Univision Communications Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
December 19, 2001
CONFIDENTIAL
Grupo Televisa S.A.
Av. Xxxxx xx Xxxxxxx No. 2000
Colonia Santa Fe
01210 Mexico, D.F.
Mexico
Attention: Xx. Xxxxx Xxxxxx
Re: Acquisition of Fonovisa Music Group
Gentlemen:
This letter agreement (this "Letter Agreement") sets forth the
understanding and agreement between Univision Communications Inc. ("Buyer") and
Grupo Televisa S.A. ("Seller"), pursuant to which Xxxxx has agreed to purchase
(directly or through a wholly-owned subsidiary of Buyer, at Buyer's option), and
Seller has agreed to cause certain of its direct and indirect subsidiaries to
sell, all of the stock of certain indirect subsidiaries of Seller, all subject
to the terms and conditions set forth herein (the "Transactions"). The parties
agree that this Letter Agreement is legally binding, and that the consummation
of the transactions contemplated herein shall be subject only to the conditions
expressly set forth in this Letter Agreement.
The parties hereto hereby agree as follows:
1. PURCHASE AND SALE. Subject to the terms and conditions of this Letter
Agreement, at the Closing Seller shall cause certain of its direct and indirect
subsidiaries to sell and transfer to Buyer, and Buyer shall purchase from such
subsidiaries of Seller, all of the capital stock (the "Stock") of Fonovisa S.A.
de C.V., a Mexican Corporation, Fonovisa de Centroamerica S.A., a Costa Rican
Corporation, Fonovisa Inc., a Delaware Corporation, and America Musical S.A., a
Mexican Corporation (each a "Company" and collectively, the "Companies").
2. PURCHASE PRICE; ALLOCATION.
(a) The aggregate purchase price for the Stock (the "Purchase Price") shall
be 6,000,000 shares of Buyer's Class A Common Stock (the "Class A Shares") and
100,000 warrants to purchase Class A Common Stock on the terms set forth in the
form of warrant attached hereto as Exhibit A (the "Warrants").
(b) Ninety percent (90%) of the Class A Shares and of the Warrants shall be
allocated to the stock of Fonovisa, Inc. and the remainder shall be allocated to
the stock of the other Companies proportionately, based upon their relative
revenues.
3. CLOSING.
(a) Subject to the satisfaction or waiver of the conditions set forth in
Section 4 hereof, the closing of the purchase and sale of the Stock (the
"Closing") shall occur at the offices of Buyer's counsel at 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx on the tenth (10th) business day
following the satisfaction of the condition set forth in Section 4(a)(i), or at
such other time and place as the parties mutually agree in writing (the date on
which the Closing shall occur, the "Closing Date").
(b) At the Closing, Seller shall cause its subsidiaries to sell, assign and
transfer to Buyer, and Buyer shall purchase from such subsidiaries of Seller,
all of such subsidiaries' right, title and interest in and to the Stock, and
Buyer shall issue to Seller (or such wholly-owned subsidiaries of Seller as it
shall designate) one or more certificates representing the Class A Shares and
the Warrants.
4. CLOSING CONDITIONS.
(a) Conditions to Obligations of Each Party. The respective obligation of
each party to effect the Closing shall be subject to:
(i) the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended (the "HSR Act"), having expired or having
been terminated; and
(ii) no injunction shall be in effect preventing the Transaction and
no legal proceeding shall be pending opposing the Transaction, which in the
reasonable judgment of a party would expose it to material liability if the
Transaction were consummated.
(b) Conditions to Obligations of Buyer. The obligation of Buyer to
effect the Closing shall be subject to the fulfillment or waiver at or
prior to the Closing of the following conditions:
(i) the representations and warranties of Seller contained in the
Long-form Agreement (as defined below) shall be true and correct as of the
Closing Date, except to the extent that the failure of such representations
and warranties to be true and correct would not be reasonably expected to
have, in the aggregate, a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Companies, taken as a whole (a "Seller Material Adverse Effect");
provided that a Seller Material Adverse Effect shall exclude any adverse
effect arising out of or relating to (A) any change in law, rule or
regulation or generally accepted accounting principles or interpretation
thereof; (B) the pendency or announcement of the execution of this Letter
Agreement or the Transaction; (C) changes in general economic or political
conditions; or (D) changes in the music industry generally;
(ii) there shall not have been a Seller Material Adverse Effect
since the date of this Letter Agreement;
(iii) Seller shall have performed in all material respects all of
its obligations provided for in the Long-form Agreement on or prior to the
Closing Date;
(iv) Seller shall have entered into a three year customary
covenant not to compete, including no solicitations of employees of the
Companies (other than Xxxxxxxxx Xxxxxxx) or of the other record operations
of Buyer;
(v) at the Closing the Companies and their subsidiaries will have
working capital computed in accordance with U.S. GAAP, but excluding cash,
current and deferred taxes and deferred revenue, of at least US $42
million;
(vi) at the Closing the Companies will have cash in an aggregate
amount equal to the deferred revenues of the Companies on the Closing Date;
and
(vii) there shall be no payola or similar investigation or
proceeding pending or threatened against any Company.
(c) Conditions to Obligations of Seller. The obligation of Seller to
effect the Closing shall be subject to the fulfillment or waiver at or
prior to the Closing of the following conditions:
(i) the representations and warranties of Buyer contained in the
Long-form Agreement shall be true and correct as of the Closing Date,
except to the extent the failure of such representations and warranties to
be true and correct would not be reasonably expected to have a material
adverse effect on Buyer's ability to perform its obligations hereunder;
(ii) Buyer shall have performed in all material respects all of
its obligations contemplated in the Long-form Agreement on or prior to the
Closing Date; and
(iii) there shall not have been since the date of this Letter
Agreement, a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of Buyer and
its subsidiaries taken as a whole (a "Buyer Material Adverse Effect");
provided that a Buyer Material Adverse Effect shall exclude any adverse
effect arising out of or relating to (A) any change in law, rule or
regulation or generally accepted accounting principles or interpretation
thereof; (B) the pendency or announcement of the execution of this Letter
Agreement or the Transaction; (C) changes in general economic or political
conditions; or (D) changes in the music and television industry generally.
5. LONG-FORM AGREEMENT. The parties shall use their commercially
reasonable efforts promptly to negotiate and to enter into a Long-form
agreement (the "Long-form Agreement") incorporating the terms and
conditions set forth herein. Notwithstanding the foregoing, the parties
expressly acknowledge and agree that this Letter Agreement shall constitute
a binding agreement between them subject only to the conditions set forth
herein and others customary for transactions of this type. If such
Long-form Agreement is not executed and delivered on or prior to January
15, 2002, then (a) this Letter Agreement shall constitute such Long-form
Agreement, (b) the parties shall promptly proceed to the Closing and to
consummate the transactions contemplated hereunder and the obligations of
the parties shall be governed by this Letter Agreement, and (c) all
references herein to the Long-form Agreement shall be deemed references to
this Letter Agreement. This Letter Agreement supersedes all prior
agreements and understandings between the parties with respect to the
subject matter, except to the extent otherwise provided herein.
6. REPRESENTATIONS AND WARRANTIES.
(a) Seller. Subject to matters pertaining to the Companies of which
either Xxxxxx Xxxxxx or Xxxxxxx Xxxxxxxxxx has actual knowledge, Seller
makes the following representations and warranties in such form as is
customary for similar music company transactions:
(i) organization, qualification, capitalization, authorization,
enforceability and lack of conflicts or acceleration;
(ii) all personal property in good operating condition,
reasonable wear and tear excepted;
(iii) good and marketable title to all personal property without
encumbrances;
(iv) no ownership of real property; leases in full force and
effect;
(v) environmental matters;
(vi) inventory saleable in the ordinary course of business
subject to ordinary course obsolescence;
(vii) on the Closing Date, the Companies shall have no
liabilities, other than current liabilities included in the calculation of
working capital pursuant to Section 4(b)(v) and executory obligations under
the contracts to which one or more of the Companies is a party as of the
Closing Date;
(viii) employment matters, including that Companies have no
employment contracts except as shown on Exhibit B (which sets forth names,
terms, compensations, and other benefits);
(ix) Seller reasonably believes that the combined EBITDA of the
Companies and their subsidiaries for the year ended December 31, 2001 will
be at least US $10.3 million; EBITDA shall be calculated in same manner as
financial statements previously delivered to Buyer;
(x) no union contracts;
(xi) no employee benefit plans except for those listed on Exhibit
C; full compliance with ERISA; plans can be terminated without liability;
and no multi-employer plans;
(xii) copyright and trademark representation re: ownership,
exclusive right to use; no infringement of others;
(xiii) all taxes (income, sales, employees, withholding, etc.)
owed for periods prior to Closing have been or will be paid by Seller; all
tax returns due prior to Closing have been or will be filed;
(xiv) Exhibit D lists the top 25 artist contracts or artists
subject to license arrangements or for whom the Companies have catalogue
rights (by revenue in the United States for the period from January 1, 2001
through November 30, 2001) including (A) whether contract is in its initial
or an option period, (B) number of option periods still available and
length of each period, (C) number of long playing records delivered to
date, (D) number of long playing records remaining and (E) status of
next-to-be-delivered long playing record;
(xv) with respect to the top ten artists covered by the artist
contracts or license arrangements referred to in clause (xiv), there are at
least two long playing records (including compilation or concept albums)
remaining under seven of the contracts or license arrangements. With
respect to the other 13 artists covered by artist contracts or license
arrangements referred to in clause (xiv), there are at least two long
playing records (including compilation or concept albums) available under
10 of the contracts and those that have less than two represented less than
5% of US revenues of the Companies in 2000 and 2001 to date;
(xvi) no written or oral indication from any of the top 25
artists (i.e. those subject to the top 25 artist contracts) whose contract
expires in one year or less from the date hereof or who is obligated to
deliver to one of the Companies less than two long playing records (or
their representatives) that he/she does not intend to renegotiate his or
her contract upon termination or intends to negotiate in a manner that
would be materially less favorable to the Companies;
(xvii) no advances made under any artist contract can be recouped
by virtue of payments made other than by or on behalf of the Companies;
(xviii) no payola liability or investigation or other proceeding
pending or threatened against any Company;
(xix) the Companies own or control all right, title and interest
in each recording and composition it has made or acquired, it being
understood and agreed that none of the Companies own the "masters" in
respect of long playing records by artists subject to license; catalogues
to be furnished to Buyer and represented;
(xx) combined and combining financial statements of the Companies
and their subsidiaries for the past three years and the nine month periods
in 2000 and 2001;
(xxi) no Seller Material Adverse Effect since September 30, 2001;
(xxii) material contacts; none contain change of control language
other than that of Xxxxx Xxxxxxx Xxxxx;
(xxiii) compliance with law;
(xxiv) no subsidiaries other than Fonomusic Inc., Fonovisa
Argentina, S.A. and Fonohits Music, Inc.; no joint ventures or investment
in other entities; all recording and music publishing, administration, and
distribution business of Seller and its affiliates, other than Editura San
Angel, are conducted by the Companies; Fonovisa LLC does not conduct any
business and is only a holding company;
(xxv) no intercompany agreements or liabilities between the
Companies and Seller or its affiliates (other than the Companies) that will
continue in effect after the Closing Date;
(xxvi) no registration of the Stock required;
(xxvii) investment intent and accredited investor;
(xxviii) insurance; and
(xxix) no brokers or finders, other than Xxxxx & Co.
(b) Buyer. Xxxxx makes the following representations and warranties in
such form as is customary for similar music company transactions:
(i) organization, qualification, capitalization, authorization,
enforceability and lack of conflicts;
(ii) Class A Shares to be duly authorized, validly issued and
fully-paid and non-assessable and subject to the Registration Rights
Agreement between Buyer, Seller and other parties dated as of October 2,
1996;
(iii) public documents duly filed; no material misstatements or
omissions;
(iv) financial statements in public documents;
(v) no Buyer Material Adverse Effect since September 30, 2001;
(vi) listing of Class A Shares on New York Stock Exchange; and
(vii) no brokers or finders, other than UBS Warburg.
(c) Inclusion in Long-form Agreement. The Long-form Agreement shall
contain the representations and warranties from Seller and Buyer referred
to above and others that are customary in a transaction of this type and
size and will be negotiated in good faith (each of which representations
and warranties shall be subject to customary materiality and other
customary exceptions). Seller and Xxxxx acknowledge and agree that if the
Long-form Agreement is not executed, this Letter Agreement shall be deemed
to contain the representations and warranties from the respective parties
referred to above in such form as is customary for similar music company
transactions, each of which shall be deemed to be subject to materiality
and other customary exceptions.
7. PRE-CLOSING FILING.
HSR. As promptly as practicable and no later than January 11, 2002,
Seller and Xxxxx shall complete any filing that may be required pursuant to
the HSR Act. Seller and Buyer shall diligently take, or fully cooperate in
the taking of, all necessary and proper steps, and provide any additional
information reasonably requested in order to comply with, the requirements
of the HSR Act.
8. COVENANTS.
(a) Affirmative and Negative Covenants. Xxxxxx agrees that from the
date hereof through the earlier of the Closing or the termination of this
Letter Agreement, unless otherwise agreed to by Buyer in writing (such
agreement not to be unreasonably withheld or delayed), Seller shall cause
the Companies:
(i) to be operated in the ordinary course of business consistent
with past practice. In furtherance of the foregoing, no Company shall enter
into any contractual commitment (including license agreements) involving
payments in excess of US $200,000 individually or US $1,000,000
collectively, or amend any existing contract involving payments or receipts
of more than $200,000; provided that the Companies shall be permitted to
enter into an artist contract with Xxxxxxx Xxxxxxxx that replaces his
license arrangements, the initial consideration for which shall not exceed
$500,000;
(ii) to use good faith efforts to maintain and preserve their
assets and insurance policies; and
(iii) not to enter into distribution agreements which cannot be
terminated by the Companies without penalty on 180 days notice or less.
(b) Access to Information. Seller will afford Buyer and its advisors
reasonable access during business hours to the offices, properties, other
facilities, books and records relating to the business of the Companies and
to those officers, employees, agents, accountants, counsel and
representatives of Seller and the Companies who have knowledge relating to
its business.
(c) Cooperation. Buyer and Seller will cooperate with each other to
the fullest extent in preparing the Long-form Agreement and any related
agreements and other necessary documentation as soon as possible, obtaining
all necessary consents from third parties and complying with all regulatory
requirements.
(d) Confidentiality. Except as required by law, neither party will
disclose the contents of this letter or the fact that discussions are
taking place or have taken place concerning the Transaction, or any of the
terms, conditions or other facts with respect to the Transaction to any
individual or entity, other than such party's employees, parent company and
majority-owned subsidiaries, agents and representatives (such as attorneys,
accountants or consultants) who both have (i) a need to know; and (ii) who
expressly agree to abide by these nondisclosure restrictions; provided that
the receiving party will remain primarily liable for breach by any such
person or entity. In addition, each party shall (and shall cause its
representatives to) keep confidential any information provided to it by the
other party in connection with the Transactions. The obligations set forth
in the immediately preceding sentence shall survive the termination of this
Letter Agreement.
9. INDEMNIFICATION.
(a) Indemnification by Seller. From and after the Closing Date, Seller
shall indemnify Buyer from and against all losses incurred by Xxxxx
resulting from (i) any misrepresentation or breach of the representations
and warranties of Seller contained herein; and (ii) any breach by Seller of
any covenants of Seller contained herein. Seller shall not be liable to
Buyer in respect of any indemnification under clause (i) (other than
indemnification with respect to breaches of clause (vii) of Section 6(a)
for which Seller shall be liable from the first dollar) except to the
extent that the aggregate amount of losses of Buyer exceeds five million
dollars (US$5,000,000), in which case Seller shall be liable for all such
losses in excess thereof. The maximum aggregate liability of Seller to
Buyer and any third parties for any and all losses shall not exceed an
amount equal to two hundred million dollars (US$200,000,000) (the "Cap").
No claim for indemnification may be made hereunder by Xxxxx at any time
after such date that is twenty-four (24) months after the date of the
Closing; provided that claims for breaches relating to taxes and
environmental matters may be made at any time up to the expiration of the
relevant statute of limitations for taxes and five years for environmental.
The Long-form Agreement will contain a separate customary provision
relating to tax indemnities and the procedures relating thereto.
Notwithstanding any other provision of this Letter Agreement herein or in
the Long-form Agreement to the contrary, Buyer acknowledges and agrees that
the (i) the indemnification provisions set forth herein shall be the sole
and exclusive remedy available to Buyer for any breach by Seller of this
Letter Agreement or the Long-form Agreement, and (ii) maximum aggregate
liability of Seller shall not exceed the Cap, regardless of whether Buyer
seeks indemnification pursuant to this Letter Agreement or otherwise the
regardless of the form of action, whether in contract or tort.
(b) Indemnification by Xxxxx. From and after the Closing Date, Xxxxx
shall indemnify Seller from and against all losses incurred by Seller
resulting from: (i) any misrepresentation or breach of the representations
and warranties of Buyer contained herein; or (ii) any breach by Buyer of
any covenants of Buyer contained herein. Buyer shall not be liable to
Seller in respect of any indemnification under clause (i) except to the
extent that the aggregate amount of losses of Seller exceeds five million
dollars (US$5,000,000), in which case Buyer shall be liable for all such
losses in excess thereof. The maximum aggregate liability of Buyer to
Seller and any third parties for any and all losses shall not exceed an
amount equal to two hundred million dollars (US$200,000,000). No claim for
indemnification may be made hereunder by Xxxxxx at any time after such date
that is twenty-four (24) months after the date of the Closing.
10. TRANSACTION EXPENSES. Buyer and Seller will each bear their own
expenses incurred in connection with the negotiation and preparation of
this Letter Agreement, the Long-form Agreement and the related documents
and the consummation of the transactions contemplated hereby.
11. EXCLUSIVE DEALING. During the period from the date hereof until
the earlier to occur of the termination of this Letter Agreement or the
execution of the Long-form Agreement (i) Seller will not, and will cause
its officers, directors and agents (collectively, "Representatives") not
to, directly or indirectly participate in any negotiations or solicit,
knowingly initiate, accept or knowingly encourage submission of inquiries,
proposals or offers from any potential buyer relating to the disposition of
the underlying assets (or any material part thereof) or of the stock of any
of the Companies with any entity other than Buyer or its affiliates and
(ii) neither Buyer nor Seller shall enter into any agreement or take any
action that by its terms or effect could reasonably be expected to have a
material adverse effect on the ability of the parties hereto to consummate
the Acquisition. Seller will promptly notify Buyer of any unsolicited
inquiry, proposal or offer from any potential buyer of which Seller or its
Representatives have knowledge relating to the stock of the stock of any of
the Companies or the underlying assets (or any material part thereof) of
the stock of any of the Companies and will refrain from engaging in
negotiations or providing any information in response to such inquiry,
proposal or offer.
12. PUBLIC ANNOUNCEMENTS. Buyer and Seller will consult with each
other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated hereby and will
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
13. TERMINATION.
(a) The parties' obligations under this Letter Agreement may be
terminated prior to the Closing as follows:
(i) by the mutual agreement of the parties; or
(ii) by Xxxxx, upon a breach of any representation, warranty
covenant or agreement of Seller set forth in this Letter Agreement, in
either case such that the conditions set forth in Section 4(b) would not be
satisfied as a result of such breach; provided, that such breach has not
been cured by Seller within ten (10) business days after Seller receives
written notice of such breach from Buyer;
(iii) by Seller, upon breach of any representation, warranty
covenant or agreement of Buyer set forth in this Letter Agreement, in
either case such that the conditions set forth in Section 4(c) would not be
satisfied as a result of such breach; provided, that such breach has not
been cured by Buyer within ten (10) business days after Buyer receives
written notice of such breach from Seller; or
(iv) by either party on or after June 18, 2002 if the Closing has
not occurred by that date.
(b) In the event of the termination of this Letter Agreement pursuant
to Section 13(a), this Letter Agreement shall forthwith become void, there
shall be no liability on the part of Buyer or Seller and all rights and
obligations of any party hereto (other than the confidentiality obligations
set forth in the second sentence of Section 8(d)) shall cease, except that
nothing herein shall relieve any party for any willful breach of this
Letter Agreement.
14. AMENDMENT. Any amendment, supplement, modification or waiver of or
to any provision of this Letter Agreement will be effective only if it is
made in writing signed by Xxxxx and Seller and only in the specific
instance and for the specific purpose for which made or given.
15. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail to the parties at the following addresses (or at such other
address for a party as shall be specified by like changes of address) or
sent by electronic transmission to the parties hereto:
(a) If to Buyer:
Univision Communications Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: X. Xxxxxxx Xxxxxxxxxx
Telecopier No: (000) 000-0000
With a copy to:
O'Melveny & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No: (000) 000-0000
(b) If to Seller
Grupo Televisa, S.A.
Av. Xxxxx xx Xxxxxxx No. 2000
Edificio A, Piso 0, Xxxxxxx Xxxxx Xx
00000, Xxxxxx, DF
Attention: Xxxxxxx de Angoitia
Telecopier No: 011-52-55-5-261-2451
With a copy to:
Xxxxx, Xxxxx, Xxxxxx, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
Telecopier: (000) 000-0000
16. COUNTERPARTS. This Letter may be executed in two or more
counterparts, each of which will be deemed to be an original but all of
which will constitute one and the same agreement.
17. GOVERNING LAW. This Letter Agreement is, and the Long-form
Agreement will be, governed by the construed in accordance with the laws of
the State of California, without giving effect to the conflicts of law
principles thereof.
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* * * * * * *
If the foregoing is set forth over mutual agreement and understanding,
please execute below.
Very truly yours,
UNIVISION COMMUNICATIONS INC.
BY:
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ACCEPTED, AGREED TO AND ACKNOWLEDGED
This _____ day of December, 2001
GRUPO TELEVISA S.A.
By:
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Name:
---------------------------------
Title:
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