Azteca America Network Reaches Accord With Pappas Telecasting Companies.

TV Azteca, S.A. de C.V. announced that the Azteca America Network, the Company’s wholly owned broadcasting network focused on the U.S. Hispanic market, has signed an agreement in principle with Pappas Telecasting Companies of Visalia, California, to resolve all outstanding litigation between the parties and establish a framework for working together in the future. Pappas Telecasting is the majority owner and operator of
Azteca America affiliates in the Los Angeles, San-Francisco-Oakland-San Jose/Sacramento-Stockton-Modesto, Houston and Reno markets.

“We are pleased to resolve these litigations and expect to be able to work out definitive agreements within the next few weeks,” said Pedro Padilla, CEO of TV Azteca. “Azteca America has once more shown that quality programming and good business sense can overcome any obstacle or misunderstanding.”

Upon the execution of definitive agreements, the accord will settle pending lawsuits between the parties with respect to Azteca International Corporation’s investments in, and affiliation agreements with, its Pappas Telecasting affiliates. Azteca International Corporation, the Company’s U.S. subsidiary, filed suit this past summer in Delaware Chancery Court seeking to enforce its option to purchase equity in Pappas’ Los Angeles station KAZA-TV. Azteca International also brought suit in a New York court, seeking to preserve its affiliation agreements with stations operated by Pappas, after Pappas claimed certain breaches by Azteca International.

The agreement in principle calls for the Pappas Companies to acquire the 25% equity interests owned by Azteca International in the Houston and San Francisco stations, as well as approximately $52 million of debt owed to TV Azteca by certain Pappas affiliates. In return, Azteca will receive a note for approximately $128 million payable on April 30, 2003, with a conditioned grace period of up to June 30, 2003. The note will be secured by the Los Angeles station KAZA-TV.

If the note is not paid in accordance with the agreed schedule, the parties have agreed that Azteca International and Pappas Telecasting will enter into a three-year local marketing agreement for Los Angeles station KAZA-TV, for which Pappas Telecasting will receive an annual fee of $15 million. However, Azteca’s payments under the LMA will be reduced in proportion to the amount of the note that has not been paid by Pappas. The note may be prepaid in whole or in part at any time during the LMA period. In addition, Azteca International will have the option, at the end of the three-year LMA term, to purchase up to the permissible statutory maximum of 25% of KAZA-TV, and to nominate a qualified U.S. entity to acquire the remaining majority interest in KAZA-TV at a $250 million total price, less any then-unpaid principal on the note.

The existing Azteca America affiliation agreements for the Pappas stations will continue in effect through 2003 with certain modifications. Azteca International will have the option to extend the agreements until April or June of 2004, after which the affiliation agreements will be renewable for additional six-month periods unless either party terminates them on 90 days’ notice.

Azteca International also expects to enter into affiliation agreements with Pappas Telecasting in other markets in which Pappas owns, or intends to acquire, stations.

“This is great news for Azteca America,” said Luis J. Echarte, President and CEO of Azteca America. “Not only are we settling all our disputes, we are securing crucial distribution for Azteca America and incorporating more Pappas stations into our network. This is a vote of confidence by Pappas Telecasting, and an important step toward achieving success for our U.S. strategy,” the executive added.