Exhibit 10.11
JOINT VENTURE AGREEMENT
by and among
LTM SPANISH HOLDINGS, INC.
and
XXXXXXX EVOLE MARTIL
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..................................................... 1
Section 1.1. Definitions................................... 1
ARTICLE II ORGANIZATION OF THE COMPANY..................................... 1
Section 2.1. Organizational Documents; Member Resolution... 1
Section 2.2. Purpose....................................... 2
ARTICLE III INITIAL CAPITAL OF THE COMPANY.................................. 2
Section 3.1. Membership Interests.......................... 2
ARTICLE IV CLOSING AND RELATED PROVISIONS.................................. 2
Section 4.1. Pre-Closing Matters........................... 2
Section 4.2. Closing....................................... 2
Section 4.3. Subsequent LTM Funding........................ 3
Section 4.4. Closing Date Contribution Amount Adjustment... 3
Section 4.5. Post-Closing Contribution Amount Adjustment... 4
Section 4.6. Independent Auditors.......................... 4
Section 4.7. Repayment of Overfunding...................... 5
Section 4.8. Failure of LTM to Fund........................ 5
Section 4.9. Failure of RE to Purchase Minorities.......... 6
ARTICLE V EXCLUDED ASSETS................................................. 7
Section 5.1. Excluded Assets............................... 7
ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................. 7
ARTICLE VII CORPORATE GOVERNANCE; CERTAIN CORPORATE ACTIONS................. 7
Section 7.1. Voting of Membership Interests................ 7
Section 7.2. Composition of the Board of Directors......... 7
Section 7.3. Managing Director and Other Executives........ 8
Section 7.4. Approval of Certain Matters................... 8
ARTICLE VIII TRANSFER AND SALE............................................... 10
Section 8.1. Transfer Restrictions......................... 10
Section 8.2. Consent....................................... 10
Section 8.3. First Refusal................................. 10
ARTICLE IX COVENANTS OF RE................................................. 12
Section 9.1. Cooperation by RE............................. 12
Section 9.2. Conduct of Business........................... 13
Section 9.3. Access........................................ 13
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Section 9.4. Required Notices.............................. 14
Section 9.5. Certain Tax Matters........................... 14
Section 9.6. Use of Certain Names.......................... 14
ARTICLE X CERTAIN AGREEMENTS.............................................. 14
Section 10.1. Non-Competition............................... 14
Section 10.2. Access to Company............................. 15
Section 10.3. Financial Reporting Obligations............... 15
Section 10.4. Conduct of Business........................... 16
ARTICLE XI CONDITIONS TO CLOSING AND TERMINATION........................... 16
Section 11.1. Conditions to Obligations of LTM.............. 16
Section 11.2. Conditions to Obligations of RE............... 17
Section 11.3. Termination................................... 18
ARTICLE XII INDEMNIFICATION................................................. 18
Section 12.1. Survival...................................... 18
Section 12.2. Losses........................................ 18
Section 12.3. Indemnification by RE......................... 18
Section 12.4. Indemnification by LTM........................ 19
Section 12.5. Indemnification by the Company................ 19
Section 12.6. Claims........................................ 20
ARTICLE XIII GENERAL......................................................... 21
Section 13.1. Arbitration................................... 21
Section 13.2. Notices....................................... 21
Section 13.3. Assignment; Binding Effect; Benefit........... 22
Section 13.4. Confidentiality............................... 23
Section 13.5. Entire Agreement.............................. 23
Section 13.6. Amendment..................................... 23
Section 13.7. Counterparts.................................. 23
Section 13.8. Headings...................................... 24
Section 13.9. Interpretation................................ 24
Section 13.10. Incorporation of Exhibits and Schedules....... 24
Section 13.11. Severability.................................. 24
Section 13.12. Enforcement of Agreement...................... 24
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JOINT VENTURE AGREEMENT
JOINT VENTURE AGREEMENT, dated as of April 27, 1998 (this "Agreement"),
by and among LTM Spanish Holdings, Inc., a Delaware corporation ("LTM") and
Xxxxxxx Evole Martil ("RE") DNI n(degree) 2.450.193-A.
BACKGROUND
(1) LTM and RE desire to operate a motion picture exhibition business
in Spain through LTM Spain S.L., a company in formation (the "Company"), by
owning and operating the Yelmo Group Companies and constructing new
state-of-the-art multiplex theaters of high quality in key locations.
(2) LTM and RE intend to acquire Membership Interests in the Company so
that immediately after giving effect to the transactions contemplated by this
Agreement to occur at the Closing and subject to the terms of this Agreement,
each of LTM and RE shall own Membership Interests in the Company which entitle
each of LTM and RE to 50% of the vote and to receive 50% of the profits and
losses of the Company.
(3) The parties intend that the Company will own Yelmo Films S.A. and
all of its Subsidiaries, the names of which are set forth in Schedule X hereto.
Accordingly, for good and valuable consideration the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used herein are defined in
Appendix A.
ARTICLE II
ORGANIZATION OF THE COMPANY
Section 2.1. Organizational Documents; Member Resolutions. (a) The
parties hereto agree that the Company's initial Estatutos shall be as set forth
in Exhibit 2.1 attached to this Agreement. In the event that the Mercantile
Registry where the Company is registered considers that any portion of the
Estatutos should be changed from the form contained in Exhibit 2.1, the parties
will amend the Estatutos so as to as closely as possible reflect the agreements
set forth herein. Notwithstanding anything herein or in the Estatutos to the
contrary, to the extent that any provision of the Estatutos conflicts with, or
otherwise is inconsistent with, any provision of this Agreement with respect to
any matter, or this Agreement covers any matter that is not covered in the
Estatutos,
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the provisions of this Agreement with respect to such matter shall control and
shall be binding upon each of the parties hereto.
(b) The Members shall call such Members' meetings and shall cause the
Company to call such directors and Members' meetings as are reasonably required
to consummate the transactions contemplated by this Agreement to occur at
Closing.
Section 2.2. Purpose. The purpose of the Company will be to develop and
operate, either itself or through its Subsidiaries, a motion picture exhibition
business (which business includes the concessions business associated with
motion picture exhibition) in Spain in accordance with the Business Plan and
otherwise as determined by the Members.
ARTICLE III
INITIAL CAPITAL OF THE COMPANY
Section 3.1. Membership Interests. Membership Interests in the Company
shall be divided into Class A Units and Class B Units ("Class A Units" and
"Class B Units"). The Class A Units and the Class B Units shall be equal in all
respects as to interests in the profits and losses of the Company and, following
contribution by LTM of an amount equal to the Contribution Amount as more
particularly described in Section 4.3 below, rights upon the liquidation or
termination of the Company. As more fully provided below under Section 7.2 and
subject to Section 4.8, Members holding Class A Units shall be entitled to elect
one half of the number of members of the Board of Directions and Members holding
Class B Units shall be entitled to elect the other half of the number of members
of the Board of Directors.
ARTICLE IV
CLOSING AND RELATED PROVISIONS
Section 4.1. Pre-Closing Matters. (a) On the date of this Agreement,
LTM shall subscribe for 750 Class A Units at a par value of Pesetas 500,000 per
Unit, for an aggregate purchase price of Pesetas 375,000,000, - payable in cash.
(b) On the date of this Agreement, the Company shall enter into the
Loan Agreement with Yelmo Films, for the amount of Pesetas 363,267,410, which
Yelmo Films shall use (in whole or in part) to purchase all of the equity
interests in the Yelmo Group Companies held by Persons other than RE, subject to
the terms of this Agreement.
Section 4.2. Closing. Subject to the terms and conditions of this
Agreement, promptly following satisfaction or waiver of the conditions set forth
in Article XI, but in no event later than 5 business days thereafter, the
following transactions shall occur, which transactions shall be deemed to occur
simultaneously:
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(a) LTM shall subscribe for 3,249 Class A Units at Pesetas
500,000 per Unit, for an aggregate purchase price of Pesetas
1,624,500,000, payable in cash.
(b) The Company shall purchase from RE and RE shall sell to
the Company 9,556 shares of Yelmo Stock, representing 15.92% of Yelmo
Films for Pesetas 1,136,732,590 in cash in accordance with the terms of
the Sale and Purchase Agreement.
(c) RE shall subscribe for 12,000 Class B Units at Pesetas
500,000 per Unit in consideration for which RE will contribute to the
Company all of the remaining shares of Yelmo Stock owned by him in a
tax-free share exchange.
Section 4.3. Subsequent LTM Funding. (a) From time to time during the
period commencing on the Closing Date and ending on the date 24 months following
the Closing Date, as directed by the Board of Directors, LTM shall make
additional capital contributions to the Company in cash up to an aggregate
amount (including the initial share capital of the Company subscribed to by LTM
and LTM's initial capital contribution pursuant to Sections 4.1 and 4.2.) equal
to the Contribution Amount.
(b) For each cash contribution by LTM, the Members shall cause the
Company (i) to issue to LTM that number of Class A Units so that, following
determination of the Contribution Amount and the contribution by LTM of an
amount equal thereto, the number of Class A Units held by LTM is equal to the
number of Class B Units held by RE and (ii) to amend the Estatutos so that the
number of votes which the holder of Class A Units are entitled to cast, the
amount of dividends and the amounts to be received at liquidation in excess of
par value, after satisfying creditors, which the holders of Class A Units is
entitled to are equal to those of the holder of Class B Units. The parties agree
that any amount funded by LTM in excess of Pesetas 6,000,000,000 (including its
initial capital contribution and its contribution pursuant to Sections 4.1. and
4.2.) will be treated as share premium which will be allocated equally between
the holders of Class A Units and the holders of Class B Units. In addition, the
parties agree that they shall cause a Members' meeting to be held for purposes
of effecting the matters referred to in this Section 4.3.(b).
Section 4.4. Closing Date Contribution Amount Adjustment. (a) No more
than 90 days following Closing, RE shall prepare and deliver to LTM a statement
(the "Initial Statement") setting forth (i) RE's calculation of Net Working
Capital and (ii) the principal amount of Debt, in each case, of the Yelmo Group
Companies as of the Closing Date. LTM shall have 45 days after receipt thereof,
to review the Initial Statement. If, within that 45 day period LTM and RE agree
on the calculation of Net Working Capital and the principal amount of Debt, the
Initial Statement shall be amended to reflect that agreement and shall be final
and binding on RE and LTM. If the parties cannot agree on the calculation of Net
Working Capital or the principal amount of Debt within the 45 day period
referred to above, the matters in dispute shall be referred to the Auditor (as
defined in Section 4.6.) who shall be instructed to deliver his report to RE and
LTM within 20 days of the date the disputed matters are referred to him, which
report shall be final and binding on RE and LTM. The amount of Net Working
Capital and the principal amount of Debt as agreed to by the parties or as
determined by the Auditor, as the case may be, is hereafter referred to as
"Final Net Working Capital" and "Final Debt", respectively.
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(b) The Contribution Amount shall be (i) increased by the amount of
positive Final Net Working Capital of the Yelmo Group Companies or decreased by
the amount of negative Final Working Capital of the Yelmo Group Companies, and
(ii) decreased by the amount by which the principal amount of Final Debt of the
Yelmo Group Companies exceeds pesetas 3,300,000,000, or increased by the amount
by which the principal amount of Final Debt of the Yelmo Group Companies is less
than Pesetas 3,300,000,000.
Section 4.5. Post-Closing Contribution Amount Adjustment. (a) Subject
to the terms contained herein, from and after the Closing Date, the Contribution
Amount, as adjusted pursuant to Section 4.4, shall be further adjusted as
follows: if the EBITDA (earnings before interest, income taxes, depreciation and
amortization) of those operations of the Yelmo Group Companies set forth in
Schedule 4.5.(a)(i) over a consecutive 12 month period (the "Calculation
Period") falling between August 1, 1997 and July 31, 1999, as selected by RE is
less than or greater than Pesetas 1,100,000,000 (the "EBITDA Base Level"), the
Contribution Amount, as adjusted pursuant to Section 4.4, shall be reduced or
increased, as the case may be, in accordance with the table set forth in
Schedule 4.5(a)(ii), it being understood and agreed that, subject to Section
4.5(b), the Contribution Amount shall not be (i) less than Pesetas 6,300,000,000
plus any increase or minus any decrease (as the case may be) of the Contribution
Amount pursuant to Section 4.4 (the "Minimum Funding Amount") or (ii) greater
than Pesetas 7,900,000,000 plus any increase or minus any decrease (as the case
may be) of the Contribution Amount pursuant to Section 4.4.
(b) If the Members mutually agree to close a theater prior to or during
the Calculation Period then (i) the EBITDA Base Level shall be decreased by the
pro-forma annual amount contributed by that closed theater to such EBITDA Base
Level and (ii) the Peseta 6,300,000,000 minimum and Pesetas 7,900,000,000
maximum Contribution Amount level referred to in Section 4.5(a) shall be reduced
by an amount equal to ten times the reduction in the EBITDA Base Level as
determined in Section 4.5(b)(i). In addition, if overhead expenses (i.e.,
salaries, employee benefit expense and head office rent expense) of the Yelmo
Group Companies, calculated on an annualized basis, during any portion of the
Calculation Period falling after Closing are greater than those overhead
expenses for the twelve month period ending on the Closing Date and such
increase is a result of the transactions contemplated by this Agreement, such
increase shall not be taken into account in calculating the EBITDA of the Yelmo
Group Companies for purposes of Section 4.5.
(c) RE shall deliver to LTM on or before September 30, 1999, a
statement setting forth his calculation of EBITDA for the Calculation Period.
Section 4.6. Independent Auditors. If LTM and RE cannot agree on the
adjustments to the Contribution Amount as described in Sections 4.4 and 4.5,
they shall each have the right, on five days notice to the other, to require the
Company to appoint an independent auditor (the "Auditor") to determine the
adjustments to the Contribution Amount. If LTM and RE cannot agree on an Auditor
within ten days of the notice referred to above, each shall appoint an auditor
which will appoint the Auditor. The Auditor's determination of the Contribution
Amount adjustments will be final and binding on LTM and RE.
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Section 4.7. Repayment of Overfunding. Until such time as the
Contribution Amount is finally determined, any contribution made to the Company
by LTM in excess of the Minimum Funding Amount shall, at LTM's option, be
treated as an advance on capital by LTM to the Company (the "Advance"). If the
Contribution amount as finally determined exceeds the Minimum Funding Amount,
the Advance, to the extent of that excess, shall be capitalized. The remaining
amount of the Advance shall be treated as a loan and shall bear interest at 0.5%
above the Madrid interbank borrowing rate ("MIBOR") in effect from time to time,
from the date that the Contribution Amount is finally determined until repaid in
full. The Members shall cause the remaining amount of the Advance, plus accrued
interest (if any) thereon, to be repaid by the Company to LTM out of 100% of the
Cashflow of the Company and its Subsidiaries. For the avoidance of doubt,
repayment of the Advance shall be made from the first peseta and each peseta
thereafter of Cashflow until fully repaid.
Section 4.8. Failure of LTM to Fund. (a) If LTM fails to comply with
its funding obligations pursuant to Section 4.3, the parties agree that, in
addition to any other remedies RE may have for breach of contract, the Company's
Estatutos shall be amended so that the voting rights attached to the Class A
Units and the Class B Units shall entitle the holders thereof to one vote per
Unit only, and that the dividend and liquidation rights of holders of Class A
Units and Class B Units shall be in proportion to their interest in the capital
of the Company, it being understood and agreed that except with respect to the
matters referred to in Section 4.8(b), the provisions of Section 7.2.(c)
requiring a Director appointed by the holders of Class A Units to form a quorum
for attendance and voting at Board meetings shall no longer apply.
(b) The parties agree that, if LTM fails to comply with its funding
obligations pursuant to Section 4.3, the limitations set forth in Sections
7.4(a) and (b) shall cease to apply and the following shall apply instead:
(I) The Managing Director shall not and shall not permit the Company
or any Subsidiary of the Company to take or agree to take any of the
following actions or engage in any of the following transactions without
the prior approval of the Board of Directors, including the vote of a
director representing Class A Units, in accordance with the provisions of
this Agreement:
(i) sale, transfer or disposal of assets of the Company or any
of its Subsidiaries, in each case, in any single or series of related
transactions for a consideration in excess of Pesetas 300,000,000;
(ii) engaging by the Company or any of its Subsidiaries in any
business other than as provided in Section 2.2;
(iii) varying the Company's accounting policies and practices
in any material respect, other than to comply with GAAP;
(iv) entering into, amending or waiving the provision of any
agreements or transactions with any Member or any Affiliate of any
Member after the Closing Date
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except as expressly provided for in this Agreement and except relating
to the exhibition and settlement of motion pictures;
(v) entering into any arrangements in connection with the
Excluded Assets other than as contemplated by the Ancillary Agreements;
(vi) entering into any joint venture, partnership agreement or
similar arrangement with a Competitor of LTM; or
(vii) incurring any debt for borrowed money in excess of
Pesetas 500,000,000.
(II) Neither the Company nor any Subsidiary of the Company shall take
any of the following actions without the unanimous approval of the Members:
(i) varying any of the rights attaching to the Membership
Interests except as set forth in this Agreement;
(ii) taking any steps to effect the winding-up, liquidation,
dissolution or voluntary bankruptcy of the Company or any of its
Subsidiaries;
(iii) entering into any merger, amalgamation, consolidation or
other business combination with a Competitor of LTM.
(III) The Estatutos of the Company shall, as applicable, reflect the
special voting requirements of the Board of Directors mentioned in I above
of this section. The Estatutos of the Company shall also, as applicable,
reflect the supermajority voting requirements for the members meeting
established in II above of this section by requiring a quorum of eighty
percent of the members to hold a members meeting that will deal with the
matters enumerated in II above and an eighty percent voting majority to
approve a resolution concerning said matters.
Section 4.9. Failure of RE to Purchase Minorities. If at or after
Closing, Yelmo Films or its Subsidiaries has, as its shareholder, any Person
other than RE, LTM or any other Subsidiary of Yelmo Films, all costs, expenses,
reserves, losses or liabilities, including without limitation, rights to
distributions (together, "Minority Costs"), associated with such Persons shall
be for the account of RE and RE shall indemnify and hold harmless LTM against
such Minority Costs, it being understood and agreed that, except as provided for
in Section 4.8, LTM shall be entitled to 50% of the profits, losses and payments
on liquidation, of the Company and its Subsidiaries before taking into account
any Minority Costs.
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ARTICLE V
EXCLUDED ASSETS
Section 5.1. Excluded Assets. Prior to the Closing Date, RE shall cause
to be transferred out of the Yelmo Group Companies those assets described in
Section 2.01(a) of the Asset Transfer Agreement and in the Yelmo Arco Iris Share
Transfer Agreement (the "Excluded Assets") in accordance with the terms of those
Agreements. Any taxes, costs, losses and expenses relating to such transfers, to
the extent actually determined by the Closing Date, shall be recorded in the
books and records of the Yelmo Group Companies as a liability and taken into
account in the calculation of Working Capital pursuant to Section 4.4 and, to
the extent not determined on or prior to the Closing Date, shall be borne by RE
who shall reimburse the Yelmo Group Companies in cash within ten days of
determination thereof for any such taxes, costs, losses or expenses actually
paid by any Yelmo Group Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The representations and warranties of the parties to this Agreement are
set forth in Appendix B.
ARTICLE VII
CORPORATE GOVERNANCE; CERTAIN CORPORATE ACTIONS
Section 7.1. Voting of Membership Interests. From and after the Closing
Date, each Member shall vote all Membership Interests owned or controlled by it,
and shall take all other necessary or desirable actions within its control
(including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), to effectuate the provisions of this Agreement.
Section 7.2. Composition of the Board of Directors. Each Member shall
vote all Membership Interests owned or controlled by it and shall take all
necessary action within its control, so that the composition of the Board of
Directors and the manner of selecting members thereof shall be as follows:
(a) On the Closing Date, the Board of Directors shall be comprised of
six persons, three of which shall be designated by the holders of Class A Units
and three of which shall be designated by the holders of Class B Units. All such
designations shall be notified in writing to the Company, which shall notify all
of the Members. A list of the initial Directors and their positions is set forth
in Schedule 7.2.
(b) Each holder of Class A Units and Class B Units, respectively, shall
have the right by notice in writing to the Company to require the Board of
Directors to call a meeting of the
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Members (i) to remove, with or without cause, any Director designated by such
holder pursuant to this Section 7.2 and (ii) to designate any replacement for a
Director designated by such holder pursuant to this Section 7.2, upon the death,
resignation, retirement, disqualification or removal from office of such
Director.
(c) At all meetings of the Board of Directors, a quorum shall consist
of not less than four Directors provided that such quorum consist of at least
one Director designated by holders of Class A Units and one Director designated
by Class B Units. Written notice shall be duly given to each Director at least
five (5) business days in advance of each meeting, provided no notice need be
given to any Director who signs a written waiver of notice at or in advance of a
meeting, or who attends the meeting without protesting any lack of notice.
Unless a higher vote is specifically required by this Agreement, all actions of
the Board of Directors shall be determined by the vote of a simple majority
(i.e., greater than 50%) of the Directors attending the meeting; provided that
such majority includes at least one Director designated by holders of Class A
Units and one Director designated by holders of Class B units.
(d) Board of Directors meetings shall be held no less frequently than
three times per year with at least one meeting being held between January 1 and
March 31 in each year for purposes of considering the annual financial
statements of the Company and its Subsidiaries. Minutes of the Board of
Directors meetings shall be taken and a copy of the minutes shall be distributed
to each Director in a timely fashion.
Section 7.3. Managing Director and Other Executives. (a) Effective as
of the Closing Date, RE shall be appointed as the initial Managing Director on
the terms set forth in the Employment Agreement. The Managing Director will
report to the Board of Directors. The Managing Director, subject to the control
of the Board of Directors, shall have general charge and control of all of the
Company's business and affairs and shall perform all duties incident to the
office of Managing Director; provided that neither he nor any other executive of
the Company shall take or shall be entitled to take, and each Member shall use
its best efforts to prevent the Company or any of it Subsidiaries from taking,
any of the actions specified in Section 7.4(a) without the prior approval of the
Board of Directors in accordance with this Agreement. The Managing Director may
attend all meetings of the Members Committee and shall have such other powers
and perform such other duties as may from time to time be assigned to him by the
Board of Directors.
(b) Except as provided in the next sentence, the Managing Director
shall have the right to appoint the senior executives of the Company and its
Subsidiaries subject to the reasonable approval of LTM. LTM shall have the
right, after consultation with RE, to appoint one senior executive of the
Company and its Subsidiaries and to remove such executive from office.
Section 7.4. Approval of Certain Matters. (a) The Managing Director
shall not and shall not permit the Company or any Subsidiary of the Company to
take or agree to take any of the following actions or engage in any of the
following transactions without the prior approval of the Board of Directors in
accordance with the provisions of this Agreement:
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(i) expenditure of any sum of Pesetas 7,500,000 or more that
is not included in an Approved budget, it being understood and agreed
that expenditures on film rental, to the extent such expenditures are
determined by reference to box-office sales, shall not be restricted by
this clause (i);
(ii) sale, transfer or disposal of assets of the Company or
any of its Subsidiaries, or purchase or other acquisition of assets or
businesses, in each case in any single or series of related
transactions for a consideration in excess of Pesetas 7,500,000;
(iii) engaging by the Company or any of its Subsidiaries in
any business other than as provided in Section 2.2;
(iv) varying the Company's accounting policies and practices
in any material respect, other than to comply with GAAP;
(v) entering into, amending or waiving the provision of any
agreements or transactions with any Member or any Affiliate of any
Member after the Closing Date except as expressly provided for in this
Agreement and except relating to the exhibition and settlement of
motion pictures;
(vi) entering into any arrangements in connection with the
Excluded Assets other than as contemplated by the Ancillary Agreements;
(vii) establishing any place of business outside Spain;
(viii) commencing or settling litigation where the amount
involved exceeds Pesetas 7,500,000;
(ix) entering into any joint venture, partnership agreement or
similar arrangement;
(x) approving and adopting the annual budget or the Business
Plan or any change thereto;
(xi) incurring any debt for borrowed money in excess of
Pesetas 7,500,000; or
(xii) entering into employment agreements or consulting
agreements with any Person involving the payment in any such agreement
of an amount in excess of Pesetas 7,500,000, or authorizing any Person
to enter into employment agreements or consulting agreements.
(b) Neither the Company nor any Subsidiary of the Company shall take
any of the following actions without the unanimous approval of the Members:
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(i) varying any of the rights attaching to the Membership
Interests except as set forth in this Agreement;
(ii) modifying the Estatutos;
(iii) taking any steps to effect the winding-up, liquidation,
dissolution or voluntary bankruptcy of the Company or any of its
Subsidiaries;
(iv) except as provided in Sections 4.1, 4.2 or 4.3, the
issuance of additional Membership Interests or other equity interests
by the Company;
(v) entering into any merger, amalgamation, consolidation or
other business combination to which the Company or any of its
Subsidiaries is a party;
(vi) declaring any dividend or making any other distribution
with respect to, or the redemption, repurchase or other acquisition of,
any class of equity securities of the Company;
(vii) changing the name of the Company; or
(viii) calling for capital contributions from Members in
excess of the Contribution Amount.
ARTICLE VIII
TRANSFER AND SALE
Section 8.1. Transfer Restrictions. No Member shall sell,
transfer, assign, pledge or otherwise dispose of (a "Transfer") all or part of
any Membership Interests beneficially owned by it or him (i) except in
compliance with the provisions of this Article VIII and the Estatutos, and (ii)
without obtaining a written agreement in form and substance reasonably
satisfactory to the Company executed by the transferee to be bound by the terms
of this Agreement, and any Transfer not in compliance with clauses (i) and (ii)
and any other provisions of this Article VIII shall have no effect and be null
and void.
Section 8.2. Consent. Until the fifth anniversary of the date
of formation of the Company (the "Transfer Waiver Date"), no Member will
Transfer any Membership Interests without the prior written consent of the other
Members other than to a Permitted Transferee.
Section 8.3. First Refusal. (a) If, following the Transfer
Waiver Date, either LTM (on behalf of itself and its Permitted Transferees) or
RE (for himself and on behalf of his Permitted Transferees) (as appropriate, the
"Transferring Members") desires to Transfer, directly or indirectly, all or any
portion of the Membership Interests owned by it (other than to a Permitted
Transferee), the Transferring Member shall provide the other Member (the
"Non-Transferring Member") with a written notice (the "First Refusal Notice"),
with a copy to the Company, setting forth:
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(i) the number of Membership Interests to be offered;
(ii) the terms and conditions of the proposed Transfer
including the price (the "Offering Price") at which the Transferring
Member proposes to Transfer such Membership Interests; and
(iii) the name of the proposed transferee and a statement
specifying whether that transferee is a Competitor or not.
Within 30 business days following the delivery of the First Refusal Notice, the
Non-Transferring Member shall, by notice in writing to the Transferring Member
(copied to the Company), have the opportunity and right to purchase 100% of the
Membership Interests referred to in the First Refusal Notice (on the terms
specified in the First Refusal Notice or on any other terms as are agreed by the
parties). If the Non-Transferring Member fails to exercise or waive its right to
purchase 100% of the Membership Interests referred to in the First Refusal
Notice, then the Transferring Member shall be free, for a three-month period
commencing at the end of such 30-day period to enter into a definitive agreement
to Transfer the offered Membership Interests to any third party other than a
Competitor (which shall be the subject of Section 8.3(b)), on terms (including,
without limitation, all terms affecting price) no more favorable to the proposed
purchaser than the terms specified in the First Refusal Notice, it being
understood, however, that if the Transferring Member does not complete the
Transfer of the Membership Interests within one month following the end of such
three month period, or if the definitive agreement is subsequently terminated,
the Transferring Member shall once again be subject to all the provisions of
this Section 8.3.
(b) In the event that a proposed transferee is a Competitor,
the Transferring Member shall provide the Non-Transferring Member with a written
notice (a "Competitor Notice"), copied to the Company, which shall include the
information required in a First Refusal Notice and shall also include an
indication of whether the Competitor is prepared to purchase 100% of the
outstanding equity of the Company. Within 30 business days following the
delivery of the Competitor Notice, the Non-Transferring Member shall, by notice
in writing to the Transferring Member (copied to the Company), have the
opportunity and right (i) to purchase 100% of the Membership Interests referred
to in the Competitor Notice (at 90% of the Offering Price specified in that
notice) or (ii) to notify the Transferring Member that it wishes to sell to the
Competitor all of the Membership Interests owned by it on terms specified in the
Competitor Notice in which case, the Transferring Member shall only be entitled
to sell its Membership Interests to the Competitor specified in the Competitor
Notice if the Non-Transferring Member's Membership Interests are also purchased
by that Competitor. If the Non-Transferring Member fails to exercise or waives
its right to purchase the Membership Interests referred to in that notice or
fails to exercise or waives its right to sell its membership interests to the
Competitor specified in the Competitor Notice, then the Transferring Member
shall be free, for a three-month period commencing at the end of such 30-day
period to enter into a definitive agreement to Transfer the offered Membership
Interests to the Competitor specified in the Competitor Notice on terms
(including, without limitation, all terms affecting price) no more favorable to
the buyer than the terms specified in that notice, it being understood, however,
that if the Transferring Member does not complete the Transfer of the Membership
Interests within one month following the end of such three-month period, or if
the
11
definitive agreement is subsequently terminated, the Transferring Members shall
once again be subject to all the provisions of this Section 8.3.
(c) Each acceptance made hereunder shall constitute a
separate, binding contract obligating the Transferring Member to sell, and the
Non-Transferring Member to purchase, the Membership Interests accepted on the
terms specified in the relevant notice (or on any other terms as the parties
shall have agreed). The parties agree to negotiate in good faith to consummate
the transaction as soon as possible, but in no event later than the date 120
days after the date the First Refusal Notice or Competitor Notice (as the case
may be) was given. Notwithstanding any provision of this Agreement to the
contrary, in the event of failure by the Non-Transferring Member to close the
transaction within the 120-day time periods referred to above, as extended if
applicable, the Transferring Member shall be entitled, in addition to all other
available remedies, to treat that failure as a waiver under Section 8.3(a) or
8.3(b), as the case may be, by the Non-Transferring Member, entitling the
Transferring Member to take the action specified in Sections 8.3(a) or 8.3(b),
as the case may be, pursuant to that waiver.
(d) If the Offering Price specified in the First Refusal
Notice or the Competitor Notice as the case may be, includes any property other
than cash, the fair market value of any non- cash property shall be determined
in the following manner:
(i) The fair market value of securities which are
publicly traded shall be deemed to be the average of the daily closing
prices of those securities for the five consecutive trading days
immediately prior to the date of the First Refusal Notice or the
Competitor Notice, as the case may be (or the date of the last written
proposal made by the Transferring Member); and
(ii) The fair market value of any other property
shall be determined by the good faith agreement of the Transferring
Member and the accepting Non-Transferring Member or, if such parties
are unable to agree, by an appropriate expert mutually selected by such
parties. If the parties cannot mutually agree on an expert, each party
shall select an expert and those experts shall select an independent
expert to resolve the dispute. The costs and expenses of the appraisal
shall be borne by the Transferring Member.
Notwithstanding anything to the contrary in this Section 8.3,
each Non-Transferring Member may pay the Offering Price in cash, with any
non-cash property valued as provided above.
ARTICLE IX
COVENANTS OF RE
RE hereby covenants and agrees with LTM as follows:
Section 9.1. Cooperation by RE. RE shall use all reasonable
efforts, and will cooperate with the Company and LTM, to secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to enable RE to effect the
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transactions contemplated hereby, and shall otherwise use all reasonable efforts
to cause the consummation of such transactions in accordance with the terms and
conditions hereof.
Section 9.2. Conduct of Business. Except as otherwise
expressly permitted by the terms of this Agreement or except as LTM may
otherwise consent to in writing, from the date hereof until the Closing, RE will
cause each of the Yelmo Group Companies to (i) conduct its business only in the
ordinary course in substantially the same manner as presently conducted; (ii)
preserve intact in all material respects its business organization; (iii)
maintain its properties, machinery and equipment in sufficient operating
condition and repair to enable it to conduct its business in all material
respects in the manner in which its business is currently conducted; (iv)
continue all existing insurance policies (or similar insurance) in full force
and effect; (v) not increase the rate or terms of compensation payable or to
become payable to its directors, officers, members, managers, key employees,
consultants or RE's family members and not increase the rate or terms of any
bonus, pension or other employee benefit plan covering any of its directors,
officers, members, managers, key employees, consultants or family members,
except, in each case, increases occurring in the ordinary course of business in
accordance with its customary practices (including normal periodic performance
reviews and related compensation and benefit increases) or as required by any
pre- existing Material Contract or applicable collective bargaining agreement;
(vi) preserve as far as possible its relationships with its suppliers,
customers, licensors and licensees and others having business dealings with it;
(vii) not declare or pay any dividend or make any other distribution to its
members or stockholders whether or not in respect of any equity interests;
(viii) not amend its Estatutos except amendments required to effect the
transactions contemplated by this Agreement; which amendments are provided to
and approved in writing by LTM; (ix) not redeem or otherwise acquire any of its
equity interests or issue any equity interest or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for any
equity interests; (x) not adopt or amend in any material respect any employee
benefit plan except as required by Law; (xi) not incur or assume any Debt except
in the ordinary course of business; (xii) not permit, allow, or suffer any of
its assets to become subjected to any Lien or other restriction of any nature
except as required by Law or this Agreement; (xiii) not waive any claims or
rights of substantial value; (xiv) not pay, loan or advance any amount to, or
sell, transfer or lease any assets to, or enter into any agreement or
arrangement with RE or any Person affiliated with RE, other than with respect to
the Excluded Assets; (xv) not sell, exchange, lease, transfer or otherwise
dispose of any assets of the Yelmo Group Companies other than the sale of
inventory in the ordinary course of business and other than the sale or transfer
of the Excluded Assets; (xvi) not make any amendment to the terms upon which the
Excluded Assets were transferred out of the Yelmo Group Companies; (xvii) not
acquire any assets, business or securities, other than the acquisition of
current assets in the ordinary course of business, except as provided for in
this Agreement; (xviii) not incur any capital expenditures in excess of Pesetas
7,500,000; (xix) not change its accounting principles or policies except as
required by GAAP or by Law; and (xx) not agree, whether in writing or otherwise,
to do any of the foregoing.
Section 9.3. Access. RE shall provide the Company and LTM with
such information as the Company and LTM may from time to time reasonably request
with respect to the Yelmo Group Companies, and the transactions contemplated by
this Agreement and provide the Company and LTM and its representatives
reasonable access during regular business hours and upon
13
reasonable notice to the properties, books and records of the Yelmo Group
Companies as LTM may from time to time reasonably request.
Section 9.4. Required Notices. From the date hereof until the
Closing Date, RE shall cause the Yelmo Group Companies to promptly, upon
obtaining knowledge thereof, give written notice to the Company and LTM of (i)
any facts or circumstances or the occurrence of any event or the failure of any
event to occur, which will, or could reasonably be expected to, result in a
Material Adverse Effect, (ii) any failure by RE to comply in all material
respects with any covenant, condition or agreement contained in this Agreement,
(iii) any complaints, investigations, proceedings or hearings of any
Governmental Entity with respect to the Yelmo Group Companies or this Agreement,
(iv) any institution or threat of institution of any litigation or similar
action or (v) the occurrence of any event which will or could reasonably be
expected to result in the failure by RE to satisfy any condition set forth in
Article XI.
Section 9.5. Certain Tax Matters. RE agrees that he shall file
his personal Tax returns consistent with the terms of the transactions
contemplated hereby including, without limitation, consistent with the treatment
of the share for share exchange referred to in Section 4.2(c) as a tax free
transaction and that he shall not take any actions inconsistent with the
treatment of such share for share exchange as a tax-free transaction.
Section 9.6. Use of Certain Names. Promptly following the
Closing Date, but in no event later than 30 days thereafter, RE shall cause
Yelmo Arco Iris, S.L. and any other Excluded Asset that uses the name "Yelmo" to
(i) change its name to exclude the word "Yelmo" and (ii) remove the name "Yelmo"
and associated graphics from its signs, purchase orders, invoices, sales orders,
labels, letterheads, shipping documents, and other items and materials.
ARTICLE X
CERTAIN AGREEMENTS
Section 10.1. Non-Competition. (a) Subject to and except as
permitted by Section 10.1(d), as long as LTM or any of its Permitted Transferees
directly or indirectly owns any Membership Interests, and until the fifth
anniversary of the date that LTM and its Permitted Transferees cease to own any
Membership Interests, LTM shall not directly or indirectly have any equity or
other ownership or participation interest in (other than passive investments of
no more than 5% of the equity of a company whose equity securities are publicly
traded) any motion picture exhibition business (which business includes the
concessions business associated with exhibition of motion pictures) in Spain
other than the Company.
(b) Subject to and except as permitted by Sections 10.1(c) and
10.1(d), as long as RE or his Permitted Transferees directly or indirectly own
Membership Interests, and until the fifth anniversary of the date that RE and
his Permitted Transferees cease to own any Membership Interests, RE shall not
directly or indirectly have any equity or other ownership or participation
interest (other than passive investments of no more than 5% of the equity of a
company whose equity securities are publicly traded) in any motion picture
exhibition business (which business includes
14
the concessions business associated with exhibition of motion pictures) in Spain
other than the Company.
(c) Notwithstanding Section 10.1(b), RE shall be entitled (i)
to retain a passive minority interest in Multidulce, S.L., Confiterias Regaliz,
S.L., and Multifiesta, S.L. and (ii) to retain an interest in Yelmo Arco Iris,
S.L., provided that the activities of Yelmo Arco Iris, S.L. do not, directly or
indirectly, breach the provisions of Section 10.1(b).
(d) If either LTM or RE wishes to participate in or undertake
any business venture which would otherwise be prohibited by Section 10.1(a) or
10.1(b) (a "New Venture"), the party proposing such New Venture (the "Proposing
Party") shall first offer it to the Company by providing written notice (a
"Notice of New Venture") to the Company containing a detailed description of the
nature, structure and terms of such New Venture as well as a copy of any
proposed agreements relating thereto. The Company shall have thirty days to
determine whether it wishes to pursue the New Venture, it being agreed that such
determination shall be made by the Directors representing the non-Proposing
Party. In the event that the Company determines not to participate in such New
Venture, then the Proposing Party (and/or its Affiliates) shall have the right
to enter into the New Venture as described in the Notice of New Venture
independently or with such third Persons as it selects; provided that the terms
related to such New Venture shall be no more favorable than the terms offered to
the Company. Notwithstanding the foregoing sentence, to the extent that there is
a material change in the details of the New Venture as described in the Notice
of New Venture, a Proposing Party will not have the right to directly or
indirectly, participate in or undertake the New Venture without giving an
additional Notice of New Venture to the Company pursuant to this Section
10.1(c).
Section 10.2. Access to Company. Upon five business days'
notice, each Member and its representatives shall be permitted to inspect the
books and records of the Company for any proper purpose and make copies thereof
at any reasonable time during normal business hours, it being acknowledged that
any information provided under this Section 10.2 shall be subject to the
provisions of Section 13.4.
Section 10.3. Financial Reporting Obligations. The Members
shall cause the Company to deliver to each of the Members (i) as soon as
available, but in any event not later than 60 days after the end of each fiscal
year of the Company, a copy of the consolidated balance sheet of the Company as
at the end of such year and the related consolidated statements of net income
and retained earnings and of cash flows of the Company for such year setting
forth in each case in comparative form the figures for the previous year, (ii)
as soon as available, but in any event not later than 90 days after the end of
the fiscal year of the Company, its financial statements referred to in clause
(i), reported on by independent certified public accountants of internationally
recognized standing, (iii) as soon as available, but in any event not later than
30 days after the end of each of the first three quarterly periods of each
fiscal year of the Company, the unaudited consolidated balance sheet of the
Company as at the end of such quarter and the related unaudited consolidated
statements of net income and retained earnings and of cash flows of the Company
for such quarter and the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures for the
previous year, certified by the Chief Financial Officer or equivalent director
15
or employee of the Company as being fairly stated in all material respects
(subject to normal year- end audit adjustments) and (iv) as soon as available,
but in any event not later than 30 days after the end of each month of each
fiscal year of the Company, the unaudited consolidated balance sheet of the
Company as at the end of such month and the related unaudited consolidated
statements of net income and retained earnings and of cash flows of the Company
for such month certified by the Chief Financial Officer or equivalent director
or employee of the Company as being fairly stated in all material respects
(subject to normal year-end audit adjustments). All such financial statements
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as any inconsistent application of GAAP is approved by such accountants
or officer, as the case may be, and disclosed therein).
Section 10.4. Conduct of Business. The Members shall cause the
Company to adopt and maintain an integrity policy satisfactory to LTM and RE.
ARTICLE XI
CONDITIONS TO CLOSING AND TERMINATION
Section 11.1. Conditions to Obligations of LTM. The obligation
of LTM (other than incorporation of the Company) to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver,
where permissible) at or prior to the Closing of all of the following
conditions:
(a) Representations, Warranties and Covenants of RE. RE shall
have complied in all material respects with all of his agreements and covenants
contained herein to be performed on or prior to the Closing Date, and all the
representations and warranties of RE contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date. The Company shall have received a
certificate executed by RE, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 11.1.
(b) No Prohibition. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the
parties from consummating the transactions contemplated hereby.
(c) Consents. All consents, approvals, authorization,
exemptions and waivers from any Governmental Entity or any third party including
those set forth in Schedule 11.1(c) hereof that shall be required in connection
with the transactions contemplated hereby shall have been obtained.
(d) Certificates and Resolutions. LTM shall have received
copies, in form and substance reasonably satisfactory to it, of such
certificates of good standing, board resolutions, officers and secretaries'
certificates and other documents with respect to the Yelmo Group Companies as
LTM or its counsel shall reasonably request.
16
(e) Minority Interests. Except for the Persons identified in
Schedule 11.1(e) holding the interests in the Yelmo Group Companies identified
on that Schedule, no Person other than RE shall have an equity interest in any
Yelmo Group Company and LTM shall have received evidence to that effect
satisfactory to it.
(f) Excluded Assets. The Excluded Assets shall have been
transferred out of the Yelmo Group Companies in accordance with the terms of the
Asset Transfer Agreement and LTM shall have received evidence to that effect
satisfactory to it.
(g) Certain Payments. RE shall have paid to Yelmo Films
(whether in repayment of a debt or otherwise) an amount of Pesetas 31,976,000
and LTM shall have received evidence to that effect satisfactory to it.
(h) Intercompany Accounts. All intercompany balances between
Yelmo Group Companies on the one hand and any Affiliates of RE on the other hand
shall have been eliminated, and for the sake of clarity there shall be no
intercompany balance between Yelmo Group Companies and the Excluded Assets, and
both of these requirements shall be evidenced in a manner satisfactory to LTM.
(i) Ancillary Agreements. The Ancillary Agreements shall have
been executed by LTM, the Company, RE, Yelmo Films, Multidulce, S.L.,
Multifiesta, S.L. and Confiterias Regaliz, S.L., as appropriate.
(j) Certain Business Combinations. The business combination of
LTM Holdings, Inc and Cineplex Odeon Corporation contemplated by the agreement
among these companies and others, dated September 30, 1997, shall have been
consummated.
Section 11.2. Conditions to Obligations of RE. The obligation
of RE to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction (or waiver, where permissible) at or prior to the
Closing of all of the following conditions:
(a) Representations, Warranties and Covenants of LTM. LTM
shall have complied in all material respects with all of its agreements and
covenants contained herein to be performed on or prior to the Closing Date, and
the representations and warranties of LTM contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date. RE shall have received a certificate
executed by or on behalf of the Company and LTM, dated as of the Closing Date,
certifying as to the fulfillment of the conditions set forth in this Section
11.2.
(b) No Prohibition. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the
parties from consummating the transactions contemplated.
17
(c) Incorporation of the Company. The Company shall have been
incorporated by LTM, and have a paid-in share capital of 2,000,000.000 pesetas
(said amount need not be registered with the Mercantile Registry at closing).
(d) Certificates and Resolutions. RE shall have received
copies, in form and substance reasonably satisfactory to him, of such
certificates of good standing, board resolutions, officers, and secretaries'
certificates and other documents with respect to LTM as RE or his counsel shall
reasonably request.
(e) Ancillary Agreements. The Ancillary Agreements shall have
been executed by LTM, the Company, RE, Yelmo Films, Multidulce, S.L.,
Multifiesta, S.L. and Confiterias Regaliz, S.L., as appropriate.
(f) Delivery of the principal amount to be loaned under the
Loan Agreement.
Section 11.3. Termination. This Agreement may be terminated at
any time prior to the Closing by the mutual written consent of RE and LTM or in
writing by either RE or LTM, as the case may be, if the conditions to Closing
set forth in this Article XI applicable to the obligation of RE or LTM, as the
case may be, to close shall not have been satisfied on or before the date 30
working days following the date of this Agreement.
ARTICLE XII
INDEMNIFICATION
Section 12.1. Survival. The representations and warranties
made in this Agreement (which, for the avoidance of doubt, are made as of the
Closing Date and not thereafter) shall survive the Closing and remain in full
force and effect (i) in the case of all such representations and warranties,
other than those contained in paragraphs A3, A4, A12 and A21 of Appendix B for a
period of two years after the Closing Date, (ii) in the case of the
representations and warranties contained in paragraphs A3 and A4 of Appendix B,
indefinitely, (iii) in the case of the representations and warranties contained
in paragraph A12 of Appendix B, for a period equal to 90 days in excess of the
applicable statute of limitations therefor and (iv) in the case of the
representations and warranties contained in paragraph A21 of Appendix B, for a
period of seven years after the Closing Date.
Section 12.2. Losses. For purposes of this Agreement, the
terms "Loss" or "Losses" shall mean each and all of the following items to the
extent actually incurred: claims, losses, liabilities, damages, judgments,
awards, costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel). Losses shall exclude all consequential damages.
Section 12.3. Indemnification by RE. RE shall indemnify and
hold harmless LTM, the Company and their respective Affiliates from and against
any and all Losses based upon, arising out of, or resulting from, any of the
following:
18
(i) any breach by RE of any of the representations or
warranties made by RE in this Agreement;
(ii) any failure by RE to perform any of his
covenants or agreements contained in this Agreement;
(iii) all Pre-Closing Taxes for which the Yelmo Group
Companies are liable;
(iv) the Excluded Assets (without duplication of
amounts recovered pursuant to Section 5.1), to the extent relating to
the period prior to the Closing Date or as a result of the transfer
thereof; and
(v) the matters set forth on Schedule 12.3.
Section 12.4. Indemnification by LTM. LTM shall indemnify and
hold harmless RE, the Company and its Affiliates from and against any and all
Losses based upon or resulting from any of the following:
(i) any breach by LTM of any of the representations
or warranties made by LTM in this Agreement; or
(ii) any failure by LTM to perform any of its
covenants or agreements contained in this Agreement.
Section 12.5. Indemnification by the Company. (a) The Members
shall cause the Company to indemnify and hold harmless each Member and each
Director, each Affiliate of each holder of Membership Interests, each of the
foregoing's respective directors, officers, employees and agents and each of the
heirs, executors, successors and assigns or any of the foregoing, from and
against any and all Losses based upon or resulting from, (i) any Liability of
the Company or (ii) any act or omission performed or omitted to be performed by
such Person in its or his capacity as a Member, member of the Members' Committee
or holder of Membership Interests (or as an Affiliate, director, officer,
employee, agent, heir, executor, successor or assign of such Member, holder,
member of the Members Committee or Affiliate) except for acts or omissions
constituting gross negligence, bad faith, fraud or willful misconduct, or breach
of this Agreement, provided that no Person shall have any obligation or
liability under this Section 12.5 with respect to any Losses for which such
Person is indemnified or is entitled to indemnification pursuant to Section 12.3
or 12.4.
(b) The Members shall cause the Company to timely indemnify
and hold harmless RE from and against all capital gains tax and any penalties
and interest associated therewith, up to a maximum aggregate amount of Pesetas
326,000,000, actually incurred by RE directly and exclusively as a result of the
share for share exchange referred to in Section 4.2(c) being finally determined
to constitute a taxable transaction by the competent Spanish authorities and not
susceptible to appeal (the "Indemnified Amount"). RE undertakes to pay the
Indemnified Amount to the competent Spanish authorities within a period of three
working days from receipt by RE of
19
the Indemnified Amount and provide immediately after payment evidence
satisfactory to the Company of said payment. The Indemnified Amount is to be
paid by the Company to RE in the manner which best protects the interests of
both the Members and the Company.
(c) Except as expressly provided in this Article XII, no
Member or holder of Membership Interests will have any obligation or Liability
to any Member or holder of Membership Interests arising out of or relating to
any Liability of the Company.
Section 12.6. Claims. (a) When a party seeking indemnification
under Section 12.3, 12.4 or 12.5(a) (the "Indemnified Party") receives notice of
any claims made by third parties ("Third Party Claims") or has any other claim
for indemnification other than a Third Party Claim, which is to be the basis for
a claim for indemnification hereunder, the Indemnified Party shall give prompt
written notice thereof to the other party or parties (the "Indemnifying Party")
reasonably indicating (to the extent known) the nature of such claims and the
basis thereof; provided, however, that failure of the Indemnified Party to give
the Indemnifying Party prompt notice as provided herein shall not relieve the
Indemnifying Party of any of its obligations hereunder unless and only to the
extent that the Indemnifying Party shall have been materially prejudiced
thereby. The Indemnified Party shall have the right to either (i) assume the
defense of any Third Party Claim or (ii) request that the Indemnifying Party
assume the defense of such Third Party Claim. No compromise or settlement in
respect of any Third Party Claims may be effected by the Indemnifying Party
without the Indemnified Party's prior written consent (which consent shall not
be unreasonably withheld or delayed). Regardless of whether the Indemnified
Party assumes the defense of a Third Party Claim or requests the Indemnifying
Party to assume such defense, the Indemnifying Party shall pay all costs and
expenses thereof, including without limitation fees and expenses of legal
counsel.
(b) If RE receives notice of any claim which is the basis for
a claim for indemnification under Section 12.5(b), he shall give prompt written
notice thereof to the Company and LTM describing in detail the amount of such
claim and the basis thereof. The Company shall have the right to assume the
defense of such claim and the Company shall have the right to compromise or
settle such claim to the extent such compromise or settlement is for the payment
of cash in an amount equal to or less than Pesetas 326,000,000. No compromise or
settlement in respect of any such claims may otherwise be effected by the
Company without RE's prior written consent (which consent shall not be
unreasonably withheld or delayed). Notwithstanding anything in this Agreement to
the contrary, the Company shall exercise its rights under this Section 12.6(b)
with the consent of, and at the direction of, LTM, it being understood and
agreed that, except as expressly provided in this Section 12.6(b), RE shall not
be entitled to prevent the Company (whether in his capacity as a Member or as
Managing Director or otherwise) from complying with LTM's direction under this
Section 12.6(b). Without limiting the Company's rights pursuant to the
foregoing, it is understood and agreed that, if RE has appointed his own counsel
to defend a tax related claim of which a claim covered by this Section 12.6(b)
is part, counsel appointed by the Company shall keep RE's counsel informed of
the progress of the defense of the claim covered by this Section 12.6(b) and
shall cooperate in a reasonable manner with RE's counsel.
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ARTICLE XIII
GENERAL
Section 13.1. Arbitration. In the event a dispute occurs with
respect to any matter in connection with this Agreement, RE and LTM will
promptly attempt to settle such dispute through consultation and negotiation in
good faith and in a spirit of mutual cooperation. If agreement is reached
concerning the resolution of such dispute, then such agreement shall be final,
conclusive and binding on RE and LTM. If, on or before the tenth day after
written notice of such dispute is given by one party to the other, such dispute
has not been resolved by the agreement of RE and LTM, LTM and RE shall each
appoint an arbitrator who shall, within five days of their appointment, agree on
a third arbitrator to whom the dispute shall be referred. If the two independent
arbitrators appointed by LTM and RE cannot agree on an appropriate third
arbitrator, the matter shall be referred to the Xxxx of the Bar of Madrid which
shall appoint an arbitrator. The finally appointed arbitrator shall be
instructed to apply the laws of Spain. The arbitrator's decision and award with
respect to the dispute referred to shall be final and binding on RE and LTM and
may be entered in any court with jurisdiction. The cost of the arbitration
proceeding and any proceeding in court to confirm or to vacate any arbitration
award, as applicable (including, without limitation, attorneys' fees and costs),
shall be borne by the unsuccessful party to the dispute and shall be awarded as
part of the arbitrator's award; provided, however, that (i) each of LTM and RE
shall bear its own attorneys' fees and costs in connection with the arbitration
proceedings and (ii) if the arbitrator does not find one of LTM or RE to be
unsuccessful then the cost of the arbitral proceeding shall be paid equally by
LTM and RE.
Section 13.2. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by facsimile transmission
or by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
If to the Company: If to LTM:
Jacometrezo 0 - 0(xxxxxx), XXXXX XXXXXXXX
00000, Xxxxxx 000 Xxxxx Xxxxxx,
Xxxxxxxxx: Managing Director Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (0000) 000-0000
Attention: Xxxx Xxxxxx XxXxxxx,
General Counsel
Facsimile: (000) 000-0000
21
With a copy to: With a copy to:
Xxxxx-Xxxxx & Xxxxx Xxxxxxxx X. Xxxxx
Xxxxxxxxxx 164, Chief Executive Officer
28046 Madrid Loews Theatres
Attn: Xxxxxxx Xxxxxxxxxxx 000 Xxxxx Xxxxxx
Facsimile: (0000) 000-0000 Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Xxxxxxxx X. Xxxxx Xxxx X. Xxxxxx
Chief Executive Officer Chief Financial Officer
Loews Theatres Loews Theatres
000 Xxxxx Xxxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Xxxx X. Xxxxxx Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Chief Financial Officer 1 New York Plaza
Loews Theatres Xxx Xxxx, Xxx Xxxx 00000
000 Xxxxx Xxxxxx Attention: Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Facsimile: (000) 000-0000
Facsimile: (000) 000-0000
If to RE:
x/x Xxxxx Xxxxx, X.X.
Xxxxxxxxxxx, 0 - 0(xxxxxx)
00000 Xxxxxx
Facsimile: (0000) 000-0000
With a copy to:
Bufete Xxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxx, 32 - 1(degree)
Attention: Xxxxx Xxxxxxxxxx Gimeno
Facsimile: (0000) 000-0000
or to such other address as any party or other addressee shall specify by
written notice so given, and such notice shall be deemed to have been delivered
as of the date so telecommunicated, personally delivered or mailed.
Section 13.3. Assignment; Binding Effect; Benefit. Except as
expressly contemplated herein, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the
22
prior written consent of the other parties, except any rights, interests or
obligations relating to Membership Interests Transferred to a Permitted
Transferee, provided that no such assignment will relieve the assigning party of
any of its obligations hereunder, and provided further that the foregoing
restriction shall not apply to any assignment to any successor Person in
connection with any merger or consolidation or sale of all or substantially all
of the assets. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 13.4. Confidentiality. Each Member agrees that it
shall keep all information regarding the business, affairs or plans of the
Company strictly confidential and shall maintain and protect all information
regarding the business, affairs or plans of the Company in no less careful a
manner than it maintains and protects its own confidential business information;
provided, however, that such information may be disclosed by a Member or holder
if, in the reasonable opinion of counsel to such Member or holder, and after
prior consultation with the Members and their counsel (but not their consent),
such disclosure is required by law or applicable rules of any securities
exchange; provided further, that the provisions of this Section 13.4 shall not
apply to information which (i) becomes generally available to the public other
than as a result of a disclosure by such Member or holder or its
representatives, (ii) was available to such Member or holder on a
non-confidential basis prior to its disclosure to such Member or holder by any
other Member or holder or their representatives, or (iii) becomes available to
such Member or holder on a non-confidential basis from a source other than any
other Member or its representatives.
Section 13.5. Entire Agreement. This Agreement has been
prepared and executed in both English and Spanish, and both versions shall be
binding on the parties hereto, provided that, in the event that any provision of
the Spanish version conflicts with or is inconsistent with any provision of the
English version of this Agreement, the provisions of the English version shall
control and be binding upon each of the parties hereto. This Agreement (in both
English and Spanish), the exhibits, appendices and schedules hereto and any
certificate delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings (oral and written) among the
parties with respect thereto.
Section 13.6. 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.
Section 13.7. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies of this Agreement, each of which may be signed by less than all of the
parties hereto, but together all such copies are signed by all of the parties
hereto.
23
Section 13.8. Headings. Headings of the Articles and Sections
of this Agreement are for the convenience of the parties only, and shall be
given no substantive or interpretive effect whatsoever.
Section 13.9. Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular number shall include
the plural, and vice versa, "including" shall mean "including, without
limitation," words denoting any gender shall include all genders and references
to a Person include such Person's successors and permitted assigns. In this
Agreement, unless defined herein, all accounting terms shall have the meaning
given to them under GAAP.
Section 13.10. Incorporation of Exhibits and Schedules. All
exhibits, appendices and schedules hereto are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
Section 13.11. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or otherwise affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 13.12. Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of Articles VII and VIII or Section 10.1 of this Agreement was not
performed in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of Articles VII and VIII or Section 10.1 of this
Agreement and to enforce specifically the terms and provisions of Articles VII
and VIII or Section 10.1 of this Agreement in any court of competent
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or in equity.
24
IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf as of the day and year
first written above.
LTM SPANISH HOLDINGS, INC.
By: /s/ Xxxx Xxxxxx XxXxxxx
--------------------------------
Name: Xxxx Xxxxxx XxXxxxx
Title: Senior Vice President and
Counsel
XXXXXXX EVOLE MARTIL
By: /s/ Xxxxxxx Evole Martil
--------------------------------
25
Appendix A
Definitions
"Advance": as defined in Section 4.7.
"Affiliate": means with respect to a specified Person, any
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
Person. As used in this definition, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, as trustee or executor, by contract or otherwise. If a Person is a
natural person, the term Affiliate also includes the wife, parents, children,
siblings, nieces, nephews and grandchildren of such natural person, any trusts
established for their benefit and any legal entities in which they are partners
or of which they own (legally or beneficially), directly or indirectly, 25% or
more of such entity's voting securities.
"Agreement": as defined in the preamble to this Agreement.
"Ancillary Agreements": means the Sale and Purchase Agreement,
the Employment Agreement, the Transition Services Agreement, the License
Agreement, the Asset Transfer Agreement, the Columbia Bar Agreement, the Loan
Agreement, the Yelmo Arco Iris Share Transfer Agreement and the Pledge
Agreement.
"Approved Budget": for any fiscal year means the annual budget
of the Company for such fiscal year as approved by the Members pursuant to this
Agreement.
"Asset Transfer Agreement": means the Asset Transfer Agreement
dated the date of this Agreement between Yelmo Films and certain of its
Subsidiaries and Multidulce, S.L. and certain of its Affiliates relating to the
sale and purchase of certain included assets and Excluded Assets substantially
in the form set forth in Exhibit 5.1(a).
"Auditor": as defined in Section 4.6.
"Balance Sheet": as defined in paragraph A.7 of Appendix B.
"Board of Directors": means the board of directors of the
Company established pursuant to Section 7.2.
"Business Plan": means the business plan of the Company as
approved and adopted by the Board of Directors from time to time.
"Calculation Period": as defined in Section 4.5.
"Cashflow": means, for any period, (i) the consolidated net
income or net loss of the Company and its Subsidiaries for such period, plus
(ii) consolidated depreciation and amortization
1
expense and other non-cash charges of the Company and its Subsidiaries for such
period, minus (iii) consolidated capital expenditures of the Company and its
Subsidiaries for such period, plus (iv) any decrease in Working Capital during
such period minus (v) any increase in Working Capital during such period, in
such case, determined in accordance with GAAP.
"Class A Units": as defined in Section 3.1.
"Class B Units": as defined in Section 3.1.
"Closing": means the closing of the transactions contemplated
by Section 4.2.
"Closing Date": means the date upon which the Closing occurs.
"Colombia Bar Agreement": means the agreement between Yelmo
Films and Multidulce, S.L. substantially in the form set forth in Exhibit A-1.
"Company": as defined in the preamble to this Agreement.
"Competitor": means any person which engages in the business
of distributing or exhibiting motion pictures in Spain or the United States of
America.
"Competitor Notice": as defined in Section 8.3(b).
"Contribution Amount": means Pesetas 7,500,000,000, subject to
adjustment as set forth in Sections 4.4 and 4.5
"Debt": means indebtedness for borrowed money (including
pursuant to capital leases) of the Yelmo Group Companies outstanding as of the
time of measurement.
"Director": means a member of the Board of Directors.
"EBITDA Base Level": as defined in Section 4.5.
"Employment Agreement": means the employment agreement between
RE and the Company to be entered into at Closing substantially in the form set
forth in Exhibit A-2.
"Estatutos": means the Estatutos of the Company, as amended
from time to time.
"Excluded Assets": as defined in Section 5.1.
"Final Debt": as defined in Section 4.4(a).
"Final Net Working Capital": as defined in Section 4.4(a).
"First Refusal Notice": as defined in Section 8.3(a).
2
"GAAP": means generally accepted accounting principles of
Spain (or such other jurisdiction as specified herein).
"Governmental Entity": as defined in paragraph A.6 of Appendix
B.
"Indemnified Party": as defined in Section 12.6.
"Indemnifying Party": as defined in Section 12.6.
"Initial Statement": as defined in Section 4.4(a).
"Intellectual Property Rights": as defined in paragraph A.17
of Appendix B.
"License Agreement": means the License Agreement between Yelmo
Films and Confiterias Regaliz, S.L., substantially in the form set forth in
Exhibit A-3.
"Laws": as defined in paragraph A.10 of Appendix B.
"Liabilities": means, as to any Person, all debts, liabilities
and obligations, direct, indirect, absolute or contingent of such Person,
whether accrued, vested or otherwise, whether known or unknown and whether or
not actually reflected, or required by GAAP to be reflected, in such Person's
balance sheets or other books and records, including, for the avoidance of
doubt, accrued interest.
"Lien": as defined in paragraph A.9 of Appendix B.
"Loan Agreement": means the Loan Agreement, dated the date
hereof, between Yelmo Films and the Company.
"Losses": as defined in Section 12.2.
"LTM": as defined in the preamble to this Agreement.
"Managing Director": means the managing director of the
Company.
"Material Adverse Effect": as defined in paragraph A.8 of
Appendix B.
"Material Contracts": as defined in paragraph A.14 of Appendix
B.
"Member": means initially each of LTM and RE and their
respective heirs, successors and permitted assigns and any other Person admitted
as a Member in accordance with this Agreement.
"Membership Interests": means as to any Member, such Member's
interest in the Company as represented by the number of Class A Units and Class
B Units held by such Member.
3
"Minimum Funding Amount": as defined in Section 4.5.
"Minority Costs": as defined in Section 4.9.
"Net Working Capital": means, (x) the sum of all current
assets plus all long term assets to the extent convertible to cash (other than
long term fixed assets) less (y) the sum of all current and long term
liabilities (other than Debt), in each case, of the Yelmo Group Companies on a
consolidated basis.
"New Venture": as defined in Section 10.1(d).
"Non-Transferring Member": as defined in Section 8.3(a).
"Notice of New Venture": as defined in Section 10.1(d).
"Offering Price": as defined in Section 8.3(a).
"Permits": as defined in paragraph A.11 of Appendix B.
"Permitted Transferee": means any Subsidiary of LTM or any
corporation in which RE owns at least 51% of the outstanding equity and in which
any of his children and/or spouse own the remaining equity, provided that such
transferee (i) must, in the case of Subsidiaries of LTM with a net worth of less
than US$100 million, continue to be a Subsidiary of LTM, or be owned by RE and
his spouse and children with RE holding at least 51% of the outstanding equity
thereof, as the case may be, as long as such transferee holds any Membership
Interests and if at any time after such Transfer the transferee ceases to be a
Subsidiary of LTM or owned by RE and his spouse and children with RE holding at
least 51% of the outstanding equity thereof, as the case may be, the transferee
must immediately Transfer any Membership Interests it holds back to the
transferring Member from whom it received its Membership Interests and (ii) has
agreed in writing to be bound by the terms of this Agreement.
"Person": means any natural person, corporation, company,
partnership, firm, association, trust, government, governmental agency or other
entity, whether acting in an individual, fiduciary or other capacity.
"Pesetas": means the lawful currency of Spain.
"Pledge Agreement": means the Pledge Agreement between the
Company and RE dated the date hereof.
"Pre-Closing Taxes": means all Taxes of the Yelmo Group
Companies attributable to any period or portion of any period ending on or
before the Closing Date, or, in the case of Taxes which are not reported on a
periodic basis, attributable to transactions occurring prior to the Closing
Date. Pre-Closing Taxes with respect to the portion of a period ending on the
Closing Date shall be calculated as though such date constituted the end of a
taxable period.
4
"Proposing Party": as defined in Section 10.1(d).
"RE": as defined in the preamble to this Agreement.
"Sale and Purchase Agreement": means the Sale and Purchase
Agreement between RE and the Company to be entered into at Closing substantially
in the form set forth in Exhibit A-4.
"Subsidiary": of any Person shall mean any corporation or
other legal entity of which such Person (either alone or through or together
with its Subsidiaries) owns, directly or indirectly, 50% or more of the stock or
other equity interests, the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity.
"Tax" or "Taxes": means taxes of any kind, levies or other
like assessments, duties, imposts, charges or fees, including any interest,
penalties or additions to tax attributable to any such Tax or requirement to
report information with respect thereto and any damages, costs, fees or other
liability arising from such Tax or reporting requirement.
"Transfer": as defined in Section 8.1(a).
"Transfer Waiver Date": as defined in Section 8.2.
"Transferring Member": as defined in Section 8.3(a).
"Transition Services Agreement": means the Transition Services
Agreement substantially in the form set forth in Exhibit A-5.
"Yelmo Arco Iris Share Transfer Agreement": means the Share
Transfer Agreement between Yelmo Films and RE substantially in the form set
forth in Exhibit 5.1(b).
"Yelmo Films": means Yelmo Films S.A., a Spanish corporation.
"Yelmo Financial Statements": as defined in paragraph A.7 of
Appendix B.
"Yelmo Group Companies": means Yelmo Films together with its
Subsidiaries including, without limitation, those Subsidiaries set forth on
Schedule X.
"Yelmo Stock": means shares of representing the share capital
of Yelmo Films.
5
Appendix B
Representations and Warranties
A. RE hereby represents and warrants to LTM as follows:
1. Organization. Each of the Yelmo Group Companies is a
corporation duly organized and validly existing under the laws of its respective
jurisdiction of incorporation and has all requisite power and authority to
enable it to own, lease or otherwise hold its properties and assets and to carry
on its business as it is now being conducted. True and correct notarial copies
as of the date hereof of the estatutos registered and adopted, pursuant to Royal
Legislative Decree 1564/1989 or Law 2/1995, as appropriate, of each of the Yelmo
Group Companies have been provided to LTM.
2. Authority. RE has full power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which he is a
party, to perform all his obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and each of the Ancillary Agreements to which he is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action (corporate or otherwise). This Agreement
and each of the Ancillary Agreements has been duly and validly executed and
delivered by RE (to the extent a party thereto) and constitutes the valid and
binding obligation of RE (to the extent a party thereto), enforceable against
him in accordance with its terms.
3. Subsidiaries and Equity Interests. Schedule A.3 accurately
sets forth (x) the authorized capital of each Yelmo Group Company and (y) the
number of issued and outstanding shares or other equity interests of each class
of equity capital of each Yelmo Group Company and the ownership thereof. Except
as disclosed on Schedule A.3, all of the issued and outstanding shares or other
equity interests of each class of equity capital of each Yelmo Group Company
have been duly authorized and validly issued, are fully paid and nonassessable
and are owned beneficially and of record by RE or another Yelmo Group Company
(as the case may be), free and clear of any Lien. Such shares or other equity
interests are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of such shares or other
equity interests, except for this Agreement. There are no outstanding securities
convertible into or exchangeable for or carrying the right to acquire any equity
security of any of the Yelmo Group Companies and no outstanding options,
warrants or other agreements or commitments that relate to or require the
issuance, sale or other disposition of any equity securities of any of the Yelmo
Group Companies, except for this Agreement. Except as disclosed in Schedule A.3,
none of the Yelmo Group Companies owns, directly or indirectly, any capital
stock of, or other equity interests in, any Person other than another Yelmo
Group Company, and none of the Yelmo Group Companies is a member of, or
participant in, any partnership, joint venture or similar Person or entity.
4. Capitalization. (a) The authorized capital stock of Yelmo
Films consists of 60,000 shares of common stock, par value Pesetas 1,000 per
share, all of which are duly authorized and validly issued and outstanding,
fully paid and nonassessable. RE is the record and beneficial
1
owner of Yelmo Stock and has good and valid title to the Yelmo Stock, free and
clear of any Liens and restrictions of any kind except those provided for in the
estatutos of Yelmo Films. Except for the Yelmo Stock, there are no shares of
capital stock or other equity securities of Yelmo Films outstanding.
(b) Upon delivery to the Company at the Closing of a
notarial or public deed evidencing transfer of the Yelmo Stock to the Company,
and upon receipt by RE of the Membership Interests to be issued to him in
consideration for such Yelmo Stock, good and valid title to the Yelmo Stock will
pass to the Company, free and clear of any Liens and restrictions of any kind.
Other than this Agreement, the Yelmo Stock is not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Yelmo Stock.
5. No Conflicts. The execution and delivery by RE of this
Agreement and the Ancillary Agreements to which he is a party, and the
consummation of the transactions contemplated hereby and by the Ancillary
Agreements will not (i) violate, conflict with, result in a breach of, or
default under, or permit the termination of, or require consent under any
agreement, obligation or commitment to which RE or any of the Yelmo Group
Companies is bound, or to which any of their properties or assets is subject,
(ii) violate any provision of any Laws to which RE or any of the Yelmo Group
Companies is subject, (iii) violate any order, judgment or decree applicable to
RE or any of the Yelmo Group Companies, or (iv) conflict with, or result in a
breach of or default under, any term or condition of the governing documents of
the Yelmo Group Companies.
6. Consents. No consent, license, approval, waiver, expiration
of waiting period or authorization of, or registration or declaration with, any
federal, provincial, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity") is
required to be obtained or made by RE or any of the Yelmo Group Companies in
connection with the execution, delivery and performance of the transactions
contemplated by this Agreement and by the Ancillary Agreements. To the knowledge
of RE, no creditor, employee, client, customer or other Person having a business
relationship with any of the Yelmo Group Companies intends to change (in a
manner adverse to any of the Yelmo Group Companies) such relationship because of
the sale and transfer of the Yelmo Stock or the transactions contemplated hereby
and by the Ancillary Agreements.
7. Financial Statements; No Undisclosed Liabilities. (a)
Schedule A.7(a) sets forth (i) the unaudited consolidated balance sheet of Yelmo
Films as of December 31, 1997, and the unaudited consolidated statement of
income and cash flows of Yelmo Films for the twelve-month period ended December
31, 1997, together with the notes to such financial statements, (ii) the
unaudited consolidated balance sheets of Yelmo Films as of December 31, 1996 and
December 31, 1995 and the unaudited consolidated statements of income and cash
flows of Yelmo Films for the years ended December 31, 1996 and December 31,
1995, together with the notes to such financial statements and (iii) a pro forma
unaudited consolidated balance sheet of Yelmo Films as of December 31, 1997 (the
"Balance Sheet"), and a pro forma unaudited consolidated statement of
2
income and cash flows for the twelve month period ended December 31, 1997, in
each case, as adjusted to reflect the exclusion of the Excluded Assets and the
elimination of certain intercompany accounts (the financial statements described
above, together with the notes to such financial statements, collectively, the
"Yelmo Financial Statements"). The Yelmo Financial Statements have been prepared
in conformity with GAAP consistently applied (except in each case as described
in the notes thereto) and fairly present (subject, in the case of the unaudited
statements, to normal recurring year-end audit adjustments) the financial
condition and results of operations of the Yelmo Group Companies (or, in the
case of the Balance Sheet, the assets and liabilities of the Yelmo Group
Companies as held in connection with the transactions contemplated by this
Agreement) as of the date thereof and for the period indicated. The parties
acknowledge that the Yelmo Financial Statements have been prepared in Spanish
and translated into English. Notwithstanding anything in this Agreement to the
contrary, if any line item set forth in the English version of the Yelmo
Financial Statements does not comply with GAAP but the equivalent line item in
the Spanish version of the Yelmo Financial Statements does not comply with GAAP,
the Spanish version of the Yelmo Financial Statements with respect to that line
item will prevail.
(b) The Yelmo Group Companies have no liabilities or
obligations of any kind (whether absolute, accrued, contingent, determined,
determinable or otherwise), except to the extent such liabilities or obligations
(i) are fully reflected as liabilities or reserved for on the Balance Sheet, or
(ii) are disclosed in Schedule A.7(b) hereto, or (iii) are liabilities or
obligations incurred since the date of the Balance Sheet in the ordinary course
of business consistent with past practice and not in violation of any of the
terms of this Agreement.
8. Absence of Changes. Except as set forth on Schedule A.8,
since the date of the Balance Sheet, the business of the Yelmo Group Companies
has been conducted in the ordinary course of business consistent with past
practice, and (i) there have been no changes in the business, assets or
liabilities or prospects of the Yelmo Group Companies which individually or in
the aggregate have had, or could reasonably be expected to have, a material
adverse effect on the business, assets, condition (financial or otherwise),
results of operations or prospects of the Yelmo Group Companies taken as a whole
or on the ability of RE to consummate the transactions contemplated hereby (a
"Material Adverse Effect"), and (ii) there has not been any transaction or event
of the type restricted or prohibited by Section 9.2 which, if such transaction
or event occurred after the date hereof, would constitute a violation of Section
9.2.
9. Title to Assets. The Yelmo Group Companies have good title
to all of the assets and properties which they purport to own (except for assets
and properties sold, consumed or otherwise disposed of in the ordinary course of
business since the date of the Balance Sheet) free and clear of all Liens,
except (a) as set forth in Schedule A.9, (b) Liens for taxes not yet due, (c)
Liens which do not interfere with the use or value of the asset affected
thereby. As used in this Agreement, "Liens" shall mean all liens, claims,
charges, security interests, pledges, mortgages, rent charges, covenants,
easements, restrictions, provisions, consents, licenses, licenses or other
encumbrances, obligations or restrictions or rights or claims of others
(including, without limitation, any options or similar rights) of any character
whatsoever which impair the relevant Person's right, title or interest in, or
the value, use or enjoyment of, the asset subject thereto.
3
10. Compliance with Laws. Except as set forth in Schedule
A.10, the Yelmo Group Companies have been and are in compliance in all material
respects with all applicable laws (including statutes and judicial and
administrative decisions, orders and decrees), rules and regulations ("Laws").
Neither RE nor any of the Yelmo Group Companies has received notice of any
noncompliance by the Yelmo Group Companies with such Laws.
11. Permits. Except as set forth in Schedule A.11, the Yelmo
Group Companies have all material licenses, permits and authorizations
("Permits") which are necessary or desirable for the conduct of the business of
the Yelmo Group Companies. Except as set forth in Schedule A.11, all such
Permits are validly held by the Yelmo Group Companies, the Yelmo Group Companies
have complied in all material respects with all terms and conditions relating to
such Permits and the same will not be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby and
thereby. The Permits listed in Schedule A-11 correspond to complete and valid
applications that have been previously submitted to the appropriate authorities
and RE has no reason to believe that each such Permit shall not be granted by
the competent authorities in the ordinary course. The Yelmo Group Companies have
not received notice or otherwise have any knowledge that any Governmental Entity
intends to cancel or terminate any such Permits and no consent or approval of
any Governmental Entity is required under any such Permit in connection with the
transactions contemplated by this Agreement. All such Permits which are held in
the name of an employee, officer, member or agent or otherwise on behalf of the
Yelmo Group Companies shall be deemed included under this paragraph A.11.
12. Tax and Social Security. Each of the Yelmo Group Companies
(i) is current with payment of all its tax and social security obligations,
including those related to salary, and does not have any liabilities apart from
those expressly appearing in the Yelmo Financial Statements; (ii) has presented
in due time and form all required declarations concerning all types of tributes,
including for those purposes social security quotes; (iii) has established
sufficient reserves in the Yelmo Financial Statements for all those tributes or
payments to social security that having come due have not been paid yet; (iv)
has not carried out any operation that may be qualified as fictitious, irregular
or unusual: (v) except as listed in Schedule A.12, is not involved in, nor has
there been threatened, any litigation, administrative, judicial or other types
of procedures, tax or labor inspection in relation to all tax and social
security matters, nor does it have reasons or motives to believe that it may be
in the future.
13. Litigation. Except as set forth in Schedu1e A.13, there is
no suit, legal or administrative action or arbitration pending or, to the
knowledge of RE, threatened against the Yelmo Group Companies which, if
adversely determined, is reasonably likely to result in liability of Pesetas
15,000,000 or more, nor are there any judgments, decrees or orders of any
Governmental Entity binding on the Yelmo Group Companies. There are no pending
or, to the knowledge of RE, threatened governmental investigations or inquiries
or proceedings concerning the Yelmo Group Companies or the business or
operations of the Yelmo Group Companies.
14. Agreements. Except as set forth in Schedule A.14, none of
the Yelmo Group Companies is party to or is bound by, and none of the
properties, assets or operations of each such
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company is subject to, any agreement, contract, lease, license, commitment or
instrument of the type described below:
(a) any license agreement, assignment or contract
(whether as licensor or licensee, assignor or assignee and whether written or
oral) relating to any Intellectual Property Rights;
(b) any agreement with any of its employees,
shareholders or members of the family of, or any Person controlled by any
members of the family of, RE or any employment or consulting agreement or any
agreement related to the Excluded Assets;
(c) any agreement, contract, lease (whether as lessor
or lessee), commitment or instrument with any Person, including any customer or
supplier, (i) providing for any payment in excess of Pesetas 15,000,000 by any
party thereto or (ii) which does not contemplate performance within 12 months;
(d) any collective bargaining or other agreement with
any labor union;
(e) any agreement relating to the acquisition or
disposition of any business, corporation or other legal entity or a material
amount of assets (by way of merger, consolidation, purchase, sale or otherwise);
(f) any agreement granting any Person a Lien on any
of its assets or properties. including, without limitation, any factoring
agreement or agreement for the assignment of accounts receivable or inventory;
(g) any agreement that creates a joint venture or
partnership with any other Person;
(h) any indenture, mortgage, note, bond or other
evidence of indebtedness, any credit or similar agreement under which it has
borrowed any money, and any guarantee of or agreement to acquire any such
obligation, of any other Person;
(i) any agreement which restricts it from entering
into any new or existing line of business or any agreement which contains
geographic restrictions on its ability to conduct business activities (including
a covenant not to compete);
(j) any guarantee of third party obligations; or
(k) any other agreement which is material to the
business or financial condition of the Yelmo Group Companies.
Except as set forth in Schedule A.14, all agreements,
contracts, leases, licenses; commitments or instruments of the Yelmo Group
Companies listed or required to be listed in Schedule A.14 (collectively, the
"Material Contracts") are valid, binding and in full force and effect
5
and are enforceable by the Yelmo Group Companies in accordance with their terms.
Except as set forth in Schedule A.14, (a) the Yelmo Group Companies have
performed all material obligations required to be performed by them to date
under the Material Contracts, and are not (with or without the lapse of time or
the giving of notice, or both) in breach or default in any material respect
thereunder, and (b) to the knowledge of RE, no other party to any of the
Material Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
Correct and complete copies of all written Material Contracts (and true and
complete summaries of all oral Material Contracts) have been made available to
LTM prior to the date hereof.
15. Broker's and Finder's Fee. RE has not employed any broker,
finder, or financial intermediary in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements that would be
entitled to a broker's, finder's or similar fee or commission in connection
therewith.
16. Employment and Employee Benefits. Schedule A.16 lists all
of the employees of each of the Yelmo Group Companies, broken out by company.
The information concerning their gross annual salary, position, category, age,
and seniority which appear in Schedule A.16 is exact and complete. There is no
labor claim pending or outstanding against any of the Yelmo Group Companies nor
do there exist reasons or motives to believe that any claims may arise in the
future. No Yelmo Group Company has any retirement plans or pension fund and has
not undertaken to establish any such retirement plan or pension fund in the
future. There exists no service or consultancy agreements signed by any of the
Yelmo Group Companies. The collective bargaining agreements applicable to the
Yelmo Group Companies are listed in Schedule A.16. There is no loan, bond, or
guaranty by any of the Yelmo Group Companies in favor of any of their employees,
directors or shareholders. There exists no contract or relationship that can be
considered as "top executive" under Spanish labor law with any of the Yelmo
Group Companies.
17. Trademarks, Trade Names, Etc. Schedule A.17 sets forth, as
of the date hereof, all registered trademarks, trade names, copyrights and
applications therefor which are held or used by the Yelmo Group Companies (the
"Intellectual Property Rights"). Except as set forth in Schedule A.17, (i) the
Yelmo Group Companies are the sole owners of the Intellectual Property Rights;
(ii) to the knowledge of RE, none of the Intellectual Property Rights is being
infringed upon or appropriated by others; (iii) all Intellectual Property Rights
have been duly registered or filed, and such registrations have been properly
maintained and renewed in accordance with all applicable laws, rules, and
regulations and all fees associated therewith have been paid; (iv) the Yelmo
Group Companies have not received notice of any claim or demand of any Person
pertaining to any prosecution, suit, action or proceeding pending or threatened,
that challenges the exclusive right of the Yelmo Group Companies to use any of
the Intellectual Property Rights; (v) no aspect of the Intellectual Property
Rights is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency; (vi) the
Yelmo Group Companies are not engaged in any litigation, and, to the knowledge
of RE, no litigation is threatened, with respect to the use of any of the
Intellectual Property Rights; and (vii) to the knowledge of RE, the conduct of
the Yelmo Group Companies as now being conducted does not, and as currently
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proposed to be conducted, will not, infringe or otherwise conflict with, any
patents, trademarks, service marks, trade names, copyrights or other
intellectual property or proprietary rights of others.
18. Insurance. Schedule A.18 sets forth, as of the date
hereof, a correct and complete list of all of the material policies of insurance
and fidelity or surety bonds with respect to the Yelmo Group Companies. All such
policies are in full force and effect, all premiums due and payable thereon have
been paid (other than retroactive or retrospective premium adjustments that are
not yet, but may be, required to be paid with respect to any period ending prior
to the Initial Closing Date), and no notice of cancellation or termination has
been received with respect to any such policy which has not been replaced on
substantially similar terms prior to the date of such cancellation. There are no
claims by the Yelmo Group Companies as to which any insurance company is denying
liability or defending under a reservation of rights or similar causes. The
activities and operations of the Yelmo Group Companies have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
such insurance policies and, except as set forth in Schedule A.18, proper notice
of all known claims that the Yelmo Group Companies reasonably believe they have
under such insurance policies, has been given to the providers of such insurance
policies.
19. Affiliate Matters. Except as set forth on Schedule A.19,
neither RE nor any other Affiliate of the Yelmo Group Companies has any interest
in any property (real or personal, tangible or intangible) or contract used in
or pertaining to the business of the Yelmo Group Companies and neither RE nor
any other Affiliate of the Yelmo Group Companies has any direct or indirect
ownership interest or economic interest in any Person with which any of the
Yelmo Group Companies competes or with which any such company has a business
relationship.
20. Information. To the knowledge of RE, none of the
information provided by RE to LTM in connection with the transactions
contemplated by this Agreement and the Ancillary Agreement contains any material
misstatement of fact or omits to state any material fact necessary to be stated
in order to make the statements therein not misleading.
21. Environmental. None of the Yelmo Group Companies has been
in the past, and is not currently, a defendant in any product liability or
environmental related claim nor does RE have knowledge of a threatened or
pending claim in respect thereof. The contracts that the Yelmo Group Companies
have entered into and their activities are in compliance with all Spanish and
applicable European Union legislation, including but not limited to
environmental and employment health and safety issues.
22. Real Property. Schedule A.22 sets forth a list of all real
property owned or leased by each of the Yelmo Group Companies. With respect to
each parcel of owned real property set forth in Schedule A.22, each Yelmo Group
Company has registered in the corresponding land registry good, valid,
marketable and insurable title thereto in fee simple, in all cases free and
clear of all Liens except as set forth in Schedule A.22. All title deeds to such
owned real property are in the possession of the Yelmo Group Companies and the
Yelmo Group Companies have complied with all statutory requirements, By-laws and
regulations relating to their real properties as well as
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all contractual covenants and conditions with respect to such properties. None
of the leases set forth in Schedule A.22 shall be adversely affected by the
transactions contemplated in this Agreement.
23. Executive Compensation etc. RE has no knowledge or reason
to believe that any of the principal executives of the Yelmo Group Companies
will leave the same after the execution of this Agreement. The individual
employment contracts reflect in writing each and every one of the employment
conditions agreed with each and every one of the employees of all the Yelmo
Group Companies. The Yelmo Group Companies have assumed no obligation to
increase the compensation, salary or benefits of any administrator or employee
now or in the future.
24. Entire Business. The Yelmo Group Companies own or lease
all of the assets necessary for each of them to operate their respective
businesses as currently conducted and as contemplated to be conducted
immediately following Closing.
B. LTM hereby represents and warrants to RE as follows:
1. Organization. LTM is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to enable it to own, lease or otherwise hold its
properties and assets and to carry on its business as it is now being conducted.
2. Authority. LTM has full corporate power and authority to
execute and deliver this Agreement and each Ancillary Agreement to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Except for approval referred to in
Section 11.1(j) of this Agreement the execution and delivery by LTM of this
Agreement and the Ancillary Agreements to which it is party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary action (corporate or otherwise) of LTM. This Agreement and the
Ancillary Agreements has been duly and validly executed and delivered by LTM (to
the extent a party thereto) and constitutes the valid and binding obligation of
LTM (to the extent a party thereto), enforceable against it in accordance with
its terms.
3. No Conflicts. The execution and delivery by LTM of this
Agreement and the Ancillary Agreement to which it is party, and the consummation
of the transactions contemplated hereby and thereby will not (i) violate,
conflict with, result in a breach of, or default under, or permit the
termination of, or require consent under any agreement, obligation or commitment
to which LTM is bound, or to which any of its properties or assets is subject,
(ii) violate any provision of any Laws to which LTM is subject, (iii) violate
any order, judgment or decree applicable to LTM, or (iv) conflict with, or
result in a breach of or default under, any term or condition of the governing
documents of LTM.
4. Consents. No consent, license, approval, waiver, expiration
of waiting period or authorization of, or registration (other than registration
with the U.S. Securities and Exchange Commission) or declaration with, any
Governmental Entity is required to be obtained or made by
8
LTM in connection with the execution, delivery and performance of the
transactions contemplated by this Agreement and the Ancillary Agreements to
which it is party.
5. Broker's and Finder's Fee. LTM has not employed any broker,
finder, or financial intermediary in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements to which it is party
that would be entitled to a broker's, finder's or similar fee or commission in
connection therewith.
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