Exhibit 10.5
EXECUTION COPY
INDUCEMENT AGREEMENT
AMONG
CINEMEX LLC
CINEMEX ACQUISITION CORP.
SYMPHONY ACQUISITION VEHICLE, S.A. DE C.V.
GRUPO CINEMEX, S.A. DE C.V.
MIGUEL ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇▇ FASTLICHT ▇▇▇▇▇▇
DATED AS OF JUNE 19, 2002
TABLE OF CONTENTS
Page
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1. Definitions............................................................................ 2
2. Effectiveness; Other Matters........................................................... 2
2.1 Effective Time.................................................................... 2
2.2 Deliveries at or Prior to the Effective Time...................................... 2
3. Representations and Warranties of Cinemex.............................................. 4
4. Representations and Warranties of the Shareholders..................................... 4
4.1 Nationality and Domicile.......................................................... 4
4.2 Authority; No Conflict............................................................ 4
4.3 Legal Proceedings; Orders......................................................... 5
4.4 Title to Shares................................................................... 5
4.5 Relationships with Related Persons................................................ 5
4.6 Brokers or Finders................................................................ 6
4.7 Accuracy of Representations and Warranties of Cinemex............................. 6
5. Representations and Warranties of Investors............................................ 6
5.1 Organization and Good Standing.................................................... 6
5.2 Authority; No Conflict............................................................ 6
5.3 Certain Proceedings............................................................... 7
5.4 Brokers or Finders................................................................ 7
5.5 No Additional Representations..................................................... 7
6. Covenants Prior to Effective Date...................................................... 7
7. Call by Cinemex........................................................................ 7
7.1 Call Option....................................................................... 7
7.2 Closing for Exercise of Call Option............................................... 7
7.3 Power of Attorney................................................................. 8
8. Indemnification; Remedies.............................................................. 8
8.1 Survival; Right to Indemnification Not Affected by Knowledge...................... 8
8.2 Indemnification and Payment of Damages by the Shareholders........................ 8
8.3 Indemnification and Payment of Damages by Investors............................... 11
8.4 Time Limitations.................................................................. 11
8.5 Limitations on Amount - Shareholders.............................................. 12
8.6 Limitations on Amount - Investors................................................. 12
8.7 Procedure for Indemnification - Third Party Claims................................ 13
8.8 Procedure for Indemnification - Other Claims...................................... 14
8.9 Additional Provisions Regarding Tax Indemnification............................... 14
8.10 Filing of Tax Returns............................................................. 17
8.11 Cooperation on Tax Matters........................................................ 17
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Page
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8.12 Allocation of Tax Liability for Overlap Periods................................... 18
8.13 Certain Miscellaneous Tax Matters................................................. 18
8.14 Notices and Determinations by Shareholders........................................ 19
8.15 Use of Commercially Reasonable Efforts............................................ 19
9. General Provisions..................................................................... 19
9.1 Expenses.......................................................................... 19
9.2 Public Announcements.............................................................. 19
9.3 Notices........................................................................... 20
9.4 Jurisdiction...................................................................... 22
9.5 Further Assurances................................................................ 22
9.6 Waiver............................................................................ 22
9.7 Entire Agreement and Modification................................................. 22
9.8 Schedules......................................................................... 22
9.9 Assignments, Successors, and No Third-Party Rights................................ 23
9.10 Severability...................................................................... 23
9.11 Section Headings, Construction.................................................... 23
9.12 Governing Law..................................................................... 23
9.13 Counterparts...................................................................... 23
Exhibits
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Exhibit A Definitions
Exhibit 2.2(a)(i) Form of Shareholder Release
Exhibit 2.2(a)(ii) Form of ▇▇▇▇▇▇ Memorandum
Exhibit 2.2(a)(iv) Form of ▇▇▇▇▇▇ Competition Agreement
Exhibit 2.2(a)(v) Form of Fastlicht Competition Agreement
Exhibit 8.2(c) Projected Cash Flow
Schedules
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Schedule A Shareholder Percentages
Schedule B Representations and Warranties of Cinemex
Annexes
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Annex 3.1 Organization
Annex 3.2 Authority; No Conflict
Annex 3.3 Capitalization as of Immediately Prior to the Recapitalization
Annex 3.4 Recapitalization
Annex 3.5 Current Capitalization
Annex 3.6 Financial Statements
Annex 3.7 Books and Records
Annex 3.8 Title to Properties; Encumbrances
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Annex 3.9 Condition and Sufficiency of Assets; Recent Capital Expenditures
Annex 3.10 Undisclosed Liabilities
Annex 3.11 Taxes
Annex 3.13 Employee Benefits
Annex 3.14 Compliance with Mexican Legal Requirements;
Mexican Governmental Authorizations
Annex 3.15 Legal Proceedings; Orders
Annex 3.16 Absence of Certain Changes and Events
Annex 3.17 Contracts
Annex 3.18 Insurance
Annex 3.19 Environmental Matters
Annex 3.20 Employees
Annex 3.21 Labor Relations; Compliance
Annex 3.22 Intellectual Property
Annex 3.24 Relationships with Related Persons
Schedule C Covenants Prior to Effective Date
Schedule 4.1 Nationality and Domicile
Schedule 4.2 Authority; No Conflict - Shareholders
Schedule 4.3 Legal Proceedings; Orders - Shareholders
Schedule 4.4 Title to Shares
Schedule 4.5 Relationship with Related Persons - Shareholders
Schedule 5.2 Authority; No Conflict - Investors
Schedule 9.3 Notices
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INDUCEMENT AGREEMENT
This INDUCEMENT AGREEMENT (this "Agreement") is made as of June 19,
2002, among Cinemex LLC, a Delaware limited liability company ("USLLC"), Cinemex
Acquisition Corp., a Delaware corporation ("USAC"), Symphony Acquisition
Vehicle, S.A. de C.V., a corporation organized under the laws of Mexico ("MAV"),
Grupo Cinemex, S.A. de C.V., a corporation organized under the laws of Mexico
("Cinemex"), ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇
("Fastlicht") pursuant to the following and recitals and clauses:
RECITALS
A. WHEREAS, at a General Extraordinary Shareholders Meeting of Cinemex
(the "General Shareholders Meeting") held on June 7, 2002, Cinemex's
shareholders approved, among other things, a recapitalization of Cinemex
(collectively, the "Recapitalization") consisting of each of the following
steps: (i) conversion of each share of Common Stock (as defined in Exhibit A to
this Agreement) then held by each of the shareholders of Cinemex other than
▇▇▇▇▇▇, Fastlicht and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ into one share of Cinemex's Series P
Preferred Stock (as defined in Exhibit A to this Agreement); (ii) conversion of
each share of Common Stock then held by each of Fastlicht and ▇▇▇▇▇▇ into one
share of Series PRD Preferred Stock (as defined in Exhibit A to this Agreement);
(iii) cancellation of each share of Common Stock issued and held immediately
prior to the time of the Recapitalization in the treasury of Cinemex and
reserved for subscription under Cinemex's employee stock option plan (the
"ESOP") in exchange for the payment of $50'251,608.84 pesos in the aggregate
(the "ESOP Payment"); (iv) cancellation of all shares of Common Stock then held
in the treasury of Cinemex pending subscription; (v) termination of the
Management Trust Agreement (as defined in Exhibit A to this Agreement) and the
Existing Stockholders Agreement (as defined in Exhibit A to this Agreement); and
(vi) amendment of Cinemex's bylaws to, among other things, eliminate any rights
of first refusal, all other restrictions on transfer of shares of Cinemex's
capital stock and all minority rights contained therein;
B. WHEREAS, all steps of the Recapitalization were effected by Cinemex
on June 7, 2002;
C. WHEREAS, simultaneously with the execution and delivery of this
Agreement, USAC, MAV and Cinemex have entered into that certain Stock Purchase
Agreement (the "Hoyts Stock Purchase Agreement"), dated as of the date hereof,
among MAV, USAC, Consolidated Press Holdings Limited (ACN ▇▇▇ ▇▇▇ ▇▇▇) ("CPHL"),
Hoyts Cinemas Ltd. ("HCL"), Hoyts European Holdings B.V. ("BV"), Hoyts Cinemas
America Limited ("HCAL"), Stichting Administratiekantoor Strawinsky ("SAS"),
Hoyts Emerging Territories, Ltd. ("HET"), Cinemas Hoyts de Mexico, S. de ▇.▇.
("SRL, and collectively with CPHL, HCL, BV, HCAL, SAS and HET, "Hoyts") and
Cinemex, pursuant to which, among other things, Investors will indirectly
acquire 1,137,963 shares of Series P Preferred Stock;
D. WHEREAS, simultaneously with the execution and delivery of this
Agreement, USAC and USLLC have entered into that certain Stock Purchase
Agreement (the "Cinemex Stock Purchase Agreement") among USLLC, USAC, Cinemex,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, BBVA Bancomer, S.A., Institucion de Banca Multiple, Grupo
Financiero, BBVA
Bancomer Division Fiduciaria, as Trustee (the "Concentration Trustee") of the
Irrevocable Trust Agreement No. F47016-1, dated as of June 13, 2002, among the
Concentration Trustee, on its own behalf and on behalf of certain of Cinemex's
shareholders, and certain of Cinemex's other shareholders, pursuant to which it
is contemplated that USLLC and USAC will purchase certain shares of Series P
Preferred Stock and Common Stock;
E. WHEREAS, the Series PRD Preferred Shares (as defined in Exhibit A to
this Agreement) contain certain rights which are as set forth in Cinemex's
Organizational Documents (as defined in Exhibit A to this Agreement); and
F. WHEREAS, in order to induce Investors to consummate the transactions
contemplated by the Cinemex Stock Purchase Agreement and the Hoyts Stock
Purchase Agreement and to acquire control of Cinemex, ▇▇▇▇▇▇ and Fastlicht have
agreed to enter into this Agreement.
The parties, intending to be legally bound and based on the foregoing
recitals, hereby agree to grant the following:
CLAUSES
1. DEFINITIONS.
Capitalized terms used in this Agreement shall have meanings set forth
in Exhibit A, which constitutes a part of this Agreement.
2. EFFECTIVENESS; OTHER MATTERS.
2.1 EFFECTIVE TIME. This Agreement shall become effective (the
"Effective Time") upon the execution and delivery of this Agreement by the
parties hereto.
2.2 DELIVERIES AT OR PRIOR TO THE EFFECTIVE TIME. At, or prior to the
Effective Time:
(a) Investors shall receive or shall have received:
(i) releases in the form of Exhibit 2.2(a)(i), executed by
each Shareholder (collectively, the "Shareholder Releases");
(ii) a Memorandum of Employment and Investment Terms in the
form of Exhibit 2.2(a)(ii) (the "▇▇▇▇▇▇ Memorandum"), executed by
▇▇▇▇▇▇;
(iii) [Intentionally omitted];
(iv) a competition agreement in the form of Exhibit 2.2(a)(iv)
(the "▇▇▇▇▇▇ Competition Agreement"), executed by ▇▇▇▇▇▇;
(v) a competition agreement in the form of Exhibit 2.2(a)(v)
(the "Fastlicht Competition Agreement"), executed by Fastlicht; and
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(vi) a certificate executed by Cinemex certifying:
(A) that each of its representations and warranties
contained in this Agreement (including, without limitation,
those set forth on Schedule B hereto) (disregarding all
qualifications and exceptions contained therein relating to
substantiality, materiality or Material Adverse Effect) were
true and correct when made and are true and correct on and as
of the Effective Date as if made on and as of the Effective
Date (except for those representations and warranties that
relate to a particular date, which representations and
warranties were true and correct as of such date), except for
any failures of such representations and warranties to be true
and correct (disregarding all such qualifications as
aforesaid) that, taken together, would not reasonably be
expected to (i) have a Material Adverse Effect or (ii)
materially impede or delay the ability of Investors to
consummate the Contemplated Transactions; and
(B) that it has performed or complied with, in all
material respects, all agreements and covenants required to be
performed or complied with by it under this Agreement at or
prior to the Effective Date (including, without limitation,
those set forth on Schedule C hereto), except for any failures
to perform or comply with such agreements and covenants that,
taken together, would not reasonably be expected to (i) have a
Material Adverse Effect or (ii) materially impair or delay the
ability of Investors to consummate the Contemplated
Transactions.
(b) Investors will:
(i) deliver to ▇▇▇▇▇▇ the ▇▇▇▇▇▇ Memorandum and the ▇▇▇▇▇▇
Competition Agreement, executed by Cinemex and Investors;
(ii) deliver to Fastlicht the Fastlicht Competition Agreement,
executed by Cinemex and Investors; and
(iii) deliver to the Shareholders a certificate executed by
Investors certifying:
(A) that each of the representations and warranties
of Investors contained in this Agreement (disregarding all
qualifications and exceptions contained therein relating to
substantiality or to materiality) were true and correct when
made and are true and correct on and as of the Effective Date
as if made on and as of the Effective Date (except for those
representations and warranties that relate to a particular
date, which representations and warranties were true and
correct as of such date), except for any failures of such
representations and warranties to be true and correct
(disregarding all such qualifications, as aforesaid) that,
taken together, would not reasonably be expected to (i) have a
material adverse effect on the business, operations, assets,
financial condition or results of
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operations of Investors (considered collectively), provided,
that in determining whether there has been such a material
adverse effect, Investors may disregard any adverse effect
principally attributable to (I) general political, economic,
business, industry or financial market conditions and (II) the
taking of any action specifically required by this Agreement,
or (ii) materially delay or impair the ability of the
Shareholders to consummate the Contemplated Transactions; and
(B) that Investors have performed or complied with,
in all material respects, all agreements and covenants
required to be performed or complied with by them under this
Agreement at or prior to the Effective Date (including,
without limitation, those set forth in Schedule C hereto),
except for any failures by Investors to perform or comply with
such agreements and covenants that, taken together, would not
reasonably be expected to (i) have a material adverse effect
on the business, operations, assets, financial condition or
results of operations of Investors (considered collectively);
provided, that in determining whether there has been such a
material adverse effect, Investors may disregard any adverse
effect principally attributable to (I) general political,
economic, business, industry or financial market conditions
and (II) the taking of any action specifically required by the
Agreement, or (ii) materially delay or impair the ability of
the Shareholders to consummate the Contemplated Transactions.
3. REPRESENTATIONS AND WARRANTIES OF CINEMEX.
Cinemex hereby makes all of the representations and warranties to
Investors set forth on Schedule B hereto, which constitutes part of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder separately, and not jointly or severally, represents
and warrants to Investors as to itself as follows:
4.1 Nationality and Domicile. Schedule 4.1 sets forth the nationality
and domicile of such Shareholder.
4.2 Authority; No Conflict.
(a) This Agreement and each Ancillary Agreement to which such
Shareholder is a party constitutes the legal, valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with its
terms. Such Shareholder has the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Agreement and each Ancillary
Agreement to which such Shareholder is a party and to perform his obligations
hereunder and thereunder.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement nor the consummation or performance by such
Shareholder of any of the
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Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which such Shareholder may be subject.
Except as set forth in Schedule 4.2 or those which have been obtained,
given or made, such Shareholder is not and will not be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the Ancillary Agreements or the consummation
or performance of any of the Contemplated Transactions.
4.3 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Schedule 4.3,
such Shareholder is not subject to any Order that relates to the business of, or
any of the assets owned or used by, any Cinemex Company.
4.4 TITLE TO SHARES. Such Shareholder is the sole, legal, record and
beneficial owner of the shares of Series PRD Preferred Stock set forth opposite
such Shareholder's name under the caption "Shares" on Schedule A as of the date
hereof, and will be the sole, legal, record and beneficial owner of such shares
of Series PRD Preferred Stock immediately prior to the Effective Time, free and
clear of all Encumbrances. Except as set forth in Schedule 4.4, no legend or
other reference to any purported Encumbrance appears upon any registration of or
certificate representing shares of Series PRD Preferred Stock identified on
Schedule A as being owned by such Shareholder, which legends and Encumbrances
will be removed on or prior to the Effective Date.
4.5 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on Schedule
4.5, neither such Shareholder nor any Related Person of such Shareholder:
(a) has, or since January 1, 2000 has had, any interest in any property
(whether real estate property, personal property or mixed and whether tangible
or intangible), used in or pertaining to the Cinemex Companies' businesses; or
(b) owns, or since January 1, 2000 has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with any Cinemex Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Cinemex
Companies at substantially prevailing market prices and on substantially
prevailing market terms and conditions, or (ii) engaged in competition with any
Cinemex Company with respect to any Competing Business, except for the ownership
of less than one percent of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market.
(c) is a party to any Contract with, or has any claim or right against,
any Cinemex Company other than (i) rights arising under Cinemex's Organizational
Documents or (ii) rights relating to the such Shareholder's ownership of Common
Stock or Series P Preferred Stock which terminated in connection with the
Recapitalization or which will terminate at or prior to Effective Time.
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4.6 BROKERS OR FINDERS. Neither such Shareholder nor any of such
Shareholder's agents has incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4.7 ACCURACY OF REPRESENTATIONS AND WARRANTIES OF CINEMEX. To the
Knowledge of such Shareholder, all representations and warranties made by
Cinemex in this Agreement are true, accurate and complete in all material
respects.
5. REPRESENTATIONS AND WARRANTIES OF INVESTORS.
Investors represent and warrant to the Shareholders as follows:
5.1 ORGANIZATION AND GOOD STANDING. USLLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Delaware, with full limited liability company power and authority
to conduct its business as it is now being conducted and to perform all its
obligations under each Contract to which it is a party. USAC is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware, with full corporate power and authority to conduct its
business as it is now being conducted and to perform all its obligations under
each Contract to which it is a party. MAV is a corporation duly organized,
validly existing and in good standing under the laws of Mexico, with full
corporate power and authority to conduct its business as it is now being
conducted and to perform all its obligations under each Contract to which it is
a party.
5.2 AUTHORITY; NO CONFLICT.
(a) The execution, delivery and performance of this Agreement and the
Ancillary Agreements to which any Investor is a party and the consummation or
performance by any Investor of the Contemplated Transactions has been duly
authorized by all necessary action on the part of any Investor. This Agreement
and the Ancillary Agreements to which any Investor is a party constitutes the
legal, valid and binding obligation of each Investor, enforceable against such
Investor (as applicable) in accordance with their terms. Each Investor has the
absolute and unrestricted right, power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and to perform its
respective obligations hereunder and thereunder.
(b) Except as set forth in Schedule 5.2, neither the execution and
delivery by any Investor of this Agreement and the Ancillary Agreements to which
any Investor is a party nor any Investor's consummation or performance of any of
the Contemplated Transactions will give any Person the right to prevent, delay,
or otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of any Investor's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of any Investor;
(iii) any Legal Requirement or Order to which any Investor may
be subject; or
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(iv) any Contract to which any Investor is a party or by which
any Investor may be bound.
Except for those which have been obtained, given or made, none of the
Investors will be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement and the
Ancillary Agreement to which it is a party or the consummation or performance of
any of the Contemplated Transactions.
5.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against any Investor and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Investors' Knowledge, no such Proceeding has been
Threatened.
5.4 BROKERS OR FINDERS. None of the Investors has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
5.5 NO ADDITIONAL REPRESENTATIONS. Investors have conducted their own
due diligence investigation of the Cinemex Companies and related matters. None
of Cinemex or the Shareholders, has made, and Investors has not relied on any
representation or warranty, except as set forth in this Agreement, the Cinemex
Stock Purchase Agreement or the Hoyts Stock Purchase Agreement, it being
understood that a party hereto that is not a party to the Cinemex Stock Purchase
Agreement or the Hoyts Stock Purchase Agreement will not have any liability or
obligation with respect to representations and warranties made in such other
agreements. Nothing in this Section 5.5 shall in any way affect or limit any
Shareholder's liabilities or obligations under Sections 4 and 8 of this
Agreement.
6. COVENANTS PRIOR TO EFFECTIVE DATE. Each of the parties hereby agrees to
perform the covenants and other agreements applicable to such party set forth on
Schedule C hereto, which constitutes part of this Agreement.
7. CALL BY CINEMEX.
7.1 CALL OPTION. For a period of three (3) years following the Effective
Date, Cinemex (or its designee) shall have the right, but not the obligation, at
any time during such period, and from time to time to purchase, by delivery of a
written notice (a "Call Notice") to ▇▇▇▇▇▇, and ▇▇▇▇▇▇ shall be required to sell
to Cinemex (or its designee) upon his receipt of a Call Notice, any and all
shares of the capital stock and other equity interests of any Subsidiary of
Cinemex he owns on the date such Call Notice is delivered by Cinemex (the "Call
Shares") for an aggregate price equal to $1,000 pesos. ▇▇▇▇▇▇ agrees that he
will not transfer, assign, sell, encumber or suffer to Encumbrance, dictate or
otherwise dispose of any shares of capital stock of a Subsidiary of Cinemex that
he owns on the date hereof (except as contemplated by this Section 7).
7.2 CLOSING FOR EXERCISE OF CALL OPTION. The closing of any purchase of
Call Shares by Cinemex (or its designee) from ▇▇▇▇▇▇ shall take place at the
principal office of Cinemex at 10:00 a.m. (local time) on such date as Cinemex
shall specify in the Call Notice. At such closing, ▇▇▇▇▇▇ shall deliver to
Cinemex (or its designee), against payment by Cinemex (or its
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designee) of the purchase price for the Call Shares in cash, certificates
evidencing the Call Shares, duly endorsed in property in favor of Cinemex (or
its designee), free and clear of all Encumbrances (other than those created by
this Agreement).
7.3 POWER OF ATTORNEY. ▇▇▇▇▇▇ hereby agrees to grant, not later than sixty
(60) days following the date hereof, an irrevocable power of attorney to the
Person or Persons appointed by Investors to, in his name of and his behalf,
execute and deliver all such instruments and other documents as may be necessary
effectively to transfer the Call Shares to Cinemex (or its designee) under this
Section 7, including but not limited to the endorsement in property of the
certificate(s) evidencing the Call Shares in favor of Cinemex (or its designee),
free and clear of all Encumbrances (other than those created by this Agreement).
▇▇▇▇▇▇ hereby ratifies and confirms and agrees to ratify and confirm all that
such attorney may lawfully do or cause to be done by virtue of the provisions of
this Section.
8. INDEMNIFICATION; REMEDIES.
8.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Schedules hereto, the supplements to such Schedules, the certificates delivered
pursuant to Sections 2.2(a)(vi) and 2.2(b)(iv) and any other certificate or
document delivered pursuant to this Agreement will survive the Effective Date.
The right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Effective Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE SHAREHOLDERS.
(a) Each Shareholder, separately and not jointly or severally, will
indemnify and hold harmless Investors, the Cinemex Companies and their
respective Representatives, stockholders, controlling persons and affiliates and
their respective successors or assignees (collectively, the "Investor
Indemnified Persons") for, and will pay to the Investor Indemnified Persons such
Shareholder's Percentage of the amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable attorneys'
fees), fine, penalty or loss profits or, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(i) any Breach of any representation or warranty made by Cinemex in this
Agreement (including, without limitation, those set forth in Schedule B hereto)
(notwithstanding that such Shareholder has not made such representation or
warranty) (without giving effect to any supplement to the Schedules hereto), the
Schedules hereto, the supplements to such Schedules or any other certificate or
document delivered by Cinemex pursuant to this Agreement;
(ii) any Breach of any representation or warranty made by Cinemex in this
Agreement (notwithstanding that such Shareholder has not made such
representation or
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warranty) (including, without limitation, those set forth in Schedule B hereto)
as if such representation or warranty were made on and as of the Effective Date
without giving effect to any supplement to the Schedules hereto, other than any
such Breach that is disclosed in a supplement to such Schedules and is expressly
identified in the certificate delivered pursuant to Section 2.2(a)(vi) as an
exception to the certification required to be made by Cinemex pursuant to such
Section (other than any such Breach as to which indemnity is available under
clause (iv) below);
(iii) any Breach by Cinemex of any covenant or obligation of Cinemex in
this Agreement (including, without limitation, those set forth in Schedule C
hereto) (other than any such Breach as to which indemnity is available under
clause (iv) below);
(iv) subject to Section 8.9(c), the payment of (A) Pre-Closing Taxes of
the Cinemex Companies to the extent that the actual amount of unpaid Pre-Closing
Taxes exceeds the amount of unpaid Pre-Closing Taxes reflected as a liability on
the Net Assets/Liabilities Statement, (B) 50% of all Transfer Taxes and (C)
Taxes of the Cinemex Companies attributable to a Post-Closing Tax Period to the
extent that they constitute Damages due to a breach of any representation or
warranty made pursuant to Section 3.11 of Schedule B hereto; provided, however,
Shareholders shall not be obligated to indemnify the Investor Indemnified
Persons for Taxes pursuant to clause (A) of this Section 8.2(a)(iv) that are
imposed on an item of income to the extent that the economic value corresponding
to such item is possessed by the Cinemex Companies and has not been reflected in
the Closing Balance Sheet, the Net Assets/Liabilities Statement or the other
financial statements of the Cinemex Companies; provided, further, that for
purposes of determining the amount of the Shareholders' liability under this
clause (iv), the actual amount of unpaid Pre-Closing Taxes of the Cinemex
Companies shall be determined on a net basis taking into account any refunds of
Pre-Closing Taxes received by any of the Cinemex Companies and retained by it by
virtue of the application of clause (ii) of Section 8.9(a);
(v) any Disruption referred to in Section 8.2(c) or the Santa Fe Event
referred to in Section 8.2(d);
(vi) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Cinemex Company (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions; or
(vii) any Breach of any representation or warranty made by such
Shareholder in Section 4.7 of this Agreement.
The parties acknowledge that the Percentages of the Shareholders have been
calculated on the basis that they would apply to the Damages that would be
sustained by a purchaser of 100% of the outstanding shares and equity interests
in Cinemex, without giving effect to any indemnification under the Hoyts Stock
Purchase Agreement or the Cinemex Stock Purchase Agreement.
9
(b) Each Shareholder will indemnify and hold harmless the Investor
Indemnified Persons for, and will pay to the Investor Indemnified Persons the
amount of, any Damages arising, directly or indirectly, from or in connection
with:
(i) any Breach of any representation or warranty made by such
Shareholder in Section 4.1, 4.2, 4.3, 4.4, 4.5 or 4.6 of this Agreement;
(ii) any Breach by such Shareholder of any covenant or obligation of
such Shareholder in this Agreement; or
(iii) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with such Shareholder (or any
Person acting on such Shareholder's behalf) in connection with any of the
Contemplated Transactions.
(c) (i) For purposes of this Agreement, a "Disruption" shall mean the
closure of the entire operation of any of the Coapa, ▇▇▇▇▇▇▇ or Universidad
theatres (each, an "Affected Theatre") that (i) continues for more than seven
(7) calendar days; (ii) is caused by the inability of the relevant Cinemex
Company to obtain or renew one or more of the Mexican Governmental
Authorizations for such theatre that is required as of and has not been obtained
as of the Effective Date; and (iii) commences within 18 months of the Effective
Date.
(ii) Notwithstanding anything in this Agreement to the contrary, (i)
the sole Damages sustained by the Investor Indemnified Persons as a result of
any Disruption that terminates within twelve (12) months of the commencement of
such Disruption (each, a "Minor Disruption") shall be equal to the product
obtained by multiplying (A) the projected annual theatre level cash flow for the
Affected Theatre as set forth in Cinemex's fiscal 2002 budget (a copy of which
is attached hereto as Exhibit 8.2(c) (the "Projected Cash Flow") divided by 365;
times (B) the number of calendar days constituting such Minor Disruption less
seven (7); and (ii) the sole Damages sustained by the Investor Indemnified
Persons as a result of any Disruption that continues for twelve (12) months or
more from and after its commencement (a "Major Disruption") shall be equal to
the product obtained by multiplying the Projected Cash Flow for the Affected
Theatre times six (6); provided that if such Affected Theater shall reopen
within eighteen (18) months following the commencement of such Major Disruption
and remain open for twelve (12) continuous months after reopening, the Investor
Indemnified Persons shall reimburse each Shareholder an amount equal to the
excess, if any, of (x) the lesser of (A) the amount paid by that Shareholder to
the Investor Indemnified Persons in respect of the Damages sustained from such
Major Disruption and (B) the product of (I) that Shareholder's Percentage, (II)
the cash flow for the Affected Theater for the twelve (12) month period
immediately following the end of such Major Disruption and (III) six (6) over
(y) the product of (I) that Shareholder's Percentage, (II) the Projected Cash
Flow for the Affected Theater and (III) the quotient obtained by dividing the
number of calendar days constituting such Major Disruption by 365.
(d) (i) For purposes of this Agreement, the "Santa Fe Event" shall mean
the successful suspension, expiration or termination by the landlord of the rent
reduction currently in effect with respect to the Santa Fe theatre lease, dated
March 2, 1995, as amended,
10
other than as a result of the construction and completion of the expansion of
the Santa Fe shopping center by the landlord and the relocation of the Santa Fe
theatre complex elsewhere in the center.
(ii) Notwithstanding anything in this Agreement to the contrary, the
sole Damages sustained by the Investor Indemnified Persons in connection with
the Santa Fe Event shall be in an amount equal to the difference between (A) the
rent payable under the Santa Fe lease for the 12 months following the Santa Fe
Event and (B) the rent that would have been payable under the Santa Fe lease
during such period had the Santa Fe Event not occurred, times six (6).
(e) Notwithstanding anything in this Agreement to the contrary, Damages
sustained by the Buyer Indemnified Persons in connection with the application of
Sections 8.2(a)(v), 8.2(c) and/or 8.2(d) of this Agreement shall be payable as
provided in such Sections so long as, and only if, the Santa Fe Event or any
Disruption, as applicable, occurs within 18 months of the Effective Date.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY INVESTORS. Investors will
jointly and severally indemnify and hold harmless the Shareholders and their
respective Representatives, stockholders, controlling persons and affiliates and
their respective successors and assignees (collectively, the "Shareholder
Indemnified Persons") for, and will pay to the Shareholder Indemnified Persons
the amount of, any Damages arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by either
Investor in this Agreement (without giving effect to any supplement to the
Schedules hereto), the Schedules hereto, the supplements to such Schedules or
any other certificate or document delivered by either Investor pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by either
Investor in this Agreement as if such representation or warranty were made on
and as of the Effective Date without giving effect to any supplement to the
Schedules hereto, other than any such Breach that is disclosed in a supplement
to such Schedules and is expressly identified in the certificate delivered
pursuant to Section 2.2(b)(iv) as an exception to the certification required to
be made by Investors pursuant to such Section;
(c) any Breach by either Investor of any covenant or obligation of such
Investor in this Agreement; or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Investor (or any Person
acting on their behalf) in connection with any of the Contemplated Transactions.
8.4 TIME LIMITATIONS.
(a) A Shareholder will not have liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and
11
complied with prior to the Effective Date, other than those in Sections 3.3,
3.4, 3.5, 3.11 or 3.13 of Schedule B, or Sections 4.1, 4.2, 4.4 or 8.2(a)(iv)
unless on or before the day which is 18 calendar months after the Effective
Time, Investors notify such Shareholder of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Investors. A
claim with respect to:
(i) Section 3.3, 3.4 or 3.5 of Schedule B or Sections 4.1, 4.2 or 4.4
may be made at any time; and
(ii) Section 3.11 or 3.13 of Schedule B or Section 8.2(a)(iv) may be
made upon notice to such Shareholder prior to sixty (60) days after the
expiration of the statute of limitations applicable to the underlying claim (as
it may from time to time be extended), unless no statute of limitations is
applicable to the underlying claim, in which event a claim hereunder may be made
at any time.
(b) Investors will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Effective Date, unless on or before the
day which is 18 calendar months after the Effective Date, the Shareholder
asserting the claim notifies Investors of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by such Shareholder.
8.5 LIMITATIONS ON AMOUNT - SHAREHOLDERS. A Shareholder will not have
liability (for indemnification or otherwise) with respect to the matters
described in Sections 8.2(a)(i), 8.2(a)(ii), 8.2(a)(iii), 8.2(a)(iv), 8.2(a)(v)
or 8.2(a)(vii) until such Shareholder's Attributable Damages exceeds such
Shareholder's Basket Amount and then shall have liability only to the extent
such Shareholder's Attributable Damages exceeds such Shareholder's Basket
Amount. A Shareholder's aggregate liability (for indemnification or otherwise)
with respect to the matters described in Section 8.2(a) shall not exceed such
Shareholder's Cap Amount. Notwithstanding the foregoing, (A) neither such
Shareholder's Cap Amount nor such Shareholder's Basket Amount shall apply to
Damages with respect to (x) the matters described in Section 8.2(b) or (y) any
Breach of any of Cinemex's representations and warranties involving fraud on the
part of such Shareholder and (B) no Shareholder's Basket Amount shall apply to
Damages with respect to the matters described in Section 8.2(a)(vi).
8.6 LIMITATIONS ON AMOUNT - INVESTORS. Investors will not have
liability (for indemnification or otherwise) with respect to the matters
described in Sections 8.3(a), 8.3(b) or 8.3(c) until the total of all Damages
with respect to such matters exceeds the Basket Amount and then Investors shall
only have liability with respect to such matters to the extent such Damages
exceed the Basket Amount. Investors' aggregate liability (for indemnification or
otherwise) with respect to the matters described in Section 8.3 shall not exceed
the Cap Amount. Notwithstanding the foregoing, (A) neither the Cap Amount nor
the Basket Amount shall apply to Damages with respect to any Breach of any of
Investors' representations and warranties involving fraud and (B) the Basket
Amount shall not apply to Damages with respect to matters described in Section
8.3(d).
12
8.7 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 8.2 or
8.3 of notice of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnified party's failure to give such
notice.
(b) If any Proceeding referred to in Section 8.7(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate) to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 8 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnifying party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any good faith compromise or settlement effected by the
indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by, or obligated to provide indemnification with respect
to (unless the basis therefor is established by a separate Proceeding) any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
13
(d) The parties hereto hereby consent to the non-exclusive jurisdiction
of any court in which a Proceeding is brought by any other party other than a
Investor Indemnified Person or a Shareholder Indemnified Person against any
indemnified party for purposes of any claim that an indemnified party may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on each party hereto with respect
to such a claim anywhere in the world; provided, applicable Legal Requirements
are complied with.
8.8 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
Cinemex shall have no obligation (for indemnification or otherwise)
with respect to its representations and warranties in or pursuant to this
Agreement, and the indemnification obligations of the Shareholders shall not be
abated or subject to any defense that Cinemex made the inaccurate representation
and warranty on which the claim is based.
8.9 ADDITIONAL PROVISIONS REGARDING TAX INDEMNIFICATION.
(a) If any of the Cinemex Companies receives any refund (whether such
refund is received directly or indirectly through a right of offset or credit)
of any Pre-Closing Taxes or Taxes otherwise described in Section 8.2(a)(iv) for
which the Shareholders have provided indemnification (other than any refunds in
respect of Transfer Taxes, any refunds accrued or any refunds reflected on the
books and records of any of the Cinemex Companies as of the Closing Date or any
refunds for which any of the Cinemex Companies has made a claim or initiated a
suit as of the Closing Date), then to the extent that such refund exceeds the
aggregate of (A) any Taxes payable by such Cinemex Company attributable to any
Post-Closing Tax Period which Taxes result from the adjustment to or amendment
of Tax Returns that give rise to the refund in question and (B) the Refund
Threshold, upon the actual or deemed receipt of any such refund by any Cinemex
Company or Investors, Cinemex shall promptly pay to each Shareholder an amount
equal to the product of (i) the amount of such refund (including any interest
thereon at the over-payment rate paid by the Governmental Body with respect to
such refund or credit) and (ii) such Shareholder's Percentage. The Shareholders
shall have the right to determine whether any claim for refund for such Taxes
shall be made on behalf of a Cinemex Company. Notwithstanding the preceding
sentence, neither Investors nor any Cinemex Company shall be required to file
any claim for refund that it reasonably believes is not true, correct and
complete in all material respects. Notwithstanding anything provided in this
Section 8.9(a), Investors reserve the right to pay any proposed refund or credit
(including interest thereon) to the Shareholders in cash (in the manner provided
in the first sentence of this Section 8.9(a)) in lieu of the filing of any
amended Tax Return or claim or suit for refund. If the Shareholders elect to
make a claim for refund, Investors and the Cinemex Companies shall cooperate
fully in connection therewith. Each Shareholder shall be responsible to
reimburse Investors and the Cinemex Companies for its Percentage of reasonable
out-of-pocket third- party expenses incurred in providing such cooperation. None
of the Cinemex Companies shall file, and Investors shall not file, and they
shall cause the Cinemex Companies not to file, any amended Tax Return or any
claim for a refund with respect to Pre-Closing Taxes of any of the Cinemex
Companies (y) without the prior consent of the Shareholders, the granting of
which
14
shall be in the Shareholders' sole discretion; or (z) unless Investors or the
relevant Cinemex Company in good faith determines that it is required to do so
under applicable Legal Requirements, and Selected Counsel does not, within
thirty days after Shareholders receive notice of such determination, render a
written legal opinion that the Investors and the Cinemex Companies are not
required to do so under applicable Legal Requirements. Notwithstanding the
foregoing, the Investors or the relevant Cinemex Company may file a claim for a
refund without meeting any of the conditions in clauses (y) or (z) or the
proviso of the preceding sentence, in which case the Shareholders shall have no
obligation to indemnify any of the Investors and the Cinemex Companies for any
Damages for Taxes incurred by any of the Investors or Cinemex Companies as a
consequence of such filing. In the event that Buyers or any of the Cinemex
Companies receives any refund in respect of Transfer Taxes, Cinemex shall
promptly pay to each Shareholder an amount equal to the product of 50% of such
refund and such Shareholder's Percentage. In the event that any Shareholder
receives any refund in respect of Transfer Taxes, such Shareholder shall
promptly pay to Buyers an amount equal to the product of 50% of the refund
received by such Shareholder.
(b) Investors shall be entitled to any refund of any Taxes other than a
refund described in Section 8.9(a), including interest thereon. If any such
refund is paid to any Shareholder, such Shareholder shall promptly pay such
refund (including any interest thereon) to Investors. Investors shall have the
sole right to determine whether any claim for refund for such Taxes shall be
made. If Investors elect to make such a claim for refund, the Shareholders shall
cooperate fully in connection therewith. Investors and the Cinemex Companies
shall be jointly responsible to reimburse the Shareholders for any reasonable
out-of-pocket expenses incurred in providing such cooperation.
(c) Investors shall include in their notice of any claim for
indemnification under Section 8.2(a)(iv) a detailed calculation of the amount of
the requested indemnity payment. The Shareholders shall not be obligated to
indemnify Investors until there has been a Final Determination of the Tax
liability for which indemnification is sought pursuant to Section 8.2(a)(iv). A
"Final Determination" shall mean (i) a final, unappealable decision by a court
of competent jurisdiction, (ii) the expiration of the applicable statute of
limitations, (iii) any other final and irrevocable determination of such Tax
liability, or (iv) the agreement by the Shareholders to pay such Tax liability.
In the event that the pursuit of any Tax Contest (defined in Section 8.9(d)
below) with respect to any Tax liability with respect to which indemnification
under Section 8.2(a)(iv) is sought requires the payment of such Tax or the
posting of any bond or deposit prior to a Final Determination with respect
thereto, the Shareholders shall pay or post any such amount up to the amount for
which they would be required to indemnify the Investors with respect to such Tax
liability if such Tax liability were finally determined to be due. The amount of
Shareholders' indemnification obligation, if any, shall be reduced by the amount
of Tax benefits realized by Investors or any of the Cinemex Companies from the
liabilities for which indemnification is made.
(d) (i) Investors shall inform the Shareholders, and the Shareholders
shall be entitled to control and conduct those audits, examinations or
proceedings, administrative or judicial (a "Tax Contest"), relating to the
Cinemex Companies that are related to (A) the liability for any Taxes for which
the Shareholders would be required to indemnify Investors pursuant to Section
8.2(a)(iv), or (B) a claim for refund for any Taxes that the Shareholders are
entitled to
15
pursuant to this Section 8.9. Costs of any Tax Contest are to be borne by the
party controlling such Tax Contest. Investors shall deliver or cause to be
delivered to the Shareholders any power of attorney required to allow the
Shareholders and their counsel or accountant to represent the relevant Cinemex
Company in connection with the Tax Contest and shall provide the Shareholders
with such assistance as may be reasonably requested by the Shareholders in
connection with the Tax Contest. The Shareholders shall reimburse the relevant
Cinemex Company for reasonable out-of-pocket third party expenses incurred in
providing such assistance.
(ii) Notwithstanding Section 8.9(d)(i), the Shareholders shall consult
in good faith with Investors with respect to the conduct of, or settlement of,
any Tax Contest. The Shareholders shall neither consent nor agree to the
settlement of any Tax Contest without Investors' prior consent which shall not
be unreasonably withheld or delayed, if such consent or agreement would legally
bind, or materially increase the Taxes of, any Cinemex Company in a Post-Closing
Tax Period, provided, however, that the Shareholders shall be entitled to settle
any such contest, even if such settlement would legally bind, or materially
increase the Taxes of, any Cinemex Company in a Post-Closing Tax Period, so long
as the Shareholders reimburse the Cinemex Companies for any liability for
additional Taxes for Post-Closing Periods incurred as a consequence of such
settlement.
(iii) Investors shall inform the Shareholders of any Tax Contest with
regard to any Tax Return of the Cinemex Companies for an Overlap Period or any
other Post-Closing Tax Period that may result in an adjustment to any Tax for
which Shareholders may be liable to indemnify Investors or any Cinemex Company
pursuant to this Agreement. Investors shall control the conduct and resolution
of any such Tax Contest. Costs of such Tax Contests are to be borne by
Investors. Investors shall consult in good faith with the Shareholders with
respect to the conduct of, and before entering into any settlement of, any Tax
Contest that may have a material adverse impact on the liability for Taxes of
the Shareholders, or any Tax for which the Shareholders may be liable to
indemnify Investors or any Cinemex Company pursuant to this Agreement, and shall
not enter into any such settlement without the prior consent of the
Shareholders, which consent shall not be unreasonably withheld or delayed.
(iv) The failure of Investors to inform the Shareholders of a Tax
Contest on a timely basis shall relieve the Shareholders of any liability for
Taxes due, as a result of such Tax Contest, unless Investors can demonstrate
that the failure to timely notify the Shareholders did not prejudice the
Shareholders with respect to the Tax liability that resulted from such Tax
Contest.
(v) Neither the Shareholders nor any affiliate of the Shareholders
shall file any amended Tax Return that may affect the Tax liability of Investors
or any Cinemex Company or any group of affiliated corporations of which Cinemex
or any Cinemex Company is a member.
(vi) Investors shall not file, and shall not allow any of the Cinemex
Companies or any affiliate of any of them to file any amended Tax Return (other
than Tax Returns referred to in Section 8.9(a)), or suit or claim for refund
that may affect the Tax liability of the Shareholders or any liability for Taxes
of which Shareholders may indemnify Investors or any
16
Cinemex Company pursuant to this Agreement without the consent of the
Shareholders, which consent shall not unreasonably be withheld or delayed.
(vii) In the case of any Tax Contest described in Section 8.9(d)(i), if
notice is given to the Shareholders of the commencement of such Tax Contest and
the Shareholders do not, within thirty days after such notice is given, give
notice to Investors of their election to assume the defense of such Tax Contest,
the Shareholders will be bound by any determination made in such Tax Contest or
any good faith compromise or settlement effected by Investors or the relevant
Cinemex Company, as the case may be.
8.10 FILING OF TAX RETURNS. The Shareholders shall prepare and file or
cause to be prepared and filed (at the expense of the Cinemex Companies) on a
timely basis all Tax Returns required to be filed prior to the Closing Date with
respect to the Cinemex Companies for Pre-Closing Tax Periods other than Overlap
Periods. Such Tax Returns shall be prepared in a manner consistent with past
practice of the Cinemex Companies. Investors and the Cinemex Companies shall
cooperate in the execution and filing of such Tax Returns, provided, however,
that Investors and the Cinemex Companies shall not be required to execute or
file any Tax Return that they reasonably believe is not true, correct and
complete in all material respects; provided further, that Investors and the
Cinemex Companies shall be deemed to have consented to the preparation,
execution and filing of Tax Returns to the extent they are prepared in a manner
consistent with past practices of the Cinemex Companies. Investors shall prepare
and file or cause to be prepared and filed all other Tax Returns and reports of
the Cinemex Companies. Investors shall prepare or shall cause to be prepared Tax
Returns for Pre-Closing Tax Periods required to be filed after the Closing Date,
including Tax Returns for Overlap Periods, in a manner consistent with past
practice of the Cinemex Companies. Shareholders shall be provided with and have
the right to review any such Tax Return at least 30 days prior to the due date
of such Tax Return, and such Tax Return shall not be filed without Shareholders'
consent, which shall not be unreasonably withheld or delayed. Shareholders shall
be deemed to have consented to the preparation, execution and filing of such Tax
Returns to the extent they are prepared in a manner consistent with past
practice of the Cinemex Companies.
8.11 COOPERATION ON TAX MATTERS. The Shareholders, Investors and the
Cinemex Companies and their respective affiliates will provide the other parties
with such assistance as may reasonably be requested by any of them in connection
with the preparation of any Tax Return, any Tax Contests, any refund claims, or
any other claim arising under this Agreement, and each will retain and provide
the others with any records or information that may be relevant to any such Tax
Return, audit or examination, proceeding or claim. Such assistance shall include
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder and shall include
providing copies of any relevant Tax Returns and supporting work schedules. The
party requesting assistance hereunder shall reimburse the other parties for
reasonable out of pocket third-party expenses incurred in providing such
assistance. Notwithstanding any other provision of this Agreement, Investors
hereby agree that they will retain, or cause the relevant Cinemex Company to
retain, until all appropriate statutes of limitation (including any extensions)
expire, copies of all Tax Returns, supporting work schedules and other records
or information which may be relevant to such Tax
17
Returns, and that they will not destroy or otherwise dispose of, and will not
allow any of the Cinemex Companies to destroy or otherwise dispose of, such
materials without first providing the Shareholders with a reasonable opportunity
to review and copy such materials.
8.12 ALLOCATION OF TAX LIABILITY FOR OVERLAP PERIODS. In the case of a Tax
Return for a Cinemex Company for an Overlap Period based upon income, gross
receipts (such as sales Taxes) or specific transactions involving Taxes other
than Taxes based upon income or gross receipts, the allocation of Taxes between
the period ending on the Effective Date and the period after the Effective Date
shall be made by means of an interim closing of the books and records of the
Cinemex Company as of the close of the Effective Date and by treating each
period within the Overlap Period as a separate taxable year, provided that
exemptions, allowances or deductions that are calculated on an annual basis
(including, but not limited to, depreciation and amortization deductions) shall
be allocated between the period ending on the Effective Date and the period
after the Effective Date in proportion to the number of days in each such
period. Notwithstanding the foregoing, if the liability for Taxes for an Overlap
Period is determined on a basis other than income or gross receipts or other
than with respect to a specific transaction, the allocation of Taxes to the
period ending on the Effective Date included in the Overlap Period shall be
equal to the amount of such Taxes for the Overlap Period multiplied by a
fraction, the numerator of which is the number of days in such period ending on
the Effective Date and the denominator of which is the total number of days in
the Overlap Period, and the amount of such Taxes allocated to the period
beginning after the Effective Date included in the Overlap Period shall be
excess of the amount of the Taxes for the Overlap Period over the amount of
Taxes attributable to the period ending on the Effective Date included in such
Overlap Period. If the liability for Taxes for the Overlap Period is increased
as a result of any action taken by Investors or any of the Cinemex Companies on
or after the Effective Date, the portion of such additional liability for Taxes
allocated to the period ending on the Effective Date shall be borne by
Investors.
8.13 CERTAIN MISCELLANEOUS TAX MATTERS.
(a) Investors and the Cinemex Companies shall not, and Investors shall
cause the Cinemex Companies not to, make or change any elections, change an
annual accounting period, or adopt or change any accounting method with respect
to any of the Cinemex Companies in a Post-Closing Tax Period, if such action
would have the effect of increasing the Pre-Closing Taxes of any of the Cinemex
Companies (i) without the prior consent of the Shareholders, the granting of
which shall be in the Shareholders' sole discretion; or (ii) unless Investors or
the relevant Cinemex Company in good faith determines that it is required to do
so under applicable Legal Requirements, and Selected Counsel does not, within
thirty days after Shareholders receive notice of such determination, render a
written legal opinion that the Investors and the Cinemex Companies are not
required to do so under applicable Legal Requirements. Notwithstanding the
foregoing, the Investors or the relevant Cinemex Company may take the
contemplated action without meeting any of conditions in clauses(i) or (ii) or
the proviso of the preceding sentence, in which case the Shareholders shall have
no obligation to indemnify any of the Investors and the Cinemex Companies for
any Damages for Taxes incurred by any of the Investors and the Cinemex Companies
as a consequence of such actions.
18
(b) Each of Shareholders and Investors agree not to cause any of the
Cinemex Companies to engage in any transaction on the Effective Date outside of
the ordinary course of business, except the transactions contemplated by this
Agreement.
(c) Investors shall pay fifty percent (50%) of all Transfer Taxes.
8.14 NOTICES AND DETERMINATIONS BY SHAREHOLDERS. With respect to any claim
for indemnification made under Section 8.2(a) or any provision of this Section 8
which contemplates a determination by, a notice from, the consent of, or any
other action by, Shareholders such determination by, notice from, consent of, or
other action by, Shareholders shall, except as provided in this Section 8.14,
require a determination of, notice of or to, consent of, or other action by all
SPA Shareholders, Hoyts, ▇▇▇▇▇▇ and Fastlicht. However, (i) any Shareholder may
exercise its right as an indemnifying party to participate in, but not assume or
control, the defense of an action or proceeding under Section 8.7 at its own
expense, and (ii) any combination of the SPA Shareholders, Hoyts, ▇▇▇▇▇▇ and
Fastlicht with an aggregate Percentage (attributing to Hoyts a Percentage of
29.935% and to each SPA Shareholder a Percentage equal to the percentage set
forth opposite such SPA Shareholder's name on Schedule A hereto under the
caption "Percentage") in excess of 50% may assume the defense of an action or
proceeding in accordance with Section 8.7 if they irrevocably agree with
Investors and Cinemex that for purposes of indemnification and reimbursement for
the matter to which such action or proceeding relates that their aggregate
Percentage (for purposes of this Agreement, the Hoyts Stock Purchase Agreement
and the Cinemex Stock Purchase Agreement) shall be 100% (allocated among them in
proportion to their respective Percentages) and designate a representative for
the conduct of such defense. If clause (ii) of the preceding sentence is
applicable to a matter which results in Damages that would be subject to
indemnification under Section 8.2(a) without regard to Section 8.5 (a
"Reallocated Matter"), then Section 8.5 shall be applied to any other matter
that may be the subject of indemnification under Section 8.2(a) as if the
Percentages and Attributable Damages applicable to, and any payments made with
respect to, the Reallocated Matter had been determined without regard to such
clause(ii). All determinations, notices, consents and other actions referred to
in this Section 8.14 must also be made or given under the Hoyts Stock Purchase
Agreement and the Cinemex Stock Purchase Agreement.
8.15 USE OF COMMERCIALLY REASONABLE EFFORTS. From and after the Effective Date,
Cinemex shall, and Investors shall cause the relevant Cinemex Companies to, use
their commercially reasonable efforts to prevent the occurrence of any
Disruption and/or the Santa Fe Event.
9. GENERAL PROVISIONS.
9.1 EXPENSES. Each party to this Agreement will bear its or his expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel and accountants.
9.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time
19
and in such manner as Investors and Cinemex may agree. Unless consented to by
the parties hereto in advance or required by Legal Requirements, prior to the
Effective Time, Investors, the Shareholders and Cinemex shall, and Cinemex shall
cause the Cinemex Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Cinemex and
Investors will consult with each other concerning the means by which the Cinemex
Companies' employees, customers, and suppliers and others having dealings with
the Cinemex Companies will be informed of the Contemplated Transactions, and
Investors and Cinemex will each have the right to be present for any such
communication.
9.3 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested or (c) when received by
the addressee, if sent by an internationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as another party may designate by notice to the other parties):
Cinemex to:
Grupo Cinemex, S.A. de C.V.
Blvd. ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ No. 40, Piso ▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, D.F.
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ or 5812
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Franck, Galicia y ▇▇▇▇▇▇, S.C.
Torre Del Bosque
Blvd. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 24, Piso 7
Col. ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, Distrito Federal
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Miaja
Facsimile No.: (▇▇▇) ▇▇▇▇-▇▇▇▇-▇▇▇▇
Shareholders to:
To the addresses and Persons identified on Schedule 9.3
20
with copies to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Franck, Galicia y ▇▇▇▇▇▇, S.C.
Torre Del Bosque
Blvd. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 24, Piso 7
Col. ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, Distrito Federal
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Miaja
Facsimile No.: (▇▇▇) ▇▇▇▇-▇▇▇▇-▇▇▇▇
Investors, to:
Cinemex Acquisition, S.A. de C.V.,
Cinemex Acquisition Corp. and
Cinemex LLC
▇/▇ ▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
Paseo de los Tamarindos ▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, Distrito Federal
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇ Carrera
Facsimile No.: (▇▇▇) ▇▇▇▇-▇▇▇▇-▇▇▇▇
with copies to:
Onex Investment Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Oaktree Capital Management, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
21
9.4 JURISDICTION. For any controversy related to this Agreement, the
parties hereto hereby expressly submit to the exclusive jurisdiction and
competence of the courts sitting in Mexico City, Federal District, Mexico,
including, but not limited to, the in personam and subject matter jurisdiction
of those courts, and the parties hereto hereby waive any right they may have to
submit to any other jurisdiction by reason of their domiciles or by any other
reason.
9.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
9.6 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law: (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
9.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
agreements between the parties (other than the Confidentiality Agreement) with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by Investors, in the
event that Investors are to be charged with the amendment or by each
Shareholder, in the event that the Shareholders are to be charged with the
amendment.
9.8 SCHEDULES.
(a) The disclosures in the Schedules, and those in any supplement thereto,
must relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate except to the extent that any
information disclosed in any Schedule to the representations or warranties of
Cinemex or any Shareholder would on its face be manifestly relevant to another
such Schedule.
(b) In the event of any inconsistency between the statements in the body
of this Agreement and those in the Schedules hereto (other than an exception
expressly set forth as such in the Schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
22
(c) Exhibit A and Schedules B and C (including the Annexes and other
attachments thereto) constitute a part of this Agreement as if the provisions
thereof were set forth in their entirety in this Agreement.
9.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement, except as specifically
contemplated by Section 11. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns, except as specifically contemplated
by Section 11. Notwithstanding anything contained in this Section 12.9, no prior
consent of the parties shall be required for the collateral assignment by
Investors to any lender of Investors for security purposes and the assignment
thereof by any such lender or agent to any purchaser in connection with the
exercise by any such lender or agent of all of its rights and remedies as a
secured creditor with respect thereto.
9.10 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.12 GOVERNING LAW. The parties agree that this Agreement shall be
governed by and construed in accordance with the applicable laws of Mexico City,
Federal District, Mexico without giving effect to laws, rules or principles
regarding the conflict of laws.
9.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
*****
23
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
CINEMEX LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Director
CINEMEX ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ A.R. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ A.R. ▇▇▇▇▇▇▇▇▇
Title: Vice President
SYMPHONY ACQUISITION VEHICLE, S.A. DE C.V.
By: /s/ ▇▇▇▇▇▇▇ A.R. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ A.R. ▇▇▇▇▇▇▇▇▇
Title: Vice President
GRUPO CINEMEX, S.A. DE C.V.
By: /s/ ▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇
Title:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇
EXHIBIT A
DEFINITIONS
"Advisors" shall have the meaning set forth in Section 6.1 of Schedule
C to this Agreement.
"Affected Theatre" shall have the meaning set forth in Section 8.2(c).
"Agreement" shall have the meaning set forth in the first paragraph to
this Agreement.
"Ancillary Agreements" shall mean the ▇▇▇▇▇▇ Memorandum, the ▇▇▇▇▇▇
Competition Agreement, the Fastlicht Competition Agreement, the Shareholder
Releases and each the ancillary agreements to be delivered by the respective
parties to the Cinemex Stock Purchase Agreement and the Hoyts Stock Purchase
Agreement.
"Applicable Contract" shall mean any Contract (a) under which any
Cinemex Company has or may acquire any rights, (b) under which any Cinemex
Company has or may become subject to any obligation or liability, or (c) by
which any Cinemex Company or any of the assets owned or used by it is or may
become bound.
"Attributable Damages" shall mean, at any time, with respect to any
Shareholder, the product of (i) the aggregate Damages for the matters described
in Sections 8.2(a)(i), 8.2(a)(ii), 8.2(a)(iii), 8.2(a)(iv), 8.2(a)(v) or
8.2(a)(vii) for which Investors are entitled to indemnification (without regard
to Section 8.5) and (ii) such Shareholder's Percentage.
"Balance Sheet" shall have the meaning set forth in Section 3.6 of
Schedule B to this Agreement.
"Basket Amount" shall mean (i) with respect to any Shareholder, the
product of (x) one and one-half percent (1.5%) of the Equity Value and (y) such
Shareholder's Percentage, and (ii) with respect to Investors, collectively, one
and one-half percent (1.5%) of the Equity Value.
"Best Efforts" shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to attempt to achieve such
result as expeditiously as possible; provided, however, that an obligation to
use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions or would require such Person to pay any consideration or otherwise
incur any liability or obligation except where such consideration, liability or
obligation is insubstantial and immaterial.
"Breach" - a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach or failure.
"BV" shall have the meaning set forth in the Recitals to this
Agreement.
Exh. A-1
"Call Notice" shall have the meaning set forth in Section 7.1.
"Call Shares" shall have the meaning set forth in Section 7.1.
"Cap Amount" shall mean (i) with respect to any Shareholder, the
product of (x) twenty five percent (25%) of the Equity Value and (y) such
Shareholder's Percentage and (ii) with respect to Investors, collectively,
twenty five percent (25%) of the Equity Value.
"Capitalized Lease Obligations" shall mean an obligation to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property which obligation is required to be classified
and accounted for as a capital lease on a balance sheet prepared in accordance
with GAAP, and for purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cinemex" shall have the meaning set forth in the first paragraph of
this Agreement.
"Cinemex Companies" shall mean Cinemex and its Subsidiaries,
collectively.
"Cinemex Indebtedness" shall mean (i) all obligations of the Cinemex
Companies for borrowed money (including, without limitation, the principal
amount outstanding under the Non-Revolving Credit Agreement, dated October 11,
2001, among ▇▇▇▇▇▇ Mexicana de Exhibicion, S.A. de C.V., BankBoston, N.A.,
General Electric Capital Corporation, Scotiabank Inverlat, S.A. and BBVA
Bancomer, S.A. (which, as of the Effective Date, shall be valued at the average
of the bid and ask peso/United States Dollar inter-bank exchange rate agreed to
by Cinemex and Investors on the Effective Date) and any unpaid fees, interest
and other amounts payable thereunder), (ii) all obligations of the Cinemex
Companies evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of the Cinemex Companies to pay the deferred purchase
price of property or services, except current trade accounts payable arising in
the Ordinary Course of Business, (iv) all of the Cinemex Companies' Capitalized
Lease Obligations, and (v) all obligations of the Cinemex Companies to reimburse
or repay any bank or other Person in respect of amounts paid or available to be
drawn under a letter of credit or banker's acceptance (each such obligation to
be valued at the face amount of such instrument).
"Cinemex Stock Purchase Agreement" shall have the meaning set forth in
the Recitals to this Agreement.
"Cleanup" shall mean the cleanup costs or corrective action, including
any investigation, cleanup, removal, containment or other remediation or
response actions.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.4(a).
"CMEX" shall mean CMEX Investors, L.P.
"Common Shares" shall have the meaning set forth in the Recitals to
this Agreement.
"Common Stock" shall mean Cinemex's "Series B" registered, common, with
full voting rights, non-par value shares.
Exh. A-2
"Competing Business" shall have the meaning set forth in Section 3.24
of Schedule B to this Agreement.
"Concentration Trustee" shall have the meaning set forth in the
Recitals to this Agreement.
"Confidentiality Agreement" shall mean the letter agreement, dated May
13, 2002, among Onex Investment Corp., Oaktree Capital Management, Cinemex and
the other parties thereto.
"Consent" shall mean any approval, consent, ratification, waiver or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" shall mean all of the transactions
contemplated by this Agreement, and the following:
(a) the execution, delivery, and performance of the Ancillary
Agreements by the respective parties thereto;
(b) the performance by Investors and Shareholders of their
respective covenants and obligations under this Agreement;
(c) the Recapitalization;
(d) the execution, delivery and performance of the Cinemex Stock
Purchase Agreement and the documents and agreements contemplated thereby by the
parties thereto; and
(e) the execution, delivery and performance of the Hoyts Stock
Purchase Agreement and the documents and agreements contemplated thereby by the
parties thereto.
"Contract" shall mean any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CPHL" shall have the meaning set forth in the Recitals to this
Agreement.
"Damages" shall have the meaning set forth in Section 8.2(a).
"▇▇▇▇▇▇" shall have the meaning set forth in the first paragraph to
this Agreement.
"▇▇▇▇▇▇ Competition Agreement" shall have the meaning set forth in
Section 2.2(a)(iv).
"▇▇▇▇▇▇ Memorandum" shall have the meaning set forth in Section
2.2(a)(ii).
"Disruption" shall have the meaning set forth in Section 8.2(c)(i).
"Effective Date" shall mean the date on which this Agreement becomes
effective in accordance with Section 2.1.
"Effective Time" shall have the meaning set forth in Section 2.1.
Exh. A-3
"Encumbrance" shall mean any charge, claim, community property
interest, condition, lien, option, pledge, mortgage, guaranty trust, easement,
security interest, right of first refusal or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Environment" shall mean soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"Environmental Law" shall mean any Mexican Legal Requirement that
requires or relates to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits or other prohibitions and of the commencement of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release or minimizing
the hazardous characteristics of wastes that are generated;
(d) protecting resources, species or ecological amenities;
(e) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(f) cleaning up pollutants that have been released, preventing the
Threat of Release or paying the costs of such clean up or prevention; or
(g) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"Equity Value" shall mean the sum of $2,750'000,000.00 pesos plus the
Recent Capital Expenditures plus the Net Assets/Liabilities (if a positive
number) or minus the absolute value of the Net Assets/Liabilities (if a negative
number).
"ESOP" shall have the meaning set forth in the Recitals to this
Agreement.
"ESOP Payment" shall have the meaning set forth in the Recitals to this
Agreement.
"Existing Stockholders Agreement" shall mean that certain Amendment and
Restated Stockholders Agreement, dated as of May 29, 1997, among ▇▇ ▇▇▇▇▇▇
International Capital Corp., CMEX, SRL and certain other parties.
Exh. A-4
"Facilities" shall mean any real estate property, leaseholds or other
similar interests currently or formerly owned or operated by any Cinemex Company
and any buildings, plants, structures or equipment (including motor vehicles)
currently or formerly owned, leased or operated by any Cinemex Company.
"Family" of an individual includes (i) the individual, (ii) the
individual's spouse and former spouses, (iii) any other natural person who is a
child or grandchild of such individual's grandparents, and (iv) any other
natural person who regularly resides with such individual.
"Fastlicht" shall have the meaning set forth in the first paragraph to
this Agreement.
"Fastlicht Competition Agreement" shall have the meaning set forth in
Section 2.2(a)(v).
"GAAP" shall mean generally accepted accounting principles in Mexico.
"General Shareholders Meeting" shall have the meaning set forth in the
Recitals to this Agreement.
"Governmental Authorization" shall mean any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental authority of any nature (including any governmental
agency, branch, department, official or entity, centralized or decentralized,
commission, government owned or controlled entities and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Activity" shall mean the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from the Facilities or any part thereof into the Environment, and any
other act, business or operation that poses an unreasonable risk of harm to
persons or property on or off the Facilities, or that may affect the value of
the Facilities or the Cinemex Companies, as the case may be.
"Hazardous Materials" shall mean any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a
▇▇▇. ▇-▇
pollutant or a contaminant in amounts and concentrations which are regulated
under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and friable asbestos or friable
asbestos-containing materials.
"HCAL" shall have the meaning set forth in the Recitals to this
Agreement.
"HCL" shall have the meaning set forth in the Recitals to this
Agreement.
"HET" shall have the meaning set forth in the Recitals to this
Agreement.
"HSR Act" shall mean the U.S. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"Hoyts" shall have the meaning set forth in the Recitals to this
Agreement.
"Hoyts Stock Purchase Agreement" shall have the meaning set forth in
the Recitals to this Agreement.
"Interim Balance Sheet" shall have the meaning set forth in Section 3.6
of Schedule B to this Agreement.
"Investor Indemnified Persons" shall have the meaning set forth in
Section 8.2(a).
"Investors" shall mean USAC, USLLC and MAV, collectively.
"JPM" shall mean JPMCC Belgium, SCA, and Sixty Wall Street Belgium,
SCA, collectively.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of performance of such
individual's regular employment duties.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, general partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time prior to the Effective Time had, Knowledge of such
fact or other matter.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, decree, ordinance, regulation, statute or treaty.
"Major Disruption" shall have the meaning set forth in Section
8.2(c)(ii).
Exh. A-6
"Management Trust Agreement" shall mean that certain Trust Agreement
No. F25234, dated as of March 24, 1995, among Cinemex, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ Fastlicht ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and BBVA Bancomer, S.A.,
Institucion de Banca Multiple, Grupo Financiero, as trustee, as amended.
"Material Adverse Effect" shall mean any events, changes or effects
which, individually or in the aggregate, would have a material adverse effect on
the business, operations, assets, financial condition or results of operations
of the Cinemex Companies, taken as a whole; provided, however, that in
determining whether there has been a Material Adverse Effect, any adverse effect
principally attributable to either of the following shall be disregarded: (i)
general political, economic, business, industry or financial market conditions;
and (ii) the taking of any action specifically required by this Agreement.
"MAV" shall have the meaning set forth in the first paragraph to this
Agreement.
"Mexican Governmental Authorization" shall mean any Governmental
Authorization issued, granted, given or otherwise made available by or under the
authority of any Mexican Governmental Body or pursuant to any Mexican Legal
Requirement.
"Mexican Governmental Body" shall mean any:
(a) Mexican federal, state, county, city, town, village, district or
other jurisdiction of any nature;
(b) Mexican federal, state, local, municipal, or other government;
(c) Mexican governmental authority of any nature (including any
governmental agency, branch, department, official or entity, centralized or
decentralized, commission, government owned or controlled entities and any court
or other tribunal);
(d) multi-national organization or body of which Mexico is a party;
or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature in Mexico.
"Mexican Legal Requirement" shall mean any administrative order,
constitution, law, decree, ordinance, regulation or statute enacted or
promulgated by any Mexican Governmental Body.
"Mexico" shall mean the United Mexican States.
"Minor Disruption" shall have the meaning set forth in Section 8.2(c).
"Net Assets/Liabilities" shall mean, with respect to the Cinemex
Companies, as of the close of business on the Effective Date (unless another
date is specified in this Agreement or the Cinemex Stock Purchase Agreement or
the Hoyts Stock Purchase Agreement), (a) the sum of (i) current assets, (ii)
long-term employee receivables and (iii) long-term creditable value added taxes,
minus (b) all Cinemex Indebtedness and other current and deferred liabilities
(including
Exh. A-7
without limitation the amount of advance sales and any amounts payable in
respect of expenses to be paid by Cinemex in accordance with Section 11.1 of the
Cinemex Stock Purchase Agreement unless such expenses are satisfied prior to the
date as of which Net Assets/Liabilities is being determined) and (ii) $922,000
pesos, as shall be finally determined in accordance with Section 2.6 of the
Cinemex Stock Purchase Agreement. Net Assets/Liabilities may be a positive or
negative number and shall be in pesos. For this purpose, there shall be taken
into account $13'500,000 pesos in respect of liability for deferred income taxes
and no amount in respect of short-term or long-term deferred income for advances
by the Coca Cola Company. In determining Net Assets/Liabilities, (i) any funds
advanced by Investors or their affiliates (whether as loans, capital or similar
contributions, amounts in respect of future capital increases or otherwise)
shall be disregarded, (ii) the amount of the ESOP Payment shall, unless
satisfied from current assets, prior to the date as of which Net
Assets/Liabilities is being determined, be treated as a current liability and
(iii) the receivable from certain of the Cinemex's shareholders (in the amount
of $922,000 pesos as of May 31, 2002) shall be disregarded.
"Net Assets/Liabilities Statement" shall mean the "Net
Assets/Liabilities Statement" delivered by the buyers under the Cinemex Stock
Purchase Agreement pursuant to Section 2.6(a) of that agreement.
"Order" shall mean any award, decision, injunction, judgment,
settlement, order, ruling, subpoena or verdict entered, issued, made, or
rendered by any court, administrative agency or other Governmental Body or by
any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business, of comparable size in terms of revenue, and similarly
closely-held in terms of stock ownership, as such Person.
"Organizational Documents" shall mean (a) the articles or certificate
of incorporation, the by-laws or code of regulations, shareholder resolutions
and transitory clauses of a corporation; (b) the partnership agreement and any
statement of partnership of a general partnership; (c) the limited partnership
agreement and the certificate of limited partnership of a limited partnership;
(d) the operating or limited liability company agreement and the certificate of
formation of a limited liability company; (e) any charter, joint venture
agreement or similar document adopted or filed in connection with the creation,
formation or organization of a Person; and (f) any amendment to any of the
foregoing.
Exh. A-8
"Overlap Period" means any taxable period beginning on or before and
ending after the Effective Date.
"Partly-Owned Person" shall mean, with respect to any Person, any
corporation or other Person (other than a Subsidiary of the first Person) of
which securities or other interests are held by such Person or one or more of
its Subsidiaries.
"Percentage" shall mean with respect to each Shareholder, the
percentage set forth opposite such Shareholder's name under the caption
"Percentage" in Schedule A to this Agreement.
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"pesos" or "$" shall mean Mexican pesos, legal tender of Mexico (except
where otherwise specifically indicated to be United States dollars).
"Plans" shall have the meaning set forth in Section 3.13(a) of Schedule
B to this Agreement.
"Post-Closing Adjustment Notice Date" shall have the meaning set forth
in Section 2.6.
"Post-Closing Representative" shall have the meaning set forth in
Section 2.6.
"Post-Closing Tax Period" means (i) any taxable period beginning after
the Effective Date and (ii) the portion of any Overlap Period beginning
immediately after the Effective Date and ending on the close of business of the
last day of such Overlap Period.
"Pre-Closing Tax Period" means (i) any taxable period ending on or
before the close of business of the Effective Date and (ii) the portion of any
Overlap Period beginning on the first day of such Overlap Period and ending on
the close of business of the Effective Date.
"Pre-Closing Taxes" shall mean the Taxes attributable to any
Pre-Closing Tax Period.
"Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, commercial, labor,
tax, administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Body, arbitrator or
other tribunal.
"Projected Cash Flow" shall have the meaning set forth in Section
8.2(c).
"Protest Notice" shall have the meaning set forth in Section 2.4(b).
"Reallocated Matter" shall have the meaning set forth in Section 8.14.
"Recapitalization" shall have the meaning set forth in the Recitals to
this Agreement.
Exh. A-9
"Recent Capital Expenditures" shall mean the aggregate amount of
capital expenditures made by the Cinemex Companies subsequent to April 1, 2002
and through and including the Effective Date in the projects identified on Annex
3.9 to Schedule B to this Agreement solely to the extent that the cumulative
total amount expended on such projects by the Cinemex Companies exceeds
$74'500,000.00 pesos, as shall be determined in accordance with Section 2.6.
"Refund Threshold" shall mean, at any time, 0.5% of Equity Value,
reduced by amounts of refunds of Pre-Closing Taxes previously received by any
Cinemex Company and retained by it pursuant to the application of clause (ii) of
Section 8.9(a).
"Related Person" shall mean, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition "Material Interest" shall mean
direct or indirect beneficial ownership of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding shares or equity interests in a Person.
Exh. A-10
For purposes of this definition "control" shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Release" shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the Environment,
whether intentional or unintentional.
"Representative" shall mean, with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
"Required Shareholders" shall have the meaning set forth in Section
2.4.
"Santa Fe Event" shall have the meaning set forth in Section 8.2(d)(i).
"SAS" shall have the meaning set forth in the Recitals to this
Agreement.
"Selected Counsel" shall mean Chevez, Ruiz, ▇▇▇▇▇▇▇▇▇ y Cia, S.C. or,
if that firm is unavailable, a law firm of comparable reputation and stature
selected by Investors and the Shareholders (acting in the manner provided in
Section 8.14).
"Series P Preferred Stock" shall mean Cinemex's registered, preferred,
Series "P" non par value shares.
"Series PRD Preferred Stock" shall mean Cinemex's registered,
preferred, with right to special dividend, redeemable, callable, Series "PRD"
non-par value shares.
"Series PRD Shares" shall mean the shares of Series PRD Preferred Stock
owned by ▇▇▇▇▇▇ and Fastlicht, collectively.
"Shareholders" shall mean ▇▇▇▇▇▇ and Fastlicht.
"Shareholder Indemnified Persons" shall have the meaning set forth in
Section 8.3.
"Shareholder Releases" shall have the meaning set forth in Section
2.3(a)(i).
"SPA Shareholders" shall mean each of the shareholders of Cinemex who
are party to the Cinemex Stock Purchase Agreement.
"SRL" shall have the meaning set forth in the Recitals to this
Agreement.
"Subsidiary" shall mean, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
Exh. A-11
"Tax" shall mean any tax or contribution (including any income,
transfer, capital gains, value-added, sales, property, gift, estate, excise,
employment, severance, stamp, occupation, premium, windfall profits, capital
stock, franchise, withholding, social security, housing fund, savings retirement
funds, profit sharing, unemployment, disability, use, registration, alternative
minimum or add-on minimum, estimated or other tax of any kind whatsoever), levy,
assessment, tariff, duty (including any customs duty), rights (including
utilities) deficiency or other fee, and any related charge or amount (including
any fine, penalty, interest or addition to tax), imposed, assessed or collected
by or under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of or indemnification for or against payment of any such tax, levy, assessment,
tariff, duty, deficiency or fee.
"Tax Contest" shall have the meaning set forth in Section 8.9(d)(i).
"Tax Return" shall mean any return (including any information return),
report (including by authorized external accountant), statement, schedule,
notice, form or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax, including any
amendment thereof.
"Threatened" - a claim, Proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing or any notice has been given in writing that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action or
other matter is reasonably likely to be asserted, commenced, taken or otherwise
pursued in the future.
"Transfer Tax" shall mean any sale, use, transfer, excise or similar
Tax imposed on any transfer of stock that is consummated as part of the
Contemplated Transactions. Transfer Tax shall not include any income or gross
receipts Tax imposed on any Shareholder, whether directly or through a
withholding mechanism.
"United States" shall mean the United States of America, including the
commonwealths, territories and possessions thereof.
"USAC" shall have the meaning set forth in the first paragraph of this
Agreement.
"USLLC" shall have the meaning set forth in the first paragraph of this
Agreement.
Exh. A-12
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF CINEMEX
3. REPRESENTATIONS AND WARRANTIES OF CINEMEX.
Cinemex represents and warrants to Investors:
3.1 ORGANIZATION. Annex 3.1 to this Schedule B sets forth a complete
and accurate list of the Cinemex Companies (including the identity of each
stockholder or other equity holder and the number of shares of capital stock
held by each). Each Cinemex Company is a corporation duly organized and validly
existing under the laws of Mexico, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use and to perform all of its obligations
under the Applicable Contracts. Cinemex holds interests in each Partly-Owned
Person as set forth in Annex 3.1 to this Schedule B.
3.2 AUTHORITY; NO CONFLICT.
(a) The execution, delivery and performance by Cinemex of this
Agreement, the Cinemex Stock Purchase Agreement, the Hoyts Stock Purchase
Agreement and each of the Ancillary Agreements to which Cinemex is a party and
the consummation and performance by Cinemex of the Contemplated Transactions
have been duly authorized by all necessary action on the part of Cinemex. This
Agreement, the Cinemex Stock Purchase Agreement, the Hoyts Stock Purchase
Agreement and each of the Ancillary Agreements to which Cinemex is a party
constitute the legal, valid and binding obligations of Cinemex, enforceable
against Cinemex in accordance with their terms. Cinemex has the absolute and
unrestricted right, power and authority to execute and deliver this Agreement,
the Cinemex Stock Purchase Agreement, the Hoyts Stock Purchase Agreement and
each of the Ancillary Agreements to which Cinemex is a party and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Annex 3.2 to this Schedule B, neither
the execution and delivery of this Agreement, the Cinemex Stock Purchase
Agreement, the Hoyts Stock Purchase Agreement or any of the Ancillary Agreements
to which Cinemex is a party, nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (1)
any provision of the Organizational Documents of the Cinemex Companies,
or (2) any resolution adopted by the board of directors (or similar
governing body) or the stockholders of any Cinemex Company;
(ii) contravene, conflict with, or result in a violation of
any Mexican Legal Requirement or any Order to which any Cinemex
Company, or any of the assets owned or used under legal title by any
Cinemex Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Mexican Governmental
Body the right to revoke,
Sch. B-1
withdraw, suspend, cancel, terminate or modify, any Mexican
Governmental Authorization that is held by any Cinemex Company or that
otherwise relates to the business of, or any of the assets owned or
used by, any Cinemex Company;
(iv) cause any Cinemex Company to become subject to, or to
become liable for the payment of, any Mexican Tax;
(v) cause any of the assets owned by any Cinemex Company to be
reassessed or revalued by any taxing authority or other Governmental
Body;
(vi) contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any Applicable
Contract listed on Annex 3.17(a) to this Schedule B; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used under legal
title by any Cinemex Company.
Except as set forth in Annex 3.2 to this Schedule B, no Cinemex Company
is or will be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of the Contemplated Transactions.
3.3 CAPITALIZATION AS OF IMMEDIATELY PRIOR TO THE RECAPITALIZATION. As
of immediately prior to the Recapitalization, the authorized capital stock of
Cinemex consisted of 4,381,498 shares of Common Stock, of which 3,801,449 shares
of Common Stock were issued and outstanding. Cinemex's stock registry book
reflects that, as of immediately prior to the Recapitalization, each Person
named on Annex 3.3 to this Schedule B was the holder of the shares of Common
Stock set forth opposite such Person's name on Annex 3.3 to this Schedule B (in
the amounts indicated on Annex 3.3 to this Schedule B). All of the shares of
each Cinemex Company issued and outstanding as of immediately prior to the
Recapitalization were duly authorized and validly issued and were fully paid and
nonassessable.
3.4 RECAPITALIZATION.
(a) Each step of the Recapitalization (i) was effected by Cinemex
on June 7, 2002, pursuant to the General Shareholders Meeting, (ii) was duly
authorized by all necessary action on the part of Cinemex and its shareholders,
(iii) did not contravene, conflict with, or result in a violation of (1) any
provision of Cinemex's Organizational Documents, or (2) any resolution adopted
by Cinemex's board of directors or its shareholders and (iv) did not contravene,
conflict with, or result in a violation of any Mexican Legal Requirement or any
Order to which any Cinemex Company, was subject. A true and complete copy of
Cinemex's bylaws as amended in the Recapitalization is attached to Annex 3.4 to
this Schedule B.
(b) The General Shareholders Meeting was duly called as instructed
by Cinemex's board of directors and complied with all provisions of Cinemex's
Organizational
Sch. B-2
Documents and all Mexican Legal Requirements. A true and correct copy of the
minutes of the General Shareholders Meeting is attached to Annex 3.4 to this
Schedule B.
3.5 CURRENT CAPITALIZATION.
After giving effect to the Recapitalization and at all times thereafter
through the Effective Time:
(a) The authorized capital stock of Cinemex consists of 209,773
shares of Common Stock, 3,140,347 shares of Series P Preferred Stock, and
426,121 shares of Series PRD Preferred Stock, all of which are issued and
outstanding. Annex 3.5(a) to this Schedule B contains an accurate and complete
list of all of the holders of the Common Stock, the Series P Preferred Stock and
the Series PRD Preferred Stock (including the number (and type) of shares held
by each such holder). Cinemex's stock registry book reflects that each Person
named on Annex 3.5(a) to this Schedule B is the holder of the shares of Common
Stock, Series P Preferred Stock or Series PRD Preferred Stock, as the case may
be, set forth opposite such Person's name on Annex 3.5(a) to this Schedule B (in
the amounts indicated on Annex 3.5(a) to this Schedule B), and no Encumbrances
on such shares of capital stock are recorded on such stock registry book. All of
the shares of the Cinemex Companies have been duly authorized and validly issued
and are fully paid and nonassessable.
(b) Cinemex's stock registry book does not reflect that there are
any Contracts relating to the issuance, sale or transfer of any equity
securities of any Cinemex Company or the repurchase, redemption or other
acquisition of any equity securities of any Cinemex Company. There are no
Contracts to which any Cinemex Company is a party relating to the issuance, sale
or transfer of any equity securities of any Cinemex Company or the repurchase,
redemption or other acquisition of any equity securities of any Cinemex Company.
Cinemex's stock registry book does not reflect any options, warrants,
convertible securities or rights that are or may become exercisable or
exchangeable for, convertible into, or that otherwise give the holder any right
to acquire shares of capital stock of any Cinemex Company or to receive payments
based in whole or in part upon the value of the capital stock of any Cinemex
Company. There are no options, warrants, convertible securities or rights to
which any Cinemex Company is a party that are or may become exercisable or
exchangeable for, convertible into, or that otherwise give the holder any right
to acquire shares of capital stock of any Cinemex Company or to receive payments
based in whole or in part upon the value of the capital stock of any Cinemex
Company. None of the equity securities of Cinemex were issued in violation of
any Mexican Legal Requirement. Except as set forth in Annex 3.5(b) to this
Schedule B, no Cinemex Company owns, or has any Contract to acquire, any equity
securities of any Person (other than any Subsidiary of Cinemex) or any direct or
indirect equity or ownership interest in any other business.
3.6 FINANCIAL STATEMENTS. Cinemex has delivered to Investors: (a)
audited consolidated balance sheets of the Cinemex Companies as of December 31,
2001 (the "Balance Sheet") and the related audited consolidated statements of
income, retained earnings and cash flow for the fiscal year then ended, together
with the notes thereto and the report thereon by ▇▇▇▇ ▇▇▇▇▇▇▇ y Cia, S.C.,
independent certified public accountants, (b) audited consolidated balance
sheets of the Cinemex Companies as of December 31 in each of the years 1997
through 2000 and
Sch. B-3
the related audited consolidated statements of income, retained earnings and
cash flow for each of the fiscal years then ended, together with the notes
thereto and the report thereon by ▇▇▇▇ ▇▇▇▇▇▇▇ y Cia, S.C., independent
certified public accountants, and (c) the unaudited consolidated balance sheet
and statement of income of the Cinemex Companies as at March 31, 2002 (the
"Interim Balance Sheet"). Such financial statements and notes fairly present the
financial condition and the results of operations and, where provided, cash
flows of the Cinemex Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which would not, individually or in the aggregate,
reasonably expected to have a Material Adverse Effect and to the absence of
footnotes; the financial statements referred to in this Section 5.6 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Cinemex Companies are required
by GAAP to be included in the consolidated financial statements of Cinemex.
Attached to Annex 3.6 to Schedule B are the Cinemex Companies' consolidated
financial statements as of May 31, 2002.
3.7 BOOKS AND RECORDS. Except as set forth in Annex 3.7 to this
Schedule B, the minute books, stock registry books, capital variations books and
other corporate records of the Cinemex Companies, all of which have been made
available to Investors are complete and correct in all material respects. Except
as set forth on Annex 3.7 to this Schedule B, the minute books of the Cinemex
Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the boards of directors (or similar
governing bodies) and committees of the boards of directors (or similar
governing bodies) of the Cinemex Companies, and no meeting of any such
stockholders, board of directors (or similar governing body) or committees has
been held for which minutes have not been prepared and are not contained in such
minute books. At the Effective Time, all of those books and records will be in
the possession of the Cinemex Companies or its Mexican counsel.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Annex 3.8 to this Schedule B
contains a complete and accurate list of all real estate property, leaseholds or
other similar interests owned by any Cinemex Company. Cinemex has made available
to Investors copies of the deeds and other instruments by which the Cinemex
Companies acquired such real estate property and other interests. The Cinemex
Companies own (with good and marketable title in the case of real estate
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real estate property, personal property or
mixed and whether tangible or intangible) that they purport to own. Except as
set forth in Annex 3.8 to this Schedule B, all material properties and assets
owned by Cinemex are free and clear of all Encumbrances and are not, in the case
of real estate property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
except, with respect to all such material properties and assets, (a) mortgages,
guaranty trusts or security interests, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (b) liens for current Taxes not yet due, (c) Encumbrances or minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or materially impairs the use of the property
subject thereto, or materially impairs the operations of any Cinemex Company,
and (d) with respect to real estate property, zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. All
Sch. B-4
buildings, plants and structures owned by the Cinemex Companies lie wholly
within the boundaries of the real estate property owned or leased by the Cinemex
Companies and do not encroach upon the property of, or, except as set forth on
Annex 3.8 to this Schedule B, or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, otherwise conflict
with the property rights of any other Person.
3.9 CONDITION AND SUFFICIENCY OF ASSETS, RECENT CAPITAL EXPENDITURES.
(a) To Cinemex's Knowledge, except as set forth in Annex 3.9 to
this Schedule B, the buildings, plants, structures and equipment of the Cinemex
Companies are structurally sound, are in good operating condition and repair and
are adequate for the uses to which they are being put, and none of such
buildings, plants, structures or equipment is in need of maintenance or repairs
other than maintenance and repairs consistent in nature and cost with the
maintenance and repairs made by the Cinemex Companies in the Ordinary Course of
Business during the 12-month period preceding the Effective Date.
(b) Except as set forth on Annex 3.9 to this Schedule B, as of May
31, 2002 the Cinemex Companies have made no capital expenditures subsequent to
April 1, 2002 on the projects identified on Annex 3.9 to this Schedule B which,
when aggregated with the cumulative total amount expended on such projects by
the Cinemex Companies, causes the total amount expended on such projects to
exceed $74'500,000.00 pesos.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth on Annex 3.10 to
this Schedule B, the Cinemex Companies have no liabilities or obligations of any
nature that would be required to be reflected or disclosed on the Balance Sheet
or in the notes thereto under GAAP, except for (a) liabilities or obligations
reflected or reserved against in the Balance Sheet or in the notes thereto or
the Interim Balance Sheet and (b) current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.11 TAXES.
(a) The Cinemex Companies have filed or caused to be filed on a
timely basis all material Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Mexican Legal Requirements. Cinemex has
delivered or made available to Investors copies of all such Tax Returns filed
since 1998. The Cinemex Companies have paid, or made provision for the payment
of, all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by any Cinemex Company, except
such Taxes, if any, as are listed in Annex 3.11 to this Schedule B and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet and the Interim
Balance Sheet.
(b) All deficiencies proposed as a result of audits of such Tax
Returns have been paid, reserved against, settled or are being contested in good
faith by appropriate proceedings. No Cinemex Company has been informed of any
pending audit relating to any Cinemex Company or any Tax Return of any Cinemex
Company. Except as described in Annex 3.11 to this Schedule B, no Cinemex
Company has given or been requested to give waivers or
Sch. B-5
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations which remain in effect relating to
the payment of Taxes of any Cinemex Company or for which any Cinemex Company may
be liable.
(c) The charges, accruals, and reserves with respect to all
material Taxes on the books of the Cinemex Companies as a whole are adequate
(determined in accordance with GAAP) and fairly approximate the Cinemex
Companies liability for Taxes accrued as of the date hereof. To the Knowledge of
Cinemex, there exists no written (or, within the past 12-months, any other)
proposed tax assessment against any Cinemex Company except as disclosed in the
Balance Sheet or in Annex 3.11 to this Schedule B. All Taxes that any Cinemex
Company is or was required by Mexican Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) any Cinemex Company, as amended, are true, correct and complete in all
material respects. There is no tax sharing agreement that will require any
payment by any Cinemex Company (other than to, or on behalf of, another Cinemex
Company) after the Effective Date.
(e) Except as set forth on Annex 3.11 to this Schedule B, no
Cinemex Company is currently the beneficiary of any extension of time within
which to file any material Tax Return. Except as set forth in Annex 3.11 to the
Knowledge of Cinemex to this Schedule B, no written (or, within the last
12-months, any other) claim has ever been made to any Cinemex Company by any
authority in a jurisdiction where any Cinemex Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction in any material
respect.
3.12 NO MATERIAL ADVERSE EFFECT. Since the date of the Balance Sheet,
there has not been any Material Adverse Effect.
3.13 EMPLOYEE BENEFITS.
(a) Except as provided by law or as set forth in Annex 3.13 to this
Schedule B hereto, none of the Cinemex Companies is a party to or bound by (i)
any Contracts with any of the members of the Board of Directors of any Cinemex
Company; or (ii) any bonus, deferred compensation, severance pay, profit
sharing, pension, retirement, stock purchase, stock option, insurance (including
life, retirement, medical, dental or other insurance), or other material plans,
fringe benefit or any other employee benefit plan, whether formal or informal,
relating to any Cinemex Company, except for the payment of bonuses, deferred
compensation, severance amounts or fringe benefits to individual employees in
the Ordinary Course of Business that are determined or made on an individual
basis and are not generally available to (and which do not create any obligation
to) other employees or groups of employees of any Cinemex Company (collectively,
the "Plans"). With respect to each Plan, true, correct and complete copies of
each material document related to such Plan (including without limitation,
agreement, trust, insurance contract, arrangement, and each amendment thereto)
have been made available or have been delivered to Investors.
Sch. B-6
(b) Each Cinemex Company has performed and complied in all material
respects with all of their obligations under and with respect to the Plans,
subject to such exceptions as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect and each of the Plans
has, at all times, in form, operation and administration complied in all
material respects with its terms and all other applicable Mexican Legal
Requirements.
3.14 COMPLIANCE WITH MEXICAN LEGAL REQUIREMENTS; MEXICAN GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Annex 3.14 to this Schedule B or as
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect:
(i) each Cinemex Company is, and at all times since January 1,
2000 has been, in compliance with each Mexican Legal Requirement that
is or was applicable to it or to the conduct or operation of its
business or the ownership, possession, or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a
violation by any Cinemex Company of, or a failure on the part of any
Cinemex Company to comply with, any Mexican Legal Requirement, or (B)
may give rise to any obligation on the part of any Cinemex Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature required under any Mexican Legal Requirement; and
(iii) no Cinemex Company has received, at any time since
January 1, 2000, any notice or other written communication from any
Mexican Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of, or failure to comply with,
any Mexican Legal Requirement, or (B) any actual, alleged, possible or
potential obligation on the part of any Cinemex Company to undertake,
or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Each Cinemex Company holds all Mexican Governmental
Authorizations required to be held by such Cinemex Company (and such Mexican
Governmental Authorizations are valid and in full force and effect) except where
the failure to hold such Mexican Governmental Authorizations would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. Except as set forth in Annex 3.14 to this Schedule B or as would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect:
(i) each Cinemex Company is, and at all times since January 1,
2000 has been, in full compliance with all of the terms and
requirements of each Mexican Governmental Authorization held by such
Cinemex Company;
(ii) no Cinemex Company has received, at any time since
January 1, 2000, any notice or other written communication from any
Mexican Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of or failure to comply with
any term or requirement of any Mexican Governmental
Sch. B-7
Authorization held by such Cinemex Company, or (B) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Mexican
Governmental Authorization held by such Cinemex Company;
(iii) all applications required to have been filed for the
renewal of the Mexican Governmental Authorizations held by any Cinemex
Company listed on Annex 3.14 to this Schedule B have been duly filed on
a timely basis with the appropriate Mexican Governmental Bodies, and
all other filings required to have been made with respect to such
Mexican Governmental Authorizations have been duly made on a timely
basis with the appropriate Mexican Governmental Bodies; and
(iv) the Cinemex Companies collectively hold all Mexican
Governmental Authorizations necessary to permit them to lawfully
conduct and operate their businesses in the manner they currently
conduct and operate such businesses and to permit them to own and use
their assets in the manner in which they currently own and use such
assets.
(c) Except as set forth on Annex 3.14 to this Schedule B, the
Cinemex Companies collectively hold all Mexican Governmental Authorizations the
failure to hold of which (i) could reasonably be expected to lead to the
temporary or permanent closure of any motion picture theater, or the principal
concession operation of any motion picture theater, owned or operated by any
Cinemex Company or (ii) could reasonably be expected to render unlawful the
operation of any motion picture theater, or the principal concession operation
of any motion picture theater, owned or operated by any Cinemex Company.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Annex 3.15 to this Schedule B, there are
no pending Proceedings:
(i) that have been commenced by or against any Cinemex Company
or that would otherwise, individually or in the aggregate, reasonably
be expected to have Material Adverse Effect; or
(ii) that challenge, or that would, individually or in the
aggregate, reasonably be expected to have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Cinemex, no such Proceedings have been Threatened.
Cinemex has made available to Investors copies of all pleadings, correspondence
and other documents relating to each Proceeding listed in Annex 3.15 to this
Schedule B.
(b) Except as set forth in Annex 3.15 to this Schedule B:
(i) there is no Order to which any of the Cinemex Companies,
or any of the assets owned or used under legal title by any Cinemex
Company, is subject; and
Sch. B-8
(ii) to the Knowledge of Cinemex, no officer, director, agent
or key employee of any Cinemex Company is subject to any Order that
prohibits such officer, director, agent or key employee from engaging
in or continuing any conduct, activity or practice material to the
business of any Cinemex Company.
(c) Except as set forth in Annex 3.15 to this Schedule B:
(i) each Cinemex Company is, and at all times since January 1,
2000 has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned,
leased, or used under legal title by it, is or has been subject,
subject to such exceptions which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
and
(ii) no Cinemex Company has received, at any time since
January 1, 2000, any notice or other communication (oral or written)
from any Mexican Governmental Body or any other Person regarding any
actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which any Cinemex
Company, or any of the assets owned or used under legal title by any
Cinemex Company, is or has been subject, which would, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Annex 3.16 to this Schedule B, since the date of the Balance Sheet, the Cinemex
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been, other than as part of the Recapitalization,
any:
(a) change in any Cinemex Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Cinemex Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Cinemex Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Cinemex
Company;
(c) payment or increase by any Cinemex Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer (except
for payment at the rates in effect on the date of the Balance Sheet, or except
in the Ordinary Course of Business) employee, or entry into any employment,
severance or similar Contract with any director, officer or employee;
(d) adoption of, or increase in the payments to or benefits under,
any Plan;
(e) damage to or destruction or loss of any asset or property of
any Cinemex Company, whether or not covered by insurance, which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
Sch. B-9
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, lease, or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by or to any Cinemex Company
of at least $2'500,000 pesos (excluding film Contracts, screen advertising
Contracts having a duration of less than one year, internet provider Contracts
and, solely in the case of the entering into of Contracts, the other Contracts
disclosed on Annex 3.17(a) to Schedule B);
(g) sale (other than sales of inventory in the Ordinary Course of
Business and sales or other dispositions of equipment deemed surplus, obsolete
or no longer necessary to the business of any Cinemex Company), lease or other
disposition of any material asset or property of any Cinemex Company or
mortgage, pledge or imposition of any Encumbrance on any material asset or
property of any Cinemex Company, including the sale, lease or other disposition
of any material intellectual property;
(h) cancellation or waiver of any claims or rights with, to
Cinemex's Knowledge, a value to any Cinemex Company in excess of $1'000,000
pesos;
(i) change in the accounting methods used by any Cinemex Company;
or
(j) agreement, whether oral or written, by any Cinemex Company to
do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Annex 3.17(a) to this Schedule B contains a complete and
accurate list, and Cinemex has, in the case of written Contracts, made available
to Investors true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more of the
Cinemex Companies of an amount or value in excess of $1'000,000 pesos
(excluding Contracts that are terminable by a Cinemex Company without
penalty or cost to the Cinemex Companies in excess of $1'000,000
pesos);
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or other
liabilities and/or receipts of one or more of the Cinemex Companies in
excess of $1'000,000 pesos (excluding Contracts that are terminable by
a Cinemex Company without penalty or cost to the Cinemex Companies in
excess of $1'000,000 pesos);
(iii) each loan agreement, promissory note, bond, letter of
credit or other Applicable Contract evidencing Cinemex Indebtedness or
any guarantee or similar obligation of any Cinemex Company with respect
to indebtedness for borrowed money or any other similar payment
obligation of any Person (other than any Cinemex Company);
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of,
Sch. B-10
leasing of, title to, use of, or any leasehold or other similar
interest in, any real or personal property (except any personal
property lease having payments of less than $1'000,000 pesos and with a
term of less than one (1) year);
(v) each material licensing agreement or other material
Applicable Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any intellectual property other
than (x) any licensing agreements or other Applicable Contracts entered
into by any Cinemex Company in the Ordinary Course of Business which
primarily relate to the exhibition by such Cinemex Company of a
particular motion picture or (y) "shrink-wrap" or other software
licenses generally available from commercial venders or retailers which
do not require ongoing royalty payments;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of
a group of employees;
(vii) each joint venture, partnership, and other similar
Applicable Contract (however named) involving a sharing of profits,
losses, costs or liabilities by any Cinemex Company with any other
Person, excluding Contracts entered into in the Ordinary Course of
Business by a Cinemex Company;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of any Cinemex
Company or any affiliate of any Cinemex Company or limit the freedom of
any Cinemex Company or any affiliate of any Cinemex Company to engage
in any line of business or to compete with any Person or in any
territory;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct
payments for goods, excluding Contracts entered into in the Ordinary
Course of Business by a Cinemex Company;
(x) other than those held by Messrs. ▇▇▇▇▇▇, Fastlicht and
▇▇▇▇▇▇, each power of attorney for (A) acts of ownership, (B) acts of
management or (C) to subscribe or execute negotiable instruments, in
each case, that is currently effective and outstanding and which will
not be terminated prior to the Effective Time;
(xi) each Applicable Contract under which a Cinemex Company is
committed for individual capital expenditures in excess of $2'500,000
pesos or aggregate capital expenditures in excess of $10'000,000 pesos;
(xii) each employment, consulting or other similar Applicable
Contract with employees or consultants of any Cinemex Company remaining
in effect after the Effective Date and which are not terminable at the
will of the applicable Cinemex Company without cost or liability to any
Cinemex Company; and
Sch. B-11
(xiii) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Annex 3.17(b) to this Schedule B to the
Knowledge of Cinemex no officer, director, agent, key employee, consultant or
contractor of any Cinemex Company is bound by any Contract that purports to
limit the ability of such officer, director, agent, key employee, consultant, or
contractor to (i) engage in or continue any conduct, activity, or practice
material to the business of any Cinemex Company, or (ii) assign to any Cinemex
Company or to any other Person any rights to any invention, improvement or
discovery.
(c) Except as set forth in Annex 3.17(c) to this Schedule B, each
Contract required to be identified in Annex 3.17(a) to this Schedule B is in
full force and effect and is valid and enforceable against the Cinemex Company
party thereto in accordance with its terms.
(d) Except as set forth in Annex 3.17(d) to this Schedule B:
(i) each Cinemex Company is, and at all times since January 1,
2002 has been, in substantial compliance with all material terms and
requirements of each material Contract identified on Annex 3.17(a) to
this Schedule B;
(ii) to the Knowledge of Cinemex, each other Person that has
any material obligation or liability under any material Contract
identified or required to be identified on Annex 3.17(a) to this
Schedule B under is, and at all times since January 1, 2002 has been,
in substantial compliance with all material terms and requirements of
such Contract;
(iii) to the Knowledge of Cinemex, no event has occurred or
circumstance exists that (with or without notice or lapse of time)
would reasonably be expected to contravene, conflict with, or result in
a violation or breach of, or give (x) any Person other than a Cinemex
Company or (y) to the Knowledge of Cinemex, any Cinemex Company the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any material Contract identified on Annex 3.17(a) to this
Schedule B; and
(iv) no Cinemex Company has given to or received from any
other Person, any notice or other written communication regarding any
actual, alleged, possible, or potential violation or breach of, or
default under, any material Contract on Annex 3.17(a) to this Schedule
B; and
(v) there are no pending renegotiations of, current attempts
to renegotiate, or outstanding rights to renegotiate any material terms
and conditions or material amounts paid or payable to any Cinemex
Company under any of the material Contracts identified on Annex 3.17(a)
to this Schedule B with any Person and no such Person has made written
demand for such renegotiation.
3.18 INSURANCE. Annex 3.18 to this Schedule B contains a complete list
of all of the Cinemex Companies' policies of insurance in effect as of the date
hereof. All of such policies are in full force and effect, and there is no
default (beyond any applicable grace or cure period)
Sch. B-12
with respect to any provision contained in any such policy, nor has there been
any failure to give any notice or present any claim under any liability policy
in a timely fashion or in the manner or detail required by such liability policy
such that the Cinemex Companies' rights to insurance recovery under such
policies would be prejudiced thereby in any material respect. Cinemex has
delivered or made available copies of all such policies to Investors. Except as
set forth in Annex 3.18 to this Schedule B, there are no overdue and unpaid
premiums or claims, and no retroactive or retrospective premium adjustments with
respect to such policies, and no notice of cancellation or nonrenewal has been
received by any Cinemex Company with respect to, or disallowance of any claim
under, any such policy.
3.19 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Annex 3.19 to this Schedule B:
(i) Each Cinemex Company is in material compliance with all
Environmental Laws;
(ii) no Cinemex Company has made, caused or contributed to any
Release of Hazardous Materials in violation of any Environmental Law;
(iii) (A) none of the operations or business of any Cinemex
Company is subject to any judicial or administrative proceeding
alleging the violation of any Environmental Law, (B) none of the
operations or business of any Cinemex Company is subject to any
compliance agreement or settlement agreement resulting from an alleged
violation of any Environmental Law, and (C) none of the operations or
business of any Cinemex Company is the subject of any federal, state or
local investigation or Threatened investigation regarding a violation
or alleged violation of any Environmental Law;
(iv) to the Knowledge of Cinemex, (A) none of the business of
the Cinemex Companies involves any Hazardous Activity, and (B) none of
the Cinemex Companies has knowledge of any Hazardous Materials in, on,
over or under any of the Facilities other than Hazardous Materials
maintained in small quantities in appropriate containers for use in the
ordinary course of the maintenance and operation of the Facilities and
in material compliance with applicable Environmental Laws;
(v) to the Knowledge of Cinemex, there is no condition arising
from the operations of the Cinemex Companies that could reasonably be
expected to result in claims against any of the Cinemex Companies, for
Cleanup costs, damages to natural resources, or for personal injury
claims under applicable Environmental Laws or as required by any
Governmental Body with jurisdiction over such matters; and
(vi) each of the Cinemex Companies possesses all material
Mexican Governmental Authorizations required under any Environmental
Law to conduct its business, and such Mexican Governmental
Authorizations are in full force and effect.
3.20 EMPLOYEES.
Sch. B-13
(a) Annex 3.20 to this Schedule B contains a list of the name,
position, seniority, salary and labor benefits of all employees of the Cinemex
Companies (including employees of companies rendering employment and personnel
services to the Cinemex Companies) with an annual salary in excess of $600,000
pesos as of May 31, 2002 and, should the case may be, of any contracts or
arrangements with them.
(b) Except as disclosed on Annex 3.20 to this Schedule B, none of
the Cinemex Companies have made any arrangements with any employees of the
Cinemex Companies which would have the effect of depriving any of the Cinemex
Companies of the continued service of any such employees following the Effective
Date.
3.21 LABOR RELATIONS; COMPLIANCE.
(a) Except as set forth in Annex 3.21 to this Schedule B, no
Cinemex Company is a party to any collective bargaining or other labor Contract
and, as of the date of execution of this Agreement, none of the Cinemex
Companies is negotiating with the unions mentioned in Annex 3.21 to this
Schedule B or any other unions.
(b) Since January 1, 2000, and except as set forth in Annex 3.21 to
this Schedule B, there has not been, there is not presently pending or existing,
and there is not Threatened (i) any strike, slowdown, picketing, work stoppage,
or interruptions of work against any of the Cinemex Companies; (ii) any
Proceeding against any Cinemex Company relating to the alleged violation of any
Mexican Legal Requirement pertaining to labor relations or employment matters,
organizational activity, or other labor or employment dispute or controversy
against any of the Cinemex Companies or their currently owned, leased or
operated Facilities or (iii) any application for certification of a collective
bargaining agent. Except as set forth in Annex 3.21 to this Schedule B, there is
no lockout of any employees by any Cinemex Company, and no such action is
contemplated by any Cinemex Company.
(c) Each Cinemex Company has substantially complied with all
Mexican Legal Requirements relating to employees and employment. Except as
disclosed on Annex 3.21 to this Schedule B, no Cinemex Company is liable for the
payment of any compensation, Damages, Taxes, fines, penalties or other amounts,
however designated, for failure to comply with any of the foregoing Mexican
Legal Requirements.
3.22 INTELLECTUAL PROPERTY. Each Cinemex Company owns or possesses
rights to use all franchises, licenses, copyrights, copyright applications,
patents, patent rights or licenses, patent applications, trademarks, trademark
rights, trade names, trade name rights, copyrights and rights with respect to
the foregoing which are required to conduct its business as currently conducted.
Except as set forth in Annex 3.22 to this Schedule B, to the Knowledge of
Cinemex, no event has occurred which permits, or after notice or lapse of time
or both would permit, the revocation or termination of any such rights, and no
Cinemex Company is liable to any Person for infringement under applicable
Mexican Legal Requirements with respect to any such rights as a result of its
business operations.
3.23 CERTAIN PAYMENTS. Since January 1, 2000, no Cinemex Company or
director or officer of any Cinemex Company, or to the Knowledge of Cinemex, any
employee, agent or
Sch. B-14
other Person acting for or on behalf of any Cinemex Company, has directly or
indirectly made any payments, gifts or rebates (whether in cash, property or
services) to any Person (i) in violation of Mexican Legal Requirements or (ii)
which, if Cinemex were subject to the United States Foreign Corrupt Practices
Act of 1977, as amended, would have violated the same, except in either case for
payments, gifts or rebates (whether in cash, property or services) which, if
discontinued subsequent to the Effective Time, could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
3.24 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on Annex
3.24 to this Schedule B, no director or officer of any Cinemex Company, or to
the Knowledge of Cinemex, any Related Person of such director or officer has, or
is an owner of, or since January 1, 2000 has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has, (i) had business dealings or a material financial interest in any
transaction with any Cinemex Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Cinemex
Companies at substantially prevailing market prices and on substantially
prevailing market terms and conditions, or (ii) engaged in the business of (a)
developing, owning or operating motion picture theaters or exhibiting motion
pictures in Mexico, or (b) within the vicinity of any motion picture theater
owned or operated by any Cinemex Company selling food, snacks or concession
services (in either case, a "Competing Business"), except for the direct or
indirect ownership of less than one percent of the outstanding capital stock of
any Competing Business (or Person that directly or indirectly owns such interest
in a Competing Business) that is publicly traded on any recognized exchange or
in the over-the-counter market.
3.25 BROKERS OR FINDERS. No Cinemex Company and, to the Knowledge of
Cinemex, none of their respective agents has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.26 NO UNITED STATES PRESENCE. None of the real estate property owned
by any Cinemex Company or which any Cinemex Company leases or has any other
interest therein, and none of the buildings, equipment, inventories and other
tangible assets of any Cinemex Company are located in the United States within
the meaning of Rule 802.51 of the HSR Act. No Cinemex Company is organized under
the laws of the United States or any state or other jurisdiction within the
United States. The Cinemex Companies have not made aggregate sales in or into
the United States of over $50 million United States Dollars in the most recently
completed fiscal year within the meaning of Rule 802.51 of the HSR Act.
Sch. B-15
SCHEDULE C
COVENANTS PRIOR TO THE EFFECTIVE DATE
6.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Effective Date, Cinemex will, and will cause each Cinemex Company and their
respective Representatives to use their Best Efforts to, (a) afford Investors
and their prospective lenders and Representatives (collectively, "Advisors")
reasonable access, during normal business hours and upon reasonable advance
notice, to each Cinemex Company's properties, contracts, books and records and
other documents and data, (b) furnish Investors and their Advisors with copies
of all such contracts, books and records, and other existing documents and data
as Investors and/or their Advisors may reasonably request, (c) furnish Investors
and their Advisors with such additional financial, operating and other data and
information concerning Cinemex as Investors and/or their Advisors may reasonably
request and as may be reasonably available to Cinemex and (d) make available to
Investors and their Advisors, upon reasonable advance notice and during normal
business hours, the officers of each Cinemex Company as Investors and/or their
Advisors may reasonably request; provided, that such availability shall not
interfere with the normal operations of such Cinemex Company. Any information
heretofore or hereafter obtained from any party hereto shall be subject to and
shall be held in accordance with the terms of the Confidentiality Agreement.
6.2. OPERATION OF BUSINESS. Between the date of this Agreement and the
Effective Date, unless otherwise consented to by Investors in writing, Cinemex
will, and will cause each Cinemex Company to:
(a) conduct the business of the Cinemex Companies only in the
Ordinary Course of Business; and
(b) use its Best Efforts to preserve intact in all material
respects the current business organization of the Cinemex Companies, keep
available the services of the current officers, employees and agents of the
Cinemex Companies, and maintain in all material respects the relations and
goodwill with suppliers, customers, landlords, creditors, employees, agents and
others having business relationships with the Cinemex Companies.
6.3. NEGATIVE COVENANTS. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Effective Date,
Cinemex will not, and Cinemex will cause each Cinemex Company not to, without
the prior consent of Investors:
(a) take any affirmative action, or fail to take any reasonable
action as a result of which any of the changes or events listed in Section 3.16
of Schedule B to this Agreement is reasonably likely to occur;
(b) make any capital expenditure commitment other than capital
expenditure commitments not in excess of $2'500,000 pesos for individual items
and not in excess of $10'000,000 pesos in the aggregate;
Sch. C-1
(c) pay, discharge or satisfy any Cinemex Indebtedness other than
the payment, discharge or satisfaction of such Cinemex Indebtedness upon
maturity or when otherwise due;
(d) take or omit to take any action with respect to Taxes if such
action or omission would have the effect of increasing the Tax liability of the
Cinemex Companies for a Tax Period after the Effective Date;
(e) settle any litigation that provides for liability to any
Cinemex Company after the Effective Time or that imposes any restrictions on any
Cinemex Company after the Effective Time; or
(f) enter into any agreement to do any of the foregoing.
6.4. REQUIRED APPROVALS.
(a) As promptly as practicable after the date of this Agreement,
the parties hereto will make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions. Between the
date of this Agreement and the Effective Date, the parties hereto will (a)
reasonably cooperate with one another with respect to all filings that any party
hereto elects to make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) reasonably cooperate with one
another in obtaining all Consents identified in Annex 3.2 to Schedule B of this
Agreement, Schedule 4.2 and Schedule 5.2.
(b) On May 29, 2002, Cinemex filed a notification of concentration
in connection with the Contemplated Transactions with the Mexican Federal
Competition Commission (Comision Federal de Competencia), and the parties shall
notify the other parties of any correspondence or contact with such agency,
shall comply as promptly as practicable with all requests for further documents
and information made by such agency, shall furnish to the other parties all such
information in its possession as may be reasonably necessary for the completion
of the reports or notifications to be filed and shall otherwise fully cooperate
in dealing with such agency.
Sch. C-2
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 6,194 0.1629%
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 3,601 0.0947%
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 3,600 0.0947%
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 9,271 0.2439%
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 9,270 0.2439%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 2,363 0.0622%
UEMCO X, L.L.C. 2,280 0.0600%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (Decedant's Trust) 1,617 0.0425%
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 6,667 0.1754%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇ ▇▇▇▇▇▇▇▇) (Trust) 1,616 0.0425%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇) (Trust) 1,616 0.0425%
▇▇▇▇▇▇▇▇▇ Nea ▇▇▇▇▇▇ ▇▇▇▇▇ de Fastlicht 398 0.0105%
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 35 0.0009%
Sch. C-3