen (15) days after the date of any such notice to elect by notice to Entravision to purchase such Equity Securities on such terms and at the time the proposed sale is consummated. For the purposes of determining the number of Equity Securities held by a Holder, transferee or assignee of Equity Securities the holdings of "affiliates" (as defined in Rule 405 under the Act), affiliated partnerships and other entities, constituent or retired partners of such partnerships (as well as Family Members of such partners or spouses who acquire Equity Securities by gift, will or intestate succession) shall be aggregated together with such affiliates, partnership and its affiliated partnerships and other entities. Each Holder shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates (or to assign such right of first offer to such partners and affiliates) in such proportions as it deems appropriate. (b) The right to maintain proportionate ownership set forth in this Section 2.3.1 shall not be applicable (A) to the issuance or sale of Equity Securities (or options or warrants therefor) approved by Entravision's Executive Committee, Board of Directors or Compensation Committee thereof to officers, directors, executive committee members, employees or consultants (pursuant to equity purchase, equity option or similar plans) for the primary purpose of soliciting or retaining their services, (B) to the issuance of Equity -15- Securities upon conversion of Entravision's Equity Securities, provided such Equity Securities are outstanding on the date hereof or the issuance or sale was effected in accordance with this Section 2.3, (C) to the issuance of securities in connection with a bona fide business acquisition of or by Entravision approved by the Executive Committee or the Board of Directors with a non- affiliated third party, whether by merger, consolidation, sale or transfer of assets, sale or exchange of Equity Securities or otherwise, (D) to the issuance of Equity Securities to financial institutions or lessors in connection with bona fide, arm's-length commercial credit arrangements, equipment financings or similar transactions approved by the Executive Committee or the Board of Directors, (E) to the issuance of Equity Securities in connection with any Equity Security split, Equity Security dividend or recapitalization by Entravision, (F) to the issuance of Equity Securities of Entravision (or options or warrants therefor) pursuant to strategic transactions with a non-affiliated third party approved by the Executive Committee or the Board of Directors with a primary purpose other than equity financing, (G) the issue of Equity Securities in connection with the conversion of convertible subordinated debt held by Univision Communications Inc., as of the date hereof or (H) securities issued in the IPO. (c) The right to maintain proportionate ownership set forth in this Section 2.3.1 shall terminate upon the earlier of immediately prior to the closing of a Qualified Public Offering or immediately prior to the closing of a "Qualified Acquisition" (defined below). For purposes of this Agreement, a "Qualified Acquisition" shall mean: (i) any consolidation or merger of Entravision with or into any other corporation or corporations following which the holders of Entravision's outstanding Equity Securities immediately before such consolidation or merger do not, immediately after such consolidation or merger, retain Equity Securities representing a majority of the voting power of the surviving corporation of such consolidation or merger or stock representing a majority of the voting power of an entity that wholly owns, directly or indirectly, the surviving entity of such consolidation or merger; (ii) the sale, transfer or assignment of Equity Securities of Entravision representing a majority of the voting power of all Entravision's outstanding voting Equity Securities by the holders thereof to an acquiring party in a single transaction or series of related transactions; (iii) any other sale, transfer or assignment of Equity Securities of Entravision representing over fifty percent (50%) of the voting power of Entravision's then outstanding voting Equity Securities by the holders thereof to an acquiring party; or (iv) the sale or transfer of all or substantially all of Entravision's assets. 2.4. Co-Sale Rights. -------------- 2.4.1. Transfer Notice. If at any time a Major Stockholder --------------- proposes to transfer Equity Securities to any person pursuant to an understanding with such person (a "Transfer"), then such Major Stockholder shall give Entravision and each Holder written notice of the Major Stockholder's intention to make the Transfer (the "Transfer Notice"), which Transfer Notice shall include (i) a description of the Equity Securities to be transferred (the "Offered Equity Securities"), (ii) the identity of the prospective transferee(s) and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be -16- made. The Transfer Notice shall include a copy of any written proposal, term sheet or letter of intent or other agreement related to the proposed Transfer. 2.4.2. Right to Participate. Each Holder which notifies the -------------------- Major Stockholder proposing to make a Transfer in writing within fifteen (15) days after receipt of the Transfer Notice shall have the right to participate in the sale of the Equity Securities on the same terms and conditions as specified in the Transfer Notice (such proposed terms and conditions, a "Purchase Offer"). To the extent a Holder exercises such right of participation in accordance with the terms and conditions set forth below, the number of Equity Securities that the Major Stockholder may sell pursuant to such Purchase Offer shall be correspondingly reduced. The right of participation of the Holders shall be subject to the following terms and conditions: (a) Each Holder may sell all or any part of that number of Holder Equity Securities equal to the product obtained by multiplying the aggregate number of Equity Securities covered by the Purchase Offer by a fraction, (x) the numerator of which shall be the number of Equity Securities (on an as-converted, as-exercised fully diluted basis) at the time owned by such Holder and (y) the denominator of which shall be the number of shares of Equity Securities (on an as converted, as-exercised fully diluted basis) at the time owned by all Holders electing to participate in the sale and all Major Stockholders participating in the sale. (b) Each Holder may effect its participation in the sale by first taking all steps necessary to convert the securities of Entravision currently held by such Holder into Class A Units, in the case of a Purchase Offer with respect to Units or Class A Common Stock, in the case of a Purchase Offer of Class A Common Stock or Class B Common Stock of the Corporation. Such Holder shall also deliver to the Major Stockholder, for transfer to the purchase offeror, an assignment separate from certificate, in the case of Class A Units, or one or more certificates, properly endorsed for transfer, in the case of Class A Common Stock, that represents the number of Equity Securities that the Holder elects to sell pursuant to Section 2.4.2. (c) To the extent that any prospective purchaser or purchasers prohibit such exercise of co-sale right or otherwise refuse to purchase Equity Securities from a Holder exercising its co-sale right hereunder, the Major Stockholder shall not sell to such prospective purchaser or purchasers any Equity Securities unless and until, simultaneously with such sale, the Major Stockholder shall purchase such Equity Securities from such Holder for the same consideration and on the same terms and conditions as the proposed transfer described in the Major Stockholder's Notice. 2.4.3. Mechanics of Transfer. The assignment or stock --------------------- certificates that the Holders deliver to the Major Stockholders pursuant to Section 2.4.2 shall be transferred by such Major Stockholder to the purchase offeror in consummation of the sale of the Major Stockholder's Equity Securities pursuant to the terms and conditions specified in the Transfer -17- Notice, and the Major Stockholders shall promptly thereafter remit to each of the Holders that portion of the sale proceeds to which each Holder is entitled by reason of its participation in such sale. In the event that less than all the Equity Securities represented by such assignment separate from certificate or the shares represented by such a stock certificate are sold pursuant to Section 2.4.1, the Seller shall instruct the Corporation or the Company to issue a new certificate to the Holder representing the shares not sold. 2.4.4. No Effect on Subsequent Rights. The exercise or non- ------------------------------ exercise of the rights of any Holder hereunder to participate in one or more sales of the Major Stockholders' Equity Securities made by a Major Stockholder shall not adversely affect the Holder's rights to participate in subsequent sales of Equity Securities by a Major Stockholder. Any person who acquires Equity Securities from a Major Stockholder must prior to or concurrently with any such transfer execute and deliver a written agreement satisfactory in form and substance to the Holders agreeing to be bound by the provisions of this Agreement. 2.5. Prohibited Transfers. -------------------- 2.5.1. Agreement Not to Transfer. Any attempt by a Major ------------------------- Stockholder to transfer any Equity Securities in violation of Section 2.4 shall be void and Entravision agrees that it will not effect such a transfer nor will it treat any alleged transferee in violation of Section 2.4 as the holder of such shares. 2.5.2. Repurchase. In the event a Major Stockholder should ---------- sell any Equity Securities in contravention of the participation rights of the Holders under Section 2.4 (a "Prohibited Transfer"), each Holder shall have the option to sell to such Major Stockholder a number of Registrable Securities equal to such Holder's pro rata share (as determined pursuant to Section 2.4.2(a) above), provided, that, the date of the Transfer Notice (if any) shall be understood to mean the date of the Prohibited Transfer, on the following terms and conditions: (a) The price per share at which such Equity Securities are to be sold to such Major Stockholder under this Section 2.5.2 shall be equal to the price per share paid by the third-party purchaser or purchasers of the Equity Securities (the "Contingent Purchaser") to such Major Stockholder. (b) Such Holder shall deliver to such Major Stockholder as applicable within ninety (90) days after such Holder has received notice from a Major Stockholder or otherwise become aware of the Prohibited Transfer, the assignment separate from certificate or the certificate or certificates representing Equity Securities to be sold, each certificate to be properly endorsed for transfer. (c) Such Major Stockholder shall, immediately upon receipt of the assignment or certificates for the Shares, pay the aggregate purchase price therefor, by certified check or bank draft made payable to the order of such Holder, and shall reimburse -18- such Holder for any reasonable additional expenses, including reasonable legal fees and expenses, incurred in effecting such purchase and sale. 2.5.3. Exclusions. The participation rights of the Holders set ---------- forth in Section 2.4 shall not pertain or apply to (i) any pledge of Equity Securities made by a Major Stockholder that creates only a security interest, (ii) any bona fide gift or estate planning transaction, (iii) any distribution by a Major Stockholder that is a partnership to the current or former partners or other interest holders of such Major Stockholder or (iv) any distribution or transfer by a Major Stockholder to any other Major Stockholders or to affiliate (as defined in Rule 405 under the Act) of such Major Stockholder or any other Major Stockholder, provided, that, in each case, the pledgee, transferee or donee shall furnish the Holders with a written agreement to be bound by and comply with all provisions of this Agreement applicable to the Major Stockholders. 2.6. Termination. The provisions of Sections 2.4 and 2.5 shall ----------- terminate immediately prior to the closing of a Qualified Public Offering or a Qualified Acquisition. 3. Series A Designee. In the period that at least fifty percent (50%) of ----------------- the shares of Series A Preferred Stock remain outstanding, each Major Stockholder shall vote (or shall cause to be voted) all shares of Equity Securities owned or controlled by such Major Stockholder (including any Equity Securities hereafter acquired), at any regular or special meeting of shareholders of the Corporation, shall take all action by written consent in lieu of such meeting of shareholders, and shall take all other actions necessary, to ensure that there shall be elected as a director and member of the Board of Directors of the Corporation one (1) individual (the "Series A Designee") designated by the holders of a majority of the outstanding Series A Preferred Stock. The Series A Designee shall be removed (with or without cause), if holders of a majority of the outstanding Series A Preferred Stock so request such removal by written notice to the Corporation. If stockholder approval is required for any removal hereunder, such removal shall be effected upon the affirmative vote or action by written consents of holders of a majority of the outstanding Series A Preferred Stock, and each Major Stockholder hereby agrees to vote all such shares then owned or held of record by him, or to take action by written consent, to effect such removal. In the event that a vacancy is created on the Board of Directors of the Corporation by the death, disability, retirement, resignation or removal (with or without cause) of the Series A Designee, each Major Stockholder hereby agrees to vote or take action by written consent, in each case, to the extent such Major Stockholder shall be entitled to do so, and to use his reasonable and diligent efforts to cause the remaining directors to vote or take action by written consent, for the election of a nominee to be designated by the holders of a majority of the outstanding Series A Preferred Stock. -19- Each Major Stockholder covenants and agrees that, except as a result of transfers expressly permitted by, and pursuant to and in accordance with, this Agreement, such Major Stockholder will have sole voting power with respect to such Major Stockholder's Equity Securities and will not grant any proxy with respect to such Equity Securities, enter into any voting trust or other voting agreement or arrangement with respect to such Equity Securities, enter into any voting trust or other voting agreement or arrangement with respect to such Equity Securities or grant any other rights to vote such Equity Securities inconsistent with the agreement to vote such Equity Securities as set forth herein. 4. Negative Covenants. ------------------ 4.1. Without the consent of Holders of the majority of the Registrable Securities, neither the Company nor the Corporation shall: (a) declare or pay any dividend, or make any other distribution or payment, on any Equity Securities (except on the Corporation's Series A Preferred Stock, dividends or distributions payable by the Company or the Corporation in their respective Equity Securities or dividends or distributions payable to the Company or the Corporation by any subsidiary thereof); (b) purchase, redeem or otherwise retire for value any Equity Securities of the Company or the Corporation (other than repurchase of Equity Securities from employees, officers, directors, consultants or other persons performing services for the Company or the Corporation or any subsidiary pursuant to arrangements approved by the Executive Committee of the Company or the Board of Directors of the Corporation, as the case may be, and in no event shall such arrangements include the purchase or acquisition of Equity Securities of the Company or the Corporation held by Walter F. Ulloa, Philip C. Wilkinson, Paul A. Zevnik or any affiliates or transferees thereof without the prior written consent of the holders of the majority of the Registrable Securities, which consent shall not be unreasonably withheld); (c) liquidate, dissolve or wind-up the Company or the Corporation; (d) enter into or engage in any transaction with an affiliate (as defined in the 1934 Act) on terms less advantageous to the Company or the Corporation than would be the case if such transaction had been effected with a non-affiliate; (e) issue or incur any indebtedness which violates the terms of that certain Amended and Restated Credit Agreement dated November 10, 1998, as amended from time to time, between the Company and Union Bank of California, N.A. or any successor agreement with the lead lender upon refinancing of such debt; (f) the Company shall not amend its Certificate of Formation or -20- Operating Agreement and the Corporation shall not amend its Certificate of Incorporation or Bylaws in any fashion which will adversely affect the rights of the Investor; or (g) the Company shall not consent to the amendment of the Exchange Agreement (or the First Restated Certificate of Incorporation or the First Amended and Restated Bylaws of the Corporation attached as exhibits to the Exchange Agreement) in a fashion that in adversely affect the rights of the Investor. 4.2. The provisions of this Section 4 shall terminate immediately prior to the closing of a Qualified Public Offering or Qualified Acquisition. 5. Affirmative Covenants. --------------------- 5.1. The Company and the Corporation will, and will cause each of their subsidiaries to, preserve and maintain its existence and its material rights, franchises, leases, licenses and privileges in the state of its incorporation or organization, except where the failure to do so would not have a material adverse effect on the assets, liabilities or properties of the Company or the Corporation and their subsidiaries taken as a whole (a "Material Adverse Effect"). 5.2. The Company and the Corporation will, and will cause each of their subsidiaries to, comply in all material respects with the requirements of all applicable laws, regulations, contracts and licenses, except where the failure to do so would not have a Material Adverse Effect. 5.3. The Company and the Corporation will file and pay all taxes and assessments when due (except in the case of a bona fide dispute), except where the failure to do so would not have a Material Adverse Effect. 5.4. The Company and the Corporation will complete the Roll-Up in accordance with the Exchange Agreement no later than the Interim Closing Deadline as defined in that certain Acquisition Agreement and Plan of Merger by and among the Company, the Corporation, ZSPN Acquisition Corporation and Z- Spanish Media Corporation and its stockholders of even date herewith. 5.5. The provisions of this Section 5 shall terminate immediately prior to the closing of a Qualified Public Offering or Qualified Acquisition. 6. Miscellaneous. ------------- 6.1. 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 and assigns of the parties (including transferees of any shares of -21- Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any 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. 6.2. Governing Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions of the State of Delaware or any other state. 6.3. Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6.4. Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.5. Notices. Except as otherwise provided herein, all notices and ------- other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of confirmed facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to a Holder or Major Stockholder, at such Holder's or Major Stockholder's address as set forth on Exhibit "A" hereto and (ii) if to the Corporation, at the address ----------- of its principal corporate offices (attention: Secretary), or at such other address as a party may designate by ten (10) days' advance written notice to the other party pursuant to the provisions above. 6.6. Expenses. Except as otherwise provided herein, if any action at -------- law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 6.7. Amendments and Waivers. Any term of this Agreement may be ---------------------- amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Corporation, the holders of a majority of the Registrable Securities then outstanding, and the holders of a majority of the Major Stockholders' Equity Securities then outstanding; provided, further, that the provisions of Section 3 hereof relating to the Series A Director Designee shall not be amended without the written consent of TSG for so long as TSG has the -22- right to designate such Designee. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Corporation and each Major Stockholder. 6.8. Aggregation of Stock. All Shares held or acquired by entities, -------------------- partnerships, former partnerships or "affiliates" (as defined in Rule 405 under the Act) of a Holder or Family Members of such Holder, or trusts the beneficiaries of which are affiliated entities or persons and/or Family Members of such Holder (collectively, "Affiliates") shall be aggregated together for the purpose of determining the availability or discharge of any rights of such Holder under this Agreement. Any Affiliate or Affiliate group shall be entitled to designate one person as representative of such group for the purpose of exercising any right or undertaking any obligation of such group hereunder (including without limitation voting any Shares held by any such Affiliate or member of any such Affiliate group), and the Company and the Corporation shall be entitled to rely on the representative for such purposes. 6.9. Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.10. Entire Agreement: Amendment: Waiver. This Agreement (including ----------------------------------- the Exhibits hereto, if any) constitutes the full and entire understanding and Agreement between the parties with regard to the subjects hereof and thereof. 6.11. Specific Performance: Proxies. The parties hereto agree that ----------------------------- irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with these specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, if any provision in this Agreement shall constitute the granting of a proxy, the parties hereto agree that such proxy shall be deemed to be coupled with an interest. [Remainder of Page Intentionally Left Blank] -23- IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. ENTRAVISION COMMUNICATIONS CORPORATION By: /s/ Walter F. Ulloa ------------------------------------------------------ Walter F. Ulloa, Chairman and Chief Executive Officer By: /s/ Jeanette L. Tully ------------------------------------------------------ Jeanette L. Tully, Chief Financial Officer ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: /s/ Walter F. Ulloa ------------------------------------------------------ Walter F. Ulloa, Chairman and Chief Executive Officer By: /s/ Jeanette L. Tully ------------------------------------------------------ Jeanette L. Tully, Chief Financial Officer TSG CAPITAL FUND III, L.P. By: /s/ Darryl B. Thompson ------------------------------------------------------ Name:____________________________________________________ Title:___________________________________________________ /s/ Walter F. Ulloa --------------------------------------------------------- Walter F. Ulloa Philip C. Wilkinson by Walter F. Ulloa, as his attorney in fact /s/ Walter F. Ulloa --------------------------------------------------------- Philip C. Wilkinson /s/ Paul A. Zevnik --------------------------------------------------------- Paul A. Zevnik [Counterpart Signature Page to Investor Rights Agreement] EXHIBIT "A" TSG Capital Fund III, L.P. 177 Broad Street, 12/th/ Floor Stamford, Connecticut 06901 Walter F. Ulloa 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Philip C. Wilkinson 5770 Ruffin Road San Diego, California 92123 Paul A. Zevnik 1299 Pennsylvania Avenue, N.W., 9th Floor Washington, D.C. 20004 EX-10.23 17 0017.txt FORM OF INVESTOR RIGHTS AGREEMENT EXHIBIT 10.23 INVESTOR RIGHTS AGREEMENT This Investor Rights Agreement (this "Agreement") is made as of __________, 2000 (the "Effective Date"), by and among Entravision Communications Corporation, a Delaware corporation (the "Corporation"), the former holders of Common Stock of Z-Spanish Media Corporation, a Delaware corporation ("ZSPN") listed on Exhibit "A" hereto (the "ZSPN Stockholders"), Univision Communications ----------- Inc. ("Univision"), and the other stockholders other than Univision of the Corporation listed on Exhibit "A" hereto (the "Founders"). ----------- WHEREAS, the Corporation, its wholly-owned subsidiary, ZSPN Acquisition Corporation, Entravision Communications Company, L.L.C., ZSPN and the ZSPN Stockholders are parties to that certain Acquisition Agreement and Plan of Merger dated April 19, 2000 pursuant to which the Corporation has acquired ZSPN and the ZSPN Stockholders have received shares of Class A Common Stock of the Corporation. WHEREAS, the Founders and Univision are holders of Class A Common Stock, Class B Common Stock and Class C Common Stock of the Corporation received in connection with an incorporation transaction pursuant to the terms of that certain Exchange Agreement dated April 19, 2000, by an among the Corporation, the Company, the Founding Stockholders and other members of the Company. WHEREAS, the Corporation desires to grant to the Holders (as defined below) certain registration rights as set forth herein. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties hereto hereby agree as follows: 1. Registration Rights. The Corporation covenants and agrees as follows ------------------- (capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Purchase Agreement): 1.1. Definitions. For purposes of this Section 1: ----------- 1.1.1. The term "1934 Act" means the Securities Exchange Act of l934, as amended. 1.1.2. The term "Act" means the Securities Act of 1933, as amended. 1.1.3. The term "Closing" has the meaning ascribed to it in the Merger Agreement. 1.1.4. The term "Common Stock" refers collectively to both the Class A Common Stock and Class B Common Stock of the Corporation. 1.1.5. The term "Demand Holder" shall mean the Holders other than Amador S. Bustos, Bustos Asset Management, L.L.C., John S. Bustos, Salvador H. Campos, Elias Conde, Mark S. Paretchan, Gonsalo Siles, Rafael Vasquez, John Vuko, Glenn Emanuel and Arthur Rockwell. 1.1.6. The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Corporation with the SEC. 1.1.7. The term "Founders Registrable Securities" means (i) Common Stock currently held by the Founders as specified on Exhibit "A", and ----------- (ii) any Common Stock of the Corporation issued as (or issuable upon the conversion or exercise of any warrants right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clause (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's right under this Section 1 are not duly assigned as provided herein or any Registrable Securities after such securities have been sold to the public or sold pursuant to Rule 144 promulgated under the Act. 1.1.8. The term "Holder" means the ZSPN Stockholders, Univision, the Founders and their respective permitted successors and assigns. 1.1.9. The terms "register," registered and registration refer to a registration effected by preparing and filing, a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document by the SEC. 1.1.10. The term "Registrable Securities" means the Founders Registrable Securities and the ZSPN Registrable Securities. 1.1.11. The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, Registrable Securities. 1.1.12. The term "SEC" shall mean the Securities and Exchange Commission. 1.1.13. The term "ZSPN Registrable Securities" means (i) the Common Stock currently held by ZSPN Stockholders as a result of the Merger as specified on Exhibit "A" and (ii) any Common Stock of the Corporation issued as ----------- (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in -2- clause (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's rights under this Section 1 are not duly assigned as provided herein or any Registrable Securities after such securities have been sold to the public or sold pursuant to Rule 144 promulgated under the Act. 1.2. Request for Registration. ------------------------ 1.2.1. Registration Rights. If the Corporation shall receive ------------------- at any time after one (1) year after the effective date of the first registration statement for a public offering of securities of the Corporation (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan), a written request from the holders of a majority of the ZSPN Registrable Securities, the holders of a majority of the Founders Registrable Securities, or Univision ("Initiating Holders"), requesting that the Corporation file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $20 million, then the Corporation shall: (a) within twenty (20) days of the receipt thereof, give written notice of such request to all Holders; and (b) use reasonable and diligent efforts to cause such shares to be registered under the Act as soon as practicable, subject to the limitations of subsection 1.2.2. 1.2.2. Underwriting: Requirements. If the Initiating Holders -------------------------- intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to subsection 1.2.1 and the Corporation shall include such information in the written notice referred to in subsection 1.2.1. The underwriter will be selected by the Corporation from the lead underwriters in its initial public offering or from another investment banking firm of national repute and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder or other holder of securities of the Corporation to include securities in such registration shall be conditioned upon such Holder's or holders' participation in such underwriting and the inclusion of such Holder's or holders' securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder or holder) to the extent provided herein. All Holders and other holders of securities of the Corporation proposing to distribute their securities through such underwriting shall (together with the Corporation as provided in subsection 1.5.5) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Corporation shall so advise all Holders of Registrable Securities and other holders of registration rights which would otherwise be -3- underwritten pursuant hereto, and the number of securities that may be included in the underwriting on behalf of each Holder or other holder shall be allocated on a pro-rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement with the Corporation; provided, however, that the numbers of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting and registration. For purposes of allocating securities to be included in any offering, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. To facilitate the allocation of shares in accordance with the above provisions, the Corporation may round the number of shares allocated to any Holder to the nearest 100 shares. 1.2.3. Notwithstanding the foregoing, if the Corporation shall furnish to Demand Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Corporation shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Corporation may not utilize this right more than once in any twelve-month period. 1.2.4. In addition, the Corporation shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (a) With respect to the ZSPN Stockholders, after the Corporation has effected one (1) such registration pursuant to Section 1.2 in which the ZSPN Stockholders were the majority of the Initiating Holders and such registration has been declared or ordered effective. (b) With respect to the Founders, after the Corporation has effected two (2) such registrations pursuant to Section 1.2 in which the Founders were the majority of the Initiating Holders and such registrations have been declared or ordered effective. (c) With respect to Univision, after the Corporation has effected one (1) such registration pursuant to Section 1.2 in which Univision was the Initiating Holder. -4- (d) During the period starting with the date sixty (60) days prior to the Corporation's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, (x) the Corporation's initial registered offering of its securities to the general public (other than a registration statement relating to either the sale of securities to employees of the Corporation pursuant to a stock option, stock purchase or similar plan), (y) a previous registration subject to this Section 1.2 or (z) a previous registration subject to Section 1.3 hereof; provided, that, the Corporation is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (e) In any particular jurisdiction in which the Corporation would be required to execute a general consent to service of process, unless the Corporation is already subject to service in such jurisdiction and except as required by the Act; or (f) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below. 1.3. Corporation Registration. ------------------------ 1.3.1. Registration Rights. If (but without any obligation ------------------- to do so) the Corporation proposes to register (including for this purpose a registration effected by the Corporation for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than the initial public offering of its securities or a registration relating solely to the sale of securities to participants in a Corporation stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Corporation shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within fifteen (15) days after mailing of such notice by the Corporation in accordance with Section 4.5, the Corporation shall, subject to the provisions of paragraph 1.3.2 below, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 1.3.2. Underwriting Requirements. In connection with any ------------------------- offering involving an underwriting of shares of the Corporation's capital stock other than its initial public offering, the Corporation shall not be required under this Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Corporation and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Corporation. If the total amount of securities, including Registrable Securities, requested by stockholders to be -5- included in such offering exceeds the amount of securities sold other than by the Corporation that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Corporation shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering. Allocation of securities to be sold in any such offering shall be made on a pro-rata basis among the selling stockholders according to the total number of securities held by each such selling stockholder and entitled to inclusion therein on the basis of a registration rights agreement with the Corporation. For purposes of allocation of securities to be included in any offering now or hereafter entered into, for any selling stockholder which is a partnership or corporation, the "affiliates" (as defined in Rule 405 under the Act), partners, retired partners and stockholders of such holder (and in the case of a partnership, any affiliated partnerships), or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. 1.4. Form S-3 Registration. In case the Corporation shall receive --------------------- from any Holder or Holders of ZSPN Registrable Securities a written request or requests that the Corporation effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Corporation will: 1.4.1. promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and 1.4.2. as soon as practicable, effect such registration and all such qualifications and compliance as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Corporation; provided, however, that the Corporation shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: (1) if the Registrable Securities requested by all Holders to be registered pursuant to this Section 1.4 have an anticipated aggregate offering price to the public (before deducting any underwriter discounts, concessions or commissions) of less than $1,000,000; (2) if Form S-3 is not available for such offering by the Holders; (3) if the Corporation shall furnish to the Holders a certificate signed by the President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Corporation shall have the right to defer the filing of the Form S-3 registration statement for a period of not more -6- than ninety (90) days after receipt of the request of the Holder or Holders under this Section 1.4; provided, however, that the Corporation shall not utilize this right more than twice in any twelve-month period; (4) if the Corporation has, within the twelve (12) month period preceding the date of such request, already effected one (1) or more registrations on Form S-3 pursuant to this Section 1.4; or (5) in any particular jurisdiction in which the Corporation would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. 1.4.3. Subject to the foregoing, the Corporation shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as demands for registration pursuant to Sections 1.2. 1.5. Obligations of the Corporation. Whenever required under this ------------------------------ Section 1 to effect the registration of any Registrable Securities, the Corporation shall, as expeditiously as reasonably possible: 1.5.1. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to ninety (90) days or until the distribution contemplated in the Registration Statement has been completed; provided, however, that such 90-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Corporation. 1.5.2. Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. 1.5.3. Furnish (at no cost) to the Holders such numbers of copies of a prospectus, including a preliminary prospectus and of each amendment and supplement thereto, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 1.5.4. Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business -7- or to file a general consent to service of process in any such states or jurisdictions. 1.5.5. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and performs its obligations under such an agreement. 1.5.6. Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 1.5.7. Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Corporation are then listed. 1.5.8. Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 1.5.9. In the event of any underwritten public offering, cooperate with the selling Holders, the underwriters participating in the offering and their counsel in any due diligence investigation reasonably requested by the selling Holders or the underwriters in connection therewith, and participate, to the extent reasonably requested by the managing underwriter for the offering or the selling Holder, in efforts to sell the Registrable Securities under the offering (including, without limitation, participating in "roadshow" meetings with prospective investors at reasonable times) that would be customary for underwritten primary offerings of a comparable amount of equity securities by the Corporation. 1.5.10. Notify each Holder of Registrable Securities covered by such registration statement: (i) when such registration statement or any post- effective amendment to the registration statement has been declared effective by the SEC, (ii) of any request by the SEC for amendments or supplements to such registration statement or prospectus or for additional information; and (iii) of the receipt by the Corporation of any notification from any public board or body with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. 1.5.11. Notify each Holder of Registrable Securities of the issuance of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose and the Corporation shall use its reasonable best efforts to prevent the issuance of any stop order, or if any order is issued, to obtain the withdrawal thereof. -8- 1.5.12. Take all actions necessary to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities and the transfer thereof upon resale by the Holder of such Registrable Securities in accordance with the applicable prospectus. 1.5.13. Otherwise use its reasonable and diligent efforts in performance of its obligations hereunder to comply with all applicable rules and regulations of the SEC and of state securities commissions and any stock exchange or automated quotation system. 1.6. Furnish Information. ------------------- 1.6.1. It shall be a condition precedent to the obligations of the Corporation to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Corporation such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6.2. The Corporation shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.4 if, due to the operation of subsection 1.6. 1, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Corporation's obligation to initiate such registration as specified in subsection 1.2.1 or subsection 1.4.2, whichever is applicable. 1.7. Expenses of Demand, Corporation or S-3 Registration. All --------------------------------------------------- expenses (exclusive of underwriting discounts and commissions and stock transfer taxes) incurred in connection with registrations, filings or qualifications pursuant to this Section 1 including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Corporation and the reasonable fees and disbursements of one counsel for all selling Holders of ZSPN Registrable Securities and one counsel for all selling Holders of Founders Registrable Securities shall be bome by the Corporation. 1.8. Delay of Registration. No Holder shall have any right to obtain --------------------- or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.9. Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 1: -9- 1.9.1. To the extent permitted by law, the Corporation will indemnify and hold harmless each Holder, the constituent partners and members, or officers, directors and employees of each Holder, and, if such Holder is a natural person, his or her heirs, personal representatives and assigns, and any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Corporation of the Act, any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Corporation will pay to each such Holder, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action, as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 1.9.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Corporation (which consent shall not be unreasonably withheld), nor shall the Corporation be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information fumished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; provided, further, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, from whom the person asserting such losses, claims, damages, or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Corporation shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. 1.9.2. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Corporation, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Corporation within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, severally but not jointly, against any losses, claims, damages, or liabilities joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise -10- out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.9.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall Holder's cumulative, aggregate liability under this subsection 1.9.2, under Section 1.9.4, or under such sections together, exceed the net proceeds received by such Holder from the offering out of which such Violation arises. 1.9.3. Promptly after receipt by an indemnified party under this Section l.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with one counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 1.9 except to the extent the failure to deliver notice prejudices its ability to defend such action. Any omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9. 1.9.4. If the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand, and of the indemnified party on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue -11- or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 1.9.5. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. In addition, any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party. 1.9.6. The obligations of the Corporation and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.10. Reports under Securities Exchange Act of 1934. With a view to --------------------------------------------- making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Corporation to the public without registration or pursuant to a registration on Form S-3, the Corporation agrees to: 1.10.1. make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Corporation for the offering of its securities to the general public; 1.10.2. take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Corporation for the offering of its securities to the general public is declared effective; 1.10.3. file with the SEC in a timely manner all reports and other documents required of the Corporation under the Act and the 1934 Act; and 1.10.4. furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Corporation that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Corporation), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it -12- qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Corporation and such other reports and documents so filed by the Corporation, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.11. Assignment of Registration Rights. The rights to cause the --------------------------------- Corporation to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to, (i) in the case of any Holder that is a partnership, limited liability company or corporation, any current and former constituent partners, members, stockholders, affiliate funds and affiliates of that Holder, or (ii) in the case of any Holder, (x) a transferee or assignee of such securities who, after such assignment or transfer, holds at least twenty percent (20%) of the Holder's shares (as appropriately adjusted for all stock splits, dividends, combinations, reclassifications and other like transactions) of the Registrable Securities originally held by such transferring Holder, (y) a transferee or assignee who is a spouse, lineal descendant, adopted child, father, mother, brother or sister (each, a "Family Member") of Holder or (z) or to a trust, the beneficiaries of which are exclusively the Holder and/or Family Members, provided, in each case, that: (a) the Corporation is, within a reasonable time after such transfer, fumished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.12 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee of a holder of Registrable Securities, the holdings of "affiliates" (as defined in Rule 405 under the Act) of such holder, affiliated partnerships, constituent or retired partners of such partnerships (as well as Family Members of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with such partnership and its affiliated partnerships and other entities; provided, that, all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.12. "Market Stand-Off" Agreement. Each Holder hereby agrees that, ---------------------------- during the period of duration specified by the Corporation and an underwriter of common stock or other securities of the Corporation, following the effective date of the registration statement of the Corporation filed under the Act relating to its initial public stock offering, it shall not, to the extent requested by the Corporation and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Securities of the Corporation held by it at any time during such period except common stock included in such registration; provided, however, that: -13- 1.12.1. all officers and directors of the Corporation shall have entered into similar agreements; 1.12.2. the Corporation uses its best efforts to obtain from persons who hold greater than five percent (5%) of the Corporation's outstanding capital stock, a lock-up agreement similar to that set forth in this Section 1.12; and 1.12.3. such market stand-off time period shall not exceed ninety (90) days (or such period as reasonably requested by the Corporation's underwriters). Each Holder agrees to provide to the other underwriters of any public offering in which such Holder is selling Registrable Securities such further agreements as such underwriter may reasonably request in connection with this market stand-off agreement, provided that the terms of such agreements are substantially consistent with the provisions of this Section 1.12. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, the obligations described in this Section 1.12 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to an SEC Rule 145 transaction. 1.13. Termination of Registration Rights. The right of any Holder to ---------------------------------- request registration or to include Registrable Securities in any registration pursuant to this Section 1 shall terminate upon the earlier of (i) the date which is five (5) years after the date immediately prior to the closing of the initial public offering of the Corporation's Common Stock, or (ii) such date as a public trading market shall exist for the Corporation's Common Stock and all shares of Registrable Securities beneficially owned and subject to Rule 144 aggregation by such Holder may immediately be sold under Rule 144 (without regard to Rule 144(k)) during any 90-day period, provided that such Holder is not then an "affiliate" of the Corporation within the meaning of Rule 144 and such Holder owns less than I% of the then outstanding shares of Common Stock. 1.14. Limitations on Subsequent Registration Rights. From and after --------------------------------------------- the date of this Agreement, the Corporation shall not, without the prior written consent of the Holders of at least a majority of the ZSPN Registrable Securities and a majority of the Founders Registrable Securities then outstanding, enter into any agreement with any Holder or prospective holder of any securities of the Corporation granting registration rights with respect to such securities, unless under the terms of such agreement or as expressly provided in this Agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included. -14- 1.15. Co-Sale Rights. -------------- 1.15.1. Transfer Notice. If at any time a Founder proposes to --------------- transfer shares of capital stock of the Corporation or rights, options or other securities exercisable for or convertible into shares of capital stock of the Corporation (directly or indirectly) whether or not such right or option or other security is immediately exercisable or convertible (collectively, the "Equity Securities") to any person or entity pursuant to an understanding with such person or entity (a "Transfer"), then such Founder shall give the Corporation and each Holder written notice of the Founder's intention to make the Transfer (the "Transfer Notice"), which Transfer Notice shall include (i) a description of the Equity Securities to be transferred (the Offered Equity Securities"), (ii) the identity of the prospective transferee(s) and (iii) the consideration and material terms and conditions upon which the proposed transfer is to be made. The Transfer Notice shall include a copy of any written proposal, term sheet or letter or intent or other agreement related to the proposed Transfer. 1.15.2. Right to Participate. Each Holder which notifies the -------------------- Founder proposing to make a transfer in writing within thirty (30) days after receipt of the Transfer Notice shall have the right to participate in the sale of the Equity Securities on the same terms and conditions as specified in the Transfer Notice (such proposed terms and conditions, a "Purchase Officer"). To the extent a Holder exercises such right of participation in accordance with the terms and conditions set forth below, the number of Equity Securities that the Founder may sell pursuant to such Purchase Offer shall be correspondingly reduced. The right of participation of the Holders shall be subject to the following terms and conditions. (a) Each Holder may sell all or any part of that number of Equity Securities equal to the product obtained by multiplying the aggregate number of Holder Equity Securities covered by the Purchase Offer by a fraction, (x) the numerator of which shall be the number of Equity Securities (on an as-converted, as exercised fully-diluted basis) at the time owned by such Holder and (y) the denominator of which shall be the number of shares of Equity Securities (on an as-converted, as-exercised fully-diluted basis) at the time owned by all Holders electing to participate in the sale and all Founders participating in the sale. (b) Each Holder may effect its participation in the sale by delivering to the Founder, for transfer to the prospective transferee(s) identified in the Transfer Notice, one or more certificates, properly endorsed for transfer, that represents the number of Equity Securities that the Holder elects to sell pursuant to this Section 1.15. (c) To the extent that any prospective transferee(s) identified in the Purchase Notice prohibit such exercise of co-sale rights or otherwise refuse to purchase Equity Securities from a Holder exercising its co- sale right hereunder, the Founder shall not sell to such prospective transferee(s) any Equity Securities unless and until, simultaneously with such sale, the Founder shall purchase such Equity Securities from such Holder for the same consideration and on the same terms and conditions as the proposed transfer described in the Transfer Notice. -15- 1.15.3. Mechanics of Transfer. The assignment or stock --------------------- certificates that the Holders deliver to the Founder pursuant to this Section 1.15 shall be transferred by such Founder to the prospective transferee(s) identified in the Transfer Notice in consummation of the sale of the Founder's Equity Securities pursuant to the terms and conditions specified in the Transfer Notice, and the Founder shall promptly thereafter remit to each of the Holders participating in the sale that portion of the sale proceeds to which each Holder is entitled by reason of its participation in such sale. In the event that less than all the Equity Securities represented by such assignment separate from certificate or the shares represented by such a stock certificate are sold pursuant to this Section 1.15, the Founder shall instruct the Corporation to issue a new certificate to the Holder representing the shares not sold. 1.15.4. No Effect on Subsequent Rights. The exercise or ------------------------------ non-exercise of the rights of any Holder hereunder to participate in one or more sale of the Founder's Equity Securities made by a Founder shall not adversely affect the Holder's rights to participate in subsequent sales of Equity Securities by a Founder. 1.15.5. Termination. The provisions of this Section 1.15 shall ----------- terminate and be of no further force or effect immediately prior to the closing of a public offering of the Corporation's common stock with total gross offering proceeds to the Corporation in excess of $50 million. 20 Miscellaneous. ------------- 2.1. 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 and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any 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. 2.2. Governing Law. This Agreement shall be governed by and -------------- construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions of the State of Delaware or any other state. 2.3. Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 2.4. Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. -16- 2.5. Notices. Except as otherwise provided herein, all notices and ------- other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of confirmed facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to a Holder, at such Holder's address as set forth on Exhibit "A" hereto and (ii) if ----------- to the Corporation, at the address of its principal corporate offices (attention: Secretary), or at such other address as a party may designate by ten (10) days' advance written notice to the other party pursuant to the provisions above. 2.6. Expenses. Except as otherwise provided herein, if any action at -------- law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 2.7. Amendments and Waivers. Any term of this Agreement may be ---------------------- amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Corporation, the holders of a majority of the ZSPN Registrable Securities then outstanding, and the holders of a majority of the Founders Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Corporation. 2.8. Aggregation of Stock. All Shares held or acquired by entities, -------------------- partnerships, former partnerships or "affiliates" (as defined in Rule 405 under the Act) of a Holder or Family Members of such Holder, or trusts the beneficiaries of which are affiliated entities or persons and/or Family Members of such Holder (collectively, "Affiliates") shall be aggregated together for the purpose of determining the availability or discharge of any rights of such Holder under this Agreement. Any Affiliate or Affiliate group shall be entitled to designate one person as representative of such group for the purpose of exercising any right or undertaking any obligation of such group hereunder (including without limitation voting any Shares held by any such Affiliate or member of any such Affiliate group), and the Corporation shall be entitled to rely on the representative for such purposes. 2.9. Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and -17- shall be enforceable in accordance with its terms. 2.10. Entire Agreement: Amendment: Waiver. This Agreement (including ----------------------------------- the exhibits hereto, if any) constitutes the full and entire understanding and Agreement between the parties with regard to the subjects hereof and thereof. [Remainder of Page Intentionally Left Blank] -18- IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. Corporation ENTRAVISION COMMUNICATIONS CORPORATION By: --------------------------------------------------------- Walter F. Ulloa, Chairman and Chief Executive Officer By: --------------------------------------------------------- Philip C. Wilkinson, President and Chief Operating Officer Company ENTRAVISION COMMUNICATIONS COMPANY, L.L.C. By: --------------------------------------------------------- Walter F. Ulloa, Chairman, Chief Executive Officer and Managing Member By: --------------------------------------------------------- Philip C. Wilkinson, President, Chief Operating Officer and Managing Member ZSPN Z-SPANISH MEDIA CORPORATION By: --------------------------------------------------------- Name: ------------------------------------------------------- Title: ------------------------------------------------------ [Counterpart Signature Page to Investor Rights Agreement] -19- IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. Individual ZSPN Investor Non-Individual ZSPN Investor - --------------------------------- ---------------------------------- Signature Print Company Name By: - --------------------------------- ------------------------------- Print Name Signature Address: ------------------------- ---------------------------------- Print Name and Title - --------------------------------- Address: -------------------------- ---------------------------------- [Counterpart Signature Page to Investor Rights Agreement] -20- IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. Founder ----------------------------------------------- Signature Print Name: ------------------------------------ [Counterpart Signature Page to Investor Rights Agreement] -21- EXHIBIT "A" REGISTRABLE SECURITIES ----------------------
Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- Walter F. Ulloa 2425 Olympic Boulevard, Suite 6000 West 10,599,517 B Santa Monica, California 90404 The Walter F. Ulloa 2425 Olympic Boulevard, Suite 6000 West 889,848 B Irrevocable Trust of 1996 Santa Monica, California 90404 Philip C. Wilkinson 2425 Olympic Boulevard, Suite 6000 West 1,174,717 B Santa Monica, California 90404 The Wilkinson Family Trust 2425 Olympic Boulevard, Suite 6000 West 9,424,800 B Santa Monica, California 90404 The 1994 Wilkinson 2425 Olympic Boulevard, Suite 6000 West 889,848 B Children's Gift Trust Santa Monica, California 90404 Paul A. Zevnik 1299 Pennsylvania Avenue, N.W. 2,162,621 B Ninth Floor Washington D.C. 20004 The Paul A. Zevnik 1299 Pennsylvania Avenue, N.W. 800,666 B Irrevocable Trust of 1996 Ninth Floor Washington D.C. 20004 Richard D. Norton 11900 Olympic Boulevard, Suite 590 1,443,181 A Los Angeles, California 90064 Norton Properties Limited c/o Richard D. Norton 234,889 A Partnership 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Yrma G. Rico 777 Grant Street, Suite 110 1,141,176 A Denver, Colorado 80203
Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- The Carol K. Luery Revocable c/o Entravision Communications Corporation 1,052,572 A Trust 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Lawrence E. Safir 1800 South Main Street 922,828 A McAllen, Texas 78503 Jeanette Tully 2425 Olympic Boulevard, Suite 6000 West 240,737 A Santa Monica, California 90404 Bram Watkins c/o Entravision Communications Corporation 82,195 A 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 The Zevnik-Harvard Fund 1299 Pennsylvania Avenue, N.W. 85,000 B Ninth Floor Washington D.C. 20004 The Zevnik Charitable 1299 Pennsylvania Avenue, N.W. 13,821 B Foundation Ninth Floor Washington D.C. 20004 LJ Holdings, L.L.C. c/o Entravision Communications Corporation 76,500 A 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 The Zevnik Family L.L.C. 1299 Pennsylvania Avenue, N.W. 1,736,516 B Ninth Floor Washington D.C. 20004 Jeanette Tully 11900 Olympic Boulevard, Suite 590 245,276 A Los Angeles, California 90064
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- Univision Communications 1999 Avenue of the Stars 21,983,392 C Inc. Los Angeles, California 90067 Yrma G. Rico 777 Grant Street, Suite 110 5,100 A Denver, Colorado 80203 Russell Sakamoto 11900 Olympic Boulevard, Suite 590 10,625 A Los Angeles, California 90064 Sonny Cavasos 101 West Xanthisma 8,500 A McAllen, Texas 78504 Roy Piwinski 2040 Ivar Avenue 6,800 A Los Angeles, California Maria Navarro 3835 Scandia Way 4,250 A Los Angeles, California 90065 Kenneth D. Polin 101 West Broadway, 17/th/ Floor, 14,450 A San Diego, California 92101 Michael G. Rowles 101 West Broadway, 17/th/ Floor 8,500 A San Diego, California 92101 Jorge Alonso Reforma 300 10,200 A Colonia Juarez Mexico, DF 06600 Gabriel Quiroz P.O. Box 12268 9,350 A Las Vegas, Nevada David Candelaria 5223 Sterling 9,350 A El Paso, Texas Carlos Ramos, Jr. P.O. Box 2645 5,950 A Carmel, California 93921
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- Luis Hernandez 7600 Eagle Rock NE 9,350 A Albuquerque, New Mexico 87111 Antonio Billet 72600 Fred Waring, #2301 7,650 A Palm Desert, California Aracely de Leon 4921 Chatfield 7,650 A Corpus Christi, Texas 78413 Rudy Guernica 10806 Dayflower Court 5,950 A Reston, Virginia 22091 Carlos Sanchez 2815 Camino del Rio South #353 7,650 A San Diego, California 92101 Sam Fuller 1320 S Monaco Parkway, #3C, 5,525 A Denver, Colorado Mike Flynn 11569 Cypress Canyon Park Drive 5,525 A San Diego, California 92131 Eric Gams 110 West. Curtis 5,100 A Salinas, California 93906 John Burton 1204 Cerrito Alegre 5,100 A El Paso, Texas Joel Olivarez 2312 Country Lane 5,525 A Mission, Texas Margarita Wilder 2920 Burton S.E. 5,950 A Albuquerque, New Mexico Timothy Foster 2422 High Vista 5,100 A Henderson, Nevada Alberto Mier Y Teran 10913 Chardonnay Place 5,525 A San Diego, California Diana De Lara 20 Williamsburg 5,100 A El Paso, Texas
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- Natalie Quaratino 15000 Zuni Street 5,100 A Broomfield, Colorado William Rosales 3601 N. Bicentennial #42 5,100 A McAllen, Texas Lyndora Valdez 7733 Inca Avenue 5,100 A El Paso, Texas Bob Morrison 5319 Vista Bonita N.E. 2,550 A Albuquerque, New Mexico Sam Calaway 618 17/th/ Street 2,125 A Pacific Grove, California 93950 Emma Atencio c/o Entravision Communications Corporation 4,250 A 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 Jose Sevilla 123 West Olive Drive, #3 2,125 A San Ysidro, California Zoltan Csanyi 6817 Pasatiempo 2,125 A El Paso, Texas Florencia Cano 1408 North 29/th/ 2,125 A McAllen, Texas Annie Doucet 5770 Ruffin Road 2,125 A San Diego, California 92123 Mary Salazar 10925 Palm Boulevard, #7 1,700 A Los Angeles, California 90034 Irmgard DiMery 432 Bird Avenue 2,125 A El Paso, Texas 79922 Marisol Silva 7134 Cloverlawn Drive 1,700 A Paramount, California
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- Alex Labrie 2610 Santiago 2,550 A Santa Ana, California Entravision Educational c/o Entravision Communications Corporation 16,201 A Scholarship Fund 2425 Olympic Boulevard, Suite 6000 West Santa Monica, California 90404 ZSPN Stockholders Bustos Asset Management, 1436 Auburn Boulevard 534 A L.L.C. Sacramento, California 95815 TSG Associates II, Inc. c/o Darryl B. Thompson 51 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901 TSG Associates II, LLC c/o Darryl B. Thompson 16 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901 Bustos Asset Management, c/o Z-Spanish Media Corporation 1,881,037 A L.L.C. 1436 Auburn Boulevard Sacramento, California 95815 TSG Capital Fund II, L.P. c/o Darryl B. Thompson 1,697,462 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901 CIBC c/o Z-Spanish Media Corporation 15,564 A 1436 Auburn Boulevard Sacramento, California 95815 John Vuko c/o Z-Spanish Media Corporation 7,289 A 1436 Auburn Boulevard Sacramento, California 95815 TSG Capital Fund III, L.P. c/o Darryl B. Thompson 753,940 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- TSG Ventures, L.P. c/o Darryl B. Thompson 116,572 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901 John Vuko c/o Z-Spanish Media Corporation 17,187 A 1436 Auburn Boulevard Sacramento, California 95815 City National Corporation c/o Z-Spanish Media Corporation 61,433 A 1436 Auburn Boulevard Sacramento, California 95815 UnionBanCal Equities, Inc. 445 South Figueroa Street 49,147 A Los Angeles, California 90071 John Bustos c/o Z-Spanish Media Corporation 446,375 A 1436 Auburn Boulevard Sacramento, California 95815 Salvador H. Campos 103 Reves Way 115,902 A Folsom, California Mark S. Paretchan c/o Z-Spanish Media Corporation 15,453 A 1436 Auburn Boulevard Sacramento, California 95815 Elias G. Conde 3436 Dixieland Way 15,453 A Rancho Cordova, California Gonzalo Siles 1135 Dickens Lane 15,453 A Naperville, Illinois Rafael Vasquez 5619 Tamarindo Lane 15,453 A Elk Grove, California Chancellor Media Corp. of c/o Z-Spanish Media Corporation 753,956 A Los Angeles 1436 Auburn Boulevard Sacramento, California 95815
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Investor Name Address Shares of Class - ------------- ------- Common ----- Stock --------- TSG Capital Fund II, L.P. c/o Darryl B. Thompson 743,466 A 177 Broad Street, 12/th/ Floor Stanford, Connecticut 06901 Bank of Montreal 430 Park Avenue 71,973 A New York, New York 10022 Peter Davidson 43 Pierre point Street 41,071 A Brooklyn, New York 11201 Glenn Emanuel 14400 Firestone Blvd. 308,368 A La Mirada, California 90638 Arthur R. Rockwell 4931 Biloxi Avenue 44,746 A North. Hollywood, California
Page-8- EX-10.25 18 0018.txt OFFICE LEASE DATED AUGUST 19, 1999 EXHIBIT 10.25 ------------- THE WATER GARDEN ---------------- OFFICE LEASE ------------ This Office Lease, which includes the preceding Summary of Basic Lease Information (the "Summary") attached hereto and incorporated herein by this reference (the Office Lease and Summary are sometimes collectively referred to herein as the "Lease"), dated as of the date set forth in Section 1 of the --------- Summary is made by and between WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company ("Landlord"), and ENTRAVISION COMMUNICATIONS COMPANY, LLC, a Delaware limited liability company ("Tenant"). ARTICLE 1 --------- PREMISES, BUILDING, PROJECT, AND COMMON AREAS --------------------------------------------- 1.1 Premises, Building, Project and Common Areas. -------------------------------------------- 1.1.1 The Premises. Upon and subject to the terms hereinafter set ------------ forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 4.2 of the Summary (the ----------- "Premises"), which Premises are located in the "Building," as that term is defined in Section 1.1.2, below. The outline of the Premises is set forth in ------------- Exhibit A attached hereto. - --------- 1.1.2 The Building and The Project. The Premises are a part of the ---------------------------- building set forth in Section 4.1 of the Summary (the "Building") located in ----------- Santa Monica, California. The Building is part of an office project known as "The Water Garden" which contains another office building (the "Adjacent Building"). The term "Project," as used in this Lease, shall mean (i) the Building, the Adjacent Building, and the "Common Areas", as that term is defined in Section 1.1.3 below, (ii) the land (which is improved with landscaping, ------------- subterranean parking facilities and other improvements) upon which the Building, the Adjacent Building, and the Common Areas are located, and (iii) at Landlord's discretion, any additional real property, areas, buildings or other improvements added thereto pursuant to the terms of Section 1.1.4 of this Lease. ------------- 1.1.3 Common Areas. Tenant shall have the non-exclusive right to use ------------ in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the --------- Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project, whether or not those areas are open to the general public (such areas, together with such other portions of the Project designated by Landlord, in its reasonable discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, such as balconies abutting tenants' premises, are collectively referred to herein as the "Common Areas"). The Common Areas shall consist of the "Project Common Areas" and the "Building Common Areas". The term "Project Common Areas", as used in this Lease, shall mean the portion of the Project designated as such by Landlord. "Building Common Areas", as used in this Lease, shall mean the portions of the Common Areas located within the Building designated as such by Landlord. The manner in which the Common Areas are maintained and operated shall be at the sole discretion of Landlord, provided that Landlord shall maintain and operate the same in a manner consistent with that of other first-class, mid-rise office buildings (including the office buildings to be constructed adjacent to the Project as "Phase II" of The Water Garden, hereafter referred to as "Phase II") in the Santa Monica, California area, which are comparable in terms of size, quality of construction, appearance, and services and amenities (the "Comparable Buildings"). Except when and where Tenant's right of access is excluded as the result of (i) an emergency, (ii) a requirement by law, or (iii) a specific provision set forth in this Lease, Tenant shall have the right of access to the Premises, the Building, and the Project parking facility twenty-four (24) hours per day, seven (7) days per week during the "Lease Term," as that term is defined in Section 2.1 of this ----------- Lease. 1.1.4 Landlord's Use and Operation of the Building, Project, and ---------------------------------------------------------- Common Areas. Landlord reserves the right from time to time without notice to - ------------ Tenant (i) to close temporarily any of the Common Areas; (ii) to make reasonable changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of street entrances, driveways, ramps, entrances, exits, passages, stairways and other ingress and egress, direction of traffic, landscaped areas, loading and unloading areas, and walkways; (iii) to expand the Building or the Adjacent Building; (iv) to add additional buildings and improvements to the Common Areas; (v) to designate land outside the Project to be part of the Project, and in connection with the improvement of such land to add additional buildings and common areas to the Project; provided that, notwithstanding anything to the contrary contained in this Lease, the Project shall not be expanded to include more than the land located in Santa Monica, California, which has Olympic Boulevard as its Southern boundary, Cloverfield Boulevard as its Western boundary, Colorado Avenue as its Northern boundary, and 26th street as its Eastern boundary; (vi) to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project or to any adjacent land, or any portion thereof; and (vii) to do and perform such other acts and make such other changes in, to or with respect to the Project, Common Areas and Building or the expansion thereof as Landlord may, in the exercise of sound business judgment, deem to be appropriate. 1.2 Verification of Rentable Square Feet of Premises, Building, and --------------------------------------------------------------- Project. For purposes of this Lease, "rentable square feet" and "usable square - ------- feet" of the Premises shall be deemed to be as set forth in Section 4.2 of the Summary and the rentable square footage of the Building shall be deemed to be 332,896 rentable square feet. 1.3 Base, Shell and Core Work in the Premises. Except as specifically set ----------------------------------------- forth in this Lease and in the Tenant Work Letter attached hereto as Exhibit E (the "Tenant Work Letter"), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that Landlord has made no representation or warranty regarding the condition of the Premises or the Project except as specifically set forth in this Lease and the Tenant Work Letter. ARTICLE 2 --------- INITIAl LEASE TERM; OPTION TERM ------------------------------- 2.1 Initial Lease Term. The terms and provisions of this Lease shall be ------------------ effective as of the date of this Lease. The term of this Lease (the "Lease Term") shall be as set forth in Section 5.1 of the Summary, shall commence on ----------- the earlier to occur of (i) the date Tenant opens for business in the Premises, and (ii) the date of "Substantial Completion", as that term is defined in this Article 2, of the Premises by Landlord (the "Lease Commencement Date"), and - --------- shall terminate on the date set forth in Section 5.3 of the Summary (the "Lease ----------- Expiration Date") unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year shall commence on the Lease Commencement Date and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date. For purposes of this Lease, "Substantial Completion" of the Premises shall occur upon the completion of construction, as reasonably determined by Landlord, of the "Tenant Improvements," as that term is defined in Section 1 of the Tenant Work Letter, in the Premises pursuant to the plans and drawings which are prepared pursuant to the terms of the Tenant Work Letter, with the exception of any punch list items and any tenant fixtures, work- stations, built-in furniture, or equipment to be installed by Tenant in the Premises pursuant to the terms of the Tenant Work Letter or to be installed under the supervision of "Contractor" as that term is defined in Section 4.1 of the Tenant Work Letter. Within thirty (30) days following the Substantial Completion of the Premises, Landlord shall deliver to Tenant a notice (the "Notice of Lease Term Dates") in substantially the form as set forth in Exhibit B attached hereto, which notice Tenant shall execute and return to Landlord within ten (10) business days of receipt thereof, and thereafter the dates set forth on such notice shall be conclusive and binding upon Tenant. Failure of Tenant to timely execute and deliver the -2- Notice of Lease Term Dates shall constitute an acknowledgment by Tenant that the statements included in such notice are true and correct, without exception. 2.2 Option Term. ----------- 2.2.1 Option Right. Landlord hereby grants the Tenant originally ------------ named in the Lease (the "Original Tenant") one (1) option to extend the Lease Term for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such notice, Tenant is not in monetary or material non-monetary default (collectively, "Material Default") under this Lease. Upon the proper exercise of such option to extend, and provided that, as of the end of the initial Lease Term, Tenant is not in Material Default under this Lease, the Lease Term, as it applies to the Premises, shall be extended for a period of five (5) years. The rights contained in this Section 2.2 shall be personal to the Original Tenant or any "Affiliate," as that term is defined in Section 14.7, below, and may only be exercised by the Original Tenant or any Affiliate (and not any other assignee, sublessee or transferee of the Original Tenant's interest in this Lease) if the Original Tenant or any Affiliate occupies the entire Premises. 2.2.2 Option Rent. The rent payable by Tenant during the Option Term ----------- (the "Option Rent") shall be equal to the rent (including additional rent and considering any "base year" or "expense stop" applicable thereto), including all escalations, at which, as of the commencement of the Option Term, tenants are leasing non-sublease, non-encumbered, non-equity space comparable in size, location and quality to the Premises, for a term of five (5) years, which comparable space is located in the Project and in Phase II, or, if there are not a sufficient number of current comparable transactions in the Project and in Phase II, then in the Comparable Buildings (the "Comparable Transactions"), in either case taking into consideration the following concessions (collectively, the "Renewal Concessions"): (a) rental abatement concessions, if any, being granted such tenants in connection with such comparable space; (b) tenant improvements or allowances provided or to be provided for such comparable space, taking into account, and deducting the value of, the existing improvements in the Premises, such value to be based upon the age, quality and layout of the improvements and the extent to which the same can be utilized by Tenant based upon the fact that the precise tenant improvements existing in the Premises are specifically suitable to Tenant; and (c) other reasonable monetary concessions being granted such tenants in connection with such comparable space; provided, however, that in calculating the Option Rent, no consideration shall be given to (i) the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with Tenant's exercise of its right to lease the Premises during the Option Term or the fact that landlords are or are not paying real estate brokerage commissions in connection with such comparable space, and (ii) any period of rental abatement, if any, granted to tenants in comparable transactions in connection with the design, permitting and construction of tenant improvements in such comparable spaces. The Option Rent shall additionally include a determination as to whether, and if so to what extent, Tenant must provide Landlord with financial security, such as a letter of credit or guaranty, for Tenant's Rent obligations during the Option Term. Such determination shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of comparable financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other tenants). 2.2.3 Exercise of Option. The option contained in this Section 2.2 ------------------ shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice (the "Interest Notice") to Landlord not more than fifteen (15) months nor less than fourteen (14) months prior to the expiration of the initial Lease Term, stating that Tenant is interested in exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall deliver notice (the "Option Rent Notice") to Tenant not less than thirteen (13) months prior to the expiration of the initial Lease Term, setting forth the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the date occurring thirty (30) days after Tenant's receipt of the Option Rent Notice, exercise the option by delivering written notice (the "Exercise Notice") thereof to Landlord, and upon, and concurrently with, such exercise, Tenant may, at its option, accept or reject the Option Rent. If Tenant does not affirmatively accept the Option Rent contained in the Option Rent Notice, or if Tenant timely delivers the Exercise Notice without -3- having previously delivered to Landlord the Interest Notice, then the parties shall follow the procedure, and the Option Rent shall be determined, as set forth in Section 2.2.4 below. ------------- 2.2.4 Determination of Option Rent. In the event Tenant does not ---------------------------- timely and appropriately accept the Option Rent or Tenant timely and appropriately objects to Landlord's determination of Option Rent, as the case may be, Landlord and Tenant shall use good faith efforts to attempt to agree upon the Option Rent. If Landlord and Tenant fail to reach agreement within ten (10) days following Tenant's objection to the Option Rent (the "Outside Agreement Date"), then each party shall make a separate determination of the Option Rent, within five (5) days, concurrently exchange such determinations and such determinations shall be submitted to arbitration in accordance with Sections 2.2.4.1 through 2.2.4.7 below. - -------------------------------- 2.2.4.1 Landlord and Tenant shall each appoint one arbitrator who shall by profession be an independent real estate broker or appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing (or appraisal, as the case may be) of commercial properties in the West Los Angeles, California area. The determination of the arbitrators shall be limited solely to the issue area of whether Landlord's or Tenant's submitted Option Rent is the closest to the actual Option Rent as determined by the arbitrators, taking into account the requirements of Section ------- 2.2.2 of this Lease. Each such arbitrator shall be appointed within fifteen - ----- (15) days after the applicable Outside Agreement Date. 2.2.4.2 The two (2) arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators. 2.2.4.3 The three (3) arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Option Rent and shall notify Landlord and Tenant thereof. 2.2.4.4 The decision of the majority of the three (3) arbitrators shall be final and binding upon Landlord and Tenant and judgment on such decision may be rendered in a court of competent jurisdiction. 2.2.4.5 If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant. 2.2.4.6 If the two (2) arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this Section 2.2.4. ------------- 2.2.4.7 The cost of arbitration shall be paid by Landlord and Tenant equally. ARTICLE 3 --------- BASE RENT --------- Tenant shall pay, without notice or demand, to Landlord or Landlord's agent at the management office of the Project, or at such other place as Landlord may from time to time designate in writing, in currency or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ("Base Rent") as set forth in Section 6 of the Summary, payable in equal monthly installments as set forth in Section 6 of the Summary in advance on or before the first day of each and every month during the Lease Term, without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term shall be paid at the time of Tenant's execution of this Lease by certified or -4- cashier's check. If the Lease Commencement Date falls on a day of the month other than the first day of such month, the Rent for the first fractional month shall accrue on a daily basis for the period from the Lease Commencement Date to the end of such calendar month. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. ARTICLE 4 --------- ADDITIONAL RENT --------------- 4.1 General Terms. As set forth in this Article 4, in addition to paying ------------- the Base Rent specified in Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Project Expenses," as those terms are defined in Sections 4.2.6 and 4.2.4 of this Lease, respectively, allocated to the tenants of the Building pursuant to the terms of Section 4.3.1 below, to the extent such Project Expenses allocated to the tenants of the Building which are in excess of such Project Expenses applicable to the "Base Year," as that term is defined in Section 4.2.1 of this Lease. Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the "Additional Rent", and the Base Rent and the Additional Rent are sometimes herein collectively referred to as "Rent." All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term. 4.2 Definitions. As used in this Article 4, the following terms shall ----------- have the meanings hereinafter set forth: 4.2.1 "Base Year" shall mean the period set forth in Section 7.1 of the Summary. 4.2.2 "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires. 4.2.3 "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature incurred in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Project, including, without limitation, any amounts paid or incurred for (i) the cost of supplying all utilities, the cost of operating, maintaining, repairing, renovating, complying with conservation measures in connection with, and managing the utility systems, mechanical systems, sanitary and storm drainage systems, and elevator systems, and the cost of supplies and equipment, maintenance, and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with the implementation and operation of a transportation system management program or a municipal or public shuttle service or parking program; (iii) the cost of all insurance carried in connection with the Project, or any portion thereof; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) the cost of parking area repair, restoration, and maintenance, including, but not limited to, resurfacing, repainting, restriping, and cleaning; (vi) fees, charges and other costs, including consulting fees, legal fees and accounting fees, of all contractors and consultants; (vii) payments under any equipment rental agreements or management agreements (including the cost of any management fee and the fair rental value of any office space provided thereunder); (viii) wages, salaries and other compensation and benefits of all persons engaged in the operation, maintenance, management, or security of the Project, or any portion thereof, including employer's Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; (ix) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Project, or any portion thereof; (x) the cost of operation, repair, maintenance and replacement of all systems and equipment which serve the Project in whole or part; (xi) the cost of janitorial services, alarm and security service, window cleaning, -5- trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) the cost of any capital improvements made to the Project which are intended as a labor-saving device or to effect other economies in the operation or maintenance of the Project, or any portion thereof, or made to all or any portion of the Project, or any portion thereof, after the Lease Commencement Date that are required under any governmental law or regulation that was not applicable to the Project at the time that permits for the construction of the Building were obtained; provided, however, that each such permitted capital expenditure shall be amortized (including interest on the unamortized cost) over its useful life as reasonably determined; and (xiii) the cost of operations, maintenance, repairs, and other expenditures (whether capital or non-capital in nature) with respect to the "Child Care Facilities," as that term is defined in Section 29.9 below, and their lease at the Project. ------------ Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include: (a) costs, including marketing costs, legal fees, space planners' fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants initially occupying space in the Project after the Lease Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common areas of the Project or parking facilities); (b) except as set forth in this Section 4.2.3, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest, costs of capital repairs and alterations, and costs of capital improvements and equipment; (c) costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company; (d) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (e) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord's interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants, and Landlord's general corporate overhead and general and administrative expenses; (f) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-a-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project manager; (g) amount paid as ground rental for the Project by the Landlord; (h) except for a Project management fee to the extent allowed pursuant to item (m), below, overhead and profit increment paid to the Landlord or to subsidiaries or -6- affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis; (i) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense; (j) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project ; (k) all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement; (l) costs, other than those incurred in ordinary maintenance and repair, for sculpture, paintings or other objects of art; (m) fees payable by Landlord for management of the Project in excess of three and one-half percent (3.5%) (the "Management Fee Cap") of Landlord's gross rental revenues, adjusted and grossed up to reflect a one hundred percent (100%) occupancy of the Building with all tenants paying rent, including base rent, pass-throughs, and parking fees (but excluding the cost of after hours services or utilities) from the Project for any calendar year or portion thereof; (n) any costs expressly excluded from Operating Expenses elsewhere in this Lease; (o) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project; (p) costs arising from the gross negligence or wilful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; (q) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; (r) costs arising from Landlord's charitable or political contributions; (s) subject to expenses expressly permitted pursuant to the terms of Section 4.2.3 (xii), above, any costs to correct defects in the original design or construction of the Project; and -7- (t) advertising and marketing expenditures. If the Project is not fully occupied during all or a portion of any Expense Year, Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Project been fully occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year. In no event shall the components of Project Expenses for any Expense Year related to electrical costs be less than the components of Project Expenses related to electrical costs in the Base Year. 4.2.4 "Project Expenses" shall mean the sum of "Operating Expenses" and "Tax Expenses". 4.2.5 "Tax Expenses" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with all or any portion of the Project), which shall be paid during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof. 4.2.5.1 Tax Expenses shall include, without limitation: (i) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election ("Proposition 13") and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Project's contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for the purposes of this Lease; (ii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any gross income tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; (iii) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises; and (iv) Any possessory taxes charged or levied in lieu of real estate taxes. 4.2.5.2 Any expenses incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid. -8- 4.2.5.3 Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year. --------- 4.2.5.4 The amount of Tax Expenses for the Base Year attributable to the valuation of the Project, inclusive of tenant improvements, shall be known as "Base Taxes." If, in any comparison year subsequent to the Base Year, the amount of Tax Expenses decreases, then for purposes of all subsequent comparison years, including the comparison year in which such decrease in Tax Expenses occurs, the Base Taxes shall be decreased by an amount equal to the decrease in Tax Expenses. 4.2.5.5 Notwithstanding anything to the contrary in this Section 4.2.5, the following shall be excluded from Tax Expenses: 4.2.5.5.1 All excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes applied or measured by Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Project); and 4.2.5.5.2 Any items included as Operating Expenses. 4.2.6 "Tenant's Share" shall mean the percentage set forth in Section 7.2 of the Summary. Tenant's Share was calculated by multiplying the number of rentable square feet of the Premises by 100, and dividing the product by the total rentable square feet in the Building. 4.3 Allocation and Calculation of Project Expenses. ---------------------------------------------- 4.3.1 Allocation of Project Expenses to Tenants of the Building. --------------------------------------------------------- Project Expenses (i.e., Operating Expenses and Tax Expenses) are determined ---- annually for the Project as a whole. Since the Building is only one of the buildings which constitute the Project, Project Expenses shall be allocated by Landlord, in its reasonable discretion, to both the tenants of the Building and the tenants of the other buildings in the Project. The portion of Project Expenses allocated to the tenants of the Building shall consist of (i) all Project Expenses attributable solely to the Building and (ii) an equitable portion of Project Expenses attributable to the Project as a whole and not attributable solely to the Building, the Adjacent Building or to any other building of the Project. Additionally, in allocating Project Expenses to the tenants of the Building, Landlord shall have the right, from time to time, to equitably allocate some or all of the Project Expenses allocable to tenants of the Building among different tenants of the Building (the "Cost Pools"). Such Cost Pools may include, but shall not be limited to, the office space tenants of the Building and the retail space tenants of the Building. 4.3.2 Calculation of Project Expenses. Notwithstanding anything to ------------------------------- the contrary set forth in this Article 4, when calculating the Project Expenses --------- for the Base Year, such Project Expenses shall include any increase in Tax Expenses attributable to special assessments, charges, costs, or fees, or due to modifications or changes in governmental laws or regulations, including but not limited to the institution of a split tax roll, and Operating Expenses shall include market-wide labor-rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes, and utility rate increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages and amortized costs relating to capital improvements; provided, however, that at such time as any such particular assessments, charges, costs or fees are no longer included in Operating Expenses, such particular assessments, charges, costs or fees shall be excluded from the Base Year calculation of Operating Expenses. 4.4 Calculation and Payment of Additional Rent. ------------------------------------------ 4.4.1 Calculation of Excess. For every Expense Year ending or --------------------- commencing within the Lease Term, Tenant shall pay to Landlord, in the manner set forth in Section 4.4.2, -9- below, and as Additional Rent, an amount equal to Tenant's Share of Project Expenses for such Expense Year in excess of Tenant's Share of Project Expenses for the Base Year (the "Excess"). 4.4.2 Statement of Actual Project Expenses and Payment by Tenant. ---------------------------------------------------------- Landlord shall endeavor to give to Tenant on or before the first day of April following the end of each Expense Year, a statement (the "Statement") which shall state the Project Expenses incurred or accrued for such preceding Expense Year and the amount thereof allocated to the tenants of the Building, and which shall indicate the amount, if any, of Tenant's Share of Project Expenses in excess of Tenant's Share of Project Expenses for the Base Year. Upon receipt of the Statement for each Expense Year ending during the Lease Term, Tenant shall pay, with its next installment of Base Rent due, the full amount of Tenant's Share of Project Expenses for such Expense Year in excess of Tenant's Share of Project Expenses for the Base Year, less the amounts, if any, paid during such Expense Year as "Estimated Additional Rent," as that term is defined in Section 4.4.3, below. If the amount of Tenant's Share of Project Expenses for such Expense Year in excess of Tenant's Share of Project Expenses for the Base Year is less than the amount paid by Tenant as Estimated Additional Rent during the applicable period of the Expense Year (but not including any period of the Expense Year which occurs after the Lease has terminated), Landlord shall pay the difference to Tenant together with the applicable Statement, even if the Lease has terminated or expired. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 4. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Project Expenses allocated to the tenants of the Building for the Expense Year in which this Lease terminates, if Tenant's Share of Project Expenses for such Expense Year is in excess of Tenant's Share of Project Expenses for the Base Year, then Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of Section 4.4.1 of this Lease. The provisions of this Section 4.4.2 shall survive the expiration or earlier termination of the Lease Term. Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant's Share of any Project Expenses attributable to any Expense Year which are first billed to Tenant more than twenty-four (24) months after the earlier of Tenant's receipt of the Statement for the applicable Expense Year or the Lease Expiration Date, provided that in any event Tenant shall be responsible for Tenant's Share of Project Expenses levied by any governmental authority or by any public utility companies at any time following the Expense Year to which such Project Expenses are attributable. 4.4.3 Statement of Estimated Project Expenses. In addition, Landlord --------------------------------------- shall endeavor to give Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth Landlord's reasonable estimate (the "Estimate") of what the total amount of Project Expenses for the then-current Expense Year shall be, the amount thereof to be allocated to the tenants of the Building, and the estimated amount of Tenant's Share of Project Expenses in excess of Tenant's Share of the Project Expenses for the Base Year (the "Estimated Additional Rent"). The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Additional Rent under this Article 4. If, pursuant to the Estimate Statement, Estimated Additional Rent is calculated for the then-current Expense Year, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Additional Rent for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.4.3). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Additional Rent set forth in the previous Estimate Statement delivered by Landlord to Tenant. 4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible. ---------------------------------------------------------------- Tenant shall reimburse Landlord upon demand for any and all taxes required to be paid by Landlord, excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when: -10- 4.5.1 Said taxes are measured by or reasonably attributable to the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build-out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord; 4.5.2 Said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project (including the Project parking facility); or 4.5.3 Said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. 4.6 Landlord's Books and Records. In the event that Tenant disputes the ---------------------------- amount of Additional Rent set forth in any annual Statement delivered by Landlord, then within one (1) year after receipt of such Statement by Tenant (the "Review Period"), Tenant shall have the right to notify Landlord in writing that it intends to cause one of its employees or an independent certified public accountant (which accountant must be qualified and experienced and must be employed by a firm which derives its primary revenues from its accounting practice) to inspect and copy (provided Tenant signs Landlord's confidentiality agreement, in such form as is commercially reasonable and such accountant or auditor is not hired on a contingent fee basis) Landlord's accounting records at Landlord's office in the Project for the Expense Year covered by such Statement during normal business hours ("Tenant's Review"). Tenant shall provide Landlord with not less than two (2) weeks' prior written notice of its desire to conduct Tenant's Review. In connection with the foregoing review, Landlord shall furnish Tenant with such reasonable supporting documentation relating to the subject Statement (and the Statement for the Base Year, provided that such supporting documentation relating to the Statement for the Base Year shall be for informational purposes only and not for the purpose of any audit of the Base Year Statement if the time period for Tenant's audit of the Base Year Statement shall have expired) as Tenant may reasonably request. In no event shall Tenant have the right to conduct Tenant's Review if Tenant is then in default under the Lease, including, without limitation, the payment by Tenant of all Additional Rent amounts described in the Statement which is the subject of Tenant's Review, which payment, at Tenant's election, may be made under dispute. In the event that Tenant shall fail to provide Landlord with written notification within the Review Period following receipt of a particular Statement of Tenant's desire to conduct a Tenant's Review, Tenant shall have no further right to dispute the amounts of Additional Rent set forth on such Statement. In the event that following Tenant's Review, Tenant and Landlord continue to dispute the amounts of Additional Rent shown on Landlord's Statement and Landlord and Tenant are unable to resolve such dispute, then either Landlord or Tenant shall cause a final and determinative audit to be made by Landlord's accountant of the proper amount of the disputed items and/or categories of Project Expenses to be shown on such Statement (the "Final Award"). The results of such Final Award shall be conclusive and binding upon both Landlord and Tenant. If the resolution of the parties' dispute with regard to the Additional Rent shown on the Statement, whether pursuant to Tenant's Review or the Final Award reveals an error in the calculation of Tenant's Share of Project Expenses to be paid for such Expense Year, the parties' sole remedy shall be for the parties to make appropriate payments or reimbursements, as the case may be, to each other as are determined to be owing. Any such payments shall be made within thirty (30) days following the resolution of such dispute. At Landlord's election, the parties shall treat any overpayments resulting from the foregoing resolution of such parties' dispute as a credit against Rent until such amounts are otherwise paid by Landlord. Tenant shall be responsible for all costs and expenses associated with Tenant's Review and any Final Award, provided that if the parties' final resolution of the dispute involves the overstatement by Landlord of Project Expenses for such Expense Year in excess of four percent (4%), then Landlord shall be responsible for all reasonable, out-of-pocket costs and expenses associated with Tenant's Review and any Final Award. This provision shall survive the termination of this Lease to allow the parties to enforce their respective rights hereunder. -11- ARTICLE 5 --------- USE OF PREMISES --------------- Tenant shall use the Premises solely for general office purposes consistent with the character of the Project as a first-class office building project, and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord's sole discretion. Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the Rules and Regulations set forth in Exhibit C, attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project. Tenant shall comply with all recorded covenants, conditions, and restrictions now or hereafter affecting the Project. Tenant shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of "Hazardous Material," as that term is defined in Section 29.23 of this Lease. ARTICLE 6 --------- SERVICES AND UTILITIES ---------------------- 6.1 Standard Tenant Services. Landlord shall provide the following ------------------------ services on all days (unless otherwise stated below) during the Lease Term. 6.1.1 Subject to all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning when necessary for normal comfort for normal office use in the Premises, from Monday through Friday, during the period from 8 A.M. to 6 P.M. and on Saturday during the period from 9 A.M. to 1 P.M., except for the date of observation of New Year's Day, Independence Day, Labor Day, Memorial Day, Thanksgiving Day, Christmas Day and, at Landlord's discretion, other nationally recognized holidays (collectively, the "Holidays"). 6.1.2 Landlord shall provide adequate electrical wiring and facilities and power for normal general office use as reasonably determined by Landlord. Landlord shall replace lamps, starters, and ballasts for Building standard lighting fixtures within the Premises at Tenant's request at Landlord's cost, which cost may be included by Landlord in Project Expenses. Landlord shall replace, at Tenant's cost, lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises. 6.1.3 Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes. 6.1.4 Landlord shall provide janitorial services Monday through Friday except the date of observation of the Holidays, in and about the Premises and window washing services in a manner consistent with other first-class office buildings in the Santa Monica, California area. 6.2 Overstandard Tenant Use. Except as approved by Landlord as part of ----------------------- the "Tenant Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter, Tenant shall not, without Landlord's prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right to install supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord. If Tenant uses water, electricity, heat or air conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay to Landlord, upon billing, the cost of such excess -12- consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, including the cost of such additional metering devices. If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate, of Tenant's desired use and Landlord shall supply such utilities to Tenant at such hourly cost to Tenant as Landlord shall from time to time establish. Amounts payable by Tenant to Landlord for such use of additional utilities shall be deemed Additional Rent hereunder and shall be billed on a monthly basis. 6.3 Interruption of Use. Tenant agrees that Landlord shall not be liable ------------------- for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord's reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6, including, but not limited to, a failure to provide telecommunications, including telephone risers. Landlord may comply with voluntary controls or guidelines promulgated by any governmental entity relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions without creating any liability of Landlord to Tenant under this Lease, provided that the Premises are not thereby rendered untenantable. 6.4 Rent Abatement. If Landlord fails to perform the obligations required -------------- of Landlord under the terms of this Lease and such failure causes all or a portion of the Premises to be untenantable and unusable by Tenant and such failure relates to the nonfunctioning of the heat, ventilation, and air conditioning system in the Premises, the electricity in the Premises, the nonfunctioning of the elevator service to the Premises, or a failure to provide access to the Premises, Tenant shall give Landlord notice (the "Initial Notice"), specifying such failure to perform by Landlord (the "Landlord Default"). If Landlord has not cured such Landlord Default within five (5) business days after the receipt of the Initial Notice (the "Eligibility Period"), Tenant may deliver an additional notice to Landlord (the "Additional Notice"), specifying such Landlord Default and Tenant's intention to abate the payment of Rent under this Lease. If Landlord does not cure such Landlord Default within five (5) business days of receipt of the Additional Notice, Tenant may, upon written notice to Landlord, immediately abate Rent payable under this Lease for that portion of the Premises rendered untenantable and not used by Tenant, for the period beginning on the date five (5) business days after the Initial Notice to the earlier of the date Landlord cures such Landlord Default or the date Tenant recommences the use of such portion of the Premises. Such right to abate Rent shall be Tenant's sole and exclusive remedy at law or in equity for a Landlord Default. Except as provided in this Section 6.4, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder. ARTICLE 7 --------- REPAIRS ------- Tenant shall, at Tenant's own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term. In addition, Tenant shall, at Tenant's own expense, but under the supervision and subject -13- to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances; provided however, that, at Landlord's option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building and/or the Project) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's involvement with such repairs and replacements forthwith upon being billed for same. Notwithstanding the foregoing, Landlord shall be responsible for repairs to the exterior walls, foundation and roof of the Building, the structural portions of the floors of the Building, and the electrical, plumbing, HVAC and other base Building systems and equipment serving the Premises and/or the Building, except to the extent that such repairs are required due to the negligence or wilful misconduct of Tenant; provided, however, that if such repairs are due to the negligence of Tenant, Landlord shall nevertheless make such repairs at Tenant's expense, or, if covered by Landlord's insurance, Tenant shall only be obligated to pay any deductible in connection therewith. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Tenant hereby waives and releases its right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect. ARTICLE 8 --------- ADDITIONS AND ALTERATIONS ------------------------- 8.1 Landlord's Consent to Alterations. Tenant may not make any --------------------------------- improvements, alterations, additions or changes to the Premises (collectively, the "Alterations") without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord; provided however, that Tenant may make strictly cosmetic changes to the finish work in the Premises, not requiring any structural or other substantial modifications to the Premises, upon thirty (30) days prior notice to Landlord. The construction of the initial improvements to the Premises shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8. 8.2 Manner of Construction. Landlord may impose, as a condition of its ---------------------- consent to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its sole discretion may deem desirable, including, but not limited to, the requirement that upon Landlord's request, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration or any early termination of the Lease Term, and/or the requirement that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen selected by Landlord. Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the City of Santa Monica, all in conformance with Landlord's construction rules and regulations. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner so as not to obstruct access to the Project or any portion thereof, by any other tenant of the Project, and so as not to obstruct the business of Landlord or other tenants in the Project, or interfere with the labor force working in the Project. In addition to Tenant's obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Project management office a reproducible copy of the "as built" drawings of the Alterations. -14- 8.3 Payment for Improvements. In the event Tenant orders any Alterations ------------------------ or repair work directly from Landlord, or from the contractor selected by Landlord, the charges for such work shall be deemed Additional Rent under this Lease, payable within five (5) days of billing therefor, either periodically during construction or upon the substantial completion of such work, at Landlord's option. Upon completion of such work, Tenant shall deliver to Landlord evidence of payment, contractors' affidavits and full and final waivers of all liens for labor, services or materials. Tenant shall pay to Landlord a percentage of the cost of such work sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord's involvement with such work, not to exceed five percent (5%) of the cost of the work. 8.4 Construction Insurance. In the event that Tenant makes any ---------------------- Alterations Tenant agrees to carry "Builder's All Risk" insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof. In addition, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co- obligee. 8.5 Landlord's Property. All Alterations, improvements, fixtures and/or ------------------- equipment which may be installed or placed in or about the Premises, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, except that Tenant may remove any Alterations, improvements, fixtures and/or equipment which Tenant can substantiate to Landlord have not been paid for with any Tenant improvement allowance funds provided to Tenant by Landlord, provided Tenant repairs any damage to the Premises and Building caused by such removal. Furthermore, if Landlord, as a condition to Landlord's consent to any Alteration, requires that Tenant remove any Alteration upon the expiration or early termination of the Lease Term, Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given following any earlier termination of this Lease, require Tenant, at Tenant's expense, to remove such Alterations and to repair any damage to the Premises and Building caused by such removal. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations, Landlord may do so and may charge the cost thereof to Tenant. ARTICLE 9 --------- COVENANT AGAINST LIENS ---------------------- Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Project or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant's interest only. Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Project, the Building or the Premises, or any portion thereof, with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, Tenant covenants and agrees to cause it to be immediately released and removed of record. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed on or before the date occurring five (5) days after notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys' fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall immediately be due and payable by Tenant. -15- ARTICLE 10 ---------- INSURANCE --------- 10.1 Indemnification and Waiver. To the extent not prohibited by law, -------------------------- Landlord, its members and their respective partners, subpartners, officers, agents, servants, employees, and independent contractors (collectively, "Landlord Parties") shall not be liable for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant. Tenant shall indemnify, defend, protect, and hold harmless Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) from any cause arising out of or relating (directly or indirectly) to this Lease, the tenancy created under this Lease, or the Premises, provided that the terms of the foregoing indemnity shall not apply to the gross negligence or wilful misconduct of Landlord. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. Notwithstanding anything to the contrary contained in this Lease, nothing in this Lease shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease. 10.2 Tenant's Compliance with Landlord's Fire and Casualty Insurance. --------------------------------------------------------------- Tenant shall, at Tenant's expense, comply with all insurance company requirements pertaining to the use of the Premises. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body. 10.3 Tenant's Insurance. Tenant shall maintain the following coverages in ------------------ the following amounts. 10.3.1 Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant's operations, assumed liabilities or use of the Premises, including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than: Bodily Injury and Property Damage Liability $3,000,000 each occurrence $3,000,000 annual aggregate Personal Injury Liability $3,000,000 each occurrence $3,000,000 annual aggregate 0% Insured's participation 10.3.2 Physical Damage Insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) the Tenant Improvements and any other improvements which exist in the Premises as of the Lease Commencement Date (excluding the "Base Building," as that term is defined hereinbelow), and (iii) all other improvements, alterations and additions to the Premises. The term "Base Building," for purposes of this Lease, shall mean the structural portions of the Building, and the public restrooms and the systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located. Such insurance shall be written on an "all risks" of physical loss or damage basis, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage. -16- 10.3.3 Workers Compensation Insurance in form and with limits in accordance with the laws of the State of California, including Occupational Disease Insurance, and Voluntary Compensation Insurance, and Employer's Liability Insurance with limits not less than Five Hundred Thousand Dollars ($500,000.00) per occurrence; per employee for disease; and in the aggregate for disease. 10.4 Form of Policies. The minimum limits of policies of insurance ---------------- required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, Tooley & Company, and any other party Landlord reasonably specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant's obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-X in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee of Landlord; and (vi) contain a cross-liability endorsement or severability of interest clause acceptable to Landlord. Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the expiration dates thereof. Tenant shall be permitted to provide the insurance required under this Lease by obtaining a blanket policy or policies to be maintained by Tenant. The coverage afforded to Landlord under this Lease shall in no way be limited, diminished or reduced because of the fact that such policy or policies are blanket in nature. 10.5 Subrogation. Landlord and Tenant agree to have their respective ----------- insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance carried by Landlord and Tenant, respectively, is not invalidated thereby. As long as such waivers of subrogation are contained in their respective insurance policies, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance for fire and all risk coverage, theft, or other similar insurance. 10.6 Additional Insurance Obligations. Tenant shall carry and maintain -------------------------------- during the entire Lease Term, at Tenant's sole cost and expense, such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably requested by Landlord, but in no event in excess of the amounts and types of insurance then being required by landlords of other Comparable Buildings. ARTICLE 11 ---------- DAMAGE AND DESTRUCTION ---------------------- 11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly ---------------------------------------- notify Landlord of any damage to the Premises resulting from fire or any other casualty. If the Base Building or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11, restore the Base Building and such Common Areas. Such restoration shall be to substantially the same condition of the Base Building and the Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building or Project or any other modifications to the Base Building or the Common Areas deemed desirable by Landlord, provided that access to the Premises and any common restrooms serving the Premises shall not be materially impaired. Tenant shall, at Tenant's sole cost and expense, repair any injury or damage to the Premises which is not part of the Base Building, in accordance with Article 8, above, and shall return the Premises to their original condition. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair of the Base Building or the Common Areas; provided, -17- however, that if such fire or other casualty shall have damaged the Base Building or Common Areas necessary to Tenant's occupancy, and if such damage is not the result of the negligence or wilful misconduct of Tenant or Tenant's employees, contractors, licensees, or invitees, Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease as the sole result of the damage to the Base Building or the Common Areas, and not occupied by Tenant as a result thereof. 11.2 Landlord's Option to Repair. Notwithstanding the terms of Section --------------------------- 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises, Building and/or Project; and instead terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs to be made by Landlord cannot reasonably be completed within one hundred twenty (120) days after the date of damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) the damage which is required to be repaired by Landlord is not fully covered, except for deductible amounts, by Landlord's insurance policies; or (iv) any owner of any other portion of the Project, other than Landlord, does not intend to repair the damage to such portion of the Project; provided, however, that if Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within one hundred eighty (180) days after being commenced, Tenant may elect not later than ninety (90) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant. Furthermore, if neither Landlord nor Tenant has terminated this Lease, and the repairs are not actually completed within such 180-day period, Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such period until such time as the repairs are complete, by notice to Landlord (the "Damage Termination Notice"), effective as of a date set forth in the Damage Termination Notice (the "Damage Termination Date"), which Damage Termination Date shall not be less than ten (10) business days following the end of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord's receipt of the Damage Termination Notice, a certificate of Landlord's contractor responsible for the repair of the damage certifying that it is such contractor's good faith judgment that the repairs shall be substantially completed within thirty (30) days after the Damage Termination Date. If repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if the repairs shall not be substantially completed within such thirty-day period, then this Lease shall terminate upon the expiration of such thirty-day period. At any time, from time to time, after the date occurring sixty (60) days after the date of the damage, Tenant may request that Landlord inform Tenant of Landlord's reasonable opinion of the date of completion of the repairs and Landlord shall respond to such request within five (5) business days. 11.3 Waiver of Statutory Provisions. The provisions of this Lease, ------------------------------ including this Article 11, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or the Project, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or the Project. -18- 11.4 Damage Near End of Term. In the event that the Premises, the ----------------------- Building, or the Project is destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term, then notwithstanding anything contained in this Article 11, Landlord shall have the option to terminate this Lease by giving written notice to Tenant of the exercise of such option within thirty (30) days after such damage or destruction, in which event this Lease shall cease and terminate as of the date of such notice. In the event that the Premises, the Building, or the Project is destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term such that Tenant cannot use the Premises for the use permitted hereunder, then notwithstanding anything contained in this Article 11, Tenant shall have the option to terminate this Lease by giving written notice to Landlord of the exercise of such option within thirty (30) days after such damage or destruction, in which event this Lease shall cease and terminate as of the date of such notice. In the event that Landlord or Tenant terminates this Lease pursuant to this Section 11.4, Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of damage, and both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term. ARTICLE 12 ---------- NONWAIVER --------- No waiver of any provision of this Lease shall be implied by any failure of Landlord or Tenant to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, and any waiver by Landlord or Tenant of any provision of this Lease may only be in writing. Additionally, no express waiver shall affect any provision other than the one specified in such waiver and then only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder, or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment. ARTICLE 13 ---------- CONDEMNATION ------------ If the whole or more than twenty-five percent (25%) of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease upon ninety (90) days' notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Premises is substantially impaired, Tenant shall have the option to terminate this Lease upon ninety (90) days' notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking. Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure. -19- ARTICLE 14 ---------- ASSIGNMENT AND SUBLETTING ------------------------- 14.1 Transfers. Tenant shall not, without the prior written consent of --------- Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as "Transfers" and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "Transferee"). If Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the "Transfer Notice") shall include (i) the proposed effective date of the Transfer, which shall not be less than twenty (20) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the "Subject Space"), (iii) all of the material terms of the proposed Transfer and the consideration therefor (including calculation of the "Transfer Premium", as that term is defined in Section 14.3 below, in connection with such Transfer), the name and address of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, and (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and any other information reasonably required by Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee's business and proposed use of the Subject Space, and such other information as Landlord may reasonably require. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and of no effect, and shall, at Landlord's option, constitute a default by Tenant under this Lease. Whether or not Landlord consents to any proposed Transfer, Tenant shall pay Landlord's review and processing fees, as well as any reasonable legal fees incurred by Landlord, within thirty (30) days after written request by Landlord, which fees shall not exceed One Thousand and No/100 Dollars ($1,000.00) for a Transfer in the ordinary course of business. 14.2 Landlord's Consent. Landlord shall not unreasonably withhold its ------------------ consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: 14.2.1 The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project, or would be a significantly less prestigious occupant of the Building than Tenant; 14.2.2 The Transferee is either a governmental agency or instrumentality thereof; 14.2.3 The Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities involved under the Lease on the date consent is requested; 14.2.4 The proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease; 14.2.5 The terms of the proposed Transfer will allow the Transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant (or will allow the Transferee to occupy space leased by Tenant pursuant to any such right); or 14.2.7 Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Project at the time of the request for consent, (ii) is negotiating with Landlord to lease space in the Project at such time, or (iii) has negotiated with Landlord during the three (3)-month period immediately preceding the Transfer Notice. -20- If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord's consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any material changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2, or (ii) which would cause the proposed Transfer to be more favorable to the Transferee than the terms set forth in Tenant's original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord's right of recapture, if any, under Section 14.4 of this Lease). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under Section 14.2 or otherwise has breached or acted ------------ unreasonably under this Article 14, their sole remedies shall be declaratory ---------- judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed Transferee. 14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition ---------------- thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord forty percent (40%) of any "Transfer Premium," as that term is defined in this Section 14.3, received by Tenant from such Transferee. "Transfer Premium" shall mean all rent, additional rent or other consideration payable by such Transferee in excess of the Rent and Additional Rent payable by Tenant under this Lease on a per rentable square foot basis if less than all of the Premises is transferred. "Transfer Premium" shall also include, but not be limited to, key money and bonus money paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee in connection with such Transfer. 14.4 Landlord's Option as to Subject Space. Notwithstanding anything to ------------------------------------- the contrary contained in this Article 14, in the event Tenant contemplates an assignment or a sublease, when aggregated with any other subleases, exceeds three thousand (3,000) rentable square feet (or in the event of any other Transfer or Transfers entered into by Tenant as a subterfuge in order to avoid the terms of this Section 14.4), Tenant shall give Landlord notice (the "Intention to Transfer Notice") of such contemplated Transfer (whether or not the contemplated Transferee or the terms of such contemplated Transfer have been determined). The Intention to Transfer Notice shall specify the portion of and amount of rentable square feet of the Premises which Tenant intends to Transfer (the "Contemplated Transfer Space"), the contemplated date of commencement of the Contemplated Transfer (the "Contemplated Effective Date"), and the contemplated length of the term of such contemplated Transfer, and shall specify that such Intention to Transfer Notice is delivered to Landlord pursuant to this Section 14.4 in order to allow Landlord to elect to recapture the Contemplated Transfer Space for the term set forth in the Intention to Transfer Notice. Thereafter, Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after receipt of any Intention to Transfer Notice, to recapture the Contemplated Transfer Space. In the event such option is exercised by Landlord, this Lease shall be canceled and terminated with respect to such Contemplated Transfer Space as of the Contemplated Effective Date until the last day of the term of the contemplated Transfer as set forth in the Intention to Transfer Notice. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to timely elect to recapture such Contemplated Transfer Space under this Section 14.4, then, subject to the other terms of this Article 14, for a period of nine (9) months (the "Nine Month Period") commencing on the last day of such thirty (30) day period, Landlord shall not have any right to recapture the Contemplated Transfer Space with respect to any Transfer made during the Nine Month Period, provided that any such Transfer is substantially on the terms set forth in the Intention to Transfer -21- Notice, and provided further that any such Transfer shall be subject to the remaining terms of this Article 14. If such a Transfer is not so consummated within the Nine Month Period (or if a Transfer is so consummated, then upon the expiration of the term of any Transfer of such Contemplated Transfer Space consummated within such Nine Month Period), Tenant shall again be required to submit a new Intention to Transfer Notice to Landlord with respect any contemplated Transfer, as provided above in this Section 14.4. 14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the ------------------ terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guarantor of the Lease from liability under this Lease. 14.6 Additional Transfers. For purposes of this Lease, the term -------------------- "Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, or transfer of fifty percent (50%) or more of partnership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded ---- through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant or, (B) the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares of Tenant (other than to immediate family members by reason of gift or death) within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12)-month period. 14.7 Non-Transfers. Notwithstanding anything to the contrary contained in ------------- this Lease, neither (i) an assignment to a transferee of all or substantially all of the assets of Tenant, (ii) an assignment of the Premises to a transferee which is the resulting entity of a merger or consolidation of Tenant with another entity, (iii) a change in ownership or control resulting from an offering of common stock or similar securities (whether as a public offering or a private placement to one more groups of investors), nor (iv) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant), shall be deemed a Transfer under Article 14 of this Lease, provided ---------- that Tenant notifies Landlord of any such assignment or sublease and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such transfer or transferee as set forth in items (i) through (iv) above, that such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease, and that such transferee or affiliate shall have a net worth (not including goodwill as an asset) computed in accordance with generally accepted accounting principles (the "Net Worth") at least equal to the greater of (A) the Net Worth of Tenant immediately prior to such assignment or sublease, or (B) the Net Worth on the date of this Lease of the original named Tenant. The transferee in items (i) through (iv), above, shall be referred to as an "Affiliate." "Control," as used in this Section ------- 14.7, shall mean the ownership, directly or indirectly, of at least fifty-one - ---- percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity. ARTICLE 15 ---------- SURRENDER OF PREMISES; ---------------------- REMOVAL OF TRADE FIXTURES ------------------------- 15.1 Surrender of Premises. No act or thing done by Landlord or any agent --------------------- or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by -22- Landlord of a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises. 15.2 Removal of Tenant Property by Tenant. Upon the expiration of the ------------------------------------ Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal. ARTICLE 16 ---------- HOLDING OVER ------------ If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Base Rent shall be payable at a monthly rate equal to twice the Base Rent applicable during the last rental period of the Lease Term under this Lease. Such month-to-month tenancy shall be subject to every other applicable term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender (including such tenant's lost profits) and any lost profits to Landlord resulting therefrom. ARTICLE 17 ---------- ESTOPPEL CERTIFICATES --------------------- Within seven (7) business days following a request in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit D, attached hereto (or such other form as may be reasonably required by any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord's mortgagee or prospective mortgagee. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. Failure of Tenant to timely execute and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception. -23- ARTICLE 18 ---------- SUBORDINATION ------------- This Lease shall be subject and subordinate to all present and future ground or underlying leases of the Building or Project and to the lien of any first mortgage or trust deed, now or hereafter in force against the Building or Project, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Landlord's delivery to Tenant of commercially reasonable non-disturbance agreement(s) in favor of Tenant from any ground lessors, mortgage holders or lien holders of Landlord who later come into existence at any time prior to the expiration of the Lease Term shall be in consideration of, and a condition precedent to, Tenant's agreement to be bound by the terms of this Article 18. Tenant ---------- covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage or deed in lieu thereof, to attorn, without any deductions or set-offs whatsoever, to the purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof if so requested to do so by such purchaser, and to recognize such purchaser as the lessor under this Lease. Tenant shall, within five (5) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations hereunder in the event of any foreclosure proceeding or sale. ARTICLE 19 ---------- DEFAULTS; REMEDIES ------------------ 19.1 Defaults. The occurrence of any of the following shall constitute a -------- default of this Lease by Tenant: 19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, within three (3) days after written notice from Landlord that the same is past due; or 19.1.2 Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant, provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, then Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to cure such default; or 19.1.3 To the extent permitted by law, a general assignment by Tenant or any guarantor of the Lease for the benefit of creditors, or the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within thirty (30) days, or any execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within thirty (30) days; or 19.1.4 The hypothecation or assignment of this Lease or subletting of the Premises, or attempts at such actions, in violation of Article 14 hereof; or 19.1.5 The failure by Tenant to occupy the Premises within sixty (60) days after the Substantial Completion of the Premises. -24- 19.2 Remedies Upon Default. Upon the occurrence of any event of default --------------------- by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever. 19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following: (i) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and (v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term "rent" as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Paragraphs 19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in Article 25 of this Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 19.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all Rent as it becomes due. 19.3 Sublessees of Tenant. Whether or not Landlord elects to terminate -------------------- this Lease on account of any default by Tenant as set forth in this Article 19, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. In the event of Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder. -25- ARTICLE 20 ---------- ATTORNEYS' FEES --------------- If either party commences litigation against the other for the specific performance of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the parties hereto agree to and hereby do waive any right to a trial by jury and, in the event of any such commencement of litigation, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorneys' fees as may have been incurred. ARTICLE 21 ---------- LETTER OF CREDIT ---------------- 21.1 Letter of Credit. Tenant shall deliver to Landlord concurrently with ---------------- Tenant's execution of this Lease, an unconditional, clean, irrevocable letter of credit (the "L-C") in an initial amount equal to the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00) (the "L-C Amount"), which L-C shall be issued by Union Bank of California, and which L-C shall be in a form and content as set forth in Exhibit F, attached hereto. Tenant shall pay all expenses, points and/or fees incurred by Tenant in obtaining the L-C. 21.2 Application of the L-C. The L-C shall be held by Landlord as ---------------------- security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the initial Lease Term. The L-C shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, or if Tenant fails to renew the L-C at least thirty (30) days before its expiration, Landlord may, but shall not be required to, draw upon all or any portion of the L-C for payment of any Rent or any other sum in default, or for the payment of any amount that Landlord may reasonably spend or may become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant's default, provided that if Tenant fails to renew the L-C at least thirty (30) days before its expiration, then Landlord shall have the right to draw upon the entire L-C. The use, application or retention of the L-C, or any portion thereof, by Landlord shall not (a) prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the L-C, nor (b) operate as a limitation on any recovery to which Landlord may otherwise be entitled. Any amount of the L-C which is drawn upon by Landlord, but is not used or applied by Landlord shall be held by Landlord and deemed a security deposit (the "L-C Security Deposit"). If any portion of the L-C is drawn upon, Tenant shall, within five (5) days after written demand therefor, either (i) deposit cash with Landlord (which cash shall be applied by Landlord to the L-C Security Deposit) in an amount sufficient to cause the sum of the L-C Security Deposit and the amount of the remaining L-C to be equivalent to the amount of the L-C then required under this Lease or (ii) reinstate the L-C to the amount then required under this Lease, and if any portion of the L-C Security Deposit is used or applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord (which cash shall be applied by Landlord to the L-C Security Deposit) in an amount sufficient to restore the L-C Security Deposit to the amount then required under this Lease, and Tenant's failure to do so shall be a default under this Lease. Tenant acknowledges that Landlord has the right to transfer or mortgage its interest in the Project and the Building and in this Lease and Tenant agrees that in the event of any such transfer or mortgage, Landlord shall have the right to transfer or assign the L-C Security Deposit and/or the L-C to the transferee or mortgagee, and in the event of such transfer, Tenant shall look solely to such transferee or mortgagee for the return of the L-C Security Deposit and/or the L-C. If Tenant is not then in default under this Lease, the L-C Amount shall be reduced during the initial Lease Term as follows: (i) commencing on the first day of the fourth (4th) Lease Year, the L-C Amount shall be reduced to Three Hundred Twenty Thousand and No/100 Dollars ($320,000.00); (ii) commencing on the first day of the fifth (5th) Lease Year, the L-C Amount shall be reduced to Two Hundred Forty Thousand and No/100 Dollars ($240,000.00); (iii) commencing on the -26- first day of the sixth (6th) Lease Year, the L-C Amount shall be reduced to One Hundred Sixty Thousand and No/100 Dollars ($160,000.00); and (iv) commencing on the first day of the seventh (7th) Lease Year, the L-C Amount shall be reduced to Eighty Thousand and No/100 Dollars ($80,000.00) and shall remain at such amount during the remainder of the Lease Term. Notwithstanding the previous sentence, in the event that as of the first day of the fourth (4th) Lease Year and continuing thereafter, Tenant has a net worth of at least Five Hundred Million Dollars ($500,000,000.00) and an annual net income of at least Thirty Million Dollars ($30,000,000.00) (collectively, the "Financial Requirement"), the L-C Amount shall reduce on the first day of the fourth (4th) Lease Year to Two Hundred Thousand and No/100 Dollars ($200,000.00) and on the first day of the fifth (5th) Lease Year, the L-C Amount shall reduce to Zero Dollars ($0.00); provided that in the event that following the first day of the fourth (4th) Lease Year, Tenant does not meet the Financial Requirement, then the L-C Amount shall be as set forth in the preceding sentence. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the L-C Security Deposit and/or the L-C, or any balance thereof, shall be returned to Tenant within thirty (30) days following the expiration of the initial Lease Term. ARTICLE 22 ---------- SUBSTITUTION OF OTHER PREMISES ------------------------------ Landlord shall have the privilege of moving Tenant to other space in the Building comparable to the Premises, and all terms hereof shall apply to the new space with equal force; provided that Tenant's then existing monetary obligations under this Lease shall not be increased as a result of such relocation of the Premises. In such event, Landlord shall give Tenant at least ninety (90) days prior notice, shall provide Tenant, at Landlord's sole cost and expense, with tenant improvements at least equal in quality to those in the Premises and comparable in layout, decor and nature and shall move Tenant's effects to the new space at Landlord's sole cost and expense at such time and in such manner as to inconvenience Tenant as little as practicable. In addition, Landlord shall reimburse Tenant for the reasonable costs and expenses incurred by Tenant in connection with such relocation (including, but not limited to, the costs of reasonable supplies of replacement stationery, marketing materials, announcements of new address plus postage and computer, data transmission and telephone installations, cabling and wiring), within thirty (30) days of Landlord's receipt of an invoice therefor. Simultaneously with such relocation of the Premises, the parties shall immediately execute an amendment to this Lease stating the relocation of the Premises. ARTICLE 23 ---------- SIGNS ----- 23.1 General. Tenant's identifying signage shall be provided by Landlord, ------- at Tenant's cost, and such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlord's Building standard signage program. Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Tenant may not install any signs on the exterior or roof of the Project or the Common Areas. Any signs, window coverings, or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items visible from the exterior of the Premises or Building, shall be subject to the prior approval of Landlord, in its sole discretion. Tenant's identifying entry on the building directory located in the lobby of the Building shall be provided by Landlord, at Tenant's cost. 23.2 Building Directory. A building directory will be located in the ------------------ lobby of the Building. Tenant shall have the right, at Tenant's sole cost and expense, to designate name strips to be displayed under Tenant's entry in such directory at the rate of two (2) strips per each 1,000 rentable square feet of the Premises. -27- ARTICLE 24 ---------- COMPLIANCE WITH LAW ------------------- Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, "Applicable Laws"). At its sole cost and expense, Tenant shall promptly comply with all such Applicable Laws which relate to (i) Tenant's use of the Premises for non-general office use, (ii) the Alterations or Tenant Improvements in the Premises, or (iii) the "Base, Shell, and Core," as that term is defined in Section 1.1 of the Tenant Work Letter, but, as to the Base, Shell, and Core, only to the extent such obligations are triggered by Tenant's Alterations, the Tenant Improvements, or Tenant's use of the Premises for non-general office use. Should any standard or regulation now or hereafter be imposed on Landlord or Tenant by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall be conclusive of that fact as between Landlord and Tenant. Landlord shall comply with all Applicable Laws relating to the Base, Shell, and Core, Project and Common Areas, provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided further that Landlord's failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, or would unreasonably or materially affect the safety of Tenant's employees, create a significant health hazard for Tenant's employees, or create a material liability for the Tenant. Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this Article 24 to the extent consistent with, and amortized to the extent required by, the terms of Section 4.2.3 above. ARTICLE 25 ---------- LATE CHARGES ------------ If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) days after written notice from Landlord, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Rent and/or other charges when due hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within five (5) days after the date they are due shall bear interest from the date when due until paid at a rate per annum equal to the lesser of (i) eighteen percent (18%) per annum or (ii) the highest rate permitted by applicable law. ARTICLE 26 ---------- LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT ---------------------------------------------------- 26.1 Landlord's Cure. All covenants and agreements to be kept or --------------- performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of Rent. If Tenant shall fail to perform any of its obligations under this Lease, within a reasonable time after such performance is required by the terms of this Lease, Landlord may, but shall not be obligated to, after reasonable prior notice to Tenant (except in the case of an emergency), make any such payment or perform any such act on Tenant's part without waiving its rights based upon any default of Tenant and without releasing Tenant from any obligations hereunder. -28- 26.2 Tenant's Reimbursement. Except as may be specifically provided to ---------------------- the contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; and (ii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so expended. Tenant's obligations under this Section 26.2 shall survive the expiration or sooner termination of the Lease Term. ARTICLE 27 ---------- ENTRY BY LANDLORD ----------------- Landlord reserves the right at all reasonable times and upon reasonable notice to Tenant (except in the case of an emergency) to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or tenants, or to the ground or underlying lessors; (iii) post notices of nonresponsibility; or (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to (A) perform services required of Landlord; (B) take possession due to any breach of this Lease in the manner provided herein; and (C) perform any covenants of Tenant which Tenant fails to perform. Landlord may make any such entries without the abatement of Rent and may take such reasonable steps as required to accomplish the stated purposes. Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant's vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises by Landlord in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. ARTICLE 28 ---------- TENANT PARKING -------------- Tenant hereby rents from Landlord, commencing on the Lease Commencement Date, the amount of parking passes set forth in Section 9 of the Summary, on a monthly basis throughout the Lease Term and any extension thereof, which parking passes shall pertain to the Project parking facility. Notwithstanding the foregoing, during the first (1st) Lease Year, Tenant shall have the right to rent between nineteen (19) and the number of parking passes set forth in Section 9 of the Summary. Prior to the end of the first Lease Year, Tenant shall deliver to Landlord notice specifying the number of unreserved parking passes Tenant shall rent during the remainder of the Lease Term, which number shall not be less than nineteen (19) nor more than the number of passes set forth in Section 9 of the Summary. Commencing on the first day of the second Lease Year and continuing throughout the remainder of the Lease Term, Tenant shall rent the number of unreserved parking passes specified in Tenant's notice. In the event that Tenant rents fewer than the number of passes set forth in Section 9 of the Summary, Tenant shall have the right to rent additional unreserved parking passes such that the total passes rented by Tenant does not exceed the number of passes set forth in Section 9 of the Summary on an "as available basis," as -29- determined by Landlord in Landlord's sole discretion. In lieu of up to five (5) unreserved parking passes, Tenant may rent passes for up to five (5) reserved parking spaces in the Project parking facility, three (3) of which shall be on the "P-1" Level and the remainder of which shall be on the "P-2" or "P-3" levels. Tenant shall give Landlord written notice of such election no later than the Lease Commencement Date, and Tenant shall thereafter during the remainder of the Lease Term rent such number of reserved parking spaces. Tenant shall have the right to rent additional passes for reserved or unreserved parking spaces on an "as available" basis, as determined by Landlord. Tenant shall pay to Landlord for automobile parking passes on a monthly basis the prevailing rate charged from time to time for parking passes in the Project. Tenant's continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the Project parking facility and upon Tenant's cooperation in seeing that Tenant's employees and visitors also comply with such rules and regulations. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Project parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, close-off or restrict access to the Project parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord. The parking passes rented by Tenant pursuant to this Article 28 are provided to Tenant solely for use by Tenant's own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval. ARTICLE 29 ---------- MISCELLANEOUS PROVISIONS ------------------------ 29.1 Binding Effect. Subject to all other provisions of this Lease, each -------------- of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease. 29.2 Modification of Lease. Should any current or prospective mortgagee --------------------- or ground lessor for the Building or Project require a modification or modifications of this Lease, which modification or modifications will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are reasonably required therefor and to deliver the same to Landlord within ten (10) days following a request therefor. Should Landlord or any such prospective mortgagee or ground lessor require execution of a short form of Lease for recording, containing, among other customary provisions, the names of the parties, a description of the Premises and the Lease Term, Tenant agrees to execute and deliver such short form of Lease to Landlord within ten (10) days following the request therefor. 29.3 Transfer of Landlord's Interest. Tenant acknowledges that Landlord ------------------------------- has the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord's obligations hereunder after the date of transfer. Tenant further acknowledges that Landlord may assign its interest in this Lease to the holder of any mortgage or deed of trust as additional security, but agrees that an assignment shall not release Landlord from its obligations hereunder and Tenant shall continue to look to Landlord for the performance of its obligations hereunder. 29.4 Prohibition Against Recording. Except as provided in Section 29.3 of ----------------------------- this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord's election. 29.5 Captions. The captions of Articles and Sections are for convenience -------- only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections. 29.6 Time of Essence. Time is of the essence of this Lease and each of --------------- its provisions. -30- 29.7 Partial Invalidity. If any term, provision or condition contained ------------------ in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law. 29.8 No Warranty. In executing and delivering this Lease, Tenant has not ----------- relied on any representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto. 29.9 Child Care Facilities. Tenant acknowledges that any child care --------------------- facilities located in the Project (the "Child Care Facilities") which are available to Tenant and Tenant's employees are provided by a third party (the "Child Care Provider") which is leasing space in the Project, and not by Landlord. If Tenant or its employees choose to use the Child Care Facilities, Tenant acknowledges that Tenant and Tenant's employees are not relying upon any investigation which Landlord may have conducted concerning the Child Care Provider or any warranties or representation with respect thereto, it being the sole responsibility of Tenant and the individual user of the Child Care Facilities to conduct any and all investigations of the Child Care Facilities prior to making use thereof. Accordingly, Landlord shall have no responsibility with respect to the quality or care provided by the Child Care Facilities, or for any acts or omissions of the Child Care Provider. Furthermore, Tenant, for Tenant and for Tenant's employees, hereby agrees that Landlord, its members and their respective partners, subpartners, officers, agents, servants, employees, and independent contractors shall not be liable for, and are hereby released from any responsibility for any loss, cost, damage, expense or liability, either to person or property, arising from the use of the Child Care Facilities by Tenant or Tenant's employees. Tenant hereby covenants that Tenant shall inform all of Tenant's employees of the provisions of this Section 29.9 prior to such employees' use of the Child Care Facilities. 29.10 Entire Agreement. It is understood and acknowledged that there are ---------------- no oral agreements between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease and any side letter or separate agreement executed by Landlord and Tenant in connection with this Lease and dated of even date herewith, contain all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises and shall be considered to be the only agreements between the parties hereto and their representatives and agents. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. 29.11 Right to Lease. Landlord reserves the absolute right to effect such -------------- other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building or Project. 29.12 Force Majeure. Any prevention, delay or stoppage due to strikes, ------------- lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, the "Force Majeure"), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure. -31- 29.13 Notices. All notices, demands, statements, designations, approvals ------- or other communications (collectively, "Notices") given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, or delivered personally (i) to Tenant at the appropriate address set forth in Section 11 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the following addresses, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant: J.P. Morgan Investment Management, Inc. 522 Fifth Avenue 12th Floor New York, New York 10036 Attention: Mr. David Chen, Vice-President and Tooley & Company 2425 Olympic Boulevard Suite 520-East Santa Monica, California 90404 Attention: Building Manager With a copy to: Allen, Matkins, Leck, Gamble & Mallory 1999 Avenue of the Stars, Suite 1800 Los Angeles, California 90067 Attn: Anton N. Natsis, Esq. Any Notice will be deemed given on the date it is mailed as provided in this Section 29.13 or upon the date personal delivery is made. If Tenant is notified of the identity and address of the holder of any deed of trust or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant's exercising any remedy available to Tenant. 29.14 Joint and Several. If there is more than one Tenant, the ----------------- obligations imposed upon Tenant under this Lease shall be joint and several. 29.15 Authority. If Tenant is a corporation or partnership, each --------- individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so. 29.16 Governing Law. This Lease shall be construed and enforced in ------------- accordance with the laws of the State of California. 29.17 Submission of Lease. Submission of this instrument for examination ------------------- or signature by Tenant does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 29.18 Brokers. Landlord and Tenant hereby warrant to each other that they ------- have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 10 of the Summary (the "Brokers"), whose commissions shall be the responsibility of Landlord pursuant to a separate written agreement, and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, -32- liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party. 29.19 Independent Covenants. This Lease shall be construed as though the --------------------- covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any setoff of the Rent or other amounts owing hereunder against Landlord; provided, however, that the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building or Project or any portion thereof, whose address has theretofore been given to Tenant, and an opportunity is granted to Landlord and such holder to correct such violations as provided above. 29.20 Project or Building Name and Signage. Landlord shall have the right ------------------------------------ at any time to change the name of the Project or Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity, without the prior written consent of Landlord. 29.21 Transportation Management. Tenant shall fully comply with all ------------------------- present or future programs intended to manage parking, transportation or traffic in and around the Project or Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation- related committees or entities. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Project, Building or area-wide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees. 29.22 No Discrimination. Tenant covenants by and for itself, its heirs, ----------------- executors, administrators and assigns, and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: that there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, sex, religion, marital status, ancestry or national origin in the leasing, subleasing, transferring, use, or enjoyment of the Premises, nor shall Tenant itself, or any person claiming under or through Tenant, establish or permit such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the Premises. 29.23 Hazardous Material. As used herein, the term "Hazardous Material" ------------------ means any hazardous or toxic substance, material or waste which is or becomes regulated by, or is dealt with in, any local governmental authority, the State of California or the United States Government. Tenant acknowledges that Landlord may incur costs (A) for complying with laws, codes, regulations or ordinances relating to Hazardous Material, or (B) otherwise in connection with Hazardous Material including, without limitation, the following: (i) Hazardous Material present in soil or ground water; (ii) Hazardous Material that migrates, flows, percolates, diffuses or in any way moves onto or under the Project; (iii) Hazardous Material present on or under the Project as a result of any discharge, dumping or spilling (whether accidental or otherwise) on the Project by other tenants of the Project or their agents, employees, contractors or invitees, or by others; and (iv) material which becomes Hazardous Material due to a change in laws, codes, regulations or ordinances which relate to hazardous or toxic material, substances or waste. Subject to the terms of Section 4.2.3(q), above, Tenant agrees that the costs incurred by Landlord with respect to, or in connection with, the Project for complying with laws, codes, regulations or -33- ordinances relating to Hazardous Material shall be an Operating Expense, unless the cost of such compliance, as between Landlord and Tenant, is made the responsibility of Tenant under this Lease. To the extent any such Operating Expense relating to Hazardous Material is subsequently recovered or reimbursed through insurance, or recovery from responsible third parties, or other action, Tenant shall be entitled to a proportionate share of such Operating Expense to which such recovery or reimbursement relates. 29.24 Development of the Project. -------------------------- 29.24.1 Subdivision. Tenant acknowledges that the Project has been ----------- subdivided. Landlord reserves the right to further subdivide all or a portion of the buildings and Common Areas in the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from a subdivision and any all maps in connection therewith. Notwithstanding anything to the contrary set forth in this Lease, the separate ownership of any buildings and/or Common Areas of the Project by an entity other than Landlord shall not affect the calculation of Project Expenses or Tenant's payment of Tenant's Share of Project Expenses. 29.24.2 The Other Improvements. If portions of the Project or ---------------------- property adjacent to the Project (collectively, the "Other Improvements") are owned by an entity other than Landlord, Landlord, at its option, may enter into an agreement with the owner or owners of any of the Other Improvements to provide (i) for reciprocal rights of access, use and/or enjoyment of the Project and the Other Improvements, (ii) for the common management, operation, maintenance, improvement and/or repair of all or any portion of the Project and all or any portion of the Other Improvements, (iii) for the allocation of a portion of the Project Expenses to the Other Improvements and the allocation of a portion of the operating expenses and taxes for the Other Improvements to the Project, (iv) for the use or improvement of the Other Improvements and/or the Project in connection with the improvement, construction, and/or excavation of the Other Improvements and/or the Project, and (v) for any other matter which Landlord deems necessary. Nothing contained herein shall be deemed or construed to limit or otherwise affect Landlord's right to sell all or any portion of the Project or any other of Landlord's rights described in this Lease. 29.24.3 Construction of Project and Other Improvements. Tenant ---------------------------------------------- acknowledges that portions of the Project and/or the Other Improvements may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction. 29.25 Tenant's ERISA Representation. Tenant hereby represents and ----------------------------- warrants to Landlord that none of the assets of Tenant are "plan assets" as that term is defined in 29 C.F.R. (S) 2509.75-2 or (S) 2510.3-101. 29.26 Landlord Exculpation. It is expressly understood and agreed that -------------------- notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord hereunder (including any successor landlord hereunder) and any recourse by Tenant against Landlord shall be limited solely and exclusively to the interest of Landlord in and to the Building. Neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Section 29.26 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for injury or damage to, or interference with, Tenant's business, including but not -34- limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring. 29.27 Health Club. The Spectrum Club health club located in the Project ----------- currently offers Tenant's management and employees a forty-five percent (45%) discount on the one-time basic membership fees provided that such management and/or employees obtain such memberships within sixty (60) days following the Lease Commencement Date. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written. "Landlord": WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company By: ---------------------------------------- David Chen, Vice President "Tenant": ENTRAVISION COMMUNICATIONS COMPANY, LLC, a Delaware limited liability company By: ---------------------------------------- Its: ----------------------------------- By: ---------------------------------------- Its: ----------------------------------- -35- EXHIBIT A --------- THE WATER GARDEN ---------------- OUTLINE OF PREMISES ------------------- Exhibit a contains a diagram outline of the premises leased pursuant to the office lease. EXHIBIT B --------- THE WATER GARDEN ---------------- NOTICE OF LEASE TERM DATES -------------------------- To: ----------------------- ----------------------- ----------------------- ----------------------- Re: Office Lease dated , 19 between WATER GARDEN ----------------- -- COMPANY L.L.C., a Delaware Limited Liability Company ("Landlord"), and , a ----------------------------------- ----------------------- ("Tenant") concerning Suite on floor(s) of the ------ ---------- office building located at , Santa ------------------------------- Monica, California. Gentlemen: In accordance with the referenced Office Lease (the "Lease"), we wish to advise you and/or confirm as follows: 1. The Substantial Completion of the Premises has occurred, and the Lease Term shall commence on or has commenced on for a ----------------- term of ending on . ---------------------- ------------------ 2. Rent commenced to accrue on , in the amount of -------------------- . ------------------- 3. If the Lease Commencement Date is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter, with the exception of the final billing, shall be for the full amount of the monthly installment as provided for in the Lease. 4. Your rent checks should be made payable to -------------------------- at . ---------------------------- 5. The exact number of rentable square feet within the Premises is 9,307 rentable (7,911 usable) square feet. 6. Tenant's Share as adjusted based upon the exact number of rentable square feet within the Premises is 2.7958%. Pursuant to the terms of Article 2 of your Lease, you are required to return an executed copy of this Notice to within ten (10) ---------------- business days following your receipt hereof, and thereafter the statements set forth herein shall be conclusive and binding upon you. Your failure to timely execute and return this Notice shall constitute your acknowledgment that the statements included herein are true and correct, without exception. EXHIBIT B - Page 1 "Landlord": WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company By: ------------------------------------------ Its: ------------------------------------- Agreed to and Accepted as of , 19 . --------------- -- "Tenant": , - --------------------------- a -------------------------- By: ------------------------- Its: --------------------- By: ------------------------- Its: --------------------- EXHIBIT B - Page 2 EXHIBIT C --------- THE WATER GARDEN ---------------- RULES AND REGULATIONS --------------------- Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Project. 1. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord's prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord. 2. All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises. 3. Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in the greater Los Angeles area. Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving the Premises if it is after the normal hours of business for the Building. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register. Access to the Building may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building. The Landlord and his agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building or the Project during the continuance thereof by any means it deems appropriate for the safety and protection of life and property. 4. No furniture, freight or equipment of any kind shall be brought into the Building without prior notice to Landlord. All moving activity into or out of the Building shall be scheduled with Landlord and done only at such time and in such manner as Landlord designates. No service deliveries (other than messenger services) will be allowed between hours of 4:00 p.m. to 6:00 p.m., Monday through Friday. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building and also the times and manner of moving the same in and out of the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. Any damage to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility and expense of Tenant. 5. No furniture, packages, supplies, equipment or merchandise will be received in the Building or carried up or down in the elevators, except between such hours and in such specific elevator as shall be designated by Landlord. 6. Any requests of Tenant shall be directed to the management office for the Project or at such office location designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord. 7. Tenant shall not disturb, solicit, or canvass any occupant of the Project and shall cooperate with Landlord and its agents to prevent such activities. 8. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any EXHIBIT C - Page 1 kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or agents, shall have caused it. 9. Tenant shall not overload the floor of the Premises, nor mark, drive nails or screws (except in connection with customary picture hanging and office decoration), or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord's consent first had and obtained. 10. Except for vending machines intended for the sole use of Tenant's employees and invitees, no vending machines other than fractional horsepower office machines shall be installed, maintained or operated upon the Premises without the written consent of Landlord. 11. Tenant shall not use or keep in or on the Premises, the Building, or the Project any kerosene, gasoline or other inflammable or combustible fluid or material. 12. Tenant shall not without the prior written consent of Landlord use any method of heating or air conditioning other than that supplied by Landlord. 13. Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Project by reason of noise, odors, or vibrations, or interfere in any way with other tenants or those having business therein. 14. Tenant shall not bring into or keep within the Project, the Building or the Premises any animals, birds, bicycles or other vehicles. 15. No cooking shall be done or permitted on the Premises, nor shall the Premises be used for the storage of merchandise, for lodging or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, Underwriters' laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and visitors, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations. 16. Landlord will approve where and how telephone and telegraph wires are to be introduced to the Premises. No boring or cutting for wires shall be allowed without the consent of Landlord. The location of telephone, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. 17. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations. 18. Tenant, its employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and shall use them only as a means of ingress and egress for the Premises. 19. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to ensure the most effective operation of the Building's heating and air conditioning system, and shall refrain from attempting to adjust any controls. 20. Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in Santa Monica, California without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate. EXHIBIT C - Page 2 21. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 22. Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 23. No awnings or other projection shall be attached to the outside walls of the Building without the prior written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord. Tenant shall abide by Landlord's regulations concerning the opening and closing of window coverings which are attached to the windows in the Premises, if any, which have a view of any interior portion of the Building or Building Common Areas. 24. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles be placed on the windowsills. Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord's reasonable judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises, Building, the Common Areas and the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. EXHIBIT C - Page 3 EXHIBIT D --------- THE WATER GARDEN ---------------- FORM OF TENANT'S ESTOPPEL CERTIFICATE ------------------------------------- The undersigned as Tenant under that certain Office Lease (the "Lease") made and entered into as of , 199 by and between ----------- - as Landlord, and the undersigned as Tenant, for - ------------------------------- Premises on the floor(s) of the office building located at ---------- , Santa Monica, California , certifies as - ---------------------- ----------- follows: 1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises. 2. The undersigned currently occupies the Premises described in the Lease. 3. The Lease Term commenced on , and the Lease Term expires on --------- . - ------------ 4. Base Rent became payable on . ----------------- 5. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A. 6. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: 7. Tenant shall not modify the documents contained in Exhibit A without the prior written consent of the holder of the first deed of trust on the Premises. 8. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through . The current monthly installment of Base Rent is -------------- $ . --------- 9. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. 10. The current amount of the Security Deposit held by Landlord is $ . ---------- 11. No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease. 12. As of the date hereof, there are no existing defenses or offsets that the undersigned has against Landlord nor have any events occurred that with the passage of time or the giving of notice, or both, would constitute a default on the part of Landlord under the Lease. 13. The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee, or a prospective purchaser, and acknowledges that said prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of making of such loan or acquisition of such property. EXHIBIT D - Page 1 14. If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. Executed at on the day of , 19 . ------------------ ---- --------- -- "Tenant": , ------------------------------ a ---------------------------- By: --------------------------- Its: ---------------------- By: --------------------------- Its: ---------------------- EXHIBIT D - Page 2 EXHIBIT E --------- THE WATER GARDEN ---------------- TENANT WORK LETTER ------------------ This Tenant Work Letter shall set forth the terms and conditions relating to the construction of the tenant improvements in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the Premises. All capitalized terms used but not defined herein shall have the meanings given such terms in this Lease. All references in this Tenant Work Letter to Articles or Sections of "this Lease" shall mean the relevant portion of Articles 1 through 29 of this Lease to which this Tenant --------------------- Work Letter is attached as Exhibit E and of which this Tenant Work Letter forms --------- a part, and all references in this Tenant Work Letter to Sections of "this Tenant Work Letter" shall mean the relevant portion of Sections 1 through 6 of -------------------- this Tenant Work Letter. SECTION 1 --------- LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES ----------------------------------------------- 1.1 Base, Shell and Core of the Premises as Constructed by Landlord. --------------------------------------------------------------- Landlord shall construct, at its sole cost and expense, the base, shell, and core (i) of the Premises and (ii) of the floor of the Building on which the Premises is located (collectively, the "Base, Shell, and Core") in accordance with the plans and specifications for the Base, Shell, and Core and on an unoccupied basis (the "Plans"). Landlord shall, at Landlord's sole cost and expense (and not be deducted from the "Tenant Improvement Allowance," as that term is defined in Section 2.1, below) make any modifications to the Base, Shell and Core which are necessary for the same to comply with Applicable Laws on an unoccupied basis necessary for Tenant to obtain a certificate of occupancy for the Premises or otherwise legally occupy the Premises. The Base, Shell and Core shall include only the following items. 1.1.1 Core Improvements. ----------------- 1.1.1.1 Toilet Rooms. The men's and women's toilets shall be ------------ complete with countertops, ceramic tile walls and floors, lavatory mirrors, lighting, ceilings, toilet partitions, toilet accessories, and high quality plumbing fixtures. 1.1.1.2 Passenger Elevator Lobby. The Passenger elevator lobby ------------------------ shall be complete with (i) finished ceiling, finished lighting, and floor coverings, (ii) fire/smoke doors, which will be finished recessed double solid- core wood doors installed complete with hardware, (iii) walls, completed with wall coverings and base, and (iv) elevator doors and frames, which will be painted metal, and call button and hall lantern face plates, which will be stainless steel. 1.1.1.3 Janitor's Closet, Telephone Room, and Electrical Room. ----------------------------------------------------- The janitor's closet shall be complete with painted walls, floor coverings and resilient base. The telephone and electrical rooms are unfinished and will include a telephone backboard and electrical distribution panelboards, respectively, for each full floor Tenant occupies (to the extent Tenant partially occupies a floor, only a portion of such distribution electrical panel board on such floor, based upon the proportionate amount of area on such floor occupied by Tenant, shall be available to Tenant). 1.1.1.4 Lifesafety. All required alarm and communication ---------- systems within the janitor's closet, telephone and electrical rooms, service elevator lobby area, the stairwells, the passenger elevator lobby area, and toilet rooms. 1.1.1.5 HVAC. The main distribution loop duct and heating hot ---- water supply and return lines (including valves) for the heating, ventilation and air conditioning system. EXHIBIT E - Page 1 1.1.1.6 Sprinkler. The sprinkler system, which shall include --------- only the main floor shut-off valves, alarms, primary loop piping, distribution piping, and heads installed with deflectors. 1.1.1.7 Service Elevator Lobby. The service elevator lobby ---------------------- complete with floor covering, resilient base, painted walls, ceiling, lighting, and elevator door and frame, which will be painted metal. 1.1.1.8 Balance of Core. All exposed core doors shall be --------------- completed with painted hollow metal frames, finished solid core wood doors or finished hollow metal doors, and hardware, and all exterior/exposed wall surfaces of the core shall be drywall, taped, floated, and sanded ready for paint. The balance of the core shall also include exit signs and fire extinguishers as required by applicable building code (the "Code") for unoccupied space. 1.1.2 Base and Shell Improvements. The structural frame of --------------------------- the Building shall be complete, including fireproofing and finished slab ready for floor coverings. 1.1.3 Items Relating to the Public Corridor (only as to that ------------------------------------------------------ portion of the Premises, if any, which occupies only a portion of a floor, - -------------------------------------------------------------------------- rather than an entire floor, of the Building). The following items relating to - --------------------------------------------- the public corridor: the wall coverings (finished corridor side only) on corridor and core walls, the floor covering, lighting, HVAC system, finished ceiling, appropriate signage, alarm and communication systems, and the sprinkler systems. SECTION 2 --------- TENANT IMPROVEMENTS ------------------- 2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time ---------------------------- tenant improvement allowance (the "Tenant Improvement Allowance") in the amount of One Hundred Ninety-Seven Thousand Seven Hundred Seventy-Five and No/100 Dollars ($197,775.00) (i.e., $25.00 per usable square foot of the Premises) for the costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Premises (the "Tenant Improvements"). In addition, Landlord shall contribute an amount not to exceed $0.15 per usable square foot of the Premises ("Landlord's Drawing Contribution") toward the cost of one (1) preliminary space plan to be prepared by "Architect," as that term is defined in Section 3.1, below, and no portion of the Landlord's Drawing Contribution, if any, remaining after the completion of the Tenant Improvements shall be available for use by Tenant. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance and the Landlord's Drawing Contribution. In the event that any portion of the Tenant Improvement Allowance remains sixty (60) days following the Lease Commencement Date, Tenant shall no longer have the right to such unused portion of the Tenant Improvement Allowance and such remaining portion of the Tenant Improvement Allowance shall be the sole property of Landlord. All Tenant Improvements for which the Tenant Improvement Allowance has been made available shall be deemed Landlord's property under the terms of Section 8.5 of this Lease. 2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise ------------------------------------------------ set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord's disbursement process) only for the following items and costs (collectively, the "Tenant Improvement Allowance Items"): 2.2.1 Payment of the fees of the "Architect" and the "Engineers," as those terms are defined in Sections 3.1 of this Tenant Work Letter, which payment shall, notwithstanding anything to the contrary contained in this Tenant Work Letter, not exceed an aggregate amount equal to $6.50 per usable square foot of the Premises, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord's consultants in connection with the preparation and review of the "Construction Drawings," as that term is defined in Section 3.1 of this Tenant Work Letter; EXHIBIT E - Page 2 2.2.2 The payment of plan check, permit and license fees relating to construction of the Tenant Improvements; 2.2.3 The cost of construction of the Tenant Improvements, including, without limitation, testing and inspection costs, freight elevator usage, hoisting and trash removal costs, and contractors' fees and general conditions; 2.2.4 The cost of any changes in the Base, Shell and Core work when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith; 2.2.5 The cost of any changes to the Construction Drawings, Tenant Improvements or Landlord's Work required by Code; 2.2.6 Sales and use taxes and Title 24 fees; 2.2.7 "Landlord's Supervision Fee", as that term is defined in Section 4.3.2 of this Tenant Work Letter; and 2.2.8 All other costs to be reasonably expended by Landlord in connection with the construction of the Tenant Improvements. 2.3 Standard Tenant Improvement Package. Landlord has established ----------------------------------- specifications (the "Specifications") for some of the Building standard components to be used in the construction of the Tenant Improvements in the Premises (collectively, the "Standard Improvement Package"). The quality of Tenant Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that Landlord may, at Landlord's option, require the Tenant Improvements to comply with certain Specifications. Landlord may make changes to the Specifications for the Standard Improvement Package from time to time. SECTION 3 --------- CONSTRUCTION DRAWINGS --------------------- 3.1 Selection of Architect/Construction Drawings. Tenant shall retain -------------------------------------------- Gensler as the architect/space planner (the "Architect") to prepare the "Construction Drawings", as that term is defined in this Section 3.1. Tenant shall retain Landlord's engineering consultants (the "Engineers") to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises, which work is not part of the Base, Shell and Core work. The fees changed by the Engineers shall be comparable to the fees charged by comparable engineers performing comparable work in the Comparable Buildings. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the "Construction Drawings." All Construction Drawings shall comply with Landlord's drawing format and specifications. Landlord's review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant's waiver and indemnity set forth in Section 10.1 of this Lease shall specifically apply to the Construction Drawings. Furthermore, Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the Plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. 3.2 Final Space Plan. On or before the date set forth in Schedule 1, ---------------- Tenant and the Architect shall prepare the final space plan for Tenant Improvements in the Premises, shall receive preliminary plan check approval for the same from the Department of Building and EXHIBIT E - Page 3 Safety of the City of Santa Monica (collectively, the "Final Space Plan"), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan and proof of receipt of preliminary plan check approval to Landlord for reasonable Landlord's approval. 3.3 Non-Standard Improvement Package Items. On or before the date set -------------------------------------- forth in Schedule 1, (i) Tenant shall submit to Landlord, for Landlord's approval, all necessary architectural and engineering design, details, and specifications to allow Landlord to immediately prepare an appropriate "Partial Cost Proposal," as that term is defined below in Section 4.2 of this Tenant Work Letter, for all materials necessary to the construction of (A) the structural portions of any interior stairway or dumbwaiter, and the openings (and required structural support areas) necessary to accommodate the placement of such interior stairways or dumbwaiters in the Premises and (B) all other structural supports and reinforcements necessary to the construction of the Tenant Improvements (collectively, the "Structural Items"); and (ii) Tenant shall provide Landlord, for Landlord's approval, with complete specifications, details and architectural and engineering drawings to allow Landlord to immediately prepare a Partial Cost Proposal for all materials, components, finishes, equipment, and improvements which are not part of the Standard Improvement Package. 3.4 Final Working Drawings. On or before the date set forth in Schedule ---------------------- 1, Tenant, Architect and the Engineers shall complete the architectural and engineering drawings for the Premises, and the final architectural working drawings in a form which is complete to allow subcontractors to bid on the work, to obtain all applicable permits, and to subsequently construct the work (collectively, the "Final Working Drawings") and shall submit the same to Landlord for Landlord's reasonable approval. 3.5 Permits. ------- 3.5.1 Structural Permits. Simultaneously with Tenant's submittal ------------------ of the items described in Sections 3.3(i)(A) and 3.3(i)(B), above, Tenant shall use its best, good faith, efforts and all due diligence to cooperate with Architect, the Engineers, Landlord and "Contractor," as that term is defined in Section 4.1, below, to do all acts necessary, including cooperation in the preparation of shop drawings, if necessary, to obtain permits (the "Structural Permits") for the immediate construction of the Structural Items, and Tenant acknowledges that in connection therewith Landlord and/or Contractor, as opposed to Tenant, on behalf of Tenant and as Tenant's agent, may be the appropriate party to obtain such permits. 3.5.2 Other Permits. After the approval of the Final Working ------------- Drawings by Landlord (the "Approved Working Drawings"), Tenant shall immediately submit same to the City of Santa Monica for all applicable building permits (except the Structural Permits to the extent the same have already been received pursuant to the terms of Section 3.5.1, above) necessary to allow Contractor to commence and fully complete the construction of the Tenant Improvements (the "Permits"), and, in connection therewith, Tenant shall coordinate with Landlord in order to allow Landlord, at its option, to take part in all phases of the permitting process, and shall supply Landlord, as soon as possible, with all plan check numbers and dates of submittal. 3.5.3 Other Terms. Notwithstanding anything to the contrary set ----------- forth in this Section 3.5, Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that the obtaining of the same shall be Tenant's responsibility (even as to the Structural Permits); provided, however, that Landlord shall, in any event, cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, provided that Landlord may withhold its consent, in its sole discretion, to any change in the Approved Working Drawings, if such change would directly or indirectly delay the Substantial Completion of the Premises. EXHIBIT E - Page 4 3.6 Time Deadlines. Tenant shall use its best, good faith, efforts and -------------- all due diligence to cooperate with Architect, the Engineers, and Landlord to complete all phases of the Construction Drawings and the permitting process and to receive the permits, and with Contractor for approval of the Cost Proposal, as soon as possible after the execution of the Lease, and, in that regard, shall meet with Landlord on a weekly basis to discuss Tenant's progress in connection with the same. The applicable dates for approval of items, plans and drawings and selection of a contractor as described in this Section 3, Section 4, below, and in this Tenant Work Letter are set forth and further elaborated upon in Schedule 1 (the "Time Deadlines"), attached hereto. Tenant agrees to comply with the Time Deadlines. SECTION 4 --------- CONSTRUCTION OF THE TENANT IMPROVEMENTS --------------------------------------- 4.1 Contractor. A contractor retained by Landlord, shall construct the ---------- Tenant Improvements. Such contractor ("Contractor") shall be mutually selected by Landlord and Tenant from three (3) general contractors upon whom Landlord and Tenant have mutually agreed and to whom Landlord has bid the Tenant Improvement Work, and Tenant shall deliver notice of its selection of the Contractor to Landlord on or before the date set forth in Schedule 1. 4.2 Cost Proposal. After the Approved Working Drawings are signed by ------------- Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in accordance with the Approved Working Drawings, which cost proposal shall include, as nearly as possible, the cost of all Tenant Improvement Allowance Items to be incurred by Tenant in connection with the construction of the Tenant Improvements (the "Cost Proposal"). Notwithstanding the foregoing, portions of the cost of the Tenant Improvements may be delivered to Tenant as such portions of the Tenant Improvements are priced by Contractor (on an individual item-by- item or trade-by-trade basis), even before the Approved Working Drawings are completed (the "Partial Cost Proposal") for purposes of facilitating the early purchase of items and construction of the same. Tenant shall approve and deliver the Cost Proposal to Landlord within five (5) business days of the receipt of the same, or, as to a Partial Cost Proposal within two (2) business days of receipt of the same, and upon receipt of the same by Landlord, Landlord shall be released by Tenant to purchase the items set forth in the Cost Proposal or Partial Cost Proposal, as the case may be, and to commence the construction relating to such items. The date by which Tenant must approve and deliver the Cost Proposal or the last Partial Cost Proposal to Landlord, as the case may be, shall be known hereafter as the "Cost Proposal Delivery Date". The total of all Partial Cost Proposals, if any, shall be known as the Cost Proposal. 4.3 Construction of Tenant Improvements by Landlord's Contractor under the ---------------------------------------------------------------------- Supervision of Landlord. - ----------------------- 4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date, --------------------- Tenant shall deliver to Landlord cash in an amount (the "Over-Allowance Amount") equal to the difference between (i) the amount of the Cost Proposal and (ii) the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the Cost Proposal Delivery Date). The Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement of any then remaining portion of the Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement Allowance. In the event that, after the Cost Proposal Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional costs which arise in connection with such revisions, changes or substitutions or any other additional costs shall be paid by Tenant to Landlord within five (5) days following Landlord's request as an addition to the Over-Allowance Amount. 4.3.2 Landlord's Retainment of Contractor. After Tenant selects ----------------------------------- the Contractor, Landlord shall independently retain Contractor to construct the Tenant Improvements in accordance with the Approved Working Drawings and the Cost Proposal and Landlord shall supervise the construction by Contractor, and Tenant shall pay a construction supervision and management fee (the "Landlord Supervision Fee") to Landlord in an amount equal to the product EXHIBIT E - Page 5 of (i) five percent (5%) and (ii) an amount equal to the Tenant Improvement Allowance plus the Over-Allowance Amount (as such Over-Allowance Amount may increase pursuant to the terms of this Tenant Work Letter). 4.3.3 Contractor's Warranties and Guaranties. Landlord hereby -------------------------------------- assigns to Tenant all warranties and guaranties by Contractor relating to the Tenant Improvements, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Tenant Improvements. Such warranties and guaranties of Contractor shall guarantee that the Tenant Improvements shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof, and Contractor shall be responsible for the replacement or repair, without additional charge, of the Tenant Improvements that shall become defective within one (1) year after Substantial Completion of the Premises. The correction of such work shall include, without additional charge, all additional expenses and damages in connection with such removal or replacement of all or any part of the Tenant Improvements. 4.3.4 Tenant's Covenants. Tenant hereby indemnifies Landlord ------------------ for any loss, claims, damages or delays arising from the actions of Architect on the Premises or in the Project. Within ten (10) days after completion of construction of the Tenant Improvements, Tenant shall cause Contractor and Architect to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute and furnish a copy thereof to Landlord upon recordation, failing which, Landlord may itself execute and file the same on behalf of Tenant as Tenant's agent for such purpose. In addition, immediately after the Substantial Completion of the Premises, Tenant shall have prepared and delivered to the Project management office a copy of the "as built" plans and specifications (including all working drawings) for the Tenant Improvements. SECTION 5 --------- COMPLETION OF THE TENANT IMPROVEMENTS; -------------------------------------- LEASE COMMENCEMENT DATE ----------------------- Except as provided in this Section 5, the Lease Commencement Date shall occur as set forth in Article 2 of this Lease. If there shall be a delay or there are delays in the Substantial Completion of the Premises or in the occurrence of any of the other conditions precedent to the Lease Commencement Date, as set forth in Article 2 of this Lease, as a direct, indirect, partial, or total result of: 5.1 Tenant's failure to comply with the Time Deadlines; 5.2 Tenant's failure to timely approve any matter requiring Tenant's approval; 5.3 A breach by Tenant of the terms of this Tenant Work Letter or the Lease; 5.4 Changes in any of the Construction Drawings after reasonable disapproval of the same by Landlord or because the same do not comply with Code or other applicable laws; 5.5 Tenant's request for changes in the Approved Working Drawings; 5.6 Tenant's requirement for materials, components, finishes or improvements which are not available in a commercially reasonable time given the anticipated date of Substantial Completion of the Premises, as set forth in the Lease, or which are different from, or not included in, the Standard Improvement Package; 5.7 Changes to the Base, Shell and Core work or Landlord Work required by the Approved Working Drawings (other than work to be performed by Landlord so that the Base, Shell and Core complies with Applicable Laws (as required by Section 1.1, above)); or 5.8 Any other acts or omissions of Tenant, or its agents, or employees; EXHIBIT E - Page 6 then, notwithstanding anything to the contrary set forth in the Lease or this Tenant Work Letter and regardless of the actual date of the Substantial Completion of the Premises, the Lease Commencement Date shall be deemed to be the date the Lease Commencement Date would have occurred if no Tenant delay or delays, as set forth above, had occurred. SECTION 6 --------- MISCELLANEOUS ------------- 6.1 Tenant's Entry Into the Premises Prior to Substantial Completion. ---------------------------------------------------------------- Provided that Tenant and its agents do not interfere with Contractor's work in the Project and the Premises, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises (but if such access is to be prior to the issuance of the Temporary Certificate of Occupancy for the Building, then such access shall be only as allowed by the City of Santa Monica) for the purpose of Tenant installing overstandard equipment or fixtures (including Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry into the Premises as permitted by the terms of this Section 6.1, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the approximate timing and purpose of Tenant's entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Project or Premises and against injury to any persons caused by Tenant's actions pursuant to this Section 6.1. 6.2 Freight Elevators. Landlord shall, consistent with its obligations to ----------------- other tenants of the Building, and subject to the needs of Landlord with respect to the construction of the Base, Shell and Core of the Building, make the freight elevator reasonably available to Tenant in connection with initial decorating, furnishing and moving into the Premises at no charge to Tenant. 6.3 Tenant's Representative. Tenant has designated Walter Ulloa as its ----------------------- sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter. 6.4 Landlord's Representative. Landlord has designated Brenda ------------------------- Tiefenthaler as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter. 6.5 Time of the Essence in This Tenant Work Letter. Unless otherwise ---------------------------------------------- indicated, all references herein to a "number of days" shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlord's sole option, at the end of such period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence. 6.6 Tenant's Lease Default. Notwithstanding any provision to the contrary ---------------------- contained in this Lease, if an event of default as described in Section 19.1 of this Lease, or a default by Tenant under this Tenant Work Letter, has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the Substantial Completion of the Premises caused by such work stoppage as set forth in Section 5.3 of this Tenant Work Letter), and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease. 6.7 Existing Tenant Improvements. Landlord shall not remove, and Tenant ---------------------------- shall be entitled to use at no cost, all existing tenant improvements in the Premises, including, but not limited to, window coverings, demising walls, HVAC systems and ducting, and ceiling tiles. EXHIBIT E - Page 7 SCHEDULE 1 TO EXHIBIT E ----------------------- TIME DEADLINES --------------
Dates Actions to be Performed ----- ----------------------- A. August 30, 1999 Final Space Plan to be completed by Tenant and delivered to Landlord, and Contractor to be selected by Tenant and notice of selection to be given by Tenant to Landlord. B. September 20, 1999 Architectural working drawings ready for engineering. C. October 7, 1999 Tenant to deliver Final Working Drawings to Landlord. D. Five (5) business days after the Tenant to approve all or a portion of Cost receipt of a complete Cost Proposal by Proposal and deliver all or a portion of Cost Tenant, or two (2) business days after Proposal to Landlord, as applicable. the receipt of a Partial Cost Proposal by Tenant, as the case may be.
SCHEDULE 1 TO EXHIBIT E - Page 1 EXHIBIT F --------- THE WATER GARDEN ---------------- FORM OF LETTER OF CREDIT ------------------------ (Letterhead of a money center bank acceptable to the Landlord) August 19, 1999 WATER GARDEN COMPANY L.L.C. c/o Tooley & Company 2425 Olympic Boulevard Suite 520-East Santa Monica California 90404 Attention: General Manager Ladies and Gentlemen: We hereby establish our Irrevocable Letter of Credit and authorize you to draw on us at sight for the account of Entravision Communications Company, LLC ("Entravision") the aggregate amount of Four Hundred Thousand and No/100 Dollars ($400,000.00), which amount shall decrease as set forth in that certain Office Lease dated August 19, 1999 (the "Lease") between Entravision and "Beneficiary," as that term is defined below, for space in that certain office building located at 2425 Olympic Boulevard, Santa Monica, California (the "Building"). Funds under this Letter of Credit are available to the beneficiary hereof as follows: Any or all of the sums hereunder may be drawn down at any time and from time to time from and after the date hereof by Water Garden Company L.L.C. ("Beneficiary") when accompanied by this Letter of Credit and a written statement signed by a representative of Beneficiary, certifying that such moneys are due and owing to Beneficiary, and a sight draft executed and endorsed by a representative of Beneficiary. This Letter of Credit is transferable in its entirety. Should a transfer be desired, such transfer will be subject to the return to us of this advice, together with written instructions. The amount of each draft must be endorsed on the reverse hereof by the negotiating bank. We hereby agree that this Letter of Credit shall be duly honored upon presentation and delivery of the certification specified above. This Letter of Credit shall expire on . -------------- Notwithstanding the above expiration date of this Letter of Credit, the term of this Letter of Credit shall be automatically renewed for successive, additional one (1) year periods unless, at least thirty (30) days prior to any such date of expiration, the undersigned shall give written notice to the parties listed in Section 29.13 of the Lease, by certified mail, return receipt requested and at the address set forth above or at such other address as may be given to the undersigned by Beneficiary, that this Letter of Credit will not be renewed. EXHIBIT F - Page 1 This Letter of Credit is governed by the Uniform Customs and Practice for Documentary Credits (1983 Revision), International Chamber of Commerce Publication 400. Very truly yours, (Name of Issuing Bank) By: ---------------------------------- EXHIBIT F - Page 2 OFFICE LEASE ------------ THE WATER GARDEN ---------------- WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company, as Landlord, and ENTRAVISION COMMUNICATIONS COMPANY, LLC, a Delaware limited liability company, as Tenant. THE WATER GARDEN ---------------- SUMMARY OF BASIC LEASE INFORMATION ---------------------------------- The undersigned hereby agree to the following terms of this Summary of Basic Lease Information (the "Summary"). This Summary is hereby incorporated into and made a part of the attached Office Lease (the "Office Lease") which pertains to the "Project," as that term is defined in the Office Lease, commonly known as "The Water Garden" located in Santa Monica, California. This Summary and the Office Lease are collectively referred to herein as the "Lease". Each reference in the Office Lease to any term of this Summary shall have the meaning set forth in this Summary for such term. In the event of a conflict between the terms of this Summary and the Office Lease, the terms of the Office Lease shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Office Lease.
TERMS OF LEASE (References are to the Office Lease) DESCRIPTION ------------------ ----------- 1. Date: August 19, 1999. 2. Landlord: WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company 3. Tenant: ENTRAVISION COMMUNICATIONS COMPANY, LLC, a Delaware limited liability company. 4. Premises (Article 1). 4.1 Building Address: 2425 Olympic Boulevard, Santa Monica, California 90404. 4.2 Premises: Approximately 9,307 rentable (7,911 usable) square feet of space located on the 6th floor of the Building, commonly known as Suite 6000-West as further set forth in Exhibit A to the Office Lease. 5. Lease Term (Article 2). 5.1 Length of Term: Seven (7) years. 5.2 Lease Commencement Date: The Lease Commencement Date shall occur as set forth in Article 2 of the Office Lease. The Lease Commencement Date is anticipated to be December 1, 1999. 5.3 Lease Expiration Date: The last day of the month in which the 7th anniversary of the Lease Commencement Date occurs. 5.4 Option to Extend the Lease One (1) option to extend the Lease Term for five (5) Term: years, as set forth in Section 2.2, below.
(ii) 6. Base Rent (Article 3):
Monthly Annual Rental Rate Period of Time Installment of per Rentable During Lease Term Annual Base Rent Base Rent Square Foot ----------------- ---------------- -------------- ------------------ First month through thirtieth month $318,299.40 $26,524.95 $34.20 Thirty-first month through sixtieth month $340,636.20 $28,386.35 $36.60 Sixty-first month through Lease Expiration Date $374,141.40 $31,178.45 $40.20 7. Additional Rent (Article 4). 7.1 Base Year: The calendar year of 2000 7.2 Tenant's Share: Approximately 2.7958%. 8. Letter of Credit (Article 21): $400,000.00, which amount shall decrease pursuant to the terms of Article 21. 9. Parking Pass Ratio (Article 28): Three (3) parking passes for every 1,000 rentable square feet of the Premises. 10. Broker(s) (Section 29.18): Tooley & Company 11150 Santa Monica Boulevard Suite 200 Los Angeles, California 90025 and Bailes & Associates, Inc. 11601 Wilshire Boulevard, Suite 1900 Los Angeles, California 90025 11. Address of Tenant (Section Entravision Communications Company, LLC 29.13): 11900 Olympic Boulevard, Suite 590 Los Angeles, California 90064 Attention: Ms. Jeanette Tully (Prior to Lease Commencement Date) and Entravision Communications Company, LLC 2425 Olympic Boulevard, Suite 6000-West Santa Monica, California 90404 Attention: Ms. Jeanette Tully (After Lease Commencement Date)
(iii) The foregoing terms of this Summary are hereby agreed to by Landlord and Tenant. "Landlord": WATER GARDEN COMPANY L.L.C., a Delaware Limited Liability Company By: /s/ David Chen David Chen, Vice President "Tenant": ENTRAVISION COMMUNICATIONS COMPANY, LLC, a Delaware limited liability company By: /s/ Jeanette Tully Its: Exec VP-Treasurer By: /s/ Philip C. Wilkinson Its: President-COO (iv) THE WATER GARDEN ---------------- INDEX -----
ARTICLE SUBJECT MATTER PAGE - ------- -------------- ---- SUMMARY OF BASIC LEASE INFORMATION ii ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS........... 1 ARTICLE 2 INITIAL LEASE TERM; OPTION TERM......................... 2 ARTICLE 3 BASE RENT............................................... 4 ARTICLE 4 ADDITIONAL RENT......................................... 5 ARTICLE 5 USE OF PREMISES......................................... 12 ARTICLE 6 SERVICES AND UTILITIES.................................. 12 ARTICLE 7 REPAIRS................................................. 13 ARTICLE 8 ADDITIONS AND ALTERATIONS............................... 14 ARTICLE 9 COVENANT AGAINST LIENS.................................. 15 ARTICLE 10 INSURANCE............................................... 16 ARTICLE 11 DAMAGE AND DESTRUCTION.................................. 17 ARTICLE 12 NONWAIVER............................................... 19 ARTICLE 13 CONDEMNATION............................................ 19 ARTICLE 14 ASSIGNMENT AND SUBLETTING............................... 20 ARTICLE 15 SURRENDER OF PREMISES; REMOVAL OF TRADE FIXTURES........ 22 ARTICLE 16 HOLDING OVER............................................ 23 ARTICLE 17 ESTOPPEL CERTIFICATES................................... 23 ARTICLE 18 SUBORDINATION........................................... 24 ARTICLE 19 DEFAULTS; REMEDIES...................................... 24 ARTICLE 20 ATTORNEYS' FEES......................................... 26 ARTICLE 21 LETTER OF CREDIT........................................ 26 ARTICLE 22 SUBSTITUTION OF OTHER PREMISES.......................... 27 ARTICLE 23 SIGNS................................................... 27 ARTICLE 24 COMPLIANCE WITH LAW..................................... 28 ARTICLE 25 LATE CHARGES............................................ 28 ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.... 28 ARTICLE 27 ENTRY BY LANDLORD....................................... 29 ARTICLE 28 TENANT PARKING.......................................... 29 ARTICLE 29 MISCELLANEOUS PROVISIONS................................ 30
EXHIBITS A OUTLINE OF PREMISES B FORM OF NOTICE OF LEASE TERM DATES C RULES AND REGULATIONS D FORM OF TENANT'S ESTOPPEL CERTIFICATE E TENANT WORK LETTER F FORM OF LETTER OF CREDIT (v) EX-21.1 19 0019.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT ------------------------------ Upon completion of the reorganization of the registrant from a limited liability company to a C-corporation and upon the registrant's acquisition of Z- Spanish Media Corporation, the registrant will own, directly or indirectly, the following entities: Entravision Communications Company, L.L.C., a Delaware limited liability company Cabrillo Broadcasting Corporation, a California corporation Golden Hills Broadcasting Corporation, a Delaware corporation KSMS-TV, Inc., a Delaware corporation Las Tres Palmas Corporation, a Delaware corporation Tierra Alta Broadcasting, Inc., a Delaware corporation Valley Channel 48, Inc., a Texas corporation Telecorpus, Inc., a Texas corporation Entravision Holdings, LLC, a California limited liability company (99.999% owned) Entravision Communications of Midland, LLC, a Delaware limited liability company (80% owned) Entravision Midland Holdings, LLC, a Delaware limited liability company (80% owned) Los Cerezos Television Company, a Delaware corporation Televisora Alco, S.A. de C.V., a Mexican corporation (40% of minority, limited voting interest (neutral investment stock) owned) Comercializadora Frontera Norte S.A. de C.V., a Mexican corporation (100% of voting shares owned; 60% of limited voting shares owned) Entravision, L.L.C., a Delaware limited liability company Entravision-El Paso, L.L.C., a Delaware limited liability company 26 de Mexico S.A. de C.V., a Mexican corporation Entravision San Diego, Inc., a California corporation Frontera Communications Corp., a Delaware corporation Channel 57, Inc. (47.5% owned) Vista Television, Inc. (47.5% owned) The Community Broadcasting Company of San Diego, a California corporation Latin Communications Inc., a Delaware corporation LCG Holdings, L.L.C., a Delaware limited liability company Vea Acquisition Corp., a Delaware corporation Latin Radio of Washington D.C., L.L.C., a Delaware corporation Latin Communications Group Television Inc., a Delaware corporation Latin Communications EXCL Inc., a Delaware corporation EXCL Holdings, Inc., an Illinois corporation EXCL Communications, Inc., an Illinois corporation Norte Broadcasting of Colorado, Inc., an Illinois corporation SUR Broadcasting of Colorado, Inc., an Illinois corporation SUR Broadcasting of New Mexico, Inc., a New Mexico corporation Norte Broadcasting of New Mexico, Inc., a New Mexico corporation Metro Mix, Inc., an Illinois corporation Radio Exito, Inc., a Nevada corporation Pacifico Broadcasting, Inc., a California corporation Sur Broadcasting, Inc., a California corporation Norte Broadcasting, Inc., a California corporation Sur Broadcasting of San Diego, Inc., a California corporation Embarcadero Media, Inc., a Delaware corporation Portland Radio, Inc., a Delaware corporation Riverside Radio, Inc., a California corporation EMI Sacramento Radio, Inc., a California corporation EMI Los Angeles Radio, Inc., a California corporation Norte Broadcasting of Nevada, Inc., a Nevada corporation Z-Spanish Radio Network, Inc., a California corporation KPPC Radio, Inc., a California corporation KZFO Broadcasting, Inc., a California corporation KZMS Broadcasting, Inc., a California corporation KZSA Broadcasting, Inc., a California corporation New KKSJ, Inc., a California corporation KZST Broadcasting, Inc., a California corporation KHZZ Broadcasting, Inc., a California corporation KZCO Broadcasting, Inc., a California corporation Oroville Radio, Inc., a California corporation KZSL Broadcasting, Inc., a California corporation New KGOL, Inc., a Texas corporation Azle Broadcasting, Inc., a Texas corporation KRVA Broadcasting, Inc., a Texas corporation Radio Plano Inc., a Texas corporation KTLR Broadcasting, Inc., a Delaware corporation Personal Achievement Radio of Dallas, LLC, a Delaware limited liability company Personal Achievement Radio, Inc., a Delaware corporation Personal Achievement Radio, LLC, a Delaware limited liability company KLNZ License Company, LLC, a Delaware limited liability company Z-Spanish Media Corporation, a Delaware corporation Z-Spanish Media Licensing Company, LLC, a Delaware limited liability company KZMP-FM License Company, LLC, a Delaware limited liability company New WNDZ, Inc., an Indiana corporation WZCO Broadcasting, Inc., an Illinois corporation WRZA Broadcasting, Inc., an Illinois corporation Glendale Broadcasting, Inc., an Arizona corporation KZLZ Broadcasting, Inc., an Arizona corporation KZPZ Broadcasting, Inc., an Arizona corporation KZPZ License Corp., an Arizona corporation Seaboard Outdoor Advertising Co., Inc., a New York corporation Sale Point Posters, Inc., a New York corporation Vista Media Group, Inc., a Delaware corporation Vista Joilet Company, LLC, a Delaware limited liability company Vista Media Group of New York, Inc., a Delaware corporation Vista Outdoor Advertising, Inc. (NY), a Delaware corporation Vista Outdoor Advertising, Inc. (NJ), a Delaware corporation Vista Outdoor Advertising, Inc. (CAL), a Delaware corporation Vista Outdoor Advertising, Inc. (ILL), a Delaware corporation EX-23.2 20 0020.txt CONSENT OF MCGLADREY & PULLEN, LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Amendment No. 4 to the Registration Statement on Form S-1 No. 333-35336, of our report, dated March 18, 2000, except for Note 12 as to which the date is July 20, 2000 and Note 13 as to which the date is July 25, 2000, relating to the combined financial statements of Entravision Communications Company, L.L.C. and its combined affiliates, our report dated February 25, 2000 relating to the financial statements of DeSoto - Channel 62 Associates, Ltd, and our report dated June 9, 2000 relating to the special purpose financial statements of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM), which are owned by Sunburst Media, L.P. We also consent to the reference to our Firm under the caption "Experts" in this Prospectus. /s/ McGLADREY & PULLEN, LLP Pasadena, California July 25, 2000 EX-23.3 21 0021.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our reports dated March 30, 2000, with respect to the consolidated financial statements of Latin Communications Group, Inc. included in Amendment No. 4 to the Registration Statement (Form S-1 No. 333-35336) and related Prospectus of Entravision Communications Corporation for the registration of its common stock. Ernst & Young LLP San Jose, California July 24, 2000 EX-23.4 22 0022.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 4 to the Registration Statement of Entravision Communications Corporation on Form S-1 of our report dated March 24, 2000, relating to the financial statements of Z-Spanish Media Corporation and its Predecessor, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Sacramento, California July 25, 2000 -----END PRIVACY-ENHANCED MESSAGE-----