As filed with the Securities and Exchange Commission on September 30, 1998
REGISTRATION NO. 333-______
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
LOEWS CINEPLEX ENTERTAINMENT
CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 7832 13-3386485
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Identification No.)
incorporation or Code Number)
organization)
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
711 FIFTH AVENUE
11TH FLOOR
NEW YORK, NEW YORK 10022
(212) 833-6200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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JOHN C. MCBRIDE, JR., ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
711 FIFTH AVENUE
11TH FLOOR
NEW YORK, NEW YORK 10022
(212) 833-6200
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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COPY TO:
DAVID C. GOLAY, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
(212) 859-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon
as practicable after the effective date of this Registration Statement.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
---------------------------------------------------
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
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CALCULATION OF REGISTRATION FEE
===============================================================================
AMOUNT PROPOSED PROPOSED AMOUNT OF
TITLE OF CLASS OF TO BE MAXIMUM MAXIMUM REGISTRATION
SECURITIES TO BE REGISTERED AGGREGATE AGGREGATE FEE
REGISTERED PRICE OFFERING
PER UNIT (1) PRICE (1)
- -------------------------------------------------------------------------------
8 7/8% SENIOR
SUBORDINATED NOTES $300,000,000 100% $300,000,000 $88,500
DUE 2008............
===============================================================================
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
[RED HERRING]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
OFFERS TO EXCHANGE ITS
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
OLD NOTES (AS DEFINED HEREIN)
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 1998, UNLESS EXTENDED.
AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER
ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER
- -------------------------------------------------------------------------------
Loews Cineplex Entertainment Corporation, a Delaware corporation
("Loews Cineplex" or the "Company"), hereby offers (the "Exchange Offer"),
upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to $300,000,000 aggregate principal amount of
its 8 7/8% Senior Subordinated Notes Due 2008 (the "New Notes"), which will
be registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Prospectus is a
part, for a like principal amount of its issued and outstanding 8 7/8%
Senior Subordinated Notes Due 2008 (the "Old Notes" and, together with the
New Notes, the "Notes"). The Exchange Offer is being made pursuant to the
terms of the Exchange and Registration Rights Agreement, dated August 5,
1998 (the "Exchange and Registration Rights Agreement"), entered into
between the Company and Goldman, Sachs & Co., BT Alex. Brown Incorporated,
Credit Suisse First Boston Corporation and Salomon Brothers Inc (the
"Initial Purchasers") pursuant to the terms of the Purchase Agreement (the
"Purchase Agreement"), dated August 5, 1998, between the Company and the
Initial Purchasers. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer".
(cover continued on next page)
--------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION
OF CERTAIN FACTORS WHICH INVESTORS SHOULD
CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND AN INVESTMENT IN THE
NEW NOTES OFFERED HEREBY
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is , 1998.
<PAGE>
Interest on the New Notes will be payable on February 1 and August 1
of each year, commencing February 1, 1999. The New Notes will mature on
August 1, 2008. The New Notes will be redeemable, in whole or in part, at
the option of the Company at any time on or after August 1, 2003 at the
redemption prices set forth herein, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, on or before August 1, 2001
the Company may, at its option and subject to certain requirements, use an
amount equal to the net cash proceeds from one or more Public Equity
Offerings (as defined herein) to redeem up to an aggregate of 33 1/3% of
the principal amount of the New Notes originally issued at a redemption
price equal to 108.875% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption. Upon the occurrence of
a Change of Control (as defined herein), the Company is required to offer
to repurchase all outstanding New Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase. See "Description of New Notes".
The New Notes will be general unsecured indebtedness of the Company
subordinated in right of payment to all existing and future Senior Debt (as
defined herein) of the Company, and senior to or pari passu with all
existing and future subordinated indebtedness of the Company. At May 31,
1998 on a pro forma basis after giving effect to the Transactions (as
defined herein), the Company would have had $654 million of indebtedness
outstanding, of which $350 million would have been Senior Debt.
The New Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined herein). The form and terms of the
New Notes will be identical in all material respects to the form and terms
of the Old Notes except that (i) the New Notes will have been registered
under the Securities Act, (ii) holders of the New Notes will not be
entitled to certain rights of holders of Old Notes under the Exchange and
Registration Rights Agreement, which agreement will terminate upon
consummation of the Exchange Offer and (iii) the New Notes will not be
entitled to the contingent increase in interest rate provided pursuant to
the Indenture and the Old Notes. Any Old Notes not tendered and accepted in
the Exchange Offer will remain outstanding and will be entitled to all the
rights and preferences and will be subject to the limitations applicable
thereto under the Indenture. Following consummation of the Exchange Offer,
the holders of Old Notes will continue to be subject to the existing
restrictions upon transfer thereof, and the Company will have no further
obligation to such holders to provide for the registration under the
Securities Act of the Old Notes held by them. Following completion of the
Exchange Offer, none of the Notes will be entitled to the contingent
increase in interest rate provided pursuant to the Indenture and the Old
Notes. See "The Exchange Offer".
The Company will accept for exchange any and all validly tendered Old
Notes on or prior to 5:00 p.m., New York City time, on [ ], 1998, unless
extended by the Company (the "Expiration Date"). Tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date, unless previously accepted for payment by the Company. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject
to certain conditions which may be waived by the Company. Old Notes may be
tendered only in denominations of $1,000 principal amount and integral
multiples thereof. New Notes to be issued in exchange for validly tendered
Old Notes will be delivered through the facilities of The Depository Trust
Company ("DTC") by the Exchange Agent (as defined herein). The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer".
Any waiver, extension or termination of the Exchange Offer will be
publicly announced by the Company through a release to PR Newswire and as
otherwise required by applicable law or regulations.
The Company is making the Exchange Offer in reliance on the position
of the staff of the Division of Corporation Finance of the Securities and
Exchange Commission (the "Commission") as set forth in no-action letters
issued to third parties in other transactions. However, the Company has not
sought its own no-action letter and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Based on those interpretations by the staff of the Division
of Corporation Finance of the Commission, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by any holder
thereof (other than broker-dealers, as set forth below, and any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and that such
holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate, in the
distribution (within the meaning of the Securities Act) of such New Notes.
Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the
New Notes may not rely upon such interpretations by the staff of the
Division of Corporation Finance of the Commission as set forth in these
no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction, and any
such secondary resale transaction must be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act.
Each broker-dealer (other than an affiliate of the Company) that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes as the result of market-making
activities or other trading activities and will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed to make this Prospectus available to
any broker-dealer for use in connection with any such resale for a period
of 180 days after the Expiration Date or, earlier, if all New Notes have
been disposed of by such broker-dealers. See "Plan of Distribution" and
"The Exchange Offer".
The New Notes will be represented by a Global Certificate (as defined
herein) registered in the name of a nominee of DTC, as Depositary.
Beneficial interest in the Global Certificates will be shown on, and
transfers will be effected only through, records maintained by the
Depositary and its participants. See "Description of the New
Notes--Book-Entry; Delivery and Form".
The New Notes will constitute a new issue of securities with no
established trading market. Accordingly, there can be no assurance that an
active trading market for any issue of the New Notes will develop. See
"Risk Factors -- Absence of Public Market for the New Notes; Volatility".
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. It is not expected that an active trading market for the Old
Notes will develop while they are subject to restrictions on transfer. See
"Risk Factors -- Consequences of the Exchange Offer on Non-Tendering
Holders of the Old Notes".
This Prospectus, together with the accompanying Letter of Transmittal,
is being sent to all registered holders of Old Notes as of [ ], 1998. As of
such date, there were [ ] registered holder(s) of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses it incurs in the Exchange Offer. No
dealer-manager is being used in connection with the Exchange Offer. See
"Use of Proceeds" and "Plan of Distribution".
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS OF OLD NOTES FOR EXCHANGE FROM, HOLDERS THEREOF IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR "BLUE SKY" LAWS OF SUCH JURISDICTION.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
(together with any amendments thereto, the "Registration Statement") on
Form S-4 under the Securities Act, with respect to the New Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information included in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein or therein and filed as an exhibit to the
Registration Statement are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as
an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the New Notes, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Midwest Regional Office, Citicorp
Center, Suite 1400, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661-2511; and Northeast Regional Office, Suite 1300, 13th Floor, 7 World
Trade Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission also maintains a Web site (http://www.sec.gov) that
makes available reports, proxy statements and other information regarding
the Company. Such material can also be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and
The Toronto Stock Exchange, 2 First Canadian Place, Toronto, Ontario M5X
1J2, on which exchanges the shares of the Company's Common Stock, $.01 par
value per share (the "Shares") is listed. Copies of the aforementioned
materials may also be inspected at the office of the National Association
of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
Under the Indenture relating to the New Notes, and without regard to
whether the Company is subject to the informational requirements of the
Exchange Act, the Company has agreed to file with the Commission and to
distribute to the Trustee (as defined herein) and the holders of the New
Notes annual reports of the Company containing audited consolidated
financial statements, as well as quarterly reports containing unaudited
consolidated financial statements for each of the first three quarters of
each fiscal year.
Potential investors may obtain a copy of the agreements summarized
herein without charge by request directed to the Secretary of the Company
at 711 Fifth Avenue, 11th Floor, New York, New York 10022, telephone (212)
833-6200.
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein, including, without limitation,
under "Prospectus Summary", "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations", "The
Transactions" and "Business", and including, without limitation, statements
concerning (i) business strategy (including, without limitation, the
Company's plans to improve operating efficiencies and reduce costs), (ii)
expansion plans and (iii) capital expenditures, contain certain
forward-looking statements. Because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause such
differences include, but are not limited to, those discussed under "Risk
Factors". The words "intend", "believe", "expect", "anticipate" and similar
expressions identify forward-looking statements. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
In addition to other factors and matters discussed elsewhere herein,
management believes that the following additional factors could cause
actual results to differ materially from those discussed in forward-looking
statements: (i) the effect of economic conditions on a national, regional
or international basis; (ii) the ability of Loews Cineplex to integrate the
operations of Cineplex Odeon Corporation ("Cineplex Odeon"), the
compatibility of the operating systems of the combined companies, and the
degree to which existing administrative functions and costs are
complementary or redundant; (iii) competitive pressures in the motion
picture exhibition industry; (iv) the financial resources of, and films
available to, the Company's competitors; (v) changes in laws and
regulations, including changes in accounting standards; (vi) the
determination of the number, job classification and location of employee
positions to be eliminated as a result of the combination of Loews Theatres
(as defined herein) and Cineplex Odeon; and (vii) opportunities that may be
presented to, and pursued by, the Company.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the related notes, appearing elsewhere in this
Prospectus. Prospective investors are urged to read this Prospectus in its
entirety. Unless otherwise indicated, industry data contained herein is
derived from publicly available industry trade journals, government reports
and other publicly available sources, which the Company has not
independently verified but which the Company believes to be reliable, and
where such sources were not available, from Company estimates, which the
Company believes to be reasonable, but which cannot be independently
verified. As used in this Prospectus, "$" refers to U.S. dollars and "Cdn$"
refers to Canadian dollars. Unless otherwise stated or where the context
otherwise requires, references herein to the "Company" or "Loews Cineplex"
refer to Loews Cineplex Entertainment Corporation and its direct and
indirect subsidiaries. References herein to "fiscal" years refer to the
Company's fiscal years ended February 28 or 29, as the case may be.
Information given with respect to "North America" includes the United
States and Canada and excludes Mexico.
THE COMPANY
Loews Cineplex is the world's largest publicly traded theatre
exhibition company in terms of revenues and operating cash flow. On May 14,
1998, the Company completed the business combination (the "Combination") of
the Loews Theatres exhibition business ("Loews Theatres") of Sony Pictures
Entertainment Inc. ("SPE") and Cineplex Odeon, another major motion picture
exhibitor with operations in the United States and Canada. On a pro forma
basis for the fiscal year ended February 28, 1998, the Company had
approximately $1.0 billion in revenues. Approximately 71% of such revenues
was related to box office receipts and approximately 29% was generated by
concession sales and other revenues. The Company's pro forma share of total
industry box office receipts in North America in 1997 was approximately
10.2%.
As of May 31, 1998, Loews Cineplex owned and operated or had interests
in 2,794 screens at 450 locations, of which 2,783 screens were located in
22 U.S. states, the District of Columbia and 6 Canadian provinces. The
Company's North American exhibition screens represent approximately 8.8% of
all exhibition screens in North America. The Company's North American
theatres are concentrated in densely populated urban and suburban areas,
with a strong presence in metropolitan New York, Boston, Chicago,
Baltimore, Dallas, Houston, Detroit, Los Angeles, Seattle, Washington,
D.C., Toronto, Montreal and Vancouver. Approximately 83% of the Company's
U.S. theatres are located in 11 of the 15 largest areas of dominant
influence as defined by the A.C. Nielsen Company/EDI ("ADIs") in the United
States, and approximately 83% of the Company's Canadian theatres are
located in the top 10 ADIs in Canada. Since June 10, 1998, the Company has
also owned a 50% interest in 108 screens in 13 locations in Spain through a
joint venture with Yelmo Films S.A. ("Yelmo Films"), a leading local
Spanish exhibitor. The Company has also established an initial presence in
both Hungary and Turkey.
The Company holds a 50% partnership interest in each of Loeks-Star
Theatres and Magic Johnson Theatres (collectively, the "U.S.
Partnerships"). As of May 31, 1998, the U.S. Partnerships held interests in
and operated 12 locations with a total of 149 screens. Loeks-Star Theatres'
circuit is located in the metropolitan Detroit, Michigan area. Magic
Johnson Theatres' circuit is located in densely populated urban areas with
predominantly minority populations. Unless otherwise noted, the screen and
location figures presented herein for the Company include the screens and
locations of the Company's U.S. Partnerships.
Loews Cineplex was the first commercial motion picture exhibitor in
North America, and perhaps the world, with operations beginning in 1904,
when Marcus Loew set up a "nickelodeon" in a rented room above a penny
arcade store in Cincinnati, Ohio. Loews Cineplex's theatre circuit has
grown over the years through both internal development and acquisitions.
Today, Loews Cineplex operates theatres under the Loews, Sony and Cineplex
Odeon theatres names, and the Company's partnerships and joint ventures
operate theatres under the Star, Magic Johnson and Yelmo Cineplex names.
PRINCIPAL STOCKHOLDERS
The Company's principal stockholders include SPE, a wholly owned
subsidiary of Sony Corporation of America ("SCA"), Universal Studios, Inc.
("Universal") and the Charles Rosner Bronfman Discretionary Trust and
certain related stockholders (the "Claridge Group"), which own 39.5% (39.5%
of the Company's voting Common Stock), 25.6% (25.5% of the Company's voting
Common Stock) and 7.4% (7.4% of the Company's voting Common Stock) of the
Company's capital stock, respectively, and collectively own approximately
72.5% of the Company's capital stock (and 72.4% of its voting Common
Stock). SPE, Universal and the Claridge Group are collectively referred to
herein as the "Stockholders".
PRINCIPAL EXECUTIVE OFFICES
The address of Loews Cineplex's principal executive offices is 711
Fifth Avenue, 11th Floor, New York, New York 10022 and its telephone number
is (212) 833-6200.
CERTAIN RECENT TRANSACTIONS
On August 5, 1998, the Company concurrently consummated the following
transactions, which were designed to increase stockholders' equity, reduce
the Company's debt and interest expense, improve the public float for the
Common Stock, increase the Company's access to capital markets and improve
the Company's operating and financial flexibility:
* The Company offered $300 million aggregate principal amount of
the Old Notes (the "Old Notes Offering").
* The Company sold to the public, in a registered offering, 10
million shares of Common Stock at a public offering price of
$11.00 per share (the "Equity Offering" and, together with the
Old Notes Offering, the "Concurrent Offerings").
* The Company used approximately $215.7 million of the net proceeds
of the Concurrent Offerings to pay the applicable consideration
under an at-the-market tender offer (the "At-the-Market Offer")
by the Company's wholly owned subsidiary, Plitt Theatres, Inc.
("Plitt"), for any and all of Plitt's outstanding 10 7/8% Senior
Subordinated Notes due 2004 (the "Plitt Notes"), which the
Company unconditionally guaranteed on a senior subordinated basis
in connection with closing the Combination. The At-the-Market
Offer expired on August 4, 1998, with holders of approximately
97% of the outstanding Plitt Notes tendering into the
At-the-Market Offer. Payment for tendered Plitt Notes was made on
August 5, 1998.
The remaining amount of the net proceeds of the Concurrent Offering
was used to reduce the outstanding balance on the Bank Credit Facilities
(as defined herein). These amounts may be reborrowed and are available to
the Company for the funding of its North American and international
expansion plans and for general corporate purposes, subject to the
satisfaction of certain covenants and financial ratios.
In addition to the above mentioned transactions, upon the consummation
of the Equity Offering, the Company's Class A Non-Voting Common Stock then
held by SPE automatically converted (the "Automatic Conversion") into an
equal number of shares of Common Stock and 3,255,212 additional shares of
Common Stock was issued to Universal for no consideration (the "Universal
Issuance") under anti-dilution provisions of the Company's subscription
agreement with Universal (the Universal Issuance, the Automatic Conversion,
the Old Notes Offering, the Equity Offering and the Plitt Note Repurchase
(as defined herein) collectively referred to as the "Transactions").
Under the terms of an agreement with the U.S. Department of Justice
("DOJ"), which was entered into in connection with its approval of the
Combination, the Company agreed to divest 25 theatres, representing 85
screens in the New York and Chicago areas. The sale of these theatres is
subject to approval by the DOJ. On August 27, 1998, the Company announced
that it had reached an agreement to sell 31 theatres in the New York City,
Chicago and suburban New York areas for $92 million to Cablevision Systems
Corp.("Cablevision"), one of the nation's leading telecommunications and
entertainment companies, subject to certain conditions, including DOJ
approval. The Company is in discussions with Cablevision regarding
obtaining DOJ approval. These 31 theatres include an additional seven
theatres, representing 21 screens, in the suburban New York area, which
will be sold, subject to certain conditions, in a separate transaction
unrelated to the agreement with the DOJ. The theatres being sold represent
approximately 3.6% of the Company's total screens and 6.8% of total box
office receipts on an annual basis. Proceeds from the sale are expected to
be used to reduce borrowings under the Bank Credit Facilities and for
general corporate purposes. Subject to DOJ approval, the Company expects to
close these transactions in the third quarter ending November 30, 1998.
THE OFFERING
On August 5, 1998, the Company consummated the offering of $300
million aggregate principal amount of 8 7/8% Senior Subordinated Notes due
2008 exempt from registration under the Securities Act (the "Offering").
The net proceeds of the Offering were used to fund the Plitt Note
Repurchase, repay loans under the Company's Bank Credit Facilities, pay
fees and expenses related to the Transactions and for general corporate
purposes. See "Prospectus Summary--The Transactions" and "Use of Proceeds".
The Old Notes..... The Old Notes were sold by the Company on August 5,
1998 to the Initial Purchasers pursuant to the Purchase
Agreement. The Initial Purchasers subsequently resold
the Old Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act ("Rule
144A") and to non-U.S. persons outside the United
States in reliance on Regulation S under the Securities
Act.
Exchange and
Registration
Rights
Agreement......... Pursuant to the Purchase Agreement, the Company and the
Initial Purchasers entered into the Exchange and
Registration Rights Agreement, which granted the
holders of the Old Notes certain exchange and
registration rights. The Exchange Offer is being made
pursuant to the Exchange and Registration Rights
Agreement and is intended to satisfy such rights which,
except under limited circumstances, terminate upon
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities
Offered........... $300,000,000 aggregate principal amount of the
Company's 8 7/8% Senior Subordinated Notes due 2008.
The Exchange
Offer............. Pursuant to the Exchange Offer, $1,000 principal amount
of New Notes will be issued in exchange for each $1,000
principal amount of Old Notes that are validly tendered
and not withdrawn. On the date of this Prospectus,
$300,000,000 aggregate principal amount of Old Notes
were outstanding. See "The Exchange Offer".
The Exchange Offer is not being made to, nor will the
Company accept surrenders of Old Notes for exchange
from, holders thereof in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of
such jurisdiction.
Holders of Old Notes whose Old Notes are not tendered
and accepted in the Exchange Offer will continue to
hold such Old Notes and will be entitled to all the
rights and preferences thereof and will be subject to
the limitations applicable thereto under the Indenture,
dated as of August 5, 1998 (the "Indenture") between
the Company and Bankers Trust Company, as Trustee,
governing the Old Notes and the New Notes. Following
consummation of the Exchange Offer, the holders of Old
Notes will continue to be subject to the existing
restrictions upon transfer thereof, and the Company
will have no further obligation to such holders to
provide for the registration under the Securities Act
of the Old Notes held by them. Following the completion
of the Exchange Offer, none of the Old Notes will be
entitled to the contingent increase in interest rate
provided pursuant to the Indenture and the Old Notes.
Resales........... Based on interpretations by the staff of the Division
of Corporate Finance the Commission set forth in
no-action letters issued to third parties, the Company
believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any holder
thereof (other than broker-dealers, as set forth below,
and any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
does not intend to participate, and has no arrangement
or understanding with any person to participate, in the
distribution (within the meaning of the Securities Act)
of such New Notes. Any holder who tenders in the
Exchange Offer with the intention to participate, or
for the purpose of participating, in a distribution of
the New Notes may not rely upon such interpretations by
the staff of the Division of Corporate Finance the
Commission as set forth in these no-action letters and,
in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any secondary resale transaction, and any such
secondary resale transaction must be covered by an
effective registration statement containing the selling
securityholder information required by Item 507 of
Regulation S-K under the Securities Act. Holders of Old
Notes wishing to accept the Exchange Offer must
represent to the Company in the Letter of Transmittal
that such conditions have been met. Failure to comply
with such requirements in such instance may result in
such holder incurring liabilities under the Securities
Act for which the holder is not indemnified by the
Company. Each broker-dealer (other than an affiliate of
the Company) that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with
any resale of such New Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended
or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading activities.
The Company has agreed to make this Prospectus
available to any broker-dealer for use in connection
with any such resale for a period of 180 days after the
Expiration Date or, earlier, if all New Notes have been
disposed of by such broker-dealers. Any broker-dealer
who is an affiliate of the Company may not participate
in the Exchange Offer and may not rely on the no-action
letters referred to above and must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with a secondary
resale transaction. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer" and "Plan of
Distribution".
Expiration Date... The Exchange Offer will expire at 5:00 p.m., New York
City time, on [ ], 1998, unless extended, in which case
the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended. Any
extension, if made, will be publicly announced through
a release to PR Newswire and as otherwise required by
applicable law or regulations.
Conditions to the
Exchange
Offer............ The Exchange Offer is subject to certain conditions,
which may be waived by the Company. See "The Exchange
Offer--Conditions of the Exchange Offer". The Exchange
Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered for exchange.
The Company reserves the right, in its discretion, (i)
to delay accepting any Old Notes, to extend the
Exchange Offer or to terminate the Exchange Offer if
any of the conditions set forth below under "The
Exchange Offer--Conditions of the Exchange Offer" shall
not have been satisfied in the good faith determination
of the Company, by giving oral or written notice of
such delay, extension or termination to the Exchange
Agent and (ii) to amend the terms of the Exchange Offer
in any manner. See "The Exchange Offer--Terms of the
Exchange Offer--Expiration Date; Extensions;
Amendments".
Procedures for
Tendering Old
Notes............. Each beneficial owner owning interests in Old Notes (a
"Beneficial Owner") through a DTC Participant (as
defined herein) must instruct such DTC Participant to
cause Old Notes to be tendered in accordance with the
procedures set forth in this Prospectus and in the
applicable Letter of Transmittal (as defined herein).
See "The Exchange Offer--Procedures for Tendering--Old
Notes held through DTC".
Each participant (a "DTC Participant") in the DTC
holding Old Notes through DTC must (i) electronically
transmit its acceptance to DTC through the DTC
Automated Tender Offer Program ("ATOP"), for which the
transaction will be eligible, and DTC will then verify
the acceptance, execute a book-entry delivery to the
Exchange Agent's account at DTC and send an Agent's
Message (as defined herein) to the Exchange Agent for
its acceptance, or (ii) comply with the guaranteed
delivery procedures set forth in this Prospectus and in
the Letter of Transmittal. By tendering through ATOP,
DTC Participants will expressly acknowledge receipt of
the accompanying Letter of Transmittal and agree to be
bound by its terms and the Company will be able to
enforce such agreement against such DTC Participants.
See "The Exchange Offer--Procedures for Tendering--Old
Notes Held through DTC" and "--Guaranteed Delivery
Procedures--Old Notes held through DTC".
Each holder of Old Notes must (i) complete and sign a
Letter of Transmittal, and mail or deliver such Letter
of Transmittal, and all other documents required by the
Letter of Transmittal, together with certificates(s)
representing all tendered Old Notes, to the Exchange
Agent at its address set forth in this Prospectus and
in the Letter of Transmittal, or (ii) comply with the
guaranteed delivery procedures set forth in this
Prospectus. See "The Exchange Offer--Procedures for
Tendering", "--Exchange Agent" and "--Guaranteed
Delivery Procedures--Old Notes Held by Holders".
By tendering, each holder of Old Notes will represent
to the Company that, among other things, (i) it is not
an affiliate of the Company, (ii) it is not a
broker-dealer tendering Old Notes acquired directly
from the Company for its own account, (iii) the New
Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such
holder and (iv) it has no arrangements or
understandings with any person to participate in the
Exchange Offer for the purpose of distributing the New
Notes. See "The Exchange Offer--Purpose and Effect of
the Exchange Offer".
Special
Procedures for
Beneficial
Owners............ Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender such
Old Notes in the Exchange Offer should contact such
registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on his or her
own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering his
or her Old Notes (or, in the case of a book-entry
transfer, causing to be delivered an Agent's Message),
either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer--Procedures
for Tendering Old Notes".
Guaranteed
Delivery
Procedures........ DTC Participants holding Old Notes through DTC who wish
to cause their Old Notes to be tendered, but who cannot
transmit their acceptances through ATOP prior to the
Expiration Date, may effect a tender in accordance with
the procedures set forth in this Prospectus and in the
Letter of Transmittal. See "The Exchange
Offer--Guaranteed Delivery Procedures". Holders who
wish to tender their Old Notes but (i) whose Old Notes
are not immediately available and will not be available
for tendering prior to the Expiration Date, or (ii) who
cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the
Exchange Agent prior to the Expiration Date, may effect
a tender in accordance with the procedures set forth in
this Prospectus. See "The Exchange Offer--Guaranteed
Delivery Procedures".
Acceptance of Old
Notes and
Delivery of
New Notes......... Subject to certain conditions (as described more fully
in "The Exchange Offer--Conditions of the Exchange
Offer"), the Company will accept for exchange any and
all Old Notes which are properly tendered in the
Exchange Offer and not withdrawn, prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered as promptly as practicable following the
Expiration Date.
Withdrawal
Rights............ Except as otherwise provided herein, tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer--Withdrawal
of Tenders of Old Notes".
Taxation.......... An exchange of Old Notes for New Notes will not be
taxable to holders. See "Certain Federal Income Tax
Consequences of the Exchange Offer".
Use of Proceeds... The Company will not receive any proceeds from the New
Notes offered hereby. See "Use of Proceeds".
Exchange Agent.... Bankers Trust Company is the Exchange Agent. The
address, telephone number and facsimile number of the
Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent".
SUMMARY OF TERMS OF THE NEW NOTES
General........... The form and terms of the New Notes are the same as the
form and terms of the Old Notes (which they replace)
except that (i) the New Notes have been registered
under the Securities Act and, therefore, will not
contain terms or bear legends with respect to transfer
restrictions, (ii) the New Notes do not include
provisions providing for an increase in the interest
rate in certain circumstances relating to the timing of
the Exchange Offer and (iii) holders of New Notes will
not be entitled to certain rights under the Exchange
and Registration Rights Agreement, which rights will
terminate when the Exchange Offer is consummated. The
New Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture.
See "Description of New Notes".
Securities
Offered........... $300,000,000 aggregate principal amount of the
Company's 8 7/8% Senior Subordinated Notes due 2008.
Maturity Date..... August 1, 2008.
Interest
Payment Dates..... February 1 and August 1 of each year, commencing
February 1, 1999.
Optional
Redemption........ The Notes will be redeemable, in whole or in part, at
the option of the Company at any time on or after
August 1, 2003 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to
but excluding the date of redemption. In addition, on
or before August 1, 2001, the Company may, at its
option and subject to certain requirements, use an
amount equal to the net cash proceeds from one or more
Public Equity Offerings to redeem up to an aggregate of
33 1/3% of the original aggregate principal amount of
the Notes issued at a redemption price equal to
108.875% of the principal amount thereof, plus accrued
and unpaid interest, if any, to but excluding the date
of redemption. See "Description of Notes--Optional
Redemption".
Change of
Control........... Upon the occurrence of a Change of Control, the Company
is required to offer to repurchase all outstanding
Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the date of repurchase. See "Description of New
Notes--Covenants--Change of Control".
Certain
Covenants......... The Indenture contains certain covenants which, among
other things, restrict the ability of the Company and
its Restricted Subsidiaries (as defined herein) to
incur additional indebtedness, pay dividends or make
distributions in respect of the Company's capital stock
or make other restricted payments, sell assets, create
certain liens or enter into certain transactions with
affiliates. See "Description of New Notes--Covenants".
Sinking Fund...... None.
Ranking........... The New Notes will constitute general unsecured
indebtedness of the Company, subordinated in right of
payment to all existing and future senior indebtedness
of the Company, including borrowings under the Bank
Credit Facilities. At May 31, 1998 on a pro forma basis
after giving effect to the Transactions, the Company
would have had $654 million of indebtedness
outstanding, of which $350 million would have been
Senior Debt. The Indenture pursuant to which the New
Notes will be issued permits the Company to incur
additional indebtedness, including Senior Debt, subject
to certain limitations. See "Capitalization" and
"Description of New Notes--Subordination". See
"Description of the New Notes--Subordination".
Market............ The New Notes will constitute a new issue of securities
with no established trading market. Accordingly, no
assurance can be given that an active public or other
market will develop for the New Notes or as to the
liquidity of or the trading market for the New Notes.
It is not expected that an active trading market for
the Old Notes will develop while they are subject to
restrictions on transfer. See "Risk Factors--Absence of
Public Market for the New Notes; Volatility" and
"--Consequences of the Exchange Offer on Non-Tendering
Holders of the Old Notes".
RISK FACTORS
Prospective investors should consider all of the information contained
in this Prospectus before making an investment in the New Notes. In
particular, prospective investors should carefully consider the factors set
forth under "Risk Factors".
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
LOEWS CINEPLEX
The following table sets forth summary historical financial data,
based on continuing operations, for the Company for the five fiscal years
ended February 28, 1998 and has been derived from the Company's annual
consolidated financial statements. The following summary financial data for
the three-month periods ended May 31, 1998 and May 31, 1997 is unaudited,
but, in the opinion of management, includes all adjustments necessary for a
fair presentation of the financial position and results of operations for
such periods. The results of operations for the three months ended May 31,
1998 are not necessarily indicative of the results to be attained for the
entire year. The summary historical financial data should be read in
conjunction with the separate consolidated financial statements and notes
thereto of Loews Cineplex and "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which are included
elsewhere in this Prospectus. THE FISCAL YEAR HISTORICAL DATA AND THE
UNAUDITED FINANCIAL DATA FOR THE THREE MONTHS ENDED MAY 31, 1997 DO NOT
GIVE EFFECT TO THE COMBINATION OR INCLUDE HISTORICAL INFORMATION FOR
CINEPLEX ODEON. However, related historical financial data for Cineplex
Odeon are presented following such data. The unaudited financial data as
of, and for the three months ended, May 31, 1998, reflects the Combination
and includes the results of Cineplex Odeon from May 15, 1998 through May
31, 1998.
The unaudited pro forma combined income statement data give effect to
the Combination and to the Transactions ("Pro Forma"), in each case as if
the relevant Transactions had occurred on March 1, 1997, by combining the
results of operations of the Company for the year ended February 28, 1998,
with the results of operations of Cineplex Odeon for the year ended
December 31, 1997, and, with respect to the three months ended May 31, 1998
by combining the results of operations of the Company and Cineplex Odeon
for the three months ended May 31, 1998. The unaudited pro forma combined
balance sheet data present the Pro Forma financial position of the Company
and Cineplex Odeon at May 31, 1998, assuming that the relevant Transactions
had been consummated as of that date. The Combination has been accounted
for under the purchase method of accounting.
The unaudited summary pro forma financial information is not
necessarily indicative of the Company's combined financial position or
results of operations that actually would have occurred if the Transactions
had been consummated on the dates indicated. In addition, they are not
intended to be a projection of results of operations that may be attained
by the Company in the future. This unaudited summary pro forma financial
information should be read in conjunction with detailed unaudited pro forma
financial information and the historical financial statements and notes
thereto of the Company and Cineplex Odeon included elsewhere in this
Prospectus.
Loews Cineplex has arranged to obtain an independent appraisal of
significant assets, liabilities and business operations of Cineplex Odeon.
Upon completion of the determination of fair value, the Excess Purchase
Price (as defined herein) will be allocated to specific assets and
liabilities of Cineplex Odeon. It is anticipated that there will be
reductions in the carrying value associated with certain assets, and
alternatively the fair value of certain other assets may exceed carrying
value. Accordingly, the final valuation could result in materially
different amounts and allocations of Excess Purchase Price from the amounts
and allocations presented in the following unaudited pro forma financial
data, primarily between goodwill and property, equipment and leaseholds,
resulting in corresponding changes in depreciation and amortization
amounts. For every one million dollars of Excess Purchase Price allocated
to fixed assets, depreciation and amortization will increase $25,000
annually (assuming an average 20 year service life for fixed assets and
straight line depreciation). Based on preliminary estimates of fair value
related to certain assets, additional "Excess Purchase Price" of between
$100 million and $150 million could result at the conclusion of the
valuation. See "Risk Factors", "Unaudited Pro Forma Financial Information"
and "Cautionary Statement Concerning Forward-Looking Statements".
<PAGE>
<TABLE>
<CAPTION>
LOEWS CINEPLEX
UNAUDITED
PRO FORMA
ACTUAL YEAR ENDED
YEAR ENDED FEBRUARY 28 OR 29, FEBRUARY 28,
------------------------------------------------------------- -------------
1994 1995 1996 1997 1998 1998 (1)(4)
---------- ------------ ----------- ---------- ---------- -------------
(IN THOUSANDS, EXCEPT RATIOS, SHARES OUTSTANDING AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Admissions revenues. $244,864 $255,392 $264,585 $273,498 $296,933 $688,195
Concessions revenues 75,355 79,287 84,358 90,643 104,009 248,671
Other revenues...... 8,800 8,656 10,153 11,204 12,568 38,956
------- ------ ------- ------ ------- -------
329,019 343,335 359,096 375,345 413,510 975,822
------- ------- ------- ------- ------- -------
Theatre operations
and other expenses
(including
concession costs). 259,173 268,236 277,375 282,480 307,568 771,670
General and
administrative.... 17,449 18,753 20,282 21,447 28,917 59,230
Depreciation and
amortization...... 37,873 38,572 41,273 44,576 52,307 105,601
Loss on
sale/disposals of
theatres.......... 3,491 13,420 7,249 9,951 7,787 13,683
Interest expense, net 9,865 10,613 15,376 14,776 14,319 47,153
Income tax
expense/(benefit). 4,662 (1,337) 309 2,295 2,751 2,292
------- -------- -------- -------- -------- ---------
Net income (loss)... $ (3,494) $ (4,922) $ (2,768) $ (180) $ (139) $ (23,807)
======== ======== ======== ======== ======== =========
Ratio of earnings to
fixed charges..... 1.11 N/A(5) N/A(5) 1.14 1.18 N/A(5)
Earnings (loss) per
common share (2):
basic............. $(0.17) $(0.24) $(0.14) $(0.01) $(0.01) $(0.41)
diluted........... $(0.17) $(0.24) $(0.14) $(0.01) $(0.01) $(0.41)
Weighted average
shares
and equivalent
outstanding (2):
basic............. 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 58,602,844
diluted........... 20,472,807 20,472,807 20,472,807 20,472,807 20,924,890 62,293,258
BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash
equivalents....... $ 4,698 $ 4,759 $ 2,390 $ 2,160 $ 9,064
Property, equipment
and leaseholds, net $566,043 $605,982 $602,435 $613,692 $609,152
Total assets........ $675,667 $723,108 $715,810 $721,372 $728,551
Total long-term debt
(including current
maturities and
capital leases)... $263,791 $313,098 $298,680 $306,342 $307,616
Total liabilities... $343,147 $395,510 $390,980 $396,722 $404,040
Stockholders' equity $332,520 $327,598 $324,830 $324,650 $324,511
CASH FLOW STATEMENT
DATA (3):
Cash flow provided
by operating
activities........ $55,150 $36,188 $46,326 $47,976 $64,185
<FN>
- ---------------------------------
(1) The final amount of the excess of the purchase price over the
historical net book value of the net assets of Cineplex Odeon and the
allocation of such excess has not yet been determined.
(2) Restated in all periods presented to reflect impact of a stock
dividend declared on February 5, 1998.
(3) Due to the subjectivity inherent in the assumptions concerning the
timing and nature of the uses of cash generated by the unaudited pro
forma adjustments, cash flow from operations are not presented in the
unaudited pro forma data.
(4) The unaudited pro forma data are not necessarily indicative of the
combined results of operations of the Company that would have occurred
nor are they necessarily indicative of future operating results of the
Company.
(5) Earnings would not have covered the fixed charges by $6,259, $2,459
and $21,515 for the years ended February 28, 1995 and February 28,
1996 and on a pro forma basis for the year ended February 28, 1998,
respectively.
</FN>
</TABLE>
<PAGE>
UNAUDITED
THREE MONTHS ENDED MAY 31,
---------------------------------------
1997 1998(1)(3)
------------ --------------------------
ACTUAL ACTUAL(2) PRO FORMA
------------ ------------- ------------
(IN THOUSANDS, EXCEPT SHARES
OUTSTANDING AND PER SHARE DATA)
INCOME STATEMENT DATA:
Admissions revenues................... $ 67,370 $ 83,207 $148,747
Concessions revenues.................. 23,486 31,170 56,471
Other revenues........................ 2,360 3,437 9,107
------------ ------------- ------------
93,216 117,814 214,325
------------ ------------- ------------
Theatre operations and other expenses
(including concession costs)........ 71,095 89,943 175,948
General and administrative............. 5,937 7,946 15,116
Depreciation and amortization.......... 12,597 14,681 24,514
Interest expense, net.................. 3,622 6,106 12,426
Income tax expense/(benefit)........... 365 (119) 258
----------- ------------- ------------
Net income (loss)...................... $ (400) $ (743) $(13,937)
=========== ============= ============
Ratio of earnings to fixed charges..... N/A (6) N/A(6) N/A(6)
Earnings (loss) per common share (4):
basic................................ $ (0.02) $ (0.03) $ (0.24)
diluted.............................. $ (0.02) $ (0.03) $ (0.24)
Weighted average shares and equivalent
outstanding (4):
basic................................ 20,472,807 24,619,805 58,621,622
diluted.............................. 20,472,807 24,984,549 62,035,255
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............. $ 37,785 $ 37,785
Property, equipment and leaseholds, net $1,180,376 $1,180,376
Total assets........................... $1,617,287 $1,625,287
Total long-term debt (including
current maturities and capital
leases).............................. $729,841 $653,778
Total liabilities...................... $1,022,019 $927,394
Stockholders' equity................... $595,268 $697,893
CASH FLOW STATEMENT DATA (5):
Cash flow provided by operating
activities.......................... $ 9,974 $ 27,292
- ------------------
(1) The final amount of the excess of the purchase price over the
historical net book value of the net assets of Cineplex Odeon and the
allocation of such excess has not yet been determined.
(2) Includes operating results of Cineplex Odeon from May 15, 1998 through
May 31, 1998.
(3) The unaudited quarterly pro forma data is not necessarily indicative
of the combined results of operations of the Company that would have
occurred nor is it necessarily indicative of future operating results
of the Company. Further, due to seasonality in the exhibition
industry, the Company's first fiscal quarter of 1998 is not
necessarily representative of future operating results for the
remainder of the year.
(4) Restated in all periods presented to reflect impact of a stock
dividend declared on February 5, 1998.
(5) Due to the subjectivity inherent in the assumptions concerning the
timing and nature of the uses of cash generated by the unaudited pro
forma adjustments, cash flow from operations is not presented in the
unaudited pro forma data.
(6) Earnings did not cover fixed charges by $35 and by $862 for the three
months ended May 31, 1997 and 1998, respectively, and by $13,679 on a
pro forma basis for the three months ended May 31, 1998.
<PAGE>
CINEPLEX ODEON
The following table sets forth summary historical financial data,
based on continuing operations, for Cineplex Odeon for the five fiscal
years ended December 31, 1997 and has been derived from Cineplex Odeon's
annual consolidated financial statements and notes related thereto. The
summary historical financial data should be read in conjunction with the
separate consolidated financial statements and notes thereto of Cineplex
Odeon and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Cineplex Odeon", which are included elsewhere in
this Prospectus. Cineplex Odeon's historical financial statements are
prepared in accordance with generally accepted accounting principles
("GAAP") in Canada, which, except as described in footnote 17 to Cineplex
Odeon's historical financial statements, conform in all material respects
with accounting principles generally accepted in the United States.
<TABLE>
<CAPTION>
ACTUAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
------------- ------------- ------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues.............. $388,944 $384,558 $365,220 $358,973 $399,171
Concessions revenues............. 138,387 133,850 126,319 126,636 147,892
Other revenues................... 18,899 22,704 21,611 24,083 26,714
------------- ------------- ------------ ------------- -------------
546,230 541,112 513,150 509,692 573,777
------------- ------------- ------------ ------------- -------------
Theatre operations and other
expenses (including
concession costs).............. 459,759 459,258 440,747 440,685 491,443
General and administrative....... 15,494 16,229 17,575 18,192 20,313
Depreciation and amortization.... 41,577 40,859 42,621 43,648 45,715
Other expenses (income).......... (1,267) 2,900 2,862 1,377 43,401
Interest expense, net............ 28,033 33,641 40,983 35,482 33,900
Income taxes..................... 1,665 2,398 1,269 1,390 1,072
------------- ------------- ------------ ------------- -------------
Net income (loss)................ $ 969 $(14,173) $(32,907) $(31,082) $(62,067)
============= ============= ============ ============= =============
Earnings (loss) per common share:
basic.......................... $0.01 $(0.13) $(0.29) $(0.19) $(0.35)
diluted........................ $0.01 $(0.13) $(0.29) $(0.19) $(0.35)
Weighted average shares
outstanding and equivalent
outstanding:
basic.......................... 106,730,000 110,175,000 114,764,000 163,473,000 176,795,000
diluted........................ 115,181,000 118,245,000 122,616,000 176,107,000 191,304,000
BALANCE SHEET DATA (AT PERIOD
END):
Cash and cash equivalents........ $ 1,268 $ 1,551 $ 1,604 $ 2,718 $ 3,505
Property, equipment and
leaseholds, net................ $619,309 $614,741 $583,442 $579,841 $567,431
Total assets..................... $697,105 $688,693 $649,643 $644,171 $635,475
Long-term debt (including current
maturities and
capital leases)................ $394,571 $396,665 $399,454 $341,301 $367,240
Total liabilities................ $496,718 $492,518 $483,651 $425,591 $484,293
Shareholders' equity............. $200,387 $196,175 $165,992 $218,580 $151,182
CASH FLOW STATEMENT DATA:
Cash flow provided by operating
activities....................... $38,674 $31,435 $ 3,522 $12,416 $30,780
</TABLE>
<PAGE>
HISTORICAL AND UNAUDITED PRO FORMA
COMBINED KEY OPERATING STATISTICS
LOEWS CINEPLEX
The table below sets forth key operating statistics for Loews Cineplex
on an actual basis and on a pro forma combined basis giving effect to the
Combination. In order to arrive at a more meaningful presentation of
financial operating data related to the productivity and performance of
Loews Cineplex, and, except as otherwise noted, all amounts below include
100% of the operating results of the U.S. Partnerships, although Loews
Cineplex has only a 50% interest in each of the U.S. Partnerships. This
information does not include any potential benefit that may be realized
from anticipated operating efficiencies and cost savings as a result of the
Combination. Management views these statistics as key financial measures
and believes that certain investors find them useful in analyzing companies
in the motion picture exhibition industry. No measure is more meaningful
than another, and management uses these measures collectively to assess
Loews Cineplex's operating performance.
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
PRO FORMA THREE MONTHS
ACTUAL YEAR ENDED MAY 31,
YEAR ENDED ENDED ----------------------------------
FEBRUARY 28 OR 29, FEBRUARY 1997 1998(7)
-------------------------------------------------- 28, -------- ---------------------
1994 1995 1996 1997 1998 1998(1)(7) ACTUAL ACTUAL PRO FORMA(1)
---- ---- ---- ---- ---- ---------- -------- ------- ------------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at
period end........... 981 1,030 950 959 1,035 2,704 986 2,794 2,728
Locations operated at
period end........... 182 180 154 143 139 439 142 450 437
Screens per location... 5.4 5.7 6.2 6.7 7.4 6.2 6.9 6.2 6.2
Attendance............. 52,113 52,656 53,544 53,133 58,387 143,266 12,855 16,686 31,052
Total revenues......... $ 360,828 $ 377,171 $ 400,412 $ 421,613 $ 480,437 $1,042,749 $105,553 $ 134,739 $231,251
Revenues per screen(2). $ 367.82 $ 366.19 $ 421.49 $ 439.64 $ 464.19 $ 385.63 $ 107.60 $ 100.40 $ 84.77
Revenues per location(2) $1,982.57 $2,095.39 $2,600.08 $2,948.34 $3,456.38 $ 2,375.28 $ 733.01 $ 701.77 $ 529.18
EBITDA(3).............. $ 48,906 $ 42,926 $ 54,190 $ 61,467 $ 69,238 $ 131,239 $ 16,184 $ 19,925 $ 23,261
Total EBITDA(4)........ $ 57,982 $ 62,540 $ 68,177 $ 78,273 $ 86,643 $ 154,540 $ 17,841 $ 22,210 $ 25,546
Partners' share of
Total EBITDA......... $ 3,677 $ 4,287 $ 4,800 $ 4,853 $ 6,339 $ 6,339 $ 1,025 $ 1,419 $ 1,419
Attributable EBITDA(4). $ 54,305 $ 58,253 $ 63,377 $ 73,420 $ 80,304 $ 148,201 $ 16,816 $ 20,791 $ 24,127
Total EBITDA per
screen(2)............ $ 59.10 $ 60.72 $ 71.77 $ 81.62 $ 83.71 $ 57.15 $ 18.19 $ 16.55 $ 9.36
Total EBITDA per
location(2).......... $ 318.58 $ 347.44 $ 442.71 $ 547.36 $ 623.33 $ 352.03 $ 123.90 $ 115.68 $ 58.46
Total EBITDA per
patron(2)............ $ 1.11 $ 1.19 $ 1.27 $ 1.47 $ 1.48 $ 1.08 $ 1.39 $ 1.33 $ 0.82
Concessions revenue per
patron............... $ 1.63 $ 1.70 $ 1.82 $ 1.98 $ 2.14 $ 1.88 $ 2.12 $ 2.20 $ 2.00
Concessions margin..... 80.8% 80.9% 80.9% 82.8% 84.5% 82.4% 84.2% 84.6% 83.0%
Admissions revenue per
patron............... $ 5.16 $ 5.34 $ 5.52 $ 5.79 $ 5.91 $ 5.14 $ 5.93 $ 5.69 $ 5.16
CASH FLOW STATEMENT
DATA(5)(6):
Net cash provided by
operating
activities......... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
Net cash used in
investing activities. $ (32,098) $ (82,486) $ (34,690) $ (53,254) $ (51,439) $ (8,960) $ (18,590)
Net cash
(used)/provided by
financing
activities......... $(23,022) $ 46,359 $ (14,005) $ 5,048 $ (5,842) $ 10,449 $ 20,019
<FN>
- ------------------------
(1) The information presented is derived from unaudited pro forma
information which is presented elsewhere in this Prospectus. See
"Unaudited Pro Forma Financial Information".
(2) All per screen, location and patron ratios are calculated based upon
screens and locations as of period end and include the U.S.
Partnerships except for the actual three months ended May 31, 1998 and
1997, which are calculated using a weighted average number of screens
and locations. This is due to the inclusion of the operations of
Cineplex Odeon for the last 17 days of the period ended May 31, 1998.
Use of the weighted average number of screens and locations for the
remaining historical data would not result in substantially different
data from the information presented.
(3) EBITDA consists of earnings before interest, income taxes,
depreciation and amortization including equity earnings from
investments in the U.S. Partnerships. EBITDA should not be construed
as an alternative to operating income (as determined in accordance
with U.S. GAAP), as a measure of the Company's operating performance,
or as an alternative to cash flows from operating activities (as
determined in accordance with U.S. GAAP), as a measure of the
Company's liquidity. EBITDA measures the amount of cash that a company
has available for investment or other uses and is used by the Company
as a measure of its performance. The Company believes that EBITDA is
an important measure, in addition to cash flow from operations,
Attributable EBITDA and Total EBITDA, in viewing its overall liquidity
and borrowing capacity.
(4) Total EBITDA consists of EBITDA plus loss on sale/disposals of
theatres and 100% of the operating results of the U.S. Partnerships.
Total EBITDA should not be construed as an alternative to operating
income (as determined in accordance with U.S. GAAP), as a measure of
the Company's operating performance, or as an alternative to cash
flows from operating activities (as determined in accordance with U.S.
GAAP), as a measure of the Company's liquidity. Total EBITDA measures
the amount of cash that a company has available for investment or
other uses and is used by the Company as a measure of its performance.
The Company believes that Total EBITDA is an important measure, in
addition to cash flow from operations, Attributable EBITDA and EBITDA,
in viewing its overall liquidity and borrowing capacity. Attributable
EBITDA equals Total EBITDA less partners' share of Total EBITDA. A
reconciliation of EBITDA to Total EBITDA and Attributable EBITDA
follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
ACTUAL ENDED MAY 31,
YEAR ENDED UNAUDITED -----------------------------------
FEBRUARY 28 OR 29, PRO FORMA 1997 1998
------------------------------------------------------ YEAR ENDED ----------- ---------------------
FEBRUARY 28,
1994 1995 1996 1997 1998 1998 ACTUAL ACTUAL PRO FORMA
-------- ---------- ---------- ----------- ----------- ------------ ----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA.............. $ 48,906 $ 42,926 $ 54,190 $ 61,467 $ 69,238 $ 131,239 $ 16,184 $ 19,925 $ 23,261
Add: Loss on
sale/disposals of
theatres*......... 3,491 13,420 7,249 9,951 7,787 13,683 -- -- --
-------- --------- -------- --------- --------- ---------- --------- -------- ----------
Modified EBITDA,
including equity
earnings.......... 52,397 56,346 61,439 71,418 77,025 144,922 16,184 19,925 23,261
Less: Equity
earnings/other,
included in EBITDA 1,769 2,380 2,862 2,851 3,060 3,060 393 553 553
Add: EBITDA from
U.S. Partnerships. 7,354 8,574 9,600 9,706 12,678 12,678 2,050 2,838 2,838
-------- --------- -------- --------- --------- ---------- --------- -------- ----------
Total EBITDA........ 57,982 62,540 68,177 78,273 86,643 154,540 17,841 22,210 25,546
Less: Partners'
share of Total
EBITDA............ 3,677 4,287 4,800 4,853 6,339 6,339 1,025 1,419 1,419
-------- --------- -------- --------- --------- ---------- --------- -------- ----------
Attributable EBITDA. $ 54,305 $ 58,253 $ 63,377 $ 73,420 $80,304 $ 148,201 $ 16,816 $ 20,791 $ 24,127
======== ========= ======== ========= ========= ========== ========= ======== ==========
<FN>
- ------------------------------
* Primarily represents (i) the noncash write off of the net book value
of the theatres disposed of and (ii) provisions for net disposal costs
(where applicable) related to the disposition of such theatres.
(5) Cash flow statement data includes cash flows from long term
investments in the U.S. Partnerships to the extent of the Company's
equity interest.
(6) Due to the subjectivity inherent in the assumptions concerning the
timing and nature of the uses of cash generated by the unaudited pro
forma adjustments, cash flow from operating, investing and financing
activities are not presented in the unaudited pro forma data.
(7) The unaudited pro forma data is not necessarily indicative of the
combined results of operations of the Company that would have occurred
nor is it necessarily indicative of future operating results of the
Company. Further, due to seasonality in the exhibition industry, the
Company's first fiscal quarter of 1998 is not necessarily
representative of future operating results for the remainder of the
year.
</FN>
</TABLE>
<PAGE>
CINEPLEX ODEON
The table below sets forth key operating statistics, based on
continuing operations, for Cineplex Odeon as of, and for, each of the
periods indicated. Management views these statistics as key financial
measures and believes that certain investors find them useful in analyzing
companies in the motion picture exhibition industry. No measure is more
meaningful than another, and management uses these measures collectively to
assess Cineplex Odeon's operating performance.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997
----------- ---------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER
PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at period end... 1,622 1,638 1,512 1,549 1,729
Locations operated at period end. 363 360 325 316 315
Screens per location............. 4.5 4.6 4.7 4.9 5.5
Attendance....................... 88,225 86,082 81,203 78,356 87,321
Total revenues................... $ 546,230 $ 541,112 $ 513,150 $ 509,692 $ 573,777
Revenues per screen(1)........... $ 336.76 $ 330.35 $ 339.38 $ 329.05 $ 331.85
Revenues per location(1)......... $1,504.77 $1,503.09 $1,578.92 $1,612.95 $1,812.51
EBITDA(2)........................ $ 72,244 $ 62,725 $ 51,966 $ 49,438 $ 18,620
Modified EBITDA(3)............... $ 70,977 $ 65,625 $ 54,828 $ 50,815 $ 62,021
Modified EBITDA per screen(1).... $ 43.76 $ 40.06 $ 36.26 $ 32.81 $ 35.87
Modified EBITDA per location(1).. $ 195.53 $ 182.29 $ 168.70 $ 160.81 $ 196.89
Modified EBITDA per patron(1).... $ 0.80 $ 0.76 $ 0.68 $ 0.65 $ 0.71
Concessions revenue per patron(4) $ 1.57 $ 1.55 $ 1.56 $ 1.62 $ 1.69
Concessions margin............... 85.9% 83.8% 82.6% 82.3% 80.6%
Admissions revenue per patron(4). $ 4.41 $ 4.47 $ 4.50 $ 4.58 $ 4.57
CASH FLOW STATEMENT DATA:
Cash provided by (used for)
operating activities........... $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
Cash used for investment
activities..................... $ (7,264) $ (41,049) $ (7,714) $ (35,961) $ (58,697)
Cash provided by (used for)
financing activities........... $ (30,445) $ 9,897 $ 4,245 $ 24,659 $ 28,704
<FN>
- --------------------------------------------------
(1) All per screen, location and patron ratios are calculated as of period
end and include screens and locations in which Cineplex Odeon has a
partnership interest. Revenues, EBITDA and Modified EBITDA, however,
reflect only Cineplex Odeon's proportionate share of the revenues,
EBITDA and Modified EBITDA of such partnerships, equal to the
respective percentage ownership interests of Cineplex Odeon in such
partnerships.
(2) EBITDA consists of earnings before interest, taxes, depreciation and
amortization. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with Canadian GAAP), as
a measure of Cineplex Odeon's operating performance, or as an
alternative to cash flow from operating activities (as determined in
accordance with Canadian GAAP), as a measure of Cineplex Odeon's
liquidity. EBITDA measures the amount of cash that a company has
available for investment or other uses and was used by Cineplex Odeon
as a measure of its performance. Cineplex Odeon believes that EBITDA
is an important measure, in addition to cash flow from operations and
Modified EBITDA, in viewing its overall liquidity and borrowing
capacity. EBITDA measures the amount of cash that a company has
available for investment or other uses and is used by the Cineplex
Odeon as a measure of its performance.
(3) Modified EBITDA is EBITDA after eliminating the impact of other
expenses (income). Modified EBITDA should not be construed as an
alternative to operating income (as determined in accordance with
Canadian GAAP), as a measure of Cineplex Odeon's operating
performance, or as an alternative to cash flow from operating
activities (as determined in accordance with Canadian GAAP), as a
measure of Cineplex Odeon's liquidity. Modified EBITDA measures the
amount of cash that a company has available for investment or other
uses and was used by Cineplex Odeon as a measure of its performance.
Cineplex Odeon believes that Modified EBITDA is an important measure,
in addition to cash flow from operations and EBITDA, in viewing its
overall liquidity and borrowing capacity. A reconciliation of EBITDA
to Modified EBITDA follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997
----------- ---------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA ....................... $ 72,244 $ 62,725 $ 51,966 $ 49,438 $ 18,620
Other expenses (income)....... (1,267) 2,900 2,862 1,377 43,401*
----------- ---------- ----------- ----------- ------------
Modified EBITDA**............. $ 70,977 $ 65,625 $ 54,828 $ 50,815 $ 62,021
=========== ========== =========== =========== ============
<FN>
------------------------------
* Includes $37.5 million representing unusual and nonrecurring loss on
Cineplex Odeon theatres to be closed as part of the contractual
obligations related to the Combination. This charge was recorded in
the fourth quarter of 1997.
** In the case of Cineplex Odeon, Modified EBITDA is substantially
comparable to Attributable EBITDA.
(4) Admissions and concessions revenue per patron is affected by the fact
that, during the periods reflected, a significant portion of Cineplex
Odeon's revenues was generated in Canadian dollars and for purposes of
financial reporting has been converted to U.S. dollars.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before exchanging for the New Notes offered hereby. This Prospectus
contains forward looking statements. These statements are subject to a
number of risks and uncertainties, certain of which are beyond the
Company's control. See "Cautionary Statement Concerning Forward-Looking
Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
HISTORICAL NET LOSSES
Each of the Company and Cineplex Odeon reported net losses during the
three fiscal years ended December 31, 1997, in the case of Cineplex Odeon,
and February 28, 1998, in the case of the Company, although each company
had positive cash flow from operations during such periods. Historically,
the respective companies used such cash flow to fund, among other things,
investments in theatre facilities and to service outstanding debt. Among
the principal assumptions made by Loews Cineplex in analyzing the
Combination were that (i) the cash flow of Loews Cineplex would increase
compared to the separate results of Cineplex Odeon and Loews Theatres due
to certain cost savings and revenue enhancements anticipated to result from
the Combination, (ii) the Company would achieve such cost savings and
revenue enhancements through, among other things, the reduction of certain
overhead expenses of the two companies and (iii) the Company would benefit
from the complementary skills and expertise of the respective managements
of Loews Theatres and Cineplex Odeon. There can be no assurance, however,
as to the amount of cash flow that will be generated by the Company and
available to fund expansion projects and service debt of the Company or
that the other assumed benefits of the Combination will be realized. In
addition, there can be no assurance that the Company will not continue to
have net losses. Moreover, under U.S. GAAP, the accounting for the
Combination follows the purchase method of accounting. The valuations and
other studies required to determine the allocation of Excess Purchase Price
to the net assets acquired (e.g., fixed assets, goodwill and other
intangibles) are in process and have not yet been completed. Accordingly,
the final valuation could result in a materially different amount of Excess
Purchase Price and a materially different allocation of the purchase price
among the purchased assets from the amounts and allocations presented in
the pro forma financial statements included elsewhere herein. The final
valuation, and the allocations and amortization of goodwill resulting
therefrom, could materially affect reported results. See "Unaudited Pro
Forma Financial Information".
RISKS OF INTEGRATION
The Combination involves the integration of two theatre circuits that
previously operated independently. No assurance can be given that Loews
Cineplex will be able to integrate the respective operations of the Loews
Theatres and Cineplex Odeon theatre circuits without encountering
difficulties or experiencing the loss of key personnel or that the benefits
expected from such integration will be realized. The integration of two
theatre circuits across geographically dispersed operations can create the
risk of interruption of, or loss of momentum in, the activities of Loews
Cineplex's operations, which could have an adverse effect on Loews
Cineplex's business and financial condition. Furthermore, there can be no
certainty that the Combination will not adversely affect the relationships
with key suppliers of either Cineplex Odeon or Loews Theatres, which also
could have an adverse effect on Loews Cineplex's business and financial
condition.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
Loews Cineplex is highly leveraged. At May 31, 1998, the Company's
total long-term debt (including capital leases and the current portion of
long-term debt) was approximately $730 million (representing approximately
55.1% of total capitalization) and, on a pro forma basis after giving
effect to the Transactions, would have been approximately $654 million
(representing approximately 48.4% of total capitalization).
The degree to which Loews Cineplex is leveraged could have important
consequences to holders of the New Notes, including: (i) that a substantial
portion of the cash flow from operations of Loews Cineplex and its
subsidiaries will be required to be dedicated to Loews Cineplex's interest
and principal obligations with respect to its indebtedness (including
Senior Debt) and may not be available to Loews Cineplex and its
subsidiaries for operations, working capital, capital expenditures,
expansion, acquisitions, general corporate or other purposes; (ii) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, expansion, acquisitions, general corporate
or other purposes may be impaired; (iii) the Company may be more highly
leveraged than certain other motion picture exhibitors, which may place it
at a competitive disadvantage; (iv) the Company's flexibility in planning
for, or reacting to, changes in its business and industry may be limited;
and (v) the Company's degree of leverage may make it more vulnerable in the
event of a downturn in its business or industry or the economy in general.
In addition, the Bank Credit Facilities and the Indenture contain financial
and other restrictive covenants that limit the ability of the Company to,
among other things, borrow additional funds, incur liens on its assets and
pay dividends on its capital stock. Failure by the Company to comply with
such covenants could result in an event of default which, if not cured or
waived, could have a material adverse effect on the Company. In addition,
the degree to which the Company is leveraged could prevent it from
repurchasing all of the New Notes tendered to it upon the occurrence of a
Change of Control. See "Description of New Notes--Covenants--Change of
Control" and "Description of Certain Indebtedness".
The Company's ability to make scheduled principal payments on, or to
pay interest on, or to refinance its indebtedness (including the New Notes)
depends on its future performance which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. Based upon the Company's current level of
operations and anticipated growth, the management of the Company believes,
based on current circumstances, the Company's available cash flow, together
with available borrowing capacity under the Bank Credit Facilities and
other sources of liquidity, will be adequate to meet the Company's
anticipated future requirements for working capital, letters of credit,
capital expenditures and scheduled payments of interest and, under certain
circumstances, principal on amounts due under the Bank Credit Facilities,
other Senior Debt and interest on the New Notes. However, there can be no
assurance that the Company's businesses will generate sufficient cash flow
from operations or that future financing will be available in an amount
sufficient to enable the Company to service its indebtedness, including the
New Notes, or to make necessary capital expenditures, or that any
refinancing would be available, or available on commercially reasonable
terms. Further, depending on the timing, amount and structure of any future
acquisitions and the availability of funds for acquisitions under the Bank
Credit Facilities, the Company may need to raise additional capital to fund
the acquisitions of additional businesses. In the event that Loews Cineplex
and its subsidiaries are unable to meet their obligations with respect to
existing indebtedness (including Senior Debt), they may be required to
refinance or restructure all or a portion of such indebtedness, sell
material assets or operations, reduce or delay capital expenditures or seek
to raise additional debt or equity capital. There can be no assurance that
Loews Cineplex and its subsidiaries would be able to effect any such
refinancing or restructuring or sell assets or obtain any such additional
capital on satisfactory terms, or that any of the proceeds therefrom would
be sufficient to enable the Company to service its indebtedness, including
the New Notes, or to fund its other liquidity needs.
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness under the Notes to fund
the Plitt Note Repurchase could be subject to review under relevant federal
and state fraudulent transfer or conveyance laws in a bankruptcy case
involving, or a lawsuit commenced by or on behalf of unpaid creditors of,
the Company. If a court were to find under such laws that (i) at the time
the Notes were issued the Company had incurred the indebtedness under the
Notes with the intent of hindering, delaying or defrauding creditors, or
(ii) the Company received less than reasonably equivalent value or fair
consideration for the Notes and (x) was insolvent or rendered insolvent by
reason of such transaction, (y) was engaged in a business or transaction
for which the assets remaining with the Company constituted unreasonably
small capital or (z) intended to incur, or believed that it would incur,
debts that it would be unable to pay when due, such court could, among
other things, subordinate the Notes to present or future indebtedness of
the Company, void the issuance of some or all of the indebtedness under the
Notes, direct any amounts paid under the Notes to be repaid to the Company
or applied to a fund for the benefit of the Company's creditors or take
other action that would be detrimental to the holders of the Notes.
The Company believes that the indebtedness represented by the Old
Notes was incurred for proper purposes and in good faith, that the Company
is receiving reasonably equivalent value or fair consideration for
incurring such indebtedness, that the Company was, is and will be solvent
under the foregoing standards and that it had, has and will have sufficient
capital for carrying on its business and was, is, and will be able to pay
its debts as they mature. There can be no assurance, however, that a court
would reach the same conclusions. See "--Substantial Leverage and Ability
to Service Debt".
EFFECTIVE RANKING; SUBORDINATION OF THE NEW NOTES; ASSET ENCUMBRANCES
The New Notes will be subordinated in right of payment to all current
and future Senior Debt of the Company and effectively subordinated to all
liabilities of its subsidiaries. Upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
the Company or its property, the holders of Senior Debt will be entitled to
be paid in full before any payment may be made with respect to the New
Notes. In addition, the subordination provisions of the Indenture provide
that payments with respect to the New Notes will be blocked in the event of
a payment default on Senior Debt and may be blocked for up to 179 of each
360 days in the event of certain non-payment defaults on Senior Debt. In
the event of a bankruptcy, liquidation or reorganization of the Company,
holders of the New Notes will participate ratably with all holders of
subordinated indebtedness of the Company that is deemed to be of the same
class or ranking as the New Notes, and potentially with all other general
creditors of the Company, based upon the respective amounts owed to each
holder or creditor, in the remaining assets of the Company. In any of the
foregoing events, there can be no assurance that there would be sufficient
assets to pay amounts due on the New Notes. As a result, holders of New
Notes may receive less than the full amounts owing in respect of the New
Notes and less, ratably, than the holders of Senior Debt and other general
creditors of the Company. At May 31, 1998 on a pro forma basis after giving
effect to the Transactions, the Company would have had $654 million of
indebtedness outstanding, of which $350 million would have been Senior
Debt.
In addition, the Bank Credit Facilities are secured by a first
priority lien against Loews Cineplex's personal property, including,
without limitation, all of the shares of stock of its direct domestic
subsidiaries and 65% of the capital stock of its direct foreign
subsidiaries, and are guaranteed by each of its domestic subsidiaries,
which guarantees are secured by a first priority lien against such
guarantors' personal property, including, without limitation, all of the
shares of stock of each of their direct domestic subsidiaries and 65% of
the capital stock of each of their direct foreign subsidiaries. Under
certain circumstances, certain other indebtedness or obligations of Loews
Cineplex and its subsidiaries may be secured by liens on some or all of
their assets. If the lenders under the Bank Credit Facilities or the
holders of any other secured indebtedness were to foreclose on the
collateral securing such indebtedness owing to them, it is possible that
after satisfaction of all such other secured indebtedness in full, the
value of the assets of Loews Cineplex not pledged to any other creditor
would be insufficient to satisfy fully the claims of the holders of the New
Notes and that the Company's financial condition and the value of the New
Notes would be materially and adversely affected. See "Description of
Certain Indebtedness".
RESTRICTIONS IMPOSED BY BANK CREDIT FACILITIES; VARIABLE INTEREST RATES
The Bank Credit Facilities impose, and the Indenture imposes, a number
of significant financial and other covenants on Loews Cineplex, including
the maintenance of certain financial tests, all as described under the
headings "Description of Certain Indebtedness" and "Description of New
Notes". These covenants limit the operating flexibility of Loews Cineplex
and Plitt and may adversely affect the Company's ability to finance its
future operations or capital needs. In addition, the ability of the Company
to comply with the financial covenants included in the financing
arrangements may be affected by events beyond the Company's control. A
failure to make any required payment under the financing arrangements or to
comply with any of the financial or operating covenants included in the
financing arrangements would generally result in an event of default
thereunder, permitting the lenders to accelerate the maturity of the
indebtedness under certain agreements, including without limitation, the
Bank Credit Facilities and to foreclose upon the collateral securing such
indebtedness. Under any such circumstances, there can be no assurance that
Loews Cineplex would have sufficient assets to satisfy all of such
obligations.
Interest rates payable by Loews Cineplex under the Bank Credit
Facilities are variable based on changes in certain market interest rates
and the maintenance of certain financial performance ratios. If such
interest rates were to rise substantially, the increased interest payments
payable by the Company could have an adverse effect on its financial
condition.
HOLDING COMPANY STRUCTURE
The New Notes are obligations exclusively of the Company. Since most
of the Company's operations are currently conducted through, and all of its
theatres are owned or leased by, subsidiaries, the Company's cash flow and
its ability to service its debt, including the New Notes, is dependent upon
the earnings of its subsidiaries and the distribution of those earnings to
the Company or upon loans or other payments of funds by those subsidiaries
to the Company.
As a result of the holding company structure of the Company, holders
of the New Notes will be structurally junior to all creditors of the
Company's subsidiaries, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of
the Company would still be subordinate to any security in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held
by the Company. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company's
subsidiaries, the Company will not receive funds available to pay to
holders of the New Notes in respect of the New Notes until after the
payment in full of the claims of the creditors of the subsidiaries.
POTENTIAL INABILITY TO REPURCHASE NEW NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be
required to offer to repurchase the New Notes at 101% of the principal
amount of the New Notes, together with accrued and unpaid interest, if any,
to the date of purchase. The events that constitute a Change of Control
under the Indenture may also be events of default under the Bank Credit
Facilities or other Senior Debt of the Company. Such events may permit the
holders under such debt instruments to accelerate the payment of such
Senior Debt and, if such Senior Debt is not paid, to proceed against their
collateral, if any, or to commence litigation that could ultimately result
in a sale of substantially all of the assets of the Company. If the Company
is unable to repay all of such Senior Debt, the Company will be unable to
offer to repurchase the New Notes, which would constitute an Event of
Default under the Indenture. There can be no assurance that the Company
will have sufficient funds available at the time of any Change of Control
to make the payments (including repurchases of the New Notes) as described
above or that the Company would be able to refinance its outstanding
indebtedness in order to permit it to repurchase the New Notes or, if such
refinancing were to occur, that such financing would be on terms favorable
to the Company. See "Description of New Notes--Covenants--Change of
Control".
DEPENDENCE UPON MOTION PICTURE PRODUCTION AND PERFORMANCE; SEASONALITY
The ability of the Company to operate successfully depends upon a
number of factors, the most important of which is the availability of
suitable motion pictures for exhibition in its theatres and the commercial
success of such motion pictures in its markets. Accordingly, the ultimate
success of the Company's operations depends on, among other things, the
quality, quantity, availability and acceptance by movie-goers of the films
available for commercial exhibition. Any disruption in the production or
distribution of motion pictures and/or poor performance of motion pictures
could have a material adverse effect on the Company's business and
financial condition. In addition, theatre admission and concession revenues
are subject to seasonal fluctuations that affect all motion picture
exhibitors. These fluctuations result principally from the distribution
practices of the major motion picture studios which have historically
concentrated on the release of a disproportionately large number of motion
pictures during the summer and holiday seasons. This practice has in the
past resulted, and may in the future be expected to result, in variations
in the Company's results from period to period during a fiscal year.
COMPETITION
The entertainment business generally, and the theatrical motion
picture exhibition business in particular, are highly competitive. The
Company's operations are subject to varying degrees of competition with
other theatre circuits with respect to, among other things, licensing
films, attracting patrons, obtaining new theatre sites and acquiring
theatre circuits. In addition, the Company's theatres face competition from
alternative motion picture exhibition delivery systems, including video
cassette, laser disk and digital video disk sales and rentals, satellite
television, pay-per-view, pay television, other basic cable television
services, broadcast network and syndicated television, the world-wide web
and the Internet and other media. There can be no assurance that these
alternative media and other forms of home entertainment that may become
available in the future will not materially adversely affect the business
or financial condition of the Company. The Company will also face
competition from other forms of entertainment which compete for the
public's leisure time and disposable income.
UNCERTAINTIES RELATING TO FUTURE EXPANSION PLANS
Historically, both Loews Theatres and Cineplex Odeon greatly expanded
their operations through existing theatre acquisitions and developing new
theatres. The Company intends to continue to pursue a strategy of expansion
involving the development of new theatres, including in foreign markets,
and acquisitions of existing theatres and theatre circuits. Acquisitions
generally would be made to enter into a new area or to expand the Company's
presence in an existing area. There is significant competition for
potential site locations and existing theatre and theatre circuit
acquisition and expansion opportunities. There can be no assurance that the
Company will be able to develop and/or acquire suitable theatres in the
future or that its expansion strategy will result in improvements to its
business, financial condition or profitability. Furthermore, the Company's
expansion program may require funds in addition to internally generated
funds and funds provided by the Bank Credit Facilities. Although the
Company believes that internally generated funds and borrowings under the
Bank Credit Facilities will be adequate to fund the Company's capital and
expansion plans for the foreseeable future, there can be no assurances that
the Company will not have additional financing requirements in the future
or sources of such funds will be available to the Company on acceptable
terms.
Development of new movie theatres from concept through construction to
opening is a form of commercial real estate development and is subject to
many of the same risks as commercial real estate development. Loews
Cineplex selectively screens potential development properties to locate new
theatres in areas where attendance levels are expected to be sufficient to
provide the Company with a reasonable return on its investment.
Unanticipated costs may be incurred throughout the development process due
to changes in design and/or increases in building material and construction
labor costs. In most areas in which the Company is likely to develop new
theatre facilities or expand existing facilities, the development and
construction of theatres are subject to state and local planning, zoning
and construction regulations, and the Company may have to obtain approvals
and/or permits from planning and zoning boards and construction officials.
In addition, local residents may oppose the building of a new theatre due
to their perception of its impact on the community. If design or
construction costs increase beyond anticipated levels, or necessary local
approvals or permits are delayed, denied or challenged, the Company might
be unable to pursue or complete certain development projects or the
development costs may be significantly increased.
RISK OF FOREIGN OPERATIONS
Foreign operations are generally subject to various risks that are not
present, or not present to the same extent, in domestic operations,
including without limitation restrictions on repatriation of funds,
unexpected changes in tariffs and other trade barriers, difficulties in
staffing and managing foreign operations, changes in foreign government
regulations, inflation, fluctuations in interest rates and currency
exchange rates, price, wage and exchange controls, labor disputes, reduced
protection for intellectual property rights in some countries, licensing
requirements, seasonal reductions in business activity, potentially adverse
tax consequences and civil disturbances and uncertain political and
economic environments as well as risks of war and other risks that may
limit or disrupt motion picture exhibition and markets, restrict the
movement of funds or result in the deprivation of contract rights or the
taking of property by nationalization or appropriation without fair
compensation. There can be no assurance that one or more of such factors
will not have a material adverse effect on the Company's anticipated future
operations in foreign markets and, consequently, on the Company's business
and results of operations. Loews Cineplex's management has only limited
experience in conducting the motion picture exhibition business in
international markets and, accordingly, there can be no assurance that the
Company's future operations in foreign markets will be successful.
CONTROL BY SIGNIFICANT STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS;
POTENTIAL CONFLICTS OF INTEREST
The Company is controlled by SPE, Universal and the Claridge Group,
which own, respectively, 39.5% (39.5% of the voting Common Stock), 25.6%
(25.5% of the voting Common Stock) and 7.4% (7.4% of the voting Common
Stock) of the capital stock of Loews Cineplex. The Stockholders in the
aggregate own approximately 72.5% of the outstanding Loews Cineplex Common
Stock and have agreed to vote their respective Common Stock in connection
with the election of Loews Cineplex directors and certain other matters in
accordance with the terms of the Stockholders Agreement (as defined
herein). As a result, the Stockholders will have the effective ability to
control the management and operations of the Company. All of the directors
of Loews Cineplex have been, and will continue to be, designated by SPE,
Universal or the Claridge Group, other than (i) Independent Directors (as
hereinafter defined) and (ii) the directors who are the two most senior
executives of the Company (the "Management Directors"). Pursuant to the
terms of the Amended and Restated Stockholders Agreement dated as of
September 30, 1997 by and among the Company, SPE, Universal and the
Claridge Group (the "Stockholders Agreement"), certain actions by the
Company will require the prior consent of SPE and Universal including,
without limitation, mergers and other business combinations involving the
Company and third parties. See "The Stockholders Agreement".
SPE and certain of its affiliates, and Universal and certain of its
affiliates, currently produce and distribute motion pictures and license
them to, among others, Loews Cineplex. While the management of Loews
Cineplex anticipates that it will conduct business with SPE and Universal
on terms no less favorable to Loews Cineplex than if such relationships
were at arm's length, SPE and Universal are major stockholders of the
Company, and the interests of SPE and its affiliates and Universal and its
affiliates may conflict from time to time with the interest of the Company.
An affiliate of Universal operates a theatre circuit that competes with the
Company's international operations. In addition, businesses conducted by
SPE or Universal, or by their affiliates, may compete with the business of
the Company in the future.
In addition, certain executives or affiliates of the Company have
interests that may be in conflict with the interests of the Company's
stockholders. See "Certain Relationships and Related Transactions".
GOVERNMENTAL REGULATION
In the United States, the distribution of motion pictures is in large
part regulated by federal and state antitrust laws and has been the subject
of numerous antitrust cases. The most significant of these cases is U.S. v.
Paramount Pictures Inc., et al., which was affirmed by the U.S. Supreme
Court in 1950. The consent decrees resulting from the Paramount case bind
certain major film distributors and require the films of such distributors
to be offered and licensed to exhibitors on a film-by-film and
theatre-by-theatre basis. Consequently, Loews Cineplex will not be able to
assure itself of a supply of motion pictures by entering into long-term
arrangements with major distributors, but must compete for its licenses on
a film-by-film and theatre-by-theatre basis. See "Business--Legal
Proceedings".
The Americans with Disabilities Act (the "ADA") and certain state
statutes and local ordinances, among other things, require that places of
public accommodation, including theatres (both existing and newly
constructed), be accessible to, and that assistive listening devices be
available for use by, patrons with disabilities. The ADA may require that
certain modifications be made to existing theatres in order to make such
theatres accessible to certain theatre patrons and employees who are
disabled. The ADA requires that theatres be constructed to permit persons
with disabilities full use of a theatre and its facilities and reasonable
access to work stations. Loews Cineplex has established a program to review
and evaluate its U.S. theatres and to make changes that may be required by
law. Although Loews Cineplex believes that the cost of complying with the
ADA will not have a material adverse effect on its financial condition, the
Company is unable to predict the extent to which the ADA or any future laws
or regulations regarding the needs of the disabled will impact the Company.
See "Business--Legal Proceedings".
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES; VOLATILITY
The New Notes will constitute a new issue of securities with no
established trading market. Accordingly, no assurance can be given that an
active public or other market will develop for the New Notes or as to the
liquidity of or the trading market for the New Notes. It is not expected
that an active trading market for the Old Notes will develop while they are
subject to restrictions on transfer. If a trading market does not develop
or is not maintained, holders of the New Notes may experience difficulty in
reselling the New Notes or may be unable to sell them at all. If a market
for the New Notes develops, any such market may cease to continue at any
time. In addition, if a market for the New Notes develops, the market
prices of the New Notes may be volatile. Factors such as fluctuations in
the Company's earnings and cash flow, the difference between the Company's
actual results and results expected by investors and analysts and economic
developments could cause the market prices of the New Notes to fluctuate
substantially.
CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OLD NOTES
In the event the Exchange Offer is consummated, the Company will not
be required to register any Old Notes not tendered and accepted in the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in
their investment would have to rely on exemptions to the registration
requirements under the securities laws, including the Securities Act, since
the Old Notes will continue to be subject to certain restrictions on
transfer. Following the Exchange Offer, none of the Notes will be entitled
to the contingent increase in interest rate provided for (in the event of a
failure to consummate the Exchange Offer in accordance with the terms of
the Exchange and Registration Rights Agreement) pursuant to the Indenture
and the Old Notes.
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated historical
capitalization of the Company as of May 31, 1998 and (ii) the Pro Forma
capitalization of the Company as adjusted to give effect to the
Transactions as if they had been consummated as of that date. The
information contained in this table should be read in conjunction with the
historical and unaudited pro forma financial information of the Company,
together with the related notes thereto, included elsewhere herein.
MAY 31, 1998
-----------------------
ACTUAL PRO FORMA
--------- ------------
(DOLLARS IN THOUSANDS)
Total Debt (including current portion)
Bank Credit Facilities............................. $ 473,000 $ 293,382
Plitt Notes (guaranteed by Loews Cineplex)......... 200,000 6,000
8 7/8% Senior Subordinated Notes due August 1,
2008 of the Company............................... -- 297,555
Capital lease obligations.......................... 29,468 29,468
Mortgages Payable.................................. 27,373 27,373
----------- ----------
Total debt......................................... 729,841 653,778
----------- ----------
Stockholders' equity
Common Stock, $.01 par value, 300,000,000 shares
authorized; 44,079,924 shares issued and
outstanding
Actual and 58,537,622 shares Pro Forma............ 441 585
Class A Non-Voting Common Stock, $.01 par value,
10,000,000 shares authorized; 1,202,486 shares
issued and outstanding Actual and nil Pro Forma... 12 --
Class B Non-Voting Common Stock, $.01 par value,
10,000,000 shares authorized; 84,000 issued and
outstanding Actual and Pro Forma.................. 1 1
Additional paid-in capital......................... 591,613 694,106
Retained earnings.................................. 3,201 3,201
----------- ----------
Total stockholders' equity......................... 595,268 697,893
----------- ----------
Total capitalization................................. $1,325,109 $1,351,671
=========== ==========
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on August 5, 1998 to the
Initial Purchasers in reliance on Section 4(2) of the Securities Act. The
Initial Purchasers offered and sold the Old Notes within the United States
only to "qualified institutional buyers" (as defined in Rule 144A) in
compliance with Rule 144A and outside the United States in compliance with
Regulation S under the Securities Act.
In connection with the sale of the Old Notes, the Company and the
Initial Purchasers entered into the Exchange and Registration Rights
Agreement, which requires the Company (i) to cause the Old Notes to be
registered under the Securities Act or (ii) to file with the Commission a
registration statement under the Securities Act with respect to an issue of
New Notes of the Company identical in all material respects to the Old
Notes and use its best efforts to cause such registration statement to
become effective under the Securities Act and, upon the effectiveness of
that registration statement, to offer to the holders of the Old Notes the
opportunity to exchange their Old Notes for a like principal amount of New
Notes, which will be issued without restrictive legends and which may be
reoffered and resold by the holder without restrictions or limitations
under the Securities Act. A copy of the Exchange and Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Exchange Offer is being made pursuant
to the Exchange and Registration Rights Agreement to satisfy the Company's
obligations thereunder with regard to the Old Notes. The term "holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the Trustee's books or any other person who has obtained a
properly completed bond power from the registered holder, or any person
whose Old Notes are held of record by DTC who desires to deliver such Old
Notes, by book-entry transfer at DTC.
The Company is making the Exchange Offer in reliance on the position
of the staff of the Division of Corporation Finance of the Commission set
forth in "no-action" letters issued to third parties in other transactions.
However, the Company has not sought its own "no-action" letter and there
can be no assurance that the staff of the Division of Corporation Finance
of the Commission would make a similar determination with respect to the
Exchange Offer as in such other circumstances. Based on those
interpretations by the staff of the Division of Corporation Finance of the
Commission, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than
broker-dealers, as set forth below, and any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and that such
holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate, in the
distribution (within the meaning of the Securities Act) of such New Notes.
Any holder who participates in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the
New Notes may not rely upon the position of the staff of the Division of
Corporation Finance of the Commission as set forth in those no-action
letters and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction, and any such secondary
resale transaction must be covered by an effective registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K under the Securities Act. Failure to comply with such
requirements in such instance may result in such holder incurring
liabilities under the Securities Act for which the holder is not
indemnified by the Company.
Each broker-dealer (other than an affiliate of the Company) that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes as a result of market-making
activities or other trading activities and will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed to make this Prospectus
available to any broker-dealer for use in connection with any such resale
for a period of 180 days after the Expiration Date or, earlier, if all New
Notes have been disposed of by such broker-dealers. See "Plan of
Distribution". Any broker-dealer who is an affiliate of the Company may not
participate in the Exchange Offer and may not rely on the no-action letters
referred to above and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
The Exchange Offer is not being made to, nor will the Company accept
surrender of Old Notes for exchange from, holders thereof in any
jurisdiction in which the Exchange Offer or the acceptance thereof would
not be in compliance with the securities or "blue sky" laws of such
jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will
represent to the Company that, among other things, (i) the New Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such New Notes, whether or not
such person is the holder, (ii) neither the holder of Old Notes nor any
such other person is participating, intends to participate or has an
arrangement or understanding with any person to participate, in the
distribution of such New Notes, (iii) if the holder is not a broker-dealer,
or is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is
engaged in or intends to participate in the distribution of such New Notes
and (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act or, if
such holder is an "affiliate", that such holder will comply with the
registration and prospectus delivery requirements of the Securities Act to
the extent applicable. If the tendering holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes, it will
acknowledge that it acquired such Old Notes as the result of market making
activities or other trading activities and it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such New Notes. See "Plan of Distribution".
Following the completion of the Exchange Offer, none of the Notes will
be entitled to the contingent increase in interest rate provided pursuant
to the Indenture and the Old Notes. Following the consummation of the
Exchange Offer, holders of Notes will not have any further registration
rights, and the Old Notes will continue to be subject to certain
restrictions on transfer. See "--Consequences of Failure to Exchange".
Accordingly, the liquidity of the market for the Old Notes could be
adversely affected. See "Risk Factors--Consequences of the Exchange Offer
on Non-Tendering Holders of the Old Notes".
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
GENERAL. Upon the terms and subject to the conditions set forth in
this Prospectus and in the Letter of Transmittal, the Company will accept
any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. New Notes will be issued
in exchange for an equal principal amount of outstanding Old Notes accepted
in the Exchange Offer. Old Notes may be tendered only in multiples of
$1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New
Notes will be registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, (ii) holders of the New
Notes will not be entitled to certain rights of holders of Old Notes under
the Exchange and Registration Rights Agreement, which agreement will
terminate upon consummation of the Exchange Offer and (iii) the New Notes
will not be entitled to the contingent increase in interest rate provided
pursuant to the Indenture and the Old Notes. The New Notes will evidence
the same debt as the Old Notes and will be entitled to the benefits of the
Indenture. The New Notes will be treated as a single class under the
Indenture with any Old Notes that remain outstanding. The Exchange Offer is
not conditioned upon any minimum aggregate principal amount of Old Notes
being tendered for exchange.
As of the date of this Prospectus, $300,000,000 aggregate principal
amount of Old Notes was outstanding and there are [ ] registered holder(s)
thereof. In connection with the issuance of the Old Notes, the Company
arranged for the Old Notes to be eligible for trading in the Private
Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A and to be
issued and transferable in book-entry form through the facilities of DTC.
The New Notes will also be issuable and transferable in book-entry form
through DTC.
This Prospectus, together with the Letter of Transmittal, is being
sent to such registered holders.
The Company intends to conduct the Exchange Offer in accordance with
the provisions of the Exchange and Registration Rights Agreement and the
applicable requirements of the Exchange Act, and the rules and regulations
of the Commission thereunder. Old Notes that are not tendered for exchange
in the Exchange Offer will remain outstanding and interest thereon will
continue to accrue, but such Old Notes will not be entitled to any rights
or benefits under the Exchange and Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old
Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "--Exchange Agent". The Exchange Agent will act
as agent for the tendering holders for the purposes of receiving the New
Notes from the Company and delivering New Notes to such holders. If any
tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Notes pursuant to the Exchange Offer. The Company will
pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "--Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The term "Expiration Date"
shall mean 5:00 p.m., New York City time, on [ ], 1998, unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend
the Exchange Offer, the Company reserves the right to extend the Exchange
Offer at any time and from time to time by giving oral or written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to
the PR Newswire. During any extension of the Exchange Offer, all Old Notes
previously tendered pursuant to the Exchange Offer and not withdrawn will
remain subject to the Exchange Offer. The date of the exchange of the New
Notes for Old Notes will be the first business day following the Expiration
Date.
The Company reserves the right, in its discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions
of the Exchange Offer" shall not have been satisfied in the good faith
determination of the Company, by giving oral or written notice of such
delay, extension or termination to the Exchange Agent and (ii) to amend the
terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If
the Exchange Offer is amended in any manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to
the registered holders, and the Company will extend the Exchange Offer for
a period of time, depending upon the significance of the amendment and the
manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such period.
Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement,
other than by making a timely release to the PR Newswire.
INTEREST ON THE NEW NOTES. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to
which interest has been paid on the Old Notes or New Notes, or, if no
interest has been paid on the Old Notes or New Notes, from August 5, 1998.
The New Notes will bear interest at a rate of 8 7/8% per annum.
Interest on the New Notes will be payable semi-annually, in arrears, on
each Interest Payment Date following the consummation of the Exchange
Offer. Untendered Old Notes that are not exchanged for New Notes pursuant
to the Exchange Offer will bear interest at a rate of 8 7/8% per annum
after the Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES. The tender to the Company of Old
Notes by a holder thereof pursuant to one of the procedures set forth below
will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein
and in the Letter of Transmittal. The tender of Old Notes will constitute
an agreement to deliver good and marketable title to all tendered Old Notes
prior to the Expiration Date free and clear of all liens, charges, claims,
encumbrances, interests and restrictions of any kind. Holders must follow
the procedures set forth in this Prospectus in order to properly and
effectively tender Old Notes.
EXCEPT AS PROVIDED IN "--GUARANTEED DELIVERY PROCEDURES", UNLESS THE
OLD NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION,
REJECT SUCH TENDER. ISSUANCE OF EXCHANGE NOTES WILL BE MADE ONLY AGAINST
DEPOSIT OF TENDERED OLD NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, DTC PARTICIPANTS TENDERING THORUGH ATOP WILL
BE DEEMED TO HAVE MADE VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN
AGENT'S MESSAGE (DEFINED BELOW) PRIOR TO THE EXPIRATION DATE.
Old Notes Held Through DTC:
Each Beneficial Owner holding Old Notes through a DTC Participant must
instruct such DTC Participant to cause its Old Notes to be tendered in
accordance with the procedures set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants,
each DTC Participant holding Old Notes through DTC must (i) electronically
transmit its acceptance through ATOP, and DTC will then verify the
acceptance, execute a book-entry delivery to the Exchange Agent's account
at DTC and send an Agent's Message to the Exchange Agent for its
acceptance, or (ii) comply with the guaranteed delivery procedures set
forth below and in the Note of Guaranteed Delivery. See "--Guaranteed
Delivery Procedures".
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect
to Old Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Old Notes in the
Exchange Agent's account through ATOP. However, although delivery of
interests in the Old Notes may be effected through book-entry transfer into
the Exchange Agent's account through ATOP, an Agent's Message in connection
with such book-entry transfer, and any other required documents, must be
transmitted to and received by the Exchange Agent at its address set forth
under "--Exchange Agent", or the guaranteed delivery procedures set forth
below must be complied with, in each case, prior to the Expiration Date.
Delivery of documents to DTC does not constitute delivery to the Exchange
Agent. The confirmation of a book-entry transfer into the Exchange Agent's
account at DTC as described above is referred to herein as a "Book-Entry
Confirmation".
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment
from each DTC Participant tendering through ATOP that such DTC Participants
have received a Letter of Transmittal and agree to be bound by the terms of
the Letter of Transmittal and that the Company may enforce such agreement
against such DTC Participants.
Cede & Co., as the holder of the global certificates representing the
Old Notes (a "Global Security"), will tender a portion of each Global
Security equal to the aggregate principal amount due at the stated maturity
or number of shares for which instructions to tender are given by DTC
Participants.
Old Notes Held by Holders:
Each holder must (i) complete and sign and mail or deliver the
accompanying Letter of Transmittal, and any other documents required by the
Letter of Transmittal, together with certificate(s) representing all
tendered Old Notes, to the Exchange Agent at its address set forth under
"--Exchange Agent", or (ii) comply with the guaranteed delivery procedures
set forth below and in the Notice of Guaranteed Delivery. See "--Guaranteed
Delivery Procedures".
All signatures on a Letter of Transmittal must be guaranteed by any
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor" institution within the meaning of Rule 17Ad-15 under the
Exchange Act (each an "Eligible Institution"); provided, however, that
signatures on a Letter of Transmittal need not be guaranteed if such Old
Notes are tendered for the account of an Eligible Institution including (as
such terms are defined in Rule 17Ad-15): (i) a bank; (ii) a broker, dealer,
municipal securities dealer, municipal securities broker, government
securities dealer or government securities broker; (iii) a credit union;
(iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings institution that is a participant in a
Securities Transfer Association recognized program.
If a Letter of Transmittal or any Old Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative
capacity, such person must so indicate when signing, and proper evidence
satisfactory to the Company of the authority of such person so to act must
be submitted.
Holders should indicate in the applicable box in the Letter of
Transmittal the name and address to which substitute certificates
evidencing Old Notes for amounts not tendered are to be issued or sent, if
different from the name and address of the person signing the Letter of
Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. If no instructions are given, such Old Notes not tendered, as
the case may be, will be returned to the person signing the Letter of
Transmittal.
By tendering, each holder and each DTC Participant will make to the
Company the representations set forth in the sixth paragraph under the
heading "--Purpose and Effect of the Exchange Offer".
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or
transmitting an acceptance through ATOP, as the case may be, each tendering
holder waives any rights to receive any notice of the acceptance for
purchase of its Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be resolved by the
Company, whose determination will be final and binding. The Company
reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which may, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the absolute right to
waive any condition to the Exchange Offer and any irregularities or
conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding.
Unless waived, any irregularities in connection with tenders must be cured
within such time as the Company shall determine. The Company and the
Exchange Agent shall not be under any duty to give notification of defects
in such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering holder, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration
Date.
The method of delivery of Old Notes and Letters of Transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptances through ATOP, is at the election
and risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only when actually received by
the Exchange Agent. If delivery is by mail, it is suggested that the holder
use properly insured, registered mail with return receipt requested, and
that the mailing be made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent prior to the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Old Notes Held Through DTC:
DTC Participants holding Old Notes through DTC who wish to cause their
Old Notes to be tendered, but who cannot transmit their acceptance through
ATOP prior to the Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible
Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration
Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by
mail, hand delivery, facsimile transmission or overnight courier)
substantially in the form provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent
within three New York Stock Exchange ("NYSE") trading days after the
date of the execution of the Notice of Guaranteed Delivery.
Old Notes Held by Holders:
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange
Agent, or (iii) who cannot complete the procedures for book-entry transfer,
prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration
Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by
facsimile transmission, mail or hand delivery) setting forth the name
and address of the holder, the certificate number(s) of such Old Notes
and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three NYSE
trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the
Old Notes (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or a confirmation or
book-entry transfer of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange
Agent within three NYSE trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL. The Letter of
Transmittal contains, among other things, the following terms and
conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Old Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it
has full power and authority to tender, exchange, assign and transfer the
Old Notes and to acquire New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Old Notes,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Notes or to transfer
ownership of such Old Notes on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor and every obligation of the Transferor shall
be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of such Transferor.
By executing a Letter of Transmittal, each holder will make to the
Company the representations set forth above under the heading "--Purpose
and Effect of the Exchange Offer".
WITHDRAWAL OF TENDERS OF OLD NOTES. Except as otherwise provided
herein, tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Old Notes Held through DTC:
DTC Participants holding Old Notes who have transmitted their
acceptances through ATOP may, prior to 5:00 p.m., New York City time, on
the Expiration Date, withdraw the instruction given thereby by delivering
to the Exchange Agent, at its address set forth under "--Exchange Agent", a
written, telegraphic or facsimile notice of withdrawal of such instruction.
Such notice of withdrawal must contain the name and number of the DTC
Participant, the principal amount due at the stated maturity date of the
Old Notes to which such withdrawal related and the signature of the DTC
Participant. Withdrawal of such an instruction will be effective upon
receipt of such written notice of withdrawal by the Exchange Agent.
Old Notes Held by Holders:
Holders may withdraw a tender of Old Notes in the Exchange Offer, by a
telegram, telex, letter or facsimile transmission notice of withdrawal
received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) contain a statement
that such holder is withdrawing its election to have such Old Notes
exchanged, (iv) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Old Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering Old
Notes" at any time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an
Eligible Institution; provided, however, that signatures on the notice of
withdrawal need not be guaranteed if the Old Notes being withdrawn are held
for the account of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC Participant or a holder, as the case may be, in the same
manner as the person's name appears on its transmission through ATOP or
Letter of Transmittal, as the case may be, to which such withdrawal
relates. If a notice of withdrawal is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative
capacity, such person must so indicate when signing and must submit with
the revocation appropriate evidence of authority to execute the notice of
withdrawal. A DTC Participant or a holder may withdraw an instruction of a
tender, as the case may be, only if such withdrawal complies with the
provisions of this Prospectus.
A withdrawal of a tender of Old Notes by a DTC Participant or a
holder, as the case may be, may be rescinded only be a new transmission of
an acceptance through ATOP or execution and delivery of a new Letter of
Transmittal, as the case may be, in accordance with the procedures
described herein.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other terms of the Exchange Offer, or any
extension of the Exchange Offer, the Company shall not be required to
accept for exchange, or exchange New Notes for, any Old Notes, and may
terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or
any action shall have been taken by any court or governmental
authority which, in the reasonable judgment of the Company would
prohibit, restrict or otherwise render illegal consummation of the
Exchange Offer; or
(b) any change, or any development involving a prospective
change, in the business or financial affairs of the Company or any of
its subsidiaries has occurred which, in the reasonable judgment of the
Company, might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits
of the Exchange Offer to the Company; or
(c) any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act
of 1939, as amended. The Company will use its reasonable best efforts
to prevent the issuance of any such order and, if any such order is
issued, to obtain the withdrawal of any such order at the earliest
possible moment; or
(d) there shall occur a change in the current interpretations by
the staff of the Commission which, in the Company's reasonable
judgment, might materially impair the Company's ability to proceed
with the Exchange Offer; or
(e) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the
Exchange Offer which, in the Company's sole judgment, might materially
impair the ability of the Company to proceed with the Exchange Offer;
or
(f) any governmental approval has not been obtained, which
approval the Company shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Company makes a good faith determination that any of the above
conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Old Notes tendered prior to the
Expiration Date, subject, however, to the right of holders to withdraw such
Old Notes (see "--Terms of the Exchange Offer--Withdrawal of Tenders of Old
Notes") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all validly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of
a prospectus supplement that will be distributed to the registered holders,
and the Company will extend the Exchange Offer for a period of time,
depending upon the significance of the waiver and the manner of disclosure
to the registered holders, if the Exchange Offer would otherwise expire
during such period.
<PAGE>
EXCHANGE AGENT
The Bankers Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for the Notice of Guaranteed Delivery should be directed to the
Exchange Agent addressed as follows:
BY HAND: BY OVERNIGHT DELIVERY: BY MAIL:
Bankers Trust Company BT Services Tennessee, BT Services Tennessee,
Receipt and Delivery Inc. Inc.
Windows Reorganization Unit Reorganization Unit
123 Washington Street 648 Grassmer Park Road P.O. Box 292737
1st Floor Nashville, Tennessee Nashville, Tennessee
New York, New York 10006 37211 37229-2737
FACSIMILE TRANSMISSION:
(for eligible institutions only)
(615) 835-3572
Confirm Receipt of Facsimile by Telephone
(615) 835-3701
FOR INFORMATION WITH RESPECT TO THE EXCHANGE OFFER, CALL:
the Exchange Agent
at (800) 735-7777
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional
solicitation may be made by telecopy, telephone or in person by officers
and regular employees of the Company and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
The Company has not retained any dealer-manager or other soliciting
agent in connection with the Exchange Offer and will not make any payments
to brokers, dealers or others soliciting acceptance of the Exchange Offer.
The Company, however, will pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of
this Prospectus, the Letter of Transmittal and related documents to the
beneficial owners of the Old Notes and in handling or forwarding tenders
for exchange.
The expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and transfer agent and registrar, accounting and legal fees
and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Notes pursuant to the Exchange Offer. If, however, New
Notes, or Old Notes for principal amounts not tendered or accepted for
exchange, are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Old Notes tendered or if a
transfer tax is imposed for any reason other than the exchange of the Old
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will
be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule
144 under the Securities Act. Accordingly, such Old Notes may be resold
only (i) to the Company or any subsidiary thereof, (ii) inside the United
States to a qualified institutional buyer in compliance with Rule 144A,
(iii) inside the United States to an institutional accredited investor
that, prior to such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Old Notes (the form of which letter can be
obtained from the Trustee) and, if such transfer is in respect of an
aggregate principal amount of Old Notes in the time of transfer of less
than $100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (iv) outside the United
States in compliance with Rule 904 under the Securities Act, (v) pursuant
to the exemption from registration provided by Rule 144 under the
Securities Act (if available) or (vi) pursuant to an effective registration
statement under the Securities Act. The liquidity of the Old Notes could be
adversely affected by the Exchange Offer. Following the consummation of the
Exchange Offer, holders of the Old Notes will have no further registration
rights under the Registration Rights Agreement and will not be entitled to
the contingent increase in the interest rate provided for in the Indenture
and the Old Notes.
ACCOUNTING TREATMENT
The New Notes would be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The costs of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following discussion is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, and administrative and judicial interpretations
thereof, all as in effect as of the date of this Prospectus and all of
which are subject to change or differing interpretation, possibly with
retroactive effect. Certain holders (including, without limitation,
financial institutions, insurance companies, tax-exempt entities, dealers
in securities or currencies, and traders in securities that elect
mark-to-market accounting treatment) may be subject to special rules not
discussed below. Holders of Old Notes should consult their own tax advisors
regarding the particular U.S. federal, state and local and foreign income
and other tax consequences of exchanging the Old Notes for New Notes in the
Exchange Offer.
The exchange of Old Notes for New Notes in the Exchange Offer will not
be a taxable exchange for federal income tax purposes and, accordingly, for
such purposes a holder will not recognize any taxable gain or loss as a
result of such exchange and will have the same tax basis and holding period
in the New Notes as it had in the Old Notes immediately before the
exchange. See also "Certain Federal Tax Consequences of an Investment in
the New Notes".
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
SELECTED HISTORICAL FINANCIAL DATA
LOEWS CINEPLEX
The following table sets forth selected historical financial data,
based on continuing operations, for the Company for the five fiscal years
ended February 28, 1998 and has been derived from the Company's annual
consolidated financial statements. The following selected financial data
for the three-month periods ended May 31, 1998 and May 31, 1997 is
unaudited, but, in the opinion of management, includes all adjustments
necessary for a fair presentation of the financial position and results of
operations for such periods. The results of operations for the three months
ended May 31, 1998 are not necessarily indicative of the results to be
attained for the entire year. The selected historical financial data should
be read in conjunction with the separate consolidated financial statements
and notes thereto of Loews Cineplex and "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which are
included elsewhere in this Prospectus. THE FISCAL YEAR HISTORICAL DATA AND
THE UNAUDITED FINANCIAL DATA FOR THE THREE MONTHS ENDED MAY 31, 1997 DO NOT
GIVE EFFECT TO THE COMBINATION OR INCLUDE HISTORICAL INFORMATION FOR
CINEPLEX ODEON. However, related historical financial data for Cineplex
Odeon are presented following such data. The unaudited financial data as
of, and for the three months ended, May 31, 1998, reflects the Combination
and includes the results of Cineplex Odeon from May 15, 1998 through May
31, 1998.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
ACTUAL THREE MONTHS
YEAR ENDED FEBRUARY 28 OR 29, ENDED MAY 31,
------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1997 1998(1)
--------- ---------- ---------- ----------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT RATIOS, SHARES OUTSTANDING AND PER
SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Admissions revenues.. $244,864 $255,392 $264,585 $273,498 $ 296,933 $67,370 $ 83,207
Concessions revenues. 75,355 79,287 84,358 90,643 104,009 23,486 31,170
Other revenues....... 8,800 8,656 10,153 11,204 12,568 2,360 3,437
--------- ---------- ---------- ----------- ----------- ----------- ------------
329,019 343,335 359,096 375,345 413,510 93,216 117,814
--------- ---------- ---------- ----------- ----------- ----------- ------------
Theatre operations
and other expenses
(including
concession costs).. 259,173 268,236 277,375 282,480 307,568 71,095 89,943
General and
administrative..... 17,449 18,753 20,282 21,447 28,917 5,937 7,946
Depreciation and
amortization....... 37,873 38,572 41,273 44,576 52,307 12,597 14,681
Loss on
sale/disposals of
theatres........... 3,491 13,420 7,249 9,951 7,787 -- --
Interest expense, net 9,865 10,613 15,376 14,776 14,319 3,622 6,106
Income tax
expense/(benefit).. 4,662 (1,337) 309 2,295 2,751 365 (119)
--------- ---------- ---------- ----------- ----------- ----------- ------------
Net income (loss).... $ (3,494) $ (4,922) $ (2,768) $ (180) $ (139) $ (400) $ (743)
========= ========== ========== =========== =========== ============ ============
Ratio of earnings to
fixed charges...... 1.11 N/A(3) N/A(3) 1.14 1.18 N/A(3) N/A(3)
Earnings (loss) per
common share (2):
basic.............. $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
diluted............ $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
Weighted average
shares
and equivalent
outstanding (2):
basic.............. 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 24,619,807
diluted............ 20,472,807 20,472,807 20,472,807 20,472,807 20,924,890 20,472,807 24,984,549
BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash
equivalents........ $ 4,698 $ 4,759 $ 2,390 $ 2,160 $ 9,064 $ 37,785
Property, equipment
and leaseholds, net $ 566,043 $ 605,982 $602,435 $613,692 $609,152 $1,180,376
Total assets......... $ 675,667 $ 723,108 $715,810 $721,372 $728,551 $1,617,287
Total long-term debt
(including current
maturities and
capital leases).... $ 263,791 $ 313,098 $298,680 $306,342 $307,616 $ 729,841
Total liabilities.... $ 343,147 $ 395,510 $390,980 $396,722 $404,040 $1,022,019
Stockholders' equity. $ 332,520 $ 327,598 $324,830 $324,650 $324,511 $ 595,268
CASH FLOW STATEMENT
DATA:
Cash flow provided
by operating
activities ....... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
<FN>
- ----------------------------------
(1) Includes operating results of Cineplex Odeon from May 15, 1998 through
May 31, 1998.
(2) Restated in all periods presented to reflect impact of a stock
dividend declared on February 5, 1998.
(3) Earnings did not cover fixed charges by $6,259, $2,459, $35 and $862
for the years ended February 28, 1995 and February 28, 1996 and for
the three months ended May 31, 1997 and 1998, respectively.
</FN>
</TABLE>
<PAGE>
CINEPLEX ODEON
The following table sets forth selected historical financial data,
based on continuing operations, for Cineplex Odeon for the five fiscal
years ended December 31, 1997 and has been derived from Cineplex Odeon's
annual consolidated financial statements and notes related thereto. The
selected historical financial data should be read in conjunction with the
separate consolidated financial statements and notes thereto of Cineplex
Odeon and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Cineplex Odeon", which are included elsewhere in
this Prospectus. Cineplex Odeon's historical financial statements are
prepared in accordance with GAAP in Canada, which, except as described in
footnote 17 to Cineplex Odeon's historical financial statements, conform in
all material respects with accounting principles generally accepted in the
United States.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ----------- ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues............ $ 388,944 $ 384,558 $ 365,220 $ 358,973 $ 399,171
Concessions revenues........... 138,387 133,850 126,319 126,636 147,892
Other revenues................. 18,899 22,704 21,611 24,083 26,714
------------ ----------- ------------ ----------- ------------
546,230 541,112 513,150 509,692 573,777
------------ ----------- ------------ ----------- ------------
Theatre operations and other
expenses (including
concession costs)............ 459,759 459,258 440,747 440,685 491,443
General and administrative..... 15,494 16,229 17,575 18,192 20,313
Depreciation and amortization.. 41,577 40,859 42,621 43,648 45,715
Other expenses (income)........ (1,267) 2,900 2,862 1,377 43,401
Interest expense, net.......... 28,033 33,641 40,983 35,482 33,900
Income taxes................... 1,665 2,398 1,269 1,390 1,072
------------ ------------ ------------ ----------- ------------
Net income (loss).............. $ 969 $ (14,173) $ (32,907) $ (31,082) $ (62,067)
============ ============ ============ =========== ============
Earnings (loss) per common
share:
basic........................ $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
diluted...................... $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
Weighted average shares
outstanding and equivalent
outstanding:
basic........................ 106,730,000 110,175,000 114,764,000 163,473,000 176,795,000
diluted...................... 115,181,000 118,245,000 122,616,000 176,107,000 191,304,000
BALANCE SHEET DATA (AT PERIOD
END):
Cash and cash equivalents...... $ 1,268 $ 1,551 $ 1,604 $ 2,718 $ 3,505
Property, equipment and
leaseholds, net.............. $ 619,309 $ 614,741 $ 583,442 $ 579,841 $ 567,431
Total assets................... $ 697,105 $ 688,693 $ 649,643 $ 644,171 $ 635,475
Long-term debt (including
current maturities and
capital leases).............. $ 394,571 $ 396,665 $ 399,454 $ 341,301 $ 367,240
Total liabilities.............. $ 496,718 $ 492,518 $ 483,651 $ 425,591 $ 484,293
Shareholders' equity........... $ 200,387 $ 196,175 $ 165,992 $ 218,580 $ 151,182
CASH FLOW STATEMENT DATA:
Cash flow provided by $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
operating activities........
</TABLE>
<PAGE>
HISTORICAL AND UNAUDITED PRO FORMA COMBINED KEY OPERATING STATISTICS
LOEWS CINEPLEX
The table below sets forth key operating statistics for Loews Cineplex
on an actual basis and on a pro forma combined basis giving effect to the
Combination. In order to arrive at a more meaningful presentation of
financial operating data related to the productivity and performance of
Loews Cineplex, and, except as otherwise noted, all amounts below include
100% of the operating results of the U.S. Partnerships, although Loews
Cineplex has only a 50% interest in each of the U.S. Partnerships. This
information does not include any potential benefit that may be realized
from anticipated operating efficiencies and cost savings as a result of the
Combination. Management views these statistics as key financial measures
and believes that certain investors find them useful in analyzing companies
in the motion picture exhibition industry. No measure is more meaningful
than another, and management uses these measures collectively to assess
Loews Cineplex's operating performance.
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
ACTUAL ENDED MAY 31,
YEAR ENDED UNAUDITED --------------------------------------
FEBRUARY 28 OR 29, PRO FORMA 1997 1998(7)
------------------------------------------------------ YEAR ENDED ----------- ----------------------
FEBRUARY 28,
1994 1995 1996 1997 1998 1998(1)(7) ACTUAL ACTUAL PRO FORMA(1)
-------- ---------- ---------- ----------- ----------- ------------ ----------- --------- ------------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at
period end.......... 981 1,030 950 959 1,035 2,704 986 2,794 2,728
Locations operated at
period end.......... 182 180 154 143 139 439 142 450 437
Screens per location.. 5.4 5.7 6.2 6.7 7.4 6.2 6.9 6.2 6.2
Attendance............ 52,113 52,656 53,544 53,133 58,387 143,266 12,855 16,686 31,052
Total revenues........ $ 360,828 $ 377,171 $ 400,412 $ 421,613 $ 480,437 $ 1,042,749 $ 105,553 $ 134,739 $ 231,251
Revenues per screen(2) $ 367.82 $ 366.19 $ 421.49 $ 439.64 $ 464.19 $ 385.63 $ 107.60 $ 100.40 $ 84.77
Revenues per location(2)$1,982.57 $ 2,095.39 $ 2,600.08 $ 2,948.34 $ 3,456.38 $ 2,375.28 $ 733.01 $ 701.77 $ 529.18
EBITDA(3)............. $ 48,906 $ 42,926 $ 54,190 $ 61,467 $ 69,238 $ 131,239 $ 16,184 $ 19,925 $ 23,261
Total EBITDA(4)....... $ 57,982 $ 62,540 $ 68,177 $ 78,273 $ 86,643 $ 154,540 $ 17,841 $ 22,210 $ 25,546
Partners' share of
Total EBITDA........ $ 3,677 $ 4,287 $ 4,800 $ 4,853 $ 6,339 $ 6,339 $ 1,025 $ 1,419 $ 1,419
Attributable EBITDA(4) $ 54,305 $ 58,253 $ 63,377 $ 73,420 $ 80,304 $ 148,201 $ 16,816 $ 20,791 $ 24,127
Total EBITDA per
screen(2)........... $ 59.10 $ 60.72 $ 71.77 $ 81.62 $ 83.71 $ 57.15 $ 18.19 $ 16.55 $ 9.36
Total EBITDA per
location(2)......... $ 318.58 $ 347.44 $ 442.71 $ 547.36 $ 623.33 $ 352.03 $ 123.90 $ 115.68 $ 58.46
Total EBITDA per
patron(2)........... $ 1.11 $ 1.19 $ 1.27 $ 1.47 $ 1.48 $ 1.08 $ 1.39 $ 1.33 $ 0.82
Concessions revenue per
patron.............. $ 1.63 $ 1.70 $ 1.82 $ 1.98 $ 2.14 $ 1.88 $ 2.12 $ 2.20 $ 2.00
Concessions margin.... 80.8% 80.9% 80.9% 82.8% 84.5% 82.4% 84.2% 84.6% 83.0%
Admissions revenue per
patron.............. $ 5.16 $ 5.34 $ 5.52 $ 5.79 $ 5.91 $ 5.14 $ 5.93 $ 5.69 $ 5.16
CASH FLOW STATEMENT
DATA(5)(6):
Net cash provided by
operating
activities.......... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
Net cash used in
investing activities $ (32,098) $ (82,486)$ (34,690)$ (53,254)$ (51,439) $ (8,960) $ (18,590)
Net cash
(used)/provided by
financing
activities.......... $ (23,022) $ 46,359 $ (14,005)$ 5,048 $ (5,842) $ 10,449 $ 20,019
<FN>
- ------------------------
(1) The information presented is derived from unaudited pro forma
information which is presented elsewhere in this Prospectus. See
"Unaudited Pro Forma Financial Information".
(2) All per screen, location and patron ratios are calculated based upon
screens and locations as of period end and include the U.S.
Partnerships except for the actual three months ended May 31, 1998 and
1997, which are calculated using a weighted average number of screens
and locations. This is due to the inclusion of the operations of
Cineplex Odeon for the last 17 days of the period ended May 31, 1998.
Use of the weighted average number of screens and locations for the
remaining historical data would not result in substantially different
data from the information presented.
(3) EBITDA consists of earnings before interest, income taxes,
depreciation and amortization including equity earnings from
investments in the U.S. Partnerships. EBITDA should not be construed
as an alternative to operating income (as determined in accordance
with U.S. GAAP), as a measure of the Company's operating performance,
or as an alternative to cash flows from operating activities (as
determined in accordance with U.S. GAAP), as a measure of the
Company's liquidity. EBITDA measures the amount of cash that a company
has available for investment or other uses and is used by the Company
as a measure of its performance. The Company believes that EBITDA is
an important measure, in addition to cash flow from operations,
Attributable EBITDA and Total EBITDA, in viewing its overall liquidity
and borrowing capacity.
(4) Total EBITDA consists of EBITDA plus loss on sale/disposals of
theatres and 100% of the operating results of the U.S. Partnerships.
Total EBITDA should not be construed as an alternative to operating
income (as determined in accordance with U.S. GAAP), as a measure of
the Company's operating performance, or as an alternative to cash
flows from operating activities (as determined in accordance with U.S.
GAAP), as a measure of the Company's liquidity. Total EBITDA measures
the amount of cash that a company has available for investment or
other uses and is used by the Company as a measure of its performance.
The Company believes that Total EBITDA is an important measure, in
addition to cash flow from operations, Attributable EBITDA and EBITDA,
in viewing its overall liquidity and borrowing capacity. Attributable
EBITDA equals Total EBITDA less partners' share of Total EBITDA. A
reconciliation of EBITDA to Total EBITDA and Attributable EBITDA
follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
ACTUAL ENDED MAY 31,
YEAR ENDED UNAUDITED --------------------------------------
FEBRUARY 28 OR 29, PRO FORMA 1997 1998
------------------------------------------------------ YEAR ENDED ----------- ----------------------
FEBRUARY 28,
1994 1995 1996 1997 1998 1998 ACTUAL ACTUAL PRO FORMA(1)
-------- ---------- ---------- ----------- ----------- ------------ ----------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA.............. $48,906 $42,926 $54,190 $61,467 $69,238 $131,239 $16,184 $19,925 $23,261
Add: Loss on
sale/disposals of
theatres*........ 3,491 13,420 7,249 9,951 7,787 13,683 -- -- --
-------- --------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Modified EBITDA,
including equity
earnings.......... 52,397 56,346 61,439 71,418 77,025 144,922 16,184 19,925 23,261
Less: Equity
earnings/other,
included in
EBITDA........... 1,769 2,380 2,862 2,851 3,060 3,060 393 553 553
Add: EBITDA from
U.S.
Partnerships..... 7,354 8,574 9,600 9,706 12,678 12,678 2,050 2,838 2,838
-------- --------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Total EBITDA........ 57,982 62,540 68,177 78,273 86,643 154,540 17,841 22,210 25,546
Less: Partners'
share of
Total EBITDA..... 3,677 4,287 4,800 4,853 6,339 6,339 1,025 1,419 1,419
---------------------------------------------------------------------------------------------------------
Attributable EBITDA. $54,305 $58,253 $63,377 $73,420 $80,304 $148,201 $16,816 $20,791 $24,127
======== ========= ========= =========== ========== ============ =========== ========== ==========
<FN>
- ------------------------
* Primarily represents (i) the noncash writeoff of the net book value of
the theatres disposed of and (ii) provisions for net disposal costs
(where applicable) related to the disposition of such theatres.
(5) Cash flow statement data includes cash flows from long term
investments in the U.S. Partnerships to the extent of the Company's
equity interest.
(6) Due to the subjectivity inherent in the assumptions concerning the
timing and nature of the uses of cash generated by the unaudited pro
forma adjustments, cash flow from operating, investing and financing
activities are not presented in the unaudited pro forma data.
(7) The unaudited pro forma data is not necessarily indicative of the
combined results of operations of the Company that would have occurred
nor is it necessarily indicative of future operating results of the
Company. Further, due to seasonality in the exhibition industry, the
Company's first fiscal quarter of 1998 is not necessarily
representative of future operating results for the remainder of the
year.
</FN>
</TABLE>
<PAGE>
CINEPLEX ODEON
The table below sets forth key operating statistics, based on
continuing operations, for Cineplex Odeon as of, and for, each of the
periods indicated. Management views these statistics as key financial
measures and believes that certain investors find them useful in analyzing
companies in the motion picture exhibition industry. No measure is more
meaningful than another, and management uses these measures collectively to
assess Cineplex Odeon's operating performance.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
--------- ------------ ------------ ----------- ------------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at period end .. 1,622 1,638 1,512 1,549 1,729
Locations operated at period end. 363 360 325 316 315
Screens per location ............ 4.5 4.6 4.7 4.9 5.5
Attendance ...................... 88,225 86,082 81,203 78,356 87,321
Total revenues .................. $ 546,230 $ 541,112 $ 513,150 $ 509,692 $ 573,777
Revenues per screen(1) .......... $ 336.76 $ 330.35 $ 339.38 $ 329.05 $ 331.85
Revenues per location(1) ........ $ 1,504.77 $ 1,503.09 $ 1,578.92 $ 1,612.95 $ 1,812.51
EBITDA(2) ....................... $ 72,244 $ 62,725 $ 51,966 $ 49,438 $ 18,620
Modified EBITDA(3) .............. $ 70,977 $ 65,625 $ 54,828 $ 50,815 $ 62,021
Modified EBITDA per screen(1) ... $ 43.76 $ 40.06 $ 36.26 $ 32.81 $ 35.87
Modified EBITDA per location(1) . $ 195.53 $ 182.29 $ 168.70 $ 160.81 $ 196.89
Modified EBITDA per patron(1) ... $ 0.80 $ 0.76 $ 0.68 $ 0.65 $ 0.71
Concessions revenue per patron(4) $ 1.57 $ 1.55 $ 1.56 $ 1.62 $ 1.69
Concessions margin .............. 85.9% 83.8% 82.6% 82.3% 80.6%
Admissions revenue per patron(4) $ 4.41 $ 4.47 $ 4.50 $ 4.58 $ 4.57
CASH FLOW STATEMENT DATA:
Cash provided by (used for)
operating activities........... $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
Cash used for investment
activities..................... $ (7,264) $ (41,049) $ (7,714) $ (35,961) $ (58,697)
Cash provided by (used for)
financing activities........... $ (30,445) $ 9,897 $ 4,245 $ 24,659 $ 28,704
- ---------------------------------
<FN>
(1) All per screen, location and patron ratios are calculated as of period
end and include screens and locations in which Cineplex Odeon has a
partnership interest. Revenues, EBITDA and Modified EBITDA, however,
reflect only Cineplex Odeon's proportionate share of the revenues,
EBITDA and Modified EBITDA of such partnerships, equal to the
respective percentage ownership interests of Cineplex Odeon in such
partnerships.
(2) EBITDA consists of earnings before interest, taxes, depreciation and
amortization. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with Canadian GAAP), as
a measure of Cineplex Odeon's operating performance, or as an
alternative to cash flow from operating activities (as determined in
accordance with Canadian GAAP), as a measure of Cineplex Odeon's
liquidity. EBITDA measures the amount of cash that a company has
available for investment or other uses and was used by Cineplex Odeon
as a measure of its performance. Cineplex Odeon believes that EBITDA
is an important measure, in addition to cash flow from operations and
Modified EBITDA, in viewing its overall liquidity and borrowing
capacity. EBITDA measures the amount of cash that a company has
available for investment or other uses and is used by Cineplex Odeon
as a measure of its performance.
(3) Modified EBITDA is EBITDA after eliminating the impact of other
expenses (income). Modified EBITDA should not be construed as an
alternative to operating income (as determined in accordance with
Canadian GAAP), as a measure of Cineplex Odeon's operating
performance, or as an alternative to cash flow from operating
activities (as determined in accordance with Canadian GAAP), as a
measure of Cineplex Odeon's liquidity. Modified EBITDA measures the
amount of cash that a company has available for investment or other
uses and was used by Cineplex Odeon as a measure of its performance.
Cineplex Odeon believes that Modified EBITDA is an important measure,
in addition to cash flow from operations and EBITDA, in viewing its
overall liquidity and borrowing capacity. A reconciliation of EBITDA
to Modified EBITDA follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
--------- ------------ ------------ ----------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
EBITDA ................ $72,244 $ 62,725 $ 51,966 $ 49,438 $18,620
Other expenses (income) (1,267) 2,900 2,862 1,377 43,401*
------- ---------- --------- -------- -------
Modified EBITDA** ..... $70,977 $ 65,625 $ 54,828 $ 50,815 $62,021
======= ========== ========= ======== =======
- ---------------------------------
<FN>
* Includes $37.5 million representing unusual and nonrecurring loss on
Cineplex Odeon theatres to be closed as part of the contractual
obligations related to the Combination. This charge was recorded in
the fourth quarter of 1997.
** In the case of Cineplex Odeon, Modified EBITDA is substantially
comparable to Attributable EBITDA.
(4) Admissions and concessions revenue per patron is affected by the fact
that, during the periods reflected, a significant portion of Cineplex
Odeon's revenues was generated in Canadian dollars and for purposes of
financial reporting has been converted to U.S. dollars.
</FN>
</TABLE>
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined income statement data give
effect to the Combination and to the Transactions ("Pro Forma"), in each
case as if the relevant Transactions had occurred on March 1, 1997, by
combining the results of operations of the Company for the year ended
February 28, 1998, with the results of operations of Cineplex Odeon for the
year ended December 31, 1997, and, with respect to the three months ended
May 31, 1998 by combining the results of operations of the Company and
Cineplex Odeon for the three months ended May 31, 1998. The unaudited pro
forma combined balance sheet data present the Pro Forma financial position
of the Company and Cineplex Odeon at May 31, 1998, assuming that the
relevant Transactions had been consummated as of that date.
Under U.S. GAAP, the accounting for the Combination follows the
purchase method of accounting, where the net assets of the acquired company
are "purchased" by the acquiring company. Accordingly, the cost to acquire
Cineplex Odeon will be allocated to the assets acquired and liabilities
assumed of Cineplex Odeon based on their respective fair values, with the
excess to be allocated to goodwill. The valuations and other studies,
required to determine the fair value of the assets acquired and liabilities
assumed, have not been performed, and, accordingly, the adjustments
reflected in the unaudited pro forma combined financial information are
preliminary and subject to further revisions and adjustments. For purposes
of this presentation, the carrying value of the Cineplex Odeon net assets
acquired was assumed to approximate fair value. Therefore, the excess of
purchase price over the historical net book value of the net assets of
Cineplex Odeon has been classified on the pro forma balance sheet as Excess
Purchase Price.
Loews Cineplex has arranged to obtain an independent appraisal of
significant assets, liabilities and business operations of Cineplex Odeon.
Upon completion of the determination of fair value, the Excess Purchase
Price will be allocated to specific assets and liabilities of Cineplex
Odeon. It is anticipated that there will be reductions in the carrying
value associated with certain assets, and alternatively the fair value of
certain other assets may exceed carrying value. Accordingly, the final
valuation could result in materially different amounts and allocations of
Excess Purchase Price from the amounts and allocations presented in the
following unaudited pro forma financial data, primarily between goodwill
and property, equipment and leaseholds, resulting in corresponding changes
in depreciation and amortization amounts. For every one million dollars of
Excess Purchase Price allocated to fixed assets, depreciation and
amortization will increase $25,000 annually (assuming an average 20 year
service life for fixed assets and straight line depreciation). Based on
preliminary estimates of fair value related to certain assets, additional
Excess Purchase Price of between $100 million and $150 million could result
at the conclusion of the valuation.
The unaudited pro forma financial information is not necessarily
indicative of the Company's combined financial position or results of
operations that actually would have occurred had the Transactions been
consummated at the beginning of the periods presented and should not be
construed as being representative of future operations. In addition, no
effect has been given to the pending disposition of 31 theatres comprising
105 screens in New York City, Chicago and suburban New York for $92 million
to Cablevision, including 25 theatres that the Company is obligated to sell
under an agreement reached with the DOJ and the attorneys general of New
York and Illinois in connection with the approval of the Combination.
Proceeds from the sale are expected to be used to reduce borrowings under
the Bank Credit Facilities and for general corporate purposes. The theatres
held for disposition represented approximately 3.6% of total screens and
generated approximately 6.8% of total box office revenue on an annual
basis. THE UNAUDITED PRO FORMA ADJUSTMENTS ALSO DO NOT INCLUDE ANY
POTENTIAL BENEFIT TO BE REALIZED FROM ANTICIPATED OPERATING EFFICIENCIES
AND COST SAVINGS AS A RESULT OF THE COMBINATION. IN ADDITION, THE PRO FORMA
DEBT LEVEL OF APPROXIMATELY $654 MILLION INCLUDES APPROXIMATELY $29.3
MILLION OF CAPITAL SPENDING ON THEATRE PROJECTS IN VARIOUS STAGES OF
DEVELOPMENT AS OF THE RESPECTIVE BALANCE SHEET DATES. THE UNAUDITED PRO
FORMA ADJUSTMENTS DO NOT INCLUDE THE FUTURE REVENUE STREAMS ASSOCIATED WITH
THESE THEATRE LOCATIONS.
This unaudited pro forma financial information should be read in
conjunction with the historical financial statements and notes thereto of
the Company and Cineplex Odeon included elsewhere in this Prospectus. See
"Risk Factors" and "Cautionary Statement Concerning Forward-Looking
Statements".
<PAGE>
<TABLE>
<CAPTION>
COMBINED LOEWS THEATRES AND CINEPLEX ODEON
UNAUDITED PRO FORMA INCOME STATEMENT--FISCAL YEAR ENDED FEBRUARY 28, 1998
(IN THOUSANDS EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
LOEWS CINEPLEX
THEATRES ODEON
YEAR ENDED YEAR ENDED PRO FORMA
2/28/98 12/31/97 ADJUSTMENTS PRO FORMA
----------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Admissions....................... $ 296,933 $ 399,171 $ (7,909)(1) $ 688,195
Concessions...................... 104,009 147,892 (3,230)(1) 248,671
Other (A)........................ 12,568 26,714 (326)(1) 38,956
---------- ----------- -------------- -------------
413,510 573,777 (11,465) 975,822
---------- ----------- -------------- -------------
EXPENSES
Theatre operations and other 291,421 462,738 (26,695)(1)(1a) 727,464
expenses........................
Cost of concessions.............. 16,147 28,705 (646)(1) 44,206
General and administrative....... 28,917 20,313 10,000(1a) 59,230
Depreciation and amortization.... 52,307 45,715 6,779(2) 105,601
800(9)
Loss on sale/disposal of theatres
and other....................... 7,787 0 5,896(3) 13,683
---------- ----------- -------------- -------------
396,579 557,471 (3,866) 950,184
---------- ----------- -------------- -------------
OPERATING INCOME................... 16,931 16,306 (7,599) 25,638
OTHER EXPENSES
Interest Expense/(Income)........ 14,319 33,900 2,131(4) 47,153
(7,697)(10)
4,500(11)
Other Expenses (Merger Related).. 0 37,505 (37,505)(5) --
Other Expenses................... 0 5,896 (5,896)(3) --
---------- ------------ -------------- -------------
INCOME/(LOSS) BEFORE INCOME TAXES.. 2,612 (60,995) 36,868 (21,515)
INCOME TAX EXPENSE/(BENEFIT)....... 2,751 1,072 (1,531)(6) 2,292
---------- ------------ -------------- -------------
NET LOSS........................... $ (139) $ (62,067) $ 38,399 $ (23,807)
=========== ============ ============== =============
Shares Outstanding:
Basic........................................................................ 58,602,844(8)
Fully Diluted................................................................ 62,293,258(8)
Loss Per Share:
Basic........................................................................ $ (0.41)
Fully Diluted................................................................ $ (0.41)
<FN>
- --------------------------
(A) Includes the Company's equity earnings from U.S. Partnerships.
</FN>
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMBINED LOEWS THEATRES AND CINEPLEX ODEON
UNAUDITED PRO FORMA INCOME STATEMENT--FOR THE THREE MONTHS ENDED MAY 31, 1998
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
LOEWS CINEPLEX
THEATRES ODEON
THREE MONTHS ENDED PERIOD ENDED PRO FORMA
5/31/98 5/15/98 ADJUSTMENTS PRO FORMA
------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Admissions......................... $ 83,207 $ 66,839 $(1,299)(1) $ 148,747
Concessions........................ 31,170 25,861 (560)(1) 56,471
Other (A).......................... 3,437 5,749 (79)(1) 9,107
---------- ----------- -------- ---------
117,814 98,449 (1,938) 214,325
---------- ----------- -------- ---------
EXPENSES
Theatre operations and other 85,115 86,974 (5,872)(1)(1a) 166,217
expenses.........................
Cost of concessions................ 4,828 4,999 (96)(1) 9,731
General and administrative......... 7,946 4,554 2,616(1a) 15,116
Depreciation and amortization...... 14,681 8,101 1,532(2) 24,514
200(9)
---------- ----------- -------- ---------
112,570 104,628 (1,620) 215,578
---------- ----------- -------- ---------
OPERATING INCOME................... 5,244 (6,179) (318) (1,253)
OTHER EXPENSES
Interest Expense/(Income).......... 6,106 7,674 (555)(4) 12,426
(1,924)(10)
1,125(11)
Other Expenses (Merger Related).... 2,009 (2,009)(5)
---------- ----------- -------- ---------
INCOME/(LOSS) BEFORE INCOME TAXES.. (862) (15,862) 3,045 (13,679)
INCOME TAX EXPENSE/(BENEFIT)....... (119) 377 -- 258
---------- ----------- -------- ---------
NET LOSS........................... $ (743) $ (16,239) $ 3,045 $(13,937)
========== =========== ======== =========
Shares Outstanding:
Basic............................................................. 58,621,622(8)
Fully Diluted..................................................... 62,035,255(8)
Loss Per Share:
Basic............................................................. $(0.24)
Fully Diluted..................................................... $(0.24)
<FN>
- --------------------------------------------------
(A) Includes the Company's equity earnings from U.S. Partnerships.
</FN>
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma financial statements.
<PAGE>
COMBINED LOEWS THEATRES AND CINEPLEX ODEON
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MAY 31, 1998
(IN THOUSANDS)
LOEWS
CINEPLEX AS PRO FORMA
OF 5/31/98 ADJUSTMENTS PRO FORMA
------------ ---------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............. $ 37,785 $ 37,785
Accounts receivable.................... 15,374 15,374
Prepaid and other current assets....... 18,773 18,773
---------- -------- ----------
TOTAL CURRENT ASSETS.................. 71,932 71,932
PROPERTY, EQUIPMENT AND LEASEHOLDS, net.. 1,180,376 1,180,376
OTHER ASSETS
Long-term Investments and Advances to 28,941 28,941
Partnerships..........................
Goodwill (Historical).................. 83,913 83,913
Excess Purchase Price.................. 224,304 224,304
Other Intangible Assets................ 6,503 6,503
Deferred charges and other assets...... 21,318 $8,000(9) 29,318
---------- -------- ----------
TOTAL ASSETS....................... $1,617,287 $8,000 $1,625,287
========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.. $ 230,471 $(18,562)(7)$ 211,909
Interest payable to Sony affiliate..... 0
Other Current liabilities.............. 22,122 22,122
Current portion of long-term debt and
other obligations..................... 9,785 9,785
--------- ------- ----------
TOTAL CURRENT LIABILITIES 262,378 (18,562) 243,816
DEFERRED INCOME TAXES.................... 16,174 16,174
LONG-TERM DEBT (including capital lease
obligations)........................... 520,056 212,562(7) 340,438
(102,625)(8)
(289,555)(9)
PLITT DEBT............................... 200,000 (194,000)(7) 6,000
8 7/8% SUBORDINATED DEBT................. 297,555(9) 297,555
OTHER LIABILITIES........................ 23,411 23,411
---------- -------- ----------
TOTAL LIABILITIES 1,022,019 (94,625) 927,394
---------- -------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock........................... 454 132(8) 586
Additional paid-in capital............. 591,613 102,493(8) 694,106
Retained earnings...................... 3,201 3,201
---------- -------- ----------
TOTAL SHAREHOLDERS' EQUITY............... 595,268 102,625 697,893
---------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,617,287 $8,000 $1,625,287
========== ======== ==========
The accompanying notes are an integral part of these unaudited pro
forma financial statements.
- ------------------------------
(1) Elimination of the operating results for certain Cineplex Odeon
theatres to be closed as a result of the Combination.
(1a) Reclassification of Cineplex Odeon district office expenses from
theatre operations and other expenses to general and administrative
expenses of $10 million ($2.6 million for the three months ended May
31, 1998) to conform with Loews Theatres' presentation.
(2) Additional amortization expense for the excess of purchase price over
historical book value of Cineplex Odeon's net assets acquired and
transaction related costs. "Excess Purchase Price" (currently
estimated at $224 million at May 31, 1998) consists of (i) the excess
of fair value over the historical book value of net assets for
Cineplex Odeon calculated at May 14, 1998, (ii) transaction related
costs and (iii) the establishment of certain liabilities as a result
of the Combination. The excess of fair value over the historical book
value of net assets for Cineplex Odeon was determined based upon the
sales price per Cineplex Odeon Common Share outstanding and the
estimated net book value of Cineplex Odeon at the closing date of the
Combination. The Excess Purchase Price of approximately $224 million
has been amortized based upon a useful life of 40 years. For each
five-year reduction in the useful life assigned to Excess Purchase
Price there would be an increase of $800,000 to amortization expense
on an annual basis. Amortization has also been adjusted to reflect the
impact of theatre dispositions and deferred financing costs as
follows:
Amortization of Excess Purchase Price
over 40 years.......................................... $ 5.5 million
Plus: Amortization of deferred Financing Charges
($6.6 million) over 5 years............................. 1.3 million
--------------
Total Fiscal Year Ended February 28, 1998.................$ 6.8 million
==============
Total Quarter Ended May 31, 1998..........................$ 1.7 million*
==============
- -----------------------------------
* Total of approximately $200,000 was recorded by Loews Cineplex
for the period May 15, 1998 through May 31, 1998.
The final determination of Excess Purchase Price will be based upon
the completion of a formal valuation of the Cineplex Odeon net assets
as of the closing date of the Combination. Based upon preliminary
estimates of fair value related to certain assets, additional Excess
Purchase Price of between $100 million and $150 million could result
at the conclusion of the valuation.
(3) Reclassification of certain costs relating to loss on theatre
dispositions/impairments and other restructuring charges to conform to
U.S. GAAP financial statement presentation.
(4) Adjustment necessary to reflect interest expense based upon the pro
forma long-term debt balance of approximately $686 million at February
28, 1998 and the actual long-term debt balance (including current
portion) of $730 million at May 31, 1998 at an average annual interest
rate of 7.5%. Amounts reflected are net of capitalized interest on
projects under development. Each 125 percentage point change in the
interest rate charged on long-term borrowings would result in a change
in interest expense of approximately $900,000 based on the actual debt
level of $730 million.
(5) Elimination of impact of unusual and nonrecurring loss on Cineplex
Odeon theatres and other activity pursuant to contractual obligations
related to the Combination. These theatres are not related to theatres
to be disposed of in connection with the DOJ settlement.
(6) Income taxes have been calculated at applicable statutory rates,
adjusted for nondeductible items and state and local minimum taxes.
(7) Represents payment of the premium required as part of the Plitt Note
Repurchase. Further, the reclassification of $18.6 million from
accounts payable to Long-Term Debt reflects the funding of the premium
for the Plitt Note Repurchase through Long-Term Debt rather than
working capital as previously considered.
(8) Equity Offering Adjustments as follows (in thousands, except share
data):
Issuance of 10 million shares at $11.00 per share.......... $ 100
Issuance of 3,255,212 shares issued to Universal
pursuant to the Subscription Agreement (transferred
from additional-paid-in-capital)......................... 32
Additional paid-in capital................................. 109,868
------------
Gross proceeds from Equity Offering........................ 110,000
------------
Expenses related to Equity Offering (estimated)............ (7,375)
------------
$ 102,625
============
The estimated net proceeds of $102.6 million from the Equity Offering
have been reflected in this pro forma financial information as a
reduction of Long-Term Debt.
<TABLE>
<CAPTION>
RECONCILIATION OF BASIC
TO DILUTED EPS
------------------------------
FEB. 28, 1998 MAY 31, 1998
--------------- -------------
<S> <C> <C>
Basic Shares Outstanding Before Equity Offering..... 45,347,632 45,366,410
Shares Issued in Equity Offering*................... 13,255,212 13,255,212
------------ ---------------
Basic Shares Outstanding After Equity Offering...... 58,602,844 58,621,622
============ ===============
Basic Shares Outstanding Before Equity Offering .... 45,347,632 45,366,410
Weighted Average Dilution Under Stock Option Plans.. 3,690,414 3,413,633
------------ ---------------
Weighted Average Diluted Shares Outstanding
Before Equity Offering.............................. 49,038,046 48,780,043
============ ===============
Basic Shares Outstanding After Equity Offering...... 58,602,844 58,621,622
Weighted Average Dilution Under Stock Option Plans 3,690,414 3,413,633
------------ ---------------
Weighted Average Diluted Shares Outstanding After
Equity Offering.................................... 62,293,258 62,035,255
============ ===============
- ---------------------------------------
<FN>
* Shares issued in conjunction with the Equity Offering comprised
of 10 million shares at $11.00 per share sold in public offering
and 3,255,212 shares issued to Universal pursuant to the
Subscription Agreement.
(9) Represents the issuance of $300 million 8 7/8% senior subordinated
notes (net of original issue discount) and the estimated costs ($8.0
million) associated with such debt offering. These costs will be
amortized over the life of the debt (assuming 10 years).
(10) Interest Expense Adjustment Related to the Equity Offering:
Annual interest savings assuming paydown of long-term
debt utilizing proceeds from Equity Offering*.......... $ 7.7 million
===============
Quarterly interest savings assuming paydown of long-term
debt utilizing proceeds from Equity Offering........... $ 1.9 million
===============
- --------------------
* Annual impact of $102.6 million at 7.5% interest rate.
(11) Interest Expense Adjustment Related to the Debt Offering:
Annual incremental interest related to issuance of $300
million 8 7/8% Senior Subordinated Notes**.............. $ 4.5 million
===============
Total each quarter...................................... $1.125 million
===============
** Represents difference anticipated in rate on new borrowing of
8 7/8% compared to blended rate under the Bank Credit Facilities
of 7.5% (plus amortization of original issue discount).
</FN>
</TABLE>
NOTE:
The combined pro forma financial information does not reflect the
impact of the pending disposition of 31 theatres comprising 105
screens to Cablevision for $92 million representing 3.6% of the
Company's total screens and 6.8% of total box office receipts on an
annual basis. This transaction is not deemed significant for separate
pro forma presentation.
In addition, the pro forma financial data do not include any potential
payments owed by the Company to SPE as a result of the Combination.
The final payment to SPE is subject to specific post-closing audit
procedures, which have not yet been completed. The Company estimates
that upon completion of the procedures it may be required to pay a
range of approximately $10 million to $15 million.
The unaudited pro forma data is not necessarily indicative of the
combined results of operations of the Company that would have occurred
nor is it necessarily indicative of future operating results of the
Company. Further, due to seasonality in the exhibition industry, the
Company's first fiscal quarter of 1998 is not necessarily
representative of future operating results for the remainder of the
year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LOEWS CINEPLEX
GENERAL
The following discussion of the Company's financial condition and
operating results should be read in conjunction with the selected
historical financial data and the audited consolidated financial statements
of the Company for the fiscal years ended February 28, 1998, February 28,
1997 and February 29, 1996 and with selected historical financial data and
the unaudited consolidated financial statements of the Company for the
three month periods ended May 31, 1998 and 1997. The information presented
below includes the results of Cineplex Odeon, which became a wholly owned
subsidiary of the Company on May 14, 1998, for the 17 day period ended May
31, 1998 and does not include any of its results prior to that time.
This discussion incorporates operating results of partnerships in
which the Company has interests to the extent of its equity share as
required by the equity method of accounting.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 COMPARED TO THREE MONTHS ENDED MAY 31,
1997. Operating Revenues of approximately $117.8 million for the three
months ended May 31, 1998 were $24.6 million, or 26.4%, higher than the
comparable period of the prior year. Operating revenues are generated
primarily from admission revenues and concession sales. Admission revenues
for the three months ended May 31, 1998 of approximately $83.2 million were
$15.8 million, or 23.4%, higher, and concession revenues of approximately
$31.2 million were $7.7 million, or 32.8%, higher, in comparison to the
three months ended May 31, 1997. The increases in revenue for the quarter
were primarily due to the inclusion of 17 days of operating results for
Cineplex Odeon of $26.5 million.
Operating Costs of approximately $89.9 million for the three months
ended May 31, 1998 were approximately $18.8 million, or 26.4%, higher than
the three months ended May 31, 1997, due primarily to the inclusion of 17
days of operating results for the Cineplex Odeon theatres of $21.1 million.
General and Administrative Costs of approximately $7.9 million for the
three months ended May 31, 1998 were $2.0 million higher than the three
months ended May 31, 1997 due primarily to the inclusion of 17 days of
operating results for Cineplex Odeon and start up costs associated with the
Company's international operations.
Depreciation and Amortization Costs of approximately $14.7 million for
the three months ended May 31, 1998 were $2.1 million higher than for the
three months ended May 31, 1997 due to the inclusion of 17 days of
operating results for the Cineplex Odeon theatres.
Interest Expense of approximately $6.1 million for the three months
ended May 31, 1998 was $2.5 million higher than for the three months ended
May 31, 1997 due primarily to the inclusion of 17 days of results for
Cineplex Odeon and the impact of additional borrowings under the Company's
Bank Credit Facilities.
Modified EBITDA for the three months ended May 31, 1998 of $19.9
million increased $3.7 million in comparison to the three months ended May
31, 1997 primarily due to the inclusion of 17 days of results for Cineplex
Odeon. Modified EBITDA (earnings before interest, taxes, depreciation and
amortization, and gains/losses on asset disposal or sales) is a measure of
financial performance that management uses in measuring the Company's
financial performance. Modified EBITDA measures the amount of cash that a
company has available for investment or other uses and is used by the
Company as a measure of performance. Modified EBITDA is primarily a
management tool and only one measure of financial performance to be
considered by the investment community. Modified EBITDA is not an
alternative to measuring operating results or cash flow under U.S. GAAP.
FISCAL YEAR ENDED FEBRUARY 28, 1998 COMPARED TO FISCAL YEAR ENDED
FEBRUARY 28, 1997. Operating Revenues of approximately $413.5 million for
the fiscal year ended February 28, 1998 were $38.2 million, or 10.2%,
higher than the comparable period of the prior year. Operating revenues are
generated primarily from admission revenues and concession sales. Admission
revenues for the fiscal year ended February 28, 1998 of approximately
$296.9 million were $23.4 million, or 8.6%, higher and concession revenues
of approximately $104.0 million were $13.4 million, or 14.8%, higher in
comparison to the fiscal year ended February 28, 1997. Other income for the
year ended February 28, 1998 of approximately $12.6 million was $1.4
million higher than the same period in fiscal 1997. These increases in
revenues were due primarily to the effect of additional revenue from new
theatre openings/expansion of existing theatres of $33.8 million, higher
admissions and concession revenue per patron resulting in an increase of
$6.4 million and $5.2 million, respectively, partially offset by other
reductions in operating revenues, including the effect of theatre
dispositions, which reduced operating revenues by approximately $7.2
million.
Operating Costs of approximately $307.6 million for the year ended
February 28, 1998 were $25.1 million, or 8.9%, higher than the fiscal year
ended February 28, 1997 due primarily to increased costs of $22.7 million
related to the aforementioned increase in operating revenues and higher
occupancy costs attributable to new theatre openings of $5.4 million offset
by lower costs, including the effect of theatre dispositions, of $3.0
million.
General and Administrative Costs of approximately $28.9 million for
the year ended February 28, 1998 were $7.5 million higher than the fiscal
year ended February 28, 1997 due primarily to higher salaries and fringe
benefits as a result of normal merit increases and higher staffing levels
required as a result of increased business activity, certain contractual
buyouts and other costs related to the Combination and the start-up of the
Company's international operations.
Depreciation and Amortization Costs of approximately $52.3 million for
the year ended February 28, 1998 were $7.7 million higher than for the
fiscal year ended February 28, 1997 due primarily to the effect of new
theatre openings, provisions for asset impairment under SFAS No. 121 and
incremental depreciation on refurbishment and information systems
expenditures.
Loss on Sale/Disposal of Theatres of approximately $7.8 million for
the year ended February 28, 1998 was $2.2 million lower than for the fiscal
year ended February 28, 1997 due primarily to the timing, nature and
characteristics of theatre dispositions. During fiscal 1998, Loews Cineplex
disposed of 10 theatres comprising 28 screens.
Interest Expense of approximately $14.3 million for the year ended
February 28, 1998 was $500,000 lower than for the fiscal year ended
February 28, 1997 due primarily to the impact of lower interest rates
partially offset by the impact of new borrowings.
Modified EBITDA for the year ended February 28, 1998 of $77.0 million
increased $5.6 million in comparison to the year ended February 28, 1997
primarily due to the increase in admission and concession revenues per
patron and the impact of newly opened theatres which were previously
discussed.
FISCAL YEAR ENDED FEBRUARY 28, 1997 COMPARED TO FISCAL YEAR ENDED
FEBRUARY 29, 1996. Operating Revenues of approximately $375.3 million for
the fiscal year ended February 28, 1997 were $16.2 million, or 5%, higher
than the comparable period of the prior year. Operating revenues are
generated primarily from admission revenues and concession sales. Admission
revenues for the fiscal year ended February 28, 1997 of approximately
$273.5 million were $8.9 million, or 3%, higher and concession revenues of
approximately $90.6 million were $6.3 million, or 7%, higher in comparison
to the fiscal year ended February 29, 1996. These increases in both
admissions and concessions revenues were due primarily to the effect of
additional revenue from new theatre openings/expansion of existing theatres
of approximately $19.2 million, higher admissions and concessions revenue
per patron resulting in an increase of $11.2 million and $6.5 million,
respectively, partially offset by other reductions in operating revenues,
including the effect of theatre dispositions, which reduced operating
revenues by approximately $20.7 million.
Operating Costs of approximately $282.5 million for the year ended
February 28, 1997 were $5.1 million, or 2%, higher than the fiscal year
ended February 29, 1996 due primarily to costs of $16 million directly
related to the aforementioned increase in operating revenues and higher
occupancy costs attributable to new theatre openings of $2.8 million offset
by lower costs, including the effect of theatre dispositions, of $13.7
million.
General and Administrative Costs of approximately $21.4 million for
the year ended February 28, 1997 were $1.2 million higher than the fiscal
year ended February 29, 1996 due primarily to higher salaries and fringe
benefits as a result of normal merit increases.
Depreciation and Amortization Costs of approximately $44.6 million for
the year ended February 28, 1997 were $3.3 million higher than for the
fiscal year ended February 29, 1996 due primarily to the effect of new
theatre openings.
Loss on Sale/Disposal of Theatres of approximately $10.0 million for
the year ended February 28, 1997 was $2.7 million higher than for the
fiscal year ended February 29, 1996 due primarily to the timing, nature and
characteristics of theatre dispositions. During fiscal 1997, Loews Cineplex
disposed of an aggregate 15 theatres comprising 57 screens.
Interest Expense of approximately $14.8 million for the year ended
February 28, 1997 was $600,000 lower than for the fiscal year ended
February 29, 1996 due primarily to the impact of lower interest rates
partially offset by the impact of new borrowings.
Modified EBITDA for the year ended February 28, 1997 of $71.4 million
increased $10.0 million in comparison to the year ended February 29, 1996,
due primarily to the increase in admission and concession revenues per
patron and the impact of newly opened theatres which were previously
discussed.
LIQUIDITY AND CAPITAL RESOURCES (PRIOR TO CONSUMMATION OF THE COMBINATION)
Cash flow from operations for the three months ended May 31, 1998 was
approximately $27.3 million, which was approximately $17.3 million higher
than for the three months ended May 31, 1997. Cash flow from operations for
the year ended February 28, 1998 was approximately $64.2 million, which was
approximately $16.2 million higher than for the year ended February 28,
1997. Loews Cineplex derives substantially all of its revenues from cash
collected at the box office and through concession sales. Generally, this
provides Loews Cineplex with a working capital operating float since cash
revenues are generally collected in advance of the payment of related
expenses. Prior to the closing of the Combination, Loews Theatres
determined the amount of cash required to fund operational needs and all
cash in excess of the daily operational needs was "swept" by Sony Capital
Corporation, an affiliate, and applied to Loews Theatres' intercompany
payable account with its affiliates. Since Loews Theatres does not carry
any significant amounts of inventory or accounts receivable and any excess
cash historically was "swept" by an affiliate of Loews Theatres' corporate
parent, it has historically operated with negative working capital.
However, there are times during the year when, based on seasonal changes in
the pattern of cash collections and the timing of cost and expense
payments, additional working capital may be required. During such times,
Loews Theatres had an arrangement whereby SCA and/or its affiliates would
make additional funds available to Loews Theatres through a short-term
credit facility at interest rates, commensurate with market, established at
the time of the loan. Historically, Loews Theatres funded its capital
requirements for its new theatre acquisition, construction and
reconfiguration programs with internally generated funds and borrowings
under its intercorporate credit facility with SCA (the "Sony Facility").
On February 5, 1998, in connection with the Combination, the Company
declared and paid a stock dividend of 19,269,348.25 shares of Common Stock
and 1,202,486 shares of Class A Non-Voting Common Stock to the Company's
sole stockholder of record at the time. In connection with the stock
dividend, $205,000 was transferred from retained earnings to additional
paid-in capital and Common Stock.
On May 14, 1998 and in connection with the Combination, the Company
repaid all amounts outstanding under the Sony Facility. At February 28,
1998, Loews Theatres' outstanding balance under the Sony Facility was
approximately $296.3 million and net borrowings for the year then ended
were approximately $1.8 million. At February 28, 1997, Loews Theatres'
outstanding balance against the Sony Facility was approximately $294.6
million and net borrowings during the fiscal year ended February 28, 1997
were approximately $8.2 million.
For periods prior to the closing of the Combination, Loews Cineplex is
included in the consolidated federal income tax returns of SCA. For
financial reporting purposes, Loews Cineplex reports its federal income tax
expense and related liability as if it filed a separate income tax return.
The resultant liability (or benefit) is treated as an intercompany payable
(or receivable).
Loews Cineplex has made significant investments in its theatres over
the last five years (including new builds, reconfigurations of existing
theatres and closing unprofitable or uncompetitive theatres). For the
five-year period ending February 28, 1998, Loews Cineplex has added 338
screens (including 52 screen expansions at existing locations) at 25
locations.
The Company has experienced, and expects to continue to realize,
improved operating results as a result of investments in theatres over the
last five years (including new builds, reconfigurations of existing
theatres and closing unprofitable or uncompetitive theatres). At May 31,
1998, the Company had capital spending commitments for the future
development and construction of 41 theatre properties comprising 608
screens aggregating approximately $290.0 million.
Additionally, the Company is committed, under the terms of the joint
venture agreement dated June 10, 1998 with Yelmo Films to provide funding
for the future development and construction of threatre properties
aggregating approximately $50 million.
LIQUIDITY AND CAPITAL RESOURCES (AFTER CONSUMMATION OF THE COMBINATION)
Subsequent to consummation of the Combination, the Company has
performed all cash management functions on a "stand-alone" basis.
In connection with the Combination, Loews Cineplex entered into the
$1.0 billion Bank Credit Facilities. The Bank Credit Facilities, together
with funds in the amount of $84.5 million paid by Universal under the
Subscription Agreement, replaced Cineplex Odeon's existing credit facility
and the Sony Facility, funded cash paid to SPE and/or its affiliates in
connection with the Combination and, together with the net proceeds of the
Concurrent Offerings will provide ongoing financing to Loews Cineplex to
fund further expansion in North America and internationally. The Company
initially borrowed $500 million under the Bank Credit Facilities at the
time the Combination was consummated. The Bank Credit Facilities are
comprised of a $750 million senior secured revolving credit facility,
secured by substantially all of the assets of Loews Cineplex and its U.S.
subsidiaries, and a $250 million uncommitted facility. The Bank Credit
Facilities bear interest at a rate of either the current prime rate as
offered by Bankers Trust Company and Adjusted Eurodollar (as defined in the
credit agreement governing the Bank Credit Facilities) rate plus an
applicable margin based on the Leverage Ratio (as defined in the credit
agreement governing the Bank Credit Facilities). The Bank Credit Facilities
include various financial covenants, including a leverage test and interest
coverage test, as well as customary restrictive covenants, including: (i)
limitations on indebtedness, (ii) limitations on dividends and other
payment restrictions, (iii) limitations on asset sales, (iv) limitations on
transactions with affiliates, (v) limitations on the issuance and sale of
capital stock of subsidiaries, (vi) limitations on lines of business, (vii)
limitations on merger, consolidation or sale of assets and (viii) certain
reporting requirements. Future cash needs in excess of amounts provided by
operations will be funded by the Bank Credit Facilities.
The Company's borrowings under the Bank Credit Facilities at May 31,
1998 totaled $473 million.
Recent Developments
Two of the Company's leased drive-in motion picture theatres in the
State of Illinois are located on properties on which certain third parties
disposed of substantial quantities of auto shredder residue and other
debris. Such materials may contain hazardous substances. With respect to
one of these sites, located in Cicero, Illinois, the Company has been named
as one of two defendants in a lawsuit commenced in August 1998 by the
Illinois Attorney General's Office at the request of the Illinois
Environmental Protection Agency. The action was brought pursuant to the
Illinois Environmental Protection Act and alleges, among other things, that
the Company caused or allowed the disposal of certain wastes bearing
hazardous substances on the theatre property. The action seeks civil
penalties and various forms of equitable relief, including the removal of
all wastes allegedly present at the property, soil and groundwater testing
and remediation, if necessary. The Company's range of liability with
respect to this action cannot be precisely estimated at this time due to
several unknown factors, including the scope of contamination at the
theatre property, the allocation of such liability, if any, to other
responsible parties, and the ability of such parties to satisfy their share
of such liability. The Company has accrued an amount that it believes
represents the minimum amount of the Company's potential liability relating
to the action. The Company will continue to evaluate future information and
developments with respect to conditions at the theatre property and will
periodically reassess any liability and adjust its accrual accordingly.
Based on the foregoing, there can be no assurance that the Company's
liability in connection with this action will not be material.
In August 1998, the Company entered into interest rate exchange
agreements effectively setting a fixed rate of 5.78% per annum (plus a
margin) on a notional amount of $250 million of indebtedness. Each Swap has
a quarterly reset date for settlements. The Company will account for these
Swaps as interest rate hedges.
As a result of the consummation of the Combination, Loews Cineplex was
obligated to offer to purchase the outstanding Plitt Notes for a price
equal to 101% of the outstanding principal amount plus accrued and unpaid
interest. In order to satisfy this requirement and retire the Plitt Notes,
on June 15, 1998, Plitt commenced the At-the-Market Offer, which terminated
on August 4, 1998. Pursuant to the At-the-Market Offer, Plitt purchased 97%
of the outstanding Plitt Notes for $216 million or 109.261% of the
outstanding principal amount of the Plitt Notes, plus accrued and unpaid
interest, leaving approximately $6 million of the Plitt Notes outstanding.
In connection with closing the Combination, the Company guaranteed the
Plitt Notes on a senior subordinated basis, and Cineplex Odeon was released
from its guarantee of the Plitt Notes. See "The Transactions".
On August 5, 1998, the Company simultaneously completed a pubic
offering of 10 million shares of its common stock at a price of $11 a share
and the issuance of $300 million of 8 7/8% Senior Subordinated Notes due
2008 through a private placement. The Company used $215.7 million of the
proceeds from these offerings to acquire the Plitt Notes and the remaining
amount to reduce Bank Credit Facilities and pay fees and expenses
associated with these offerings.
Under the terms of an agreement with the DOJ, which was entered into
in connection with its approval of the Combination, the Company agreed to
divest 25 theatres, representing 85 screens in the New York and Chicago
areas. The sale of these theatres is subject to approval by the DOJ. On
August 27, 1998, the Company announced that it had reached an agreement to
sell 31 theatres in the New York City, Chicago and suburban New York areas
for $92 million to Cablevision, one of the nation's leading
telecommunications and entertainment companies, subject to certain
conditions, including DOJ approval. The Company is in discussions with
Cablevision regarding obtaining DOJ approval. These 31 theatres include an
additional seven theatres, representing 21 screens, in the suburban New
York area, which will be sold, subject to certain conditions, in a separate
transaction unrelated to the agreement with the DOJ. The theatres being
sold represent approximately 3.6% of the Company's total screens and 6.8%
of total box office receipts on an annual basis. Proceeds from the sale are
expected to be used to reduce borrowings under the Bank Credit Facilities
and for general corporate purposes. Subject to DOJ approval, the Company
expects to close these transactions in the third quarter ending November
30, 1998.
The Company is offering to exchange hereby $300 million aggregate
principal amount of New Notes. The New Notes will be general unsecured
obligations of the Company, ranking subordinate in right of payment to all
Senior Debt of the Company, including indebtedness under the Bank Credit
Facilities. For a description of the New Notes, see "Description of New
Notes".
EFFECT OF INFLATION
Inflation has not had a material effect on Loews Cineplex's
operations.
YEAR 2000 ISSUE
The Year 2000 issue affects virtually all companies and organizations.
Loews Cineplex has implemented programs designed to ensure that all
software used in connection with providing services to its customers and
its internal operations will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data
abnormality. Loews Cineplex does not anticipate incurring significant
additional costs to address the Year 2000 issue, although the effectiveness
of Loews Cineplex's present efforts to address the Year 2000 issue cannot
be assured. In addition, it is currently unknown whether vendors and other
third parties with whom Loews Cineplex conducts business will successfully
address the Year 2000 issue with respect to their own computer software. If
Loews Cineplex's present efforts to address the Year 2000 issue are not
successful, or if vendors and other third parties with which Loews Cineplex
conducts business do not successfully address the Year 2000 issue, Loews
Cineplex's business and financial condition could be adversely affected.
NEW ACCOUNTING PRONOUNCEMENTS
Loews Cineplex has determined that three new pronouncements that have
been issued but are not yet effective are applicable to Loews Cineplex, and
may have an impact on its financial statements:
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information", which
is effective for Loews Cineplex's fiscal year ending February 28, 1999,
requires Loews Cineplex to disclose financial information about business
segments, including certain information about products and services,
activities in different geographic areas and other information.
SFAS No. 132, "Employer's Disclosure about Pensions and Other
Post-Retirement Benefits", is effective for the Company's fiscal year
ending February 28, 1999. SFAS No. 132 standardizes the disclosure
requirements for pension and other post-retirement plans; the standard does
not change the measurement or recognition of such plans.
Additionally, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity", is effective for all the Company's fiscal quarters of
all fiscal years beginning February 28, 2000. This statement standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts by requiring that the Company
recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value.
Loews Cineplex expects to adopt these standards when required and does
not believe they will have a material impact on its financial statements.
CINEPLEX ODEON
INTRODUCTION
Management's discussion and analysis of results of operations and
financial condition focuses on liquidity, capital resources and the results
of Cineplex Odeon's operations. This section should be read in conjunction
with the consolidated financial statements, the notes thereto and other
information presented elsewhere herein.
RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1997 AND 1996
Cineplex Odeon recorded a net loss for the year ended December 31,
1997 of $62,067,000 compared to a net loss for the year ended December 31,
1996 of $31,082,000 and a net loss for the year ended December 31, 1995 of
$32,907,000. Included in the 1997 net loss are other expenses of
$43,401,000 (1996--$1,377,000 and 1995--$2,862,000). Other expenses in 1997
includes a charge of $46,239,000 representing the costs associated with
terminating certain leases and disposing of certain properties and the
write-off of the net book value attributable to the related properties.
Industry admission revenue and attendance increased in 1997 by 7.7%
and 3.9% respectively compared to 1996 figures.
Cineplex Odeon reported its results in United States dollars. In order
to eliminate the impact of exchange rate fluctuations on the yearly
comparison of both admission and concession revenue, the results for the
Canadian operations discussed below are stated in Canadian dollars. In 1996
Cineplex Odeon sold five theatres located in Texas. The impact of this sale
is not considered significant to Cineplex Odeon's United States results.
Cineplex Odeon's United States theatre circuit box office revenue
increased for both the year and the quarter ended December 31, 1997 by 3.3%
and 10.0% respectively when compared to the corresponding period in the
prior year. This increase in box office revenue for the year ended December
31, 1997 was the result of an increase in attendance of 1.7% and an
increase in box office revenue per patron of 1.6%. The increase in box
office revenue in the fourth quarter of 1997 was the result of an
attendance increase of 8.2% and an increase in box office revenue per
patron of 1.8%. The increase in attendance in the fourth quarter reflects a
strong slate of pictures released in that period, including Titanic, and
the impact of new theatres opened by Cineplex Odeon in the United States.
Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 28.4% in 1997 compared to 1996 (when measured in Canadian
dollars). This increase was the result of an increase in attendance of
24.1% and an increase in box office revenue per patron of 4.3%. In the
fourth quarter of 1997 Cineplex Odeon's Canadian theatres reported an
increase in box office revenue of 43.5% compared to the fourth quarter of
1996 (when measured in Canadian dollars). This increase was the result of
an increase in attendance of 39.5% and an increase in box office revenue
per patron of 4.0%. The increase in attendance experienced by Cineplex
Odeon's Canadian theatre circuit in both the quarter and year ended
December 31, 1997 compared to 1996 was a result of Cineplex Odeon's
relationships with certain film distributors who enjoyed comparatively more
successful film product in 1997 compared to 1996 and the impact of new
theatres opened by Cineplex Odeon in Canada.
Cineplex Odeon's United States concession revenue increased by 8.8% in
1997 compared to 1996. This increase was the result of an increase in
attendance of 1.7% and an increase in concession revenue per patron of
7.1%. In the fourth quarter of 1997, Cineplex Odeon's United States
concession revenue increased by 16.9% when compared to the fourth quarter
of 1996. For the fourth quarter the increase was the result of an increase
in attendance of 8.2% and an 8.7% increase in concession revenue per
patron.
Cineplex Odeon's Canadian concession revenue increased in 1997 by
31.5% (when measured in Canadian dollars) compared to 1996, reflecting an
increase in concession revenue per patron of 7.4% and an increase in
attendance of 24.1%. For the fourth quarter of 1997, Cineplex Odeon's
Canadian concession revenue increased by 49.4% comprising an increase in
attendance of 39.5% and an increase in concession revenue per patron of
9.9%.
The increase in concession revenue per patron in both the United
States and Canada for the year reflects the impact of Cineplex Odeon's
focus in this area and the augmented design of concession stands in
Cineplex Odeon's newer theatres.
GROSS MARGIN AND OTHER COSTS. The gross margin from theatre operations
(being revenue from theatre operations less film cost, cost of concessions,
advertising, theatre payroll, occupancy and supplies and services), when
expressed as a percentage of theatre operating revenue, increased in 1997
to 16.2% compared to 15.4% in 1996. For the fourth quarter of 1997 compared
to the fourth quarter of 1996 the gross margin from theatre operations,
when expressed as a percentage of theatre operating revenue, increased to
17.7% from 14.0%. The increase in gross margin for both the year and the
fourth quarter was primarily the result of the increase in revenue.
Interest on long-term debt decreased by 4.5% in 1997 compared to the
prior year. The decrease in interest on long-term debt was primarily a
result of the decision to denominate certain of Cineplex Odeon's long-term
debt in Canadian dollars during 1997 which, for the period was subject to a
lower interest rate.
In 1997 other expenses were $43,401,000 compared to $1,377,000 in 1996
and $2,862,000 in 1995. The primary component of this charge is an expense
of $46,239,000 relating to the costs associated with terminating certain
theatre leases and disposing of certain other theatre properties and the
corresponding write-off of the net book value associated with the
properties. It is anticipated that the disposal of these properties will be
substantially complete by the end of 1998 and will result in an annual
operating cash flow improvement of $7,000,000.
During 1997 the value of the Canadian dollar weakened relative to the
United States dollar. While currency movements affect the reporting of
revenues and expenses of Cineplex Odeon's Canadian operations, the
financial impact is limited as the costs of operating the Canadian theatres
are supported by the revenues of such theatres.
RESULTS OF OPERATIONS--1996 AND 1995
Industry admission revenue and attendance increased in 1996 by 7.6%
and 6.0% respectively compared to 1995 figures.
Cineplex Odeon's United States results were impacted by the sale of 28
theatres, located in Florida and Georgia, to Carmike Cinemas, Inc. in the
second quarter of 1995. In 1996 Cineplex Odeon sold five theatres located
in Texas, the impact of which is not considered significant to Cineplex
Odeon's United States results.
Cineplex Odeon's United States theatre circuit box office revenue
decreased for both the year and the quarter ended December 31, 1996 by 4.0%
and 8.6% respectively when compared to the corresponding period in the
prior year. Adjusting for the impact of the sale of the Florida and Georgia
theatres, Cineplex Odeon's United States theatre circuit box office revenue
decreased by 1.9% for the year ended December 31, 1996 compared to the year
ended December 31, 1995. This decrease in box office revenue for the year
ended December 31, 1996 was the result of a decrease in attendance of 4.3%
offset by an increase in box office revenue per patron of 2.4%. The
decrease in attendance in 1996 compared to 1995 is a direct result of
increasing competition from other film exhibitors who have been
aggressively building new theatres. The decrease in box office revenue in
the fourth quarter of 1996 was the result of an attendance decrease of
10.3% offset by an increase in box office revenue per patron of 1.7%. The
decrease in attendance in the fourth quarter reflects the fact that the
film product in the fourth quarter of 1996 was not as strong as the prior
year and the aforementioned increasing competition.
Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 2.8% in 1996 compared to 1995 (when measured in Canadian
dollars). This increase was the result of an increase in attendance of 3.5%
offset by a decrease in box office revenue per patron of 0.7%. In the
fourth quarter of 1996 Cineplex Odeon's Canadian theatres reported an
increase in box office revenue of 5.0% compared to the fourth quarter of
1995 (when measured in Canadian Dollars). This increase was the result of
an increase in attendance of 4.1% and an increase in box office revenue per
patron of 0.9%. The increase in attendance experienced by Cineplex Odeon's
Canadian theatre circuit in 1996 compared to 1995 was a result of Cineplex
Odeon's relationships with certain film distributors who enjoyed
comparatively more successful film product in 1996 compared to 1995.
Cineplex Odeon's United States concession revenue decreased by 3.0% in
1996 compared to 1995. In the fourth quarter of 1996, Cineplex Odeon's
United States concession revenue decreased by 5.1% when compared to the
fourth quarter of 1995. Adjusting for the impact of the sale of the Florida
and Georgia theatres, Cineplex Odeon's United States concession revenue for
the year ended December 31, 1996 was equivalent to that of the year ended
December 31, 1995. This was achieved due to an increase in concession
revenue per patron of 4.3% which offset the decrease in attendance. For the
fourth quarter the decrease was the result of a decrease in attendance of
10.3% offset by a 5.2% increase in concession revenue per patron.
Cineplex Odeon's Canadian concession revenue increased in 1996 by 6.0%
(when measured in Canadian dollars) compared to 1995, reflecting an
increase in concession revenue per patron of 2.5% and an increase in
attendance of 3.5%. For the fourth quarter of 1996, Cineplex Odeon's
Canadian concession revenue increased by 3.7% comprising an increase in
attendance of 4.1% and a decrease in concession revenue per patron of 0.4%.
The increase in concession revenue per patron for the year reflects the
impact of Cineplex Odeon's focus in this area and the augmented design of
concession stands in Cineplex Odeon's newer theatres.
GROSS MARGIN AND OTHER COSTS. The gross margin from theatre operations
(being revenue from theatre operations less film cost, cost of concessions,
advertising, theatre payroll, occupancy and supplies and services), when
expressed as a percentage of theatre operating revenue, decreased in 1996
to 15.4% compared to 15.7% in 1995. The slight decline in gross margin for
the year was primarily the result of a general increase in certain direct
costs associated with theatre operations.
The gross margin from theatre operations, when expressed as a
percentage of theatre operating revenue, decreased in the fourth quarter of
1996 compared to the fourth quarter of 1995 to 14.0% from 16.4%. The
decline in gross margin for the fourth quarter of 1996 was due to (1) a
general increase in certain direct costs associated with theatre
operations; and (2) the fixed component of theatre operating costs
(primarily occupancy costs).
Interest on long-term debt decreased by 13.4% in 1996 compared to the
prior year. The decrease in interest on long-term debt was primarily
attributable to the initial application of equity proceeds from the public
offering in the first quarter of 1996 against Cineplex Odeon's long-term
debt.
During 1996 the value of the Canadian dollar strengthened relative to
the United States dollar. While currency movements affect the reporting of
revenues and expenses of Cineplex Odeon's Canadian operations, the
financial impact is limited as the costs of operating the Canadian theatres
are supported by the revenues of such theatres.
RESULTS OF OPERATIONS--SINCE DECEMBER 31, 1997
Unaudited financial statements for Cineplex Odeon for the three months
ended March 31, 1998 and March 31, 1997 are included herein commencing at
page F-59. On a stand alone basis for the three months ended May 31, 1998,
Cineplex Odeon's revenues and EBITDA were lower than for the corresponding
period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM CONTINUING OPERATIONS. Cash flow from operations in
1997 amounted to a net inflow of $30,780,000 compared to a net inflow of
$12,416,000 in 1996. The increase in cash flow from operations is a
function of the increase in revenue experienced in 1997 (See "--Results of
Operations"). Excluding the impact of the net change in non-cash working
capital, Cineplex Odeon's cash flow from operations for the year ended
December 31, 1997 amounted to a net inflow of $1,622,000 compared to a net
inflow of $10,468,000 for the year ended December 31, 1996. This decline is
attributable to the cash costs associated with the aforementioned
disposition of certain properties which amounted to $21,648,000.
LONG-TERM DEBT. Long-term debt increased from $326,058,000 at December
31, 1996 to $333,523,000 at December 31, 1997. This increase is the result
of the capital expenditures associated with Cineplex Odeon's expansion
program. In connection with the Combination, Cineplex Odeon repaid $153.9
million of outstanding debt under its credit facility with funds provided
by Loews Cineplex from borrowings under the Bank Credit Facilities, and the
Cineplex Odeon facility was terminated.
At December 31, 1997 Cineplex Odeon had two interest rate swap
agreements outstanding. The aggregate notional principal associated with
the two swap agreements is $35,000,000 and such agreements require Cineplex
Odeon to pay a fixed interest rate and receive a floating rate. The
weighted average fixed interest rates associated with the swap agreements
are 5.73%. These agreements were terminated in connection with the
Combination. Of Cineplex Odeon's long-term debt at December 31, 1997,
approximately 79% was subject to fixed rates of interest.
FUTURE COMMITMENTS. In 1997 Cineplex Odeon opened seven new theatres
and refurbished two theatres in the United States adding a total of 87 new
screens. In Canada in 1997 Cineplex Odeon opened ten new theatres and
refurbished four theatres adding a total of 127 new screens. The total cost
associated with the construction of these theatres was approximately
$50,000,000.
CANADIAN ISSUER
Cineplex Odeon is an Ontario corporation which conducts approximately
one-third of its operations in Canada. Cineplex Odeon is subject to certain
Canadian economic, fiscal, monetary and political policies and factors.
Reference is made to Note 17 of the Notes to the Consolidated
Financial Statements of Cineplex Odeon for a reconciliation of Cineplex
Odeon's financial statements to United States generally accepted accounting
principles.
INFLATION
For the three years ended December 31, 1997, inflation did not have a
pronounced effect on Cineplex Odeon's results of operations.
<PAGE>
THE MOTION PICTURE EXHIBITION INDUSTRY
GENERAL
The motion picture exhibition industry in North America comprises over
400 exhibitors, 250 of which operate four or more screens. Based on the
listing of exhibitors in the National Association of Theatre Operators
("NATO") 1997-98 Encyclopedia of Exhibition, as of May 1, 1997, the ten
largest exhibitors (in terms of number of screens in the United States)
operated approximately 51% of the total screens, with no one exhibitor
operating more than 10% of the total of 29,731 screens.
The following table presents the ten largest exhibition companies in
North America by box office revenue, screens and theatres according to the
most recent publicly available information:
BOX
OFFICE
COMPANY REVENUES SCREENS THEATRES(3)
- -------------------- ------------- ---------- ------------
(MILLIONS)
Loews Cineplex..................... $688.2(1) 2,781(2) 450(2)
AMC Entertainment.................. 530.7 2,475 231
United Artists Theatres............ 465.6 2,154 332
Regal Cinemas(3)................... 344.0 2,306 256
Carmike Cinemas.................... 322.6 2,720 520
GC Companies....................... 298.3 1,222 182
Cinemark Cinemas................... 288.1 2,310 233
Act III Theatres(3)................ 166.4 673 122
Hoyts Cinemas Corp................. N/A 817 114
National Amusements................ N/A 1,141 125
- ---------------------------------
(1) Includes Loeks-Star Theatres and Magic Johnson Theatres. Amounts for
Loews Cineplex represent the sum of data reported for Loews Theatres
as of February 28, 1998 and Cineplex Odeon as of December 31, 1997.
This data is not intended to represent total screens, locations or box
office revenue of the Company on a pro forma basis at any time.
(2) Amount for Loews Cineplex include screens and theatres of Loeks-Star
Theatres and Magic Johnson Theatres.
(3) Data for Regal Cinemas is prior to its merger with Act III Theatres.
Act III Theatres screen and theatre information is as of December 31,
1996.
In 1997, U.S. motion picture attendance was approximately 1.4 billion,
the highest attendance level recorded by NATO during the past 38 years, and
in the same year, box office revenues exceeded $6.4 billion, an 8% increase
over 1996. The average ticket price for 1997 was $4.59, an increase of 4%
over 1996.
Exhibitors' chief sources of revenue are derived from box office sales
of theatre tickets and sale of concession products at theatres. Box office
revenues are directly related to attendance which is driven by the quality
of the movie-going experience including the comfort, cleanliness and
convenience of the location of theatres, the content and quality of film
product distributed by major motion picture and independent film studios,
the ticket price, the quality of projection and sound presentation and the
level of customer service. Concessions (generally food and beverage items)
are sold at stands located within theatres. Concession revenues are largely
dependent on attendance levels and the effectiveness of theatre staffing,
training and the type and quality of products offered.
Exhibitors' primary operating costs include film costs for licensing
rights paid to motion picture distributors, the cost of concession
products, labor, theatre rents, real estate taxes and advertising. In
recent years, film costs to the exhibition industry have increased. There
are a variety of reasons for this, including a trend toward shorter film
exhibition runs. In addition, exhibitors must spend significant amounts of
capital on investments in developing and constructing theatre facilities.
RELATIONSHIP BETWEEN MOTION PICTURE PRODUCTION AND DISTRIBUTION
AND MOTION PICTURE EXHIBITION
There is an integral relationship between the motion picture
exhibition and the motion picture production and distribution industries.
Motion picture theatres are the primary initial distribution channel for
new motion picture releases, and theatrical success of a motion picture is
often the most important factor in establishing its value in the cable
television, pay-per-view, videocassette and other ancillary markets. At the
same time, the ultimate success of an exhibitor's box office is dependent
on, among other things, the quality, quantity, availability and acceptance
by movie going patrons of the motion picture product produced by the motion
picture production companies and licensed for exhibition to the motion
picture exhibitors by distribution companies.
The motion picture production and distribution industry in North
America is led by a few major movie studios and their distribution
operations. The major studios and distributors are Columbia and TriStar
(which are both owned by Sony), Universal (approximately 84% of which is
owned by Seagram), The Walt Disney Corporation, Warner Bros. (which is
owned by Time-Warner Inc.), Paramount Pictures (which is owned by Viacom
Inc.), Twentieth Century-Fox (which is owned by NewsCorp.) and
Metro-Goldwyn-Mayer Inc. These studios account for approximately 90% of the
motion picture product exhibited in the United States, based on box office
receipts.
FILM LICENSING
In order to secure adequate product, theatrical exhibitors, such as
the Company, must engage in continuous negotiations with film distributors
for licensing rights of first run feature motion pictures. Such
negotiations are conducted on a film-by-film and theatre-by-theatre basis
and consider, among other things, the projected success of the movie, the
movie's subject content and appeal to segments of the population and the
exhibitor's presence in metropolitan areas, theatre locations and size.
Film exhibition licenses typically specify rental fees based upon a gross
receipts formula or a theatre admissions revenue-sharing formula. Under a
gross receipts formula, the distributor receives a specified percentage of
box office receipts, with the percentage generally declining over the term
of the run. Under a theatre admissions revenue-sharing formula, the
distributor receives a specified percentage of the excess of box office
receipts over a negotiated house expense.
If there are multiple exhibitors in a film zone, a distributor may
require the exhibitors in a zone to bid for a film or may allocate its
films among the exhibitors in the zone. When films are licensed under the
allocation process, a distributor will choose which exhibitor is offered a
movie and then that exhibitor will negotiate film rental terms directly
with the distributor for the film. Over the past several years,
distributors have generally used the allocation rather than the bidding
process to license their films. The Company does not currently bid for film
licenses in any of the markets in which it operates.
SEASONALITY
The release of motion pictures is often seasonal, with the release of
a disproportionate number of major motion pictures taking place during the
summer and holiday seasons. This industry-wide practice is expected to
continue and may cause significant swings in attendance levels, theatre
staffing levels and reported results for the Company from quarter to
quarter. However, recently there has been an industry trend towards movie
releases in the "off" season to attempt to mitigate the effect described
above and annual attendance levels and admissions revenues have tended to
increase moderately in the recent past.
GOVERNMENT REGULATION
In the United States, the distribution of motion pictures is in large
part regulated by federal and state antitrust laws and has been the subject
of numerous antitrust cases. The most significant of these cases is U.S. v.
Paramount Pictures Inc., et al., which was affirmed by the U.S. Supreme
Court in 1950. The consent decrees resulting from the Paramount case bind
certain major film distributors and require the films of such distributors
to be offered and licensed to exhibitors on a film-by-film and
theatre-by-theatre basis. Consequently, Loews Cineplex will not be able to
assure itself of a supply of motion pictures by entering into long-term
arrangements with major distributors, but must compete and negotiate for
its licenses on a film-by-film and theatre-by-theatre basis. See
"Business--Legal Proceedings".
The ADA and certain state statutes and local ordinances, among other
things, require that places of public accommodation, including theatres
(both existing and newly constructed), be accessible to, and that assistive
listening devices be available for use by, patrons with disabilities. The
ADA may require that certain modifications be made to existing theatres in
order to make such theatres accessible to certain theatre patrons and
employees who are disabled. The ADA requires that theatres be constructed
to permit persons with disabilities full use of theatre and its facilities
and reasonable access to work stations. Loews Cineplex has established a
program to review and evaluate its U.S. theatres and to make changes that
may be required by law. See "Business--Legal Proceedings" for information
concerning claims alleging that certain theatres in the Cineplex Odeon
circuit are not in compliance with the ADA.
Motion picture theatres are also subject to certain U.S. and Canadian
federal, state, provincial and local laws governing such matters as
construction, renovation and operation of its theatres, employee wages and
working conditions, health and sanitation regulations. Loews Cineplex
believes all of its theatres are in material compliance with such
requirements.
<PAGE>
BUSINESS
Loews Cineplex is the world's largest publicly traded theatre
exhibition company in terms of revenues and operating cash flow. On May 14,
1998, the Company completed the business combination of the Loews Theatres
exhibition business of SPE and Cineplex Odeon, another major motion picture
exhibitor with operations in the United States and Canada. On a pro forma
basis for the fiscal year ended February 28, 1998, the Company had
approximately $1.0 billion in revenues and $148.2 million in Attributable
EBITDA. Approximately 71% of such revenues was related to box office
receipts and approximately 29% was generated by concession sales and other
revenues. The Company's pro forma share of total industry box office
receipts in North America in 1997 was approximately 10.2%. See "Selected
Historical and Unaudited Pro Forma Financial Information--Historical and
Unaudited Pro Forma Combined Key Operating Statistics" for a reconciliation
of EBITDA and Attributable EBITDA.
As of May 31, 1998, Loews Cineplex owned and operated or had interests
in 2,794 screens at 450 locations, of which 2,783 screens were located in
22 U.S. states, the District of Columbia and 6 Canadian provinces. The
Company's North American exhibition screens represent approximately 8.8% of
all exhibition screens in North America. The Company's North American
theatres are concentrated in densely populated urban and suburban areas,
with a strong presence in metropolitan New York, Boston, Chicago,
Baltimore, Dallas, Houston, Detroit, Los Angeles, Seattle, Washington,
D.C., Toronto, Montreal and Vancouver. Approximately 83% of the Company's
U.S. theatres are located in 11 of the 15 largest ADIs in the United
States, and approximately 83% of the Company's Canadian theatres are
located in the top 10 ADIs in Canada. Since June 10, 1998, the Company has
also owned a 50% interest in 108 screens in 13 locations in Spain through a
joint venture with Yelmo Films, a leading local Spanish exhibitor. The
Company has also established an initial presence in both Hungary and
Turkey.
The Company holds a 50% partnership interest in each of the U.S.
Partnerships. As of May 31, 1998, the U.S. Partnerships held interests in
and operated 12 locations with a total of 149 screens. Loeks-Star Theatres'
circuit is located in the metropolitan Detroit, Michigan area. Magic
Johnson Theatres' circuit is located in densely populated urban areas with
predominantly minority populations. Unless otherwise noted, the screen and
location figures presented herein for the Company include the screens and
locations of the Company's U.S. Partnerships.
Loews Cineplex was the first commercial motion picture exhibitor in
North America, and perhaps the world, with operations beginning in 1904,
when Marcus Loew set up a "nickelodeon" in a rented room above a penny
arcade store in Cincinnati, Ohio. Loews Cineplex's theatre circuit has
grown over the years through both internal development and acquisitions.
Today, Loews Cineplex operates theatres under the Loews, Sony and Cineplex
Odeon theatres names, and the Company's partnerships and joint ventures
operate theatres under the Star, Magic Johnson and Yelmo Cineplex names.
The Company's principal stockholders include SPE, a wholly owned
subsidiary of SCA, Universal and the Claridge Group, which own 39.5%, 25.6%
(25.5% of the Company's voting Common Stock) and 7.4% (7.4% of the
Company's voting Common Stock), respectively, of the Company's capital
stock and collectively own approximately 72.5% of the Company's capital
stock (and 72.4% of its voting Common Stock). SPE, Universal and the
Claridge Group are collectively referred to herein as the "Stockholders".
The Company was incorporated under the laws of the State of Delaware
in 1986. Its principal offices are located at 711 Fifth Avenue, 11th Floor,
New York, New York 10022, and its telephone number is (212) 833-6200.
<PAGE>
KEY BUSINESS STRATEGIES
The Company's goals are:
* to be the leading theatrical exhibitor in densely populated
metropolitan centers in North America;
* to expand into selected international markets through joint
ventures, new theatre construction and acquisitions; and
* to maintain its reputation as a preferred exhibitor for
distributors and theatre-going patrons.
The Company has developed a number of successful operating and expansion
strategies designed to achieve these goals and place it at the forefront of
the industry.
OPERATING STRATEGY
The Company intends to achieve the same high levels of operating
performance and cash flow growth historically achieved by Loews Theatres by
applying its proven operating strategy to the recently acquired Cineplex
Odeon theatres and to the Company's new ventures. During the last five
fiscal years, the Company's Loews Theatres circuit consistently achieved
strong operating results, with Total EBITDA per location growing at a
compound annual growth rate of 18.3% from fiscal 1994 to fiscal 1998 and
its Total EBITDA margin improving from 16.1% to 18.0% during the same
period . The Company has achieved these results by actively managing and
improving the Loews Theatres portfolio, providing a high level of customer
service, actively controlling operating costs, closely monitoring
operations on a daily basis, and increasing efficiency through the
integration of highly flexible state-of-the-art information systems into
the Company's theatre operations. In contrast, Cineplex Odeon experienced
virtually no growth in Modified EBITDA (which, in the case of Cineplex
Odeon, is substantially comparable to Loews Theatres' Total EBITDA) per
theatre from 1993 through 1997, and its Modified EBITDA margin declined
from 13.0% in 1993 to 10.8% in 1997. The Company believes that this lack of
growth and margin decline was attributable primarily to capital constraints
and Cineplex Odeon management's need to focus on certain long-term
strategies. For the definitions of Total EBITDA, Attributable EBITDA,
Modified EBITDA and EBITDA, see "Selected Historical and Unaudited Pro
Forma Financial Information--Historical and Unaudited Pro Forma Combined
Key Operating Statistics".
The Company's management believes that there are significant
opportunities to improve the performance of the combined circuit by
adopting Loews Theatres' policies and practices throughout the combined
circuit. Key elements of the Company's operating strategy include:
PURSUE COST SAVINGS AND OPERATING EFFICIENCIES
The Company believes that it will be able to significantly improve its
revenues, operating cash flow and gross margins by improving operating
efficiencies and reducing costs following the combination of the Loews
Theatres and Cineplex Odeon theatre circuits. The Company believes it can
achieve these efficiency improvements and cost reductions by (i) applying
Loews Theatres' proven operating practices and revenue enhancement programs
throughout the Company's combined chain of theatres and (ii) eliminating
redundant overhead and taking advantage of economies of scale. Since the
consummation of the Combination, the Company has already begun to reduce
overhead costs through headcount reductions, negotiated the extension of
significant volume discounts on bulk concession items to the Cineplex Odeon
circuit and implemented other efficiencies. The Company estimates that
initial steps taken to date will result in annual cost savings and
operating efficiencies of approximately $10 million. The Company
anticipates that, over the next several years, these cost savings and
operating efficiencies will increase to approximately $25 million annually.
APPLY PROVEN OPERATING PRACTICES. Over the past five fiscal years,
Loews Theatres increased concessions revenue per patron by 31.3% from $1.63
to $2.14. This increase was attributable to expanded concession offerings
designed to provide more variety to patrons, increased prices, the
implementation of employee training and incentive programs which encourage
"upselling" and improve customer service, and more efficient design of
concession stands in the Company's new theatres. Loews Theatres' concession
margins have increased from 80.8% to 84.5% during the same period. This
improvement was due to the Company's ability to obtain favorable terms with
its vendors, benefit from volume discounts and offer a varied product mix
while maintaining attractive margins. In contrast, Cineplex Odeon increased
its concession revenue per patron by only 7.6% from $1.57 to $1.69 and its
concession margins decreased from 85.9% to 80.6% from 1994 to 1997. The
Company expects that Loews Theatres' proven operating practices will
improve Cineplex Odeon's overall concession productivity and margins.
Loews Theatres' theatre operating expenses (including concession
costs) as a percentage of revenues decreased from 78.8% to 74.4% between
fiscal 1994 and fiscal 1998. Loews Theatres has been successful in reducing
these expenses by minimizing rent through favorable real estate practices
and implementing more efficient facilities layouts in the Company's newer
theatres, as well as by cross-training its staff and adjusting staffing
levels based on "real time" information from its theatres in order to
increase staffing efficiency. Between 1993 and 1997, Cineplex Odeon's
theatre operating expenses (including concession costs) as a percentage of
revenues increased from 84.2% to 85.7%. The Company believes that by
applying Loews Theatres' proven operating practices Cineplex Odeon's cost
structure will improve as the two circuits are integrated.
REALIZE ECONOMIES OF SCALE. The Company believes that it can improve
operating margins by realizing cost savings through the elimination of
overhead redundancies and by spreading the remaining overhead costs over a
larger theatre circuit. The Company also anticipates that it will realize
additional benefits created by economies of scale such as volume purchase
discounts, application of more favorable terms with selected vendors and
service suppliers and certain revenue generating contracts on a circuitwide
basis. Additional efficiencies are expected to be realized through more
efficient film programming and scheduling, enabling the Company to exhibit
motion pictures for the maximum play time by matching optimal auditoria
size with rapidly changing audience demands.
FOCUS ON CUSTOMER SERVICE
The Company's goal is to be the industry leader in, and to provide an
unprecedented level of, customer service and convenience, positioning Loews
Cineplex as the "theatre of choice" for movie-going patrons. Loews Theatres
has developed a proven customer service program focused on increasing
patronage and generating customer loyalty by improving the overall
movie-going experience. This program includes optimizing the scheduling of
showtimes to lessen congestion at its theatres, offering more frequent
showtimes of popular films for the convenience of its patrons, guaranteeing
"next-in-line" service to improve ticket and concession sales, and scripted
greetings to promote a friendly atmosphere. The Company also provides
intensive employee training to improve service and sales techniques and
increase concession sales. By serving customers more quickly, the Company
believes that it can increase its concession revenues per patron. To
encourage increased patronage, the Company has established new concession
programs, providing a wider selection of concession items and enhanced
promotions and merchandising activities. The Company has also established a
series of box office admission discount programs, including bargain
matinees, as incentives for patronage by select groups of customers,
including senior citizens and children.
MAINTAIN STATE-OF-THE-ART INFORMATION SYSTEMS
In the last three years, Loews Theatres has streamlined its
point-of-sales system and invested in state-of-the-art computer technology
at its theatre box offices and concession stands, enabling it to increase
productivity and manage operating costs more efficiently. Touch screen
selling stations at its box offices and concession stands provide quicker
service, resulting in higher customer turnover and productivity
improvements. This system has shortened transaction processing times and
provides "real time" information to the home office regarding attendance
levels, box office receipts, concession sales and employee productivity at
each location, as well as better inventory management and control.
Immediate access to attendance levels and concession sales at each theatre
allows management to make daily adjustments to staffing levels and
inventories in order to maximize staffing efficiencies and concession
productivity. This is especially important during critical operating
periods such as weekends and holidays. The Company has also made
significant investments in technology to streamline and enhance features
within its major reporting systems. Over the past three years, the Company
has spent approximately $13.0 million on information systems technology.
The Company has begun to integrate the Cineplex Odeon theatres into the
Company's systems in order to achieve similar benefits in its revenues and
operating costs.
EXPAND ANCILLARY REVENUES
The Company is continually identifying ancillary revenue opportunities
in addition to box office and concession revenues. The Company believes
that it can be an attractive medium for advertising and joint marketing and
promotion efforts because it can provide access to mass audiences
throughout North America (approximately 145 million patrons in fiscal 1998
on a pro forma basis) with highly attractive demographics. The Company
maintains screen advertising programs circuitwide with local and national
advertisers. The Company is currently advertising Calvin Klein Jeans'
products on its serving containers for popcorn and beverages and is
exploring additional advertising and marketing programs with other world
class consumer product companies. The Company has also generated additional
revenue through the leasing of its theatres for motion picture premieres
and screenings, corporate events and private parties. Certain of the
Company's theatres, such as the Sony Lincoln Square Theatre in New York
City, have earned reputations as the "preferred" theatres for these events
given their locations in key urban markets as well as their upscale
settings.
MOTIVATE KEY EMPLOYEES
The Company adopted the Stock Incentive Plan in connection with the
Combination which is designed to link compensation of management with
stockholder return. The Company expects to expand this program by granting
additional options to key employees. The Company provides additional
incentives to its theatre staff employees through the payment of
commissions for concession productivity over certain target levels, and
through the offer of benefits such as college tuition assistance programs
designed to reduce employee turnover and increase operating efficiencies.
EXPANSION STRATEGY AND PORTFOLIO MANAGEMENT
A key component of Loews Cineplex's business strategy is to pursue a
significant expansion and upgrade of its portfolio of movie theatre
properties. The Company plans to spend an aggregate of approximately $1.0
billion in capital expenditures during the next five years to (i) develop
or acquire additional theatres in the North American and international
markets, (ii) expand the number of screens at certain existing theatres,
(iii) significantly upgrade and modernize existing theatres where
appropriate and (iv) dispose of obsolete, unprofitable and non-strategic
theatres. During the past four fiscal years, Loews Theatres has achieved an
average return on investment from new theatre construction of greater than
20% per annum (calculated on the basis of EBITDA to net investment).
UPGRADE AND EXPAND IN NORTH AMERICA
In the past four years, Loews Theatres has implemented a major theatre
reconfiguration and expansion program. This program has increased screens
per location from 5.4 at the end of fiscal year 1994 to 7.4 at the end of
fiscal year 1998. In conjunction with this expansion program, the Company
has adopted a prototype design for new theatre construction which typically
has between 12 and 24 screens depending on the location, with oversized
screens, stadium seating, rocking chair seats, state-of-the-art digital
sound systems and spacious lobbies. The prototype also provides operating
efficiency in the design, location and size of concession stands and
incorporates state-of-the-art point-of-sale technology. The Company
believes larger multiscreen theatres are more efficient to operate and
provide for greater operating margins and better asset utilization. The
greater number of screens per theatre provides effective leverage of fixed
costs and staffing levels over a larger revenue base. Multiscreen
facilities also enable Loews Cineplex to present a variety of films with
more frequent showtimes to the movie-going public, in order to maximize
attendance levels.
During the five fiscal years ended February 28, 1998, Loews Theatres
constructed and placed into service 25 new multiplex and megaplex theatres
with a total of 286 screens. During the same period, Loews Theatres also
added 52 new screens at existing theatres. The quality of the Company's
theatres and their major metropolitan locations position the Company's
theatres among the top grossing theatres in the United States. The Company
currently operates the three highest grossing theatres in the United States
for the 1998 year-to-date according to A.C. Nielsen Company/EDI: (i) the
13-screen flagship Sony Theatres Lincoln Square in New York City (home of
the first commercial 3-D IMAX(R) theatre in the United States); (ii) the
18-screen Universal City at Citywalk, a retail and entertainment complex in
Universal City, California; and (iii) the 20-screen Star Theatres in
Southfield, Michigan.
The following table indicates the number of theatre locations, screens
and changes to the Loews Theatres circuit configuration as a result of its
theatre reconfiguration program (including screens and locations relating
to Loeks-Star Theatres and Magic Johnson Theatres but excluding screens and
locations relating to Cineplex Odeon's theatres and Yelmo Cineplex de
Espana's theatres) during the fiscal years ending in 1994 through 1998:
<TABLE>
<CAPTION>
FIVE
FEBRUARY 28 OR 29, YEAR
----------------------------------------------------------
1994 1995 1996 1997 1998 TOTAL
-------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SCREENS
Beginning of year......... 944 981 1,030 950 959 944
New construction 60 54 36 44 92 286
Expansions ............. -- 15 3 22 12 52
Dispositions ........... (23) (20) (119) (57) (28) (247)
-------- ---------- ---------- ---------- --------- ---------
Year end ................. 981 1,030 950 959 1,035 1,035
======== ========== ========== ========== ========= =========
LOCATIONS
Beginning of year......... 188 182 180 154 143 188
New construction 7 5 3 4 6 25
Dispositions ........... (13) (7) (29) (15) (10) (74)
-------- ---------- ---------- ---------- --------- ---------
Year end ................. 182 180 154 143 139 139
======== ========== ========== ========== ========= =========
Average screens per 5.4 5.7 6.2 6.7 7.4
location................
</TABLE>
With the addition of the Cineplex Odeon theatre circuit as a result of
the Combination, at May 31, 1998, the Company operated theatres at 450
locations with 2,794 screens or an average of 6.2 screens per location.
These include 31 theatres comprising 105 screens in New York City, Chicago
and suburban New York that the Company has agreed to sell to Cablevision
for $92 million, including 25 theatres comprising 85 screens that the
Company is obligated to sell under an agreement reached with the DOJ and
the attorneys general of New York and Illinois in connection with the
approval of the Combination. The theatres held for disposition represent
approximately 3.6% of the Company's total screens and generated
approximately 6.8% of total box office revenue on an annual basis. The
Company also expects to close or dispose of certain overlapping theatre
locations and underperforming theatres, including older obsolete theatres.
In the aggregate, these theatres contribute only marginally to cash flow
from operations or that are operating at a loss. The Company has
preliminarily targeted a significant number of these theatres for closing.
The Company believes that a significant opportunity exists to improve
the Company's competitive position in many of its existing markets as well
as to selectively enter new markets in North America that are currently
underserved. The Company's goal in this expansion effort is to develop a
more modern portfolio of multiplex and megaplex theatre properties which
offer customers an exceptional movie-going experience. The Company
currently is targeting to open approximately 12 to 15 new theatre locations
annually, and to add new screens at certain existing locations. The Company
has enacted a program to upgrade existing theatres with stadium seating,
where appropriate. The Company also expects to close or dispose of certain
overlapping theatre locations and underperforming theatres, including older
obsolete theatres that contribute only marginally to cash flow from
operations or that are operating at a loss. The Company has preliminarily
targeted approximately 550 screens for disposition or closing over the next
five years. While in the aggregate the screens to be disposed of currently
generate significant revenues, the Company believes that the disposition or
closure of these screens will not negatively impact the Company's operating
cash flow on an ongoing basis. Closure costs related to most of these
theatre closings have been provided for as part of the "Excess Purchase
Price" in connection with the purchase accounting adjustments resulting
from the Combination. See "Unaudited Pro Forma Financial Information" and
"Properties".
EXPAND INTERNATIONALLY
According to the Baskerville Communications Corporation, the
international (i.e., non-North American) share of total worldwide box
office receipts rose from 43% in 1983 to 62% in 1996 and since 1983
international box office receipts have increased at approximately a 9%
compounded annual growth rate. The Company believes that the international
market offers significant growth opportunities to motion picture
exhibitors, particularly through the replication of the multiplexing
process underway today in the domestic arena. Much of the world is
underscreened and underserved by poor quality theatres. According to Screen
Digest, there were approximately 9,000 people per screen in the United
States in 1996, compared to an average of approximately 20,000 people per
screen in Western Europe and approximately 79,000 people per screen in
Latin America. In the United States, the average person visits a theatre
approximately five times per year, compared to 1.9 times per year in
Western Europe and only 0.6 times per year in Latin America. Marginal
increases in attendance rates and increased average ticket prices have a
dramatic impact in expanding box office receipts.
In June 1998, the Company formed its Loews Cineplex International
division to develop, construct and operate theatres outside of North
America. The Company is currently considering expansion opportunities in
selected areas throughout the world that the Company believes are
underscreened and underserved by existing operators and is currently
pursuing several opportunities in Western Europe and developed countries in
other regions. The Company has targeted selected markets in Western Europe
for its international expansion based on the favorable economy, ease of
doing business and availability of attractive partners. The Company intends
to identify local partners in targeted international markets with whom
management can pursue joint venture opportunities that capitalize on the
Company's development and operating expertise and access to capital, and
that take advantage of the local partners' established presence and
significant local expertise.
On June 10, 1998, Loews Cineplex and Yelmo Films formed Yelmo Cineplex
de Espana, a 50/50 joint venture, to develop, construct and operate movie
theatres throughout Spain. Yelmo Films, Spain's second largest film
exhibition company and leading builder of state-of-the-art multiplex
theatres, currently owns and operates 108 screens (25 of which were opened
in 1997) at 13 theatre locations in high-density population areas in
Madrid, Catalunya and Galicia. Under the terms of the agreement, Loews
Cineplex and Yelmo Films formed a 50/50 joint venture into which Yelmo
Films contributed its existing theatre assets and Loews Cineplex will
contribute cash equal to the agreed value of these assets net of debt on an
"as-needed" basis, primarily to fund the construction of new multiplexes.
The newly formed company expects to add approximately 15 new theatre
locations and approximately 175 screens to its existing assets in the next
several years. There are currently eight theatre locations, representing 70
screens, which are in various stages of development. The Spanish film
exhibition market has experienced strong growth recently with a 34%
increase in box office receipts since 1993.
The Company also operates a six-screen theatre in Hungary and a
five-screen theatre in Turkey. The Company is currently evaluating several
other specific international expansion opportunities in Western Europe,
Eastern Europe, Latin America and Asia.
PURSUE ACQUISITIONS AND JOINT VENTURES
The Company is continually seeking opportunities to acquire theatre
circuits with locations that complement the Company's existing locations
and that provide the opportunity to improve operating margins through
significant cost savings realized through economies of scale. Acquisitions
can also provide the critical mass needed to expand into new markets. The
Company targets acquisitions that can be consummated at an attractive
valuation and where there is a significant strategic fit with the Company's
existing theatre circuit.
The Company also explores joint ventures with partners that offer
complementary expertise, enabling Loews Cineplex to increase its success in
entering certain niche markets or markets where it currently does not have
a presence. The Company's partnership interest in the Loeks-Star Theatre
circuit provides the opportunity to capitalize on the local reputation and
consumer recognition of a high quality circuit, while offering the
resources and expertise of a national exhibitor. The Magic Johnson Theatres
partnership leverages the brand name recognition of one of the most
well-known and respected athletes in the world and provided Loews Theatres
with a unique vehicle through which to make the first successful entry into
underserved, minority markets. The Company's joint venture with Yelmo Films
in Spain is another example of the Company's strategy of combining its
financial resources and operating expertise with a partner's knowledge of a
local market in order to expand into a new market with the optimal
combination of key elements to facilitate a successful entry.
Although the Company regularly evaluates acquisition opportunities,
the Company has not entered into any commitment with respect to any future
material acquisition.
OPEN THEATRES IN LOCATION-BASED ENTERTAINMENT CENTERS
As consumers seek more sophisticated entertainment offerings, the
Company and its competitors have begun to construct new theatres in
location-based entertainment centers. In addition to theatres, these
centers typically have specialty retail stores, themed restaurants and
video arcades, all of which have high entertainment content. The Company
currently operates the 18-screen Universal City theatre multiplex at
Citywalk, and will operate a 15-screen theatre and a Sony IMAX(R) theatre
at Metreon, Sony's 350,000 square foot entertainment center in San
Francisco scheduled to open in mid-1999. The Company will continue to
explore these opportunities with Sony and Universal as well as other
developers of location-based entertainment centers.
THEATRE OPERATIONS
Nearly all of the Company's screens are located in multiscreen
theatres. The Company's average screens per theatre is 6.2 as of May 31,
1998, and the Company intends to increase this ratio through the
construction of larger multiplex or megaplex theatres as well as expansion
of certain existing theatres and closing of smaller obsolete theatres.
Multiplex theatres enable the Company to present a variety of films
appealing to several segments of the movie-going public while serving
patrons from common support facilities, box office, concession areas,
restrooms and lobby. This strategy enhances attendance, utilization of
theatre capacity and operating efficiencies thereby enhancing revenues and
profitability. Staggered scheduling of starting times minimizes staffing
requirements for crowd control, box office and concession services while
reducing congestion at the box office and in the concession areas.
The Company relies upon advertising and movie schedules printed in
newspapers to inform its patrons of film selections and show times. The
Company also exhibits in its theatres previews of coming attractions and
films presently playing on the Company's other screens in the same market
area.
PROPERTIES
At May 31, 1998, the Company, including Loeks-Star Theatres and Magic
Johnson Theatres, operated or had interests in 2,794 screens in 450
theatres, of which 46 theatres were owned by the Company, 398 theatres were
leased and 6 theatres were subject to management arrangements. The
Company's leases are generally entered into on a long-term basis with terms
(including options to renew) generally ranging from 20 to 40 years. Theatre
leases generally provide for the payment of a fixed annual rent and, in
some cases, a percentage of box office receipts or total theatre revenue.
The table below sets forth the locations of the Company's screens at May
31, 1998 (except in the case of Spain which is as of June 10, 1998).
<TABLE>
<CAPTION>
<S> <C> <C> <S> <C> <C>
UNITED STATES CANADA
- ---------------------------------------------------- -----------------------------------------------------
STATE SCREENS LOCATIONS(1) PROVINCE SCREENS LOCATIONS(FN1)
- ---------------- -------- ------------- ------------------------ ----------- --------------
Arizona................... 33 4 Alberta.................. 116 19
California................ 69 10 British Columbia......... 53 11
Connecticut............... 32 8 Manitoba................. 9 3
District of Columbia...... 38 12 Ontario.................. 373 62
Florida................... 7 1 Quebec................... 224 36
Georgia................... 12 1 Saskatchewan............. 27 4
Idaho..................... 21 5 ------------ -------------
Illinois (FN2)............ 364 63 Total................ 802 135
Indiana................... 54 6 ============ =============
Kentucky.................. 9 2
Maryland.................. 169 27 INTERNATIONAL
Massachusetts............. 82 12 ----------------------------------------------------
Michigan.................. 113 9 COUNTRY SCREENS LOCATIONS(1)
Minnesota................. 25 5 Spain.................... 108 13
New Hampshire............. 12 2 Hungary.................. 6 1
New Jersey................ 196 23 Turkey................... 5 1
New York(2)............... 299 59 ------------ ------------
Ohio...................... 26 4 Total................ 119 15
Pennsylvania.............. 7 1 ============ =============
Texas..................... 180 20
Utah...................... 65 12
Virginia.................. 57 9
Washington................ 111 18
---------- --------------
Total................... 1,981 313
========== ==============
<FN>
- ------------------------------
(1) Includes theatres owned, leased or managed by the Company, as well as
partnerships in which the Company has interests.
(2) The above properties include 31 theatres comprising 105 screens the
Company has agreed to sell to Cablevision for $92 million, including
25 theatres required to be divested as a result of the DOJ settlement.
See "--Legal Proceedings".
</FN>
</TABLE>
Pursuant to the agreements governing the Loeks-Star Theatres
partnership, the Company is responsible for film booking arrangements and
the facilities are managed by Loeks Michigan Theatres, Inc. under an
operating agreement. Those agreements also include certain provisions
governing the transfer of partnership interest between the partners and to
unaffiliated third parties.
COMPETITION
The North American motion picture exhibition industry is generally
fragmented, with ten large companies owning or operating a majority of
screens. In most of its respective markets, the Company is in direct
competition for film exhibition licensing rights and theatre locations with
both large and small exhibition companies. See "Risk Factors--Competition"
and "The Motion Picture Exhibition Industry".
ENVIRONMENTAL MATTERS
The Company owns, manages and/or operates theatres and other
properties that are subject to certain U.S. and Canadian federal, state and
local laws and regulations relating to environmental protection and human
health and safety, including those governing the investigation and
remediation of contamination resulting from past or present releases of
hazardous substances. Certain of these laws and regulations may impose
joint and several liability on certain statutory classes of persons for the
costs of investigation or remediation of such contamination, regardless of
fault or the legality of the original disposal. These persons include the
present or former owner or operator of a contaminated property, and
companies that generated, disposed of or arranged for the disposal of
hazardous substances found at the property.
Two of the Company's leased drive-in motion picture theatres in the
State of Illinois are located on properties on which certain third parties
disposed of substantial quantities of auto shredder residue and other
debris. One of these theatres is currently the subject of a claim filed by
the Attorney General of the State of Illinois and an investigation by the
Illinois Environmental Protection Agency in connection with the past
disposal of auto shredder residue and other debris which appear to contain
hazardous materials. See "--Legal Proceedings".
LEGAL PROCEEDINGS
From time to time, the Company is involved in routine litigation and
legal proceeding in the ordinary course of its business, such as personal
injury claims, employment matters and contractual disputes. Except for
those instances noted below, the Company does not have any litigation or
proceedings that management believes will have a material adverse effect,
either individually or in the aggregate, upon the Company.
DOJ PROCEEDINGS
On April 16, 1998, a Complaint was filed in the Southern District of
New York by the United States of America, the State of New York, by and
through its Attorney General, Dennis C. Vacco, and the State of Illinois,
by and through its Attorney General, Jim Ryan vs. SCA, LTM Holdings, Inc.
d/b/a/ Loews Theatres, Cineplex Odeon and Seagram Co. Ltd., alleging
federal antitrust violations in New York and Illinois stemming from the
Combination. That same day the parties entered into, and the Southern
District of New York so ordered, a Stipulation & Order setting forth a
proposed Final Judgment resolving the matter. Under the terms of the
agreement, which is subject to court approval following the public comment
period, the Company is required to divest itself of certain theatres in New
York and Chicago. The Company has agreed to sell these theatres, as well as
seven additional theatres in suburban New York to Cablevision for $92
million. These theatres represented approximately 3.6% of total screens and
generated approximately 6.8% of total box office revenue on an annual
basis.
The Company owns, manages and/or operates theaters and other
properties that are subject to certain U.S. and Canadian federal, state and
local laws and regulations relating to environmental protection and human
health and safety, including those governing the investigation and
remediation of contamination resulting from past or present releases of
hazardous substances. Certain of these laws and regulations may impose
joint and several liability on certain statutory classes of persons for the
costs of investigation or remediation of such contamination, regardless of
fault or the legality of the original disposal. These persons include the
present or former owner or operator of a contaminated property, and
companies that generated, disposed of or arranged for the disposal of
hazardous substances found at the property.
Two of the Company's leased drive-in motion picture theaters in the
State of Illinois are located on properties on which certain third parties
disposed of substantial quantities of auto shredder residue and other
debris. Such materials may contain hazardous substances. With respect to
one of these sites, located in Cicero, Illinois, the Company has been named
as one of two defendants in a lawsuit commenced in August 1998 by the
Illinois Attorney General's Office at the request of the Illinois
Environmental Protection Agency. The action was brought pursuant to the
Illinois Environmental Protection Act and alleges, among other things, that
the Company caused or allowed the disposal of certain wastes bearing
hazardous substances on the theater property. The action seeks civil
penalties and various forms of equitable relief, including the removal of
all wastes allegedly present at the property, soil and groundwater testing
and remediation, if necessary. The Company's range of liability with
respect to this action cannot be precisely estimated at this time due to
several unknown factors, including the scope of contamination at the
theater property, the allocation of such liability, if any, to other
responsible parties, and the ability of such parties to satisfy their share
of such liability. The Company has accrued an amount that it believes
represents the minimum amount of the Company's potential liability relating
to the action. The Company will continue to evaluate future information and
developments with respect to conditions at the theater property and will
periodically reassess any liability and adjust its accrual accordingly.
Based on the foregoing, there can be no assurance that the Company's
liability in connection with this action will not be material.
SIX WEST RETAIL ACQUISITION, INC.
On July 24, 1997, Six West Retail Acquisition, Inc., a real estate
development company ("SWRA"), initiated a lawsuit against the Company and
certain of its affiliates in the U.S. District Court for the Southern
District of New York, seeking injunctive relief and unspecified monetary
damages and alleging, among other things, the Company has violated federal
antitrust laws by engaging in block booking agreements and monopolizing the
motion picture exhibition market in New York City. SWRA owns or leases the
Paris and New York Twin theatres in Manhattan. The Paris Theatre was
managed by an operating subsidiary of the Company under an oral management
agreement that has been terminated. The New York Twin Theatre is managed by
an operating subsidiary of the Company under a written management
agreement. SWRA is also alleging that the Company violated its contractual
and fiduciary responsibilities in managing the two theatres. On December 3,
1997, an amended complaint was filed asserting similar claims with respect
to the Festival Theatre which was operated by a subsidiary of the Company
until it was closed in 1994. All of the defendants moved to dismiss the
amended complaint by motion dated January 8, 1998. No decision on the
motion to dismiss has been rendered by the court as of the date of this
Offering Circular. The parties have commenced document production and
discovery proceedings. The Company believes that SWRA's claims are without
merit, and the Company intends to oppose SWRA's claims vigorously.
ADA LITIGATION
On or about December 17, 1997, the Disability Rights Council of
Greater Washington and others commenced a lawsuit in the U.S. District
Court for the District of Columbia against Cineplex Odeon and Plitt. The
complaint alleges that certain Cineplex Odeon theatres in the Washington,
DC metropolitan area (including Maryland and Virginia) deny persons with
physical disabilities full and equal enjoyment of such theatres as a result
of architectural and structural barriers. The complaint alleges that, as a
consequence, Cineplex Odeon and Plitt are discriminating against such
persons in violation of the ADA and, where applicable, the District of
Columbia Human Rights Act. The plaintiffs are seeking a judgment with
injunctive relief ordering Cineplex Odeon and Plitt to cease violating, and
to bring their facilities into compliance with, such statutes. The
plaintiffs are also seeking compensatory and punitive or exemplary damages
in an unknown amount, as well as costs and attorneys' fees. The Company
intends to defend this claim vigorously.
The DOJ, in coordination with the New York City Commission on Human
Rights, is currently investigating Cineplex Odeon theatres in New York City
for compliance with the ADA and the New York City Human Rights Law,
including the 13 theatres in Manhattan that the Company intends to sell in
order to comply with the agreement with the DOJ and the Attorney General of
New York. On May 8, 1998, the DOJ informed Cineplex Odeon that it intended
to accelerate the schedule of site visits in light of the impending sale of
these theatres. In addition, the DOJ has alleged that its investigation to
date has identified numerous violations of the ADA. The Company has and
will continue to vigorously oppose the allegations and claims of the DOJ
with respect to the compliance of these theatres under the ADA.
Nevertheless, the pending investigation and related allegations may
adversely affect the price received by the Company in connection with the
sale of these theatres.
EMPLOYEES
As of May 15, 1998, the Company employed approximately 12,442
employees, including 2,772 full-time and 9,670 part-time employees. The
Company's employment levels are generally directly related to seasonal
changes in business activity. The Company is a party to collective
bargaining agreements with 33 unions, of which approximately 1,220
employees are members. The Company believes that its employee relations are
generally good.
Certain of the Company's labor contracts with the I.A.T.S.E. for
projectionists in Chicago expired in February of 1998. On April 27, 1998
the projectionists were locked-out by the Company, but the theatres
continue to operate despite the lockout. The Company believes that it is
premature to assess the outcome of these negotiations at this time.
I.A.T.S.E. Local 523 has been locked out of a Company theatre in
Quebec City since April 16, 1997, as a result of a dispute over the hours
to be worked by, and wages for, projectionists, but the theatre continues
to operate despite the lockout.
The Company is currently in negotiations with a union in Seattle,
Washington, where there is a possibility of a labor dispute. However,
management is confident that the Company's theatres will continue to
operate there in the event of a strike or lockout.
Additionally, the Company is in negotiations with two unions in the
greater New York area. It is premature to assess the outcome of such
negotiations. However, the Company does not expect any disruption in
operations during such negotiations.
The Company is not currently in discussions with union members in Utah
and Idaho. The current contract has expired, and the local has been
decertified in Utah. Negotiations are likely to begin in the next several
months in Idaho and will resume in Utah if the local is recertified.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following persons are the current directors and executive officers
of the Company. Certain information relating to the directors and executive
officers, which has been furnished to the Company by the individuals named,
is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- ---- -----------------------------------------------------
<S> <C> <C>
Lawrence J. Ruisi................. 50 President, Chief Executive Officer and Director
Allen Karp........................ 58 Chairman, Chief Executive Officer of Cineplex
Odeon Canada and Director
Travis Reid....................... 43 President, Loews Cineplex United States
J. Edward Shugrue................. 48 President, Loews Cineplex International
John J. Walker.................... 45 Senior Vice President, Chief Financial Officer
and Treasurer
John C. McBride, Jr. ............. 42 Senior Vice President and General Counsel
Seymour Smith..................... 78 Senior Vice President and Deputy General Counsel
Mindy Tucker...................... 38 Corporate Vice President of Strategic Planning
and Secretary
Joseph Sparacio................... 38 Vice President, Finance and Controller
George A. Cohon................... 61 Director
Marinus N. Henny.................. 47 Director
Ernest Leo Kolber................. 69 Director
Kenneth Lemberger................. 51 Director
Ron Meyer......................... 53 Director
Brian C. Mulligan................. 38 Director
Yuki Nozoe........................ 47 Director
Karen Randall..................... 45 Director
Stanley Steinberg................. 64 Director
Howard Stringer................... 55 Director
Robert J. Wynne................... 55 Director
Mortimer B. Zuckerman............. 60 Director
</TABLE>
Lawrence J. Ruisi--Since May 1998, Mr. Ruisi has served as President
and Chief Executive Officer of Loews Cineplex and a director of Loews
Cineplex. From September 1994 until May 1998, Mr. Ruisi was President of
Sony Retail Entertainment ("SRE"), and from 1990 through May 1998, Mr.
Ruisi served as Executive Vice President of SPE. In such capacities, Mr.
Ruisi was responsible for oversight of SPE's theatrical exhibition group,
including the Loews Theatres, Star Theatres of Michigan and Magic Johnson
Theatres circuits.
Allen Karp--Mr. Karp has been Chairman and Chief Executive Officer of
Cineplex Odeon Canada and a director of Loews Cineplex since May 1998. From
December 1989 until May 1998, Mr. Karp served as President and Chief
Executive Officer of Cineplex Odeon.
Travis Reid--Since May 1998, Mr. Reid has served as President, U.S.
Operations of Loews Cineplex. From October 1996 to May 1998, Mr. Reid had
served as President of Loews Theatres and, for the preceding year, served
as Executive Vice President-Film Buying of Loews Theatres. As Executive
Vice President of Loews Theatres, Mr. Reid was involved in all aspects of
the circuit's strategic planning, corporate development and expansion. For
the three years prior to 1995, Mr. Reid served as Senior Vice President of
Film. Prior to joining Loews Theatres in 1991, Mr. Reid served as Vice
President of Film for General Cinema's Midwestern, Southwestern and Western
regions.
J. Edward Shugrue--Since June 1998, Mr. Shugrue has served as
President, Loews Cineplex International. From 1996 until 1998, Mr. Shugrue
served as a senior corporate executive of SPE's Corporate Development
Group, where he was responsible for identifying and developing growth
opportunities for SPE in international markets. From 1987 to 1996, Mr.
Shugrue served as president of Columbia TriStar Film Distributors
International, the international theatrical arm of SPE.
John J. Walker--Since 1998, Mr. Walker has served as Senior Vice
President, Chief Financial Officer and Treasurer of Loews Cineplex. From
1990 until 1998, Mr. Walker served as Executive Vice President and Chief
Financial Officer of Loews Theatres. From 1988 to 1990, Mr. Walker has
served as Vice President-Controller of Loews Theatres. Mr. Walker is
responsible for overseeing all aspects of financial reporting, budgeting,
internal auditing, management information systems, treasury and risk
management and insurance. Mr. Walker is a certified public accountant and
is a member of the American Institute of Certified Public Accountants and
the New York State Society of Certified Public Accountants.
John C. McBride, Jr.--Since January 1998, Mr. McBride has been
employed by Loews Theatres and since May 1998, Mr. McBride has served as
Senior Vice President and General Counsel of Loews Cineplex. From 1996 to
1998, Mr. McBride served as Senior Vice President, Legal Affairs of SPE.
From 1992 to 1996, Mr. McBride served as Vice President, Legal Affairs of
SPE. From 1990 to 1992, Mr. McBride served as Assistant General Counsel of
SPE.
Seymour Smith--Effective May 1998, Mr. Smith became Senior Vice
President and Deputy General Counsel of the Company. From 1993 to May 1998,
Mr. Smith served as Executive Vice President and General Counsel of Loews
Theatres. Until 1997, Mr. Smith served as a director of Loews Theatres.
Mindy Tucker--Since May 1998, Ms. Tucker has served as Corporate Vice
President of Strategic Planning and Secretary of Loews Cineplex. From 1996
to 1998, Ms. Tucker served as Senior Vice President of Development and
Planning for SRE. From 1994 to 1996, Ms. Tucker served as Vice President of
Business Development for SRE. From 1992 to 1994, Ms. Tucker served as Vice
President of Corporate Strategy and Planning of SPE.
Joseph Sparacio--Since May 1998, Mr. Sparacio has served as Vice
President, Finance and Controller of Loews Cineplex. From 1990 to May 1998,
Mr. Sparacio served as Vice President of Finance and Controller of Loews
Theatres. Prior to joining Loews Theatres, Mr. Sparacio spent eight years
with the New York City office of the independent accounting firm of Ernst &
Young where he was a Senior Manager of Audit. Mr. Sparacio is a certified
public accountant and is a member of the American Institute of Certified
Public Accountants and the New York State Society of Certified Public
Accountants.
George A. Cohon--Since 1992, Mr. Cohon has served as Senior Chairman
of the Executive Committee of McDonald's Restaurants of Canada Limited and
Senior Chairman of McDonald's in Russia. Mr. Cohon also serves as a
director of The Royal Bank of Canada and Astral Communications Inc.
Additionally, Mr. Cohon is an officer of the Order of Canada.
Marinus N. Henny--Since April 1997, Mr. Henny has been Executive Vice
President and Chief Financial Officer of SCA. From December 1993 to April
1997, Mr. Henny was Executive Vice President of SCA.
The Honorable Ernest Leo Kolber--Senator Kolber was appointed Chairman
of the Board of Cineplex Odeon in December 1989. He has been a Member of
the Senate of Canada since December 1983. From October 1987 to September
1993, Senator Kolber was Chairman of Claridge Inc. Senator Kolber is a
director of The Seagram Company Ltd. Senator Kolber has been a director of
Loews Cineplex since May 1998.
Kenneth Lemberger--Since January 1997, Mr. Lemberger has been
President of Columbia TriStar Motion Picture Group. From 1994 to January
1997, Mr. Lemberger was Corporate Executive Vice President of SPE.
Ron Meyer--Mr. Meyer has been President and Chief Operating Officer of
Universal since August 1, 1995. Prior to August 1995, Mr. Meyer served as
President of Creative Artists Agency, Inc., a talent agency that he
co-founded in 1975.
Brian C. Mulligan--Mr. Mulligan has been Senior Vice President,
Corporate Development and Strategic Planning, of Universal since January
1997. From late 1995 to January 1997, Mr. Mulligan served as Vice President
of Corporate Development of Universal and he served as Vice President and
Controller of Universal from 1991 to early 1995.
Yuki Nozoe--Since October 1996, Mr. Nozoe has been Executive Vice
President of SPE. From February 1996 to October 1996, Mr. Nozoe was
Executive Vice President of SCA. From 1993 to February 1996, Mr. Nozoe was
Senior Vice President of Marketing for Sony Electronics, Inc.
Karen Randall--Since February 1996, Ms. Randall has been Senior Vice
President and General Counsel of Universal. From 1991 to February 1996, Ms.
Randall was Managing Partner of the Los Angeles office of Katten Muchin &
Zavis.
Stanley "Mickey" Steinberg--Since May 1998, Mr. Steinberg has been a
consultant to Sony Development. From August 1994 to May 1998, Mr. Steinberg
served as Chairman of SRE and, in that capacity, has had overall
responsibility for developing and operating retail concepts, food venues
and large retail entertainment centers in the United States and abroad, as
well as Loews Cineplex locations, Sony Plaza and Sony Wonder interactive
museum. Prior to joining SRE, Mr. Steinberg was Executive Vice President
and Chief Operating Officer of Walt Disney Imagineering since 1989.
Howard Stringer--Since May 1998, Mr. Stringer has served as Chairman
of SPE. Mr. Stringer has served as President of SCA and as a member of the
Boards of Directors of SCA, SPE, Sony Electronics, Inc. and Sony Music
Entertainment, Inc. since May, 1997. From February 1995 to April 1997, Mr.
Stringer was Chairman and CEO of TELE-TV, a company formed by Bell
Atlantic, Nynex and Pacific Telesis. Prior to that time, Mr. Stringer was
President of the CBS Broadcast Group since 1988.
Robert J. Wynne--Since May 1998, Mr. Wynne has served as Co-President
and Chief Operating Officer of SPE. From November 1997 to May 1998, Mr.
Wynne has been Co-President and Chief of Corporate Operations of SPE, and,
since January 1997, Senior Executive Vice President. He joined SPE in
November 1995 as Corporate Executive Vice President. Prior to that, Mr.
Wynne was a founding partner of the law firm Hill, Wynne, Troop and
Meisinger, where he served as primary outside counsel to SPE on major
corporate, financing and strategic transactions since the late 1970's.
Mortimer B. Zuckerman--For more than the past five years, Mr.
Zuckerman has served as Chairman of Boston Properties, Inc. Mr. Zuckerman
is also Chairman and Editor-in-Chief of U.S. News and World Report,
Chairman of The Atlantic Monthly, Chairman and Co-Publisher of the New York
Daily News, Chairman of Fast Company and Chairman of Applied Graphics
Technologies.
Subject to the provisions of the Stockholders Agreement described
elsewhere in this Prospectus, all directors hold office until the annual
meeting of stockholders following their election or until their successors
are duly elected and qualified. Officers are appointed by the Board of
Directors and serve at the discretion thereof, subject to certain
provisions of the Stockholders Agreement concerning the appointment of
executive officers. See "The Stockholders Agreement".
EXECUTIVE COMPENSATION
The table set forth below contains information concerning compensation
for services in all capacities to Loews Cineplex of those persons who (i)
served as the chief executive officer of Loews Cineplex and (ii) were the
other four most highly compensated executive officers of Loews Cineplex
(determined as of the end of the last fiscal year and hereafter referred to
as the "Named Executive Officers") for the two fiscal years ended February
28, 1998 and February 28, 1997, respectively.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
--------------------------------------------------- COMPENSATION ON
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------- ------- ------------- ---------------- --------------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi. 1998 $ 728,875(1) $ 500,000(1) $ 1,796,933(1)(2) 900,000 $ 56,313(6)
Chief Executive 1997 $ 683,974(1) $ 608,802(1) $ 655,200(1)(3) 16,183(7)
Officer
Barrie
Lawson-Loeks(4). 1998 $ 534,070 $ 250,000 $ 69,360(5) $761,158(6)
Co-Chairman 1997 $ 522,492 $ 275,000 $ 50,000(5) 16,914(7)
Jim Loeks(4)...... 1998 $ 534,070 $ 250,000 $ 62,160(5) $761,076(6)
Co-Chairman 1997 $ 522,492 $ 275,000 $ 50,000(5) 16,430(7)
Travis E. Reid.... 1998 $ 393,026 $ 225,000 250,000 $ 12,116(6)
President 1997 $ 363,903 $ 175,000 10,320(7)
Seymour Smith .... 1998 $ 382,040 $ 60,000 50,000 $ 9,834(6)
Senior Vice 1997 $ 382,061 $ 60,000 7,732(7)
President,
Deputy General
Counsel and
Assistant
Secretary
- ----------------------------------
<FN>
(1) Represents amounts paid to Mr. Ruisi as President of SRE. In this
capacity, Mr. Ruisi had other responsibilities in addition to the
oversight and direction of the Sony theatrical exhibition group.
(2) Represents amounts paid to Mr. Ruisi in connection with the
termination of his employment agreement with SRE in satisfaction of
certain outstanding incentive award obligations under the agreement.
(3) Represents amounts paid to Mr. Ruisi by SRE pursuant to its long-term
incentive plan.
(4) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
(5) Includes (i) for fiscal 1998, $50,000 for each of Ms. Lawson-Loeks and
Mr. Loeks attributable to forgiveness by an affiliate of SPE of a
portion of relocation indebtedness owed to such affiliate of SPE
incurred in 1992, and $19,360 and $12,160 paid to Ms. Lawson-Loeks and
Mr. Loeks, respectively, as car allowances and (ii) for fiscal 1997,
$50,000 for each of Ms. Lawson-Loeks and Mr. Loeks attributable to
forgiveness by an affiliate of SPE of a portion of relocation
indebtedness owed to such affiliate of SPE incurred in 1992.
(6) Represents $10,400, $56,313, $10,400, $11,546 and $9,834 contributed
by the Company to the Company's savings plan for Ms. Lawson-Loeks and
Messrs. Ruisi, Loeks, Reid and Smith, respectively; premiums paid by
the Company for term-life insurance in the amounts of $758, $676 and
$570 for Ms. Lawson-Loeks and Messrs. Loeks and Reid, respectively;
and $750,000 paid to each of Ms. Lawson-Loeks and Mr. Loeks as
separation payments.
(7) Represents $16,183, $16,183, $15,754, $9,750 and $7,732 contributed by
the Company to the Company's savings plan for Ms. Lawson-Loeks,
Messrs. Ruisi, Loeks, Reid and Smith, respectively, premiums paid by
the Company for term life insurance in the amounts of $731, $676 and
$570 for Ms. Lawson-Loeks and Messrs. Loeks and Reid.
</FN>
</TABLE>
STOCK OPTIONS
The table below sets forth information with respect to grants of
options to purchase Common Stock during the year ended February 28, 1998 to
the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------------- -----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE/BASE EXPIRATION GRANT DATE
NAME GRANTED (1) FISCAL YEAR(2) PRICE ($/SHARE) DATE PRESENT VALUE(3)
- ------------------- ---------- -------------- --------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Lawrence J. Ruisi.. 900,000 42.0% $ 13.125 12/16/07 $ 3,924,000
Barrie -- -- -- -- --
Lawson-Loeks(4)....
Jim Loeks(4)....... -- -- -- -- --
Travis Reid........ 250,000 11.7% $ 13.125 12/16/07 $ 1,090,000
Seymour Smith...... 50,000 2.3% $ 13.125 12/16/07 $ 218,000
- -----------------
<FN>
(1) All options, other than those held by Mr. Ruisi, become exercisable
with respect to twenty percent of the aggregate number of shares of
Common Stock covered by such options on each of the first, second,
third, fourth and fifth anniversaries of the closing of the
Combination, but in any event will be fully vested and exercisable as
of the fifth anniversary of the date of grant. With respect to the
options held by Mr. Ruisi, options to purchase 500,000 shares of
Common Stock became exercisable upon grant and the remaining options
will become exercisable in respect of 100,000 shares covered thereby
on the first through fourth anniversaries of the closing of the
Combination. Upon a change of control of the Company, all options
outstanding on the date of such change of control will become
immediately and fully exercisable.
(2) Percentages shown are based on a total of 2,145,000 options granted to
employees of the Company during the fiscal year ended February 28,
1998.
(3) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of
the Commission and are not intended to predict future prices of the
Company's common stock. The values assigned to each reported option on
this table are computed using the Black-Scholes option pricing model.
The calculations assume a risk-free rate of return of 5.77%, which
represents the ten-year yield of United States Treasury Notes on the
date of grant and an expected volatility of 23.46%; however, there can
be no assurance as to the actual volatility of the Company's common
stock in the future. The calculations also assume no dividend payout
and a five year expected life.
(4) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
</FN>
</TABLE>
AGGREGATED EXERCISES AND YEAR-END HOLDINGS
The following table sets forth as of February 28, 1998, for each of
the Named Executive Officers (i) the total number of options for Common
Stock (exercisable and unexercisable) held and (ii) the value of such
options that were in-the-money at February 28, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE FEBRUARY 28, 1998(#)(1) AT FEBRUARY 28, 1998($)(3)
EXERCISE REALIZED --------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi...... -- -- 500,000 400,000 1,562,500 1,250,000
Barrie Lawson-Loeks(2). -- -- -- -- -- --
Jim Loeks(2)........... -- -- -- -- -- --
Travis Reid............ -- -- -- 250,000 -- 781,200
Seymour Smith.......... -- -- -- 50,000 -- 156,250
- -----------------------------
<FN>
(1) The number of securities underlying the options give effect to the
Combination.
(2) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
(3) Based on the difference between (i) ten times the per share closing
price of the Common Stock of Cineplex Odeon as reported on the NYSE
Composite Tape on February 28, 1998 and (ii) the exercise price of the
options on such date.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
Loews Cineplex and Mr. Ruisi entered into an employment agreement (the
"Agreement") that became effective as of the consummation of the
Combination and provides for an employment term of five years (the
"Employment Period"). During the Employment Period Mr. Ruisi will serve as
President and Chief Executive Officer of Loews Cineplex and be a member of
Loews Cineplex's Board of Directors and of its principal Canadian
subsidiary's Board of Directors and of any Executive or similar committee.
During the Employment Period Mr. Ruisi will be paid a base salary of
$750,000 each year and will be eligible to participate in all
then-operative employee benefit plans of Loews Cineplex which are
applicable generally to Loews Cineplex's senior executives. In addition,
Mr. Ruisi will be eligible to receive an annual bonus (the "Annual Bonus")
which shall be targeted at $500,000 plus a specified cost of living
adjustment and in any event will be not less than $250,000 plus the
specified cost of living adjustment (the "Minimum Annual Bonus"). In
addition to the initial grant of options to purchase 900,000 shares of
Loews Cineplex common stock pursuant to the Loews Cineplex stock option
plan at an exercise price of $13.125 (the "Initial Options"), Mr. Ruisi
will be granted not less than an additional 100,000 options on each day
immediately preceding the second, third and fourth anniversaries of the
date of the consummation of the Combination (the "Additional Options").
If Mr. Ruisi's employment terminates upon the expiration of his
agreement, or sooner by reason of death or disability, for "cause" (as
defined in Mr. Ruisi's agreement) by Loews Cineplex or by Mr. Ruisi other
than by reason of Loews Cineplex's material breach of the Agreement, Loews
Cineplex is obligated to pay him all accrued but unpaid salary and benefits
and a pro rata portion of the Minimum Annual Bonus for the year of
termination. If Loews Cineplex terminates Mr. Ruisi's employment without
cause prior to the expiration of the Agreement, which it will be deemed to
do if it materially reduces Mr. Ruisi's duties or responsibilities or
otherwise materially breaches the Agreement, it is obligated to provide, in
addition to the amounts described in the preceding sentence, his base
salary, employee benefits (excluding car allowance or leasing benefits) and
the Minimum Annual Bonus that would have been payable during the balance of
the Employment Period (or with respect to certain benefits which are not
quantifiable such as health benefits, to continue such benefits for the
balance of the Employment Period), and Mr. Ruisi would have no obligation
to mitigate the amount payable by the Company by seeking subsequent
employment or otherwise. In addition, in the event of such a termination,
the Initial Options and Additional Options awarded prior to the date of
such termination shall vest immediately and continue to be exercisable in
accordance with Loews Cineplex stock option plan for a period of not longer
than twelve months from the date of such termination. Except in the event
Mr. Ruisi's employment is terminated by Loews Cineplex for cause, for a
period of three months following termination, Mr. Ruisi will be entitled,
without cost, to the exclusive use of an office, as well as access to
secretarial, receptionist and telephone services.
Effective as of the consummation of the Combination, Allen Karp became
a director of the Company and Chairman and Chief Executive Officer of
Cineplex Odeon Canada. Allen Karp entered into an employment agreement with
Cineplex Odeon dated July 4, 1996, which was amended on November 28, 1997
in anticipation of the Combination and which was assumed by the Company as
part of the Combination. The agreement, as amended, provides for (i) an
annual employment term ending on the third anniversary of the Combination,
(ii) a minimum annual base salary of $550,000, (iii) certain employee
benefits, (iv) a guaranteed minimum annual bonus of $155,000 (the "Minimum
Bonus"), (v) a special one-time cash bonus of $1,000,000 and (vi) an option
to purchase 100,000 shares of the Company's common stock. Mr. Karp's
employment agreement provides that Cineplex Odeon may provide written
notice of non-renewal at any time during the first six months of the last
year of the agreement. If Cineplex Odeon provides such notice, Mr. Karp is
entitled to a termination payment upon the expiration of the agreement in
an amount equal to two times the average of the sum of his annual base
salary plus Minimum Bonus paid and any annual bonus paid or payable in
excess of his Minimum Bonus in respect of the three preceding calendar
years minus the base salary and Minimum Bonus paid to him from the date of
such notice to the expiration of the agreement, together with any
compensation previously deferred and not yet paid.
Mr. Karp's employment agreement also provides that Cineplex Odeon may
provide written notice of non-renewal on a date which is on or before one
year prior to the expiration of the agreement. In such event, Cineplex
Odeon may also elect to terminate Mr. Karp's employment as of the date
which is one year prior to the expiration of the agreement. If Cineplex
Odeon gives such notice of non-renewal but does not terminate Mr. Karp's
employment effective one year prior to the expiry of his agreement, he is
entitled to a termination payment upon the expiration of the agreement in
an amount equal to his then annual base salary plus the Minimum Bonus,
together with any compensation previously deferred and not yet paid by
Cineplex Odeon. If Cineplex Odeon provides such notice and elects to
terminate his employment as of the date which is one year prior to the
expiration of the agreement, Mr. Karp is entitled to a termination payment
in an amount equal to two times the average of the sum of his annual base
salary plus Minimum Bonus paid and any annual bonus paid or payable in
excess of his Minimum Bonus in respect of the three preceding calendar
years, together with any compensation previously deferred and not yet paid.
In addition, if Cineplex Odeon provides written notice of non-renewal,
then, in certain circumstances, Mr. Karp may opt to terminate his
employment on 90 days' notice, in which case he will be entitled to a
termination payment equal to the base salary plus Minimum Bonus which would
have been paid to him from the date of termination of his employment to the
expiry of his agreement, together with any compensation previously deferred
and not yet paid.
If Mr. Karp's employment agreement is terminated as a result of a
material breach by Cineplex Odeon, he is entitled to a payment equal to the
greater of (i) his most recent annual bonus to the extent it exceeds his
Minimum Bonus and his Minimum Bonus plus the base salary then being paid
which would have otherwise been paid from the date of termination of
employment to the expiration date of the agreement, and (ii) two times the
sum of the annual base salary and Minimum Bonus then being paid plus his
most recent annual bonus paid to the extent it exceeds his Minimum Bonus.
In addition, Mr. Karp will be entitled to any compensation previously
deferred and not yet paid by Cineplex Odeon. If, however, the Aggregate
Compensation (as hereinafter defined) which would have been paid to him
from the date of termination of employment to the expiration date of the
agreement plus an amount equal to one times the Aggregate Compensation is
greater than the aforesaid amount, then that is the termination payment to
which he is entitled.
Mr. Karp has the right to terminate his employment at any time until
the first anniversary of the Combination in which event he will be entitled
to a termination payment equal to the greater of (i) the amount described
in the preceding paragraph, or (ii) an amount equal to the greater of (A)
the Minimum Bonus and base salary that would have otherwise been paid from
the date of termination of employment to the expiration date of the
agreement, plus any previously deferred but unpaid amounts, or (B) an
amount equal to two times the sum of his base salary and Minimum Bonus and
the most recent annual bonus paid to the extent it exceeds his Minimum
Bonus in the one year period prior to the Combination (the "Pre-Combination
Compensation"), plus, to the extent not theretofore paid, the
Pre-Combination Compensation for a period of six months or, if greater, the
period from the consummation of the Combination to the date of termination
of employment, plus any previously deferred but unpaid amounts. For the
purpose of making all of the calculations described in this paragraph, Mr.
Karp's employment will be deemed to have terminated effective as of the
consummation of the Combination. In addition, the bonus paid to Mr. Karp in
the one year period prior to the Combination is deemed to equal his Minimum
Bonus. The approximate amount that would be payable to Mr. Karp if he
terminated his employment prior to the first anniversary of the Combination
is $2.8 million, plus any previously deferred but unpaid amounts.
In addition, Cineplex Odeon may terminate Mr. Karp's employment on not
less than six months' notice or payment of six months' base salary plus
Minimum Bonus in lieu of notice at any time during the term of the
agreement. If Cineplex Odeon provides such notice, Mr. Karp is entitled to
a termination payment in an amount equal to the average of his annual base
salary plus Minimum Bonus and any bonus paid or payable to the extent it
exceeds his Minimum Bonus in respect of the three preceding calendar years
(the "Aggregate Compensation") which would have otherwise been paid to him
from the date of termination of his employment to the expiration date of
the agreement plus an amount equal to one times the Aggregate Compensation,
as well as any compensation previously deferred and not yet paid by
Cineplex Odeon. If, however, Cineplex Odeon terminates Mr. Karp's
employment on not less than six months notice within the year following the
Combination, the termination payment he would be entitled to would not be
less than the payment described in the preceding paragraph.
Subject to any required regulatory approvals, if Cineplex Odeon
terminates the employment of Mr. Karp for any reason, or if Mr. Karp
terminates his employment due to a material breach by Cineplex Odeon or
within one year following the Combination, all stock options previously
granted to him and not then vested shall immediately vest and he shall
remain entitled to exercise any vested and unexercised stock options
previously granted to him at any time until the expiration of the full term
of the exercise period of each such options.
Travis Reid entered into an amendment to his employment contract with
Loews Cineplex, effective May 1, 1998, which has a term of three years with
a two year option of the Company to renew. Mr. Reid's employment agreement
provides for an annual base salary, which is currently $400,000, and an
annual bonus in an amount determined by Loews Cineplex. Mr. Reid is
guaranteed a minimum aggregate bonus of $400,000 over the four year term of
his employment agreement. Mr. Reid was also granted a non-qualified stock
option with respect to 250,000 shares of Common Stock.
J. Edward Shugrue entered into an employment agreement with Loews
Cineplex dated December 15, 1997, to serve as President-International
Operations for a term of four years and an option by Loews Cineplex to
extend the term for an additional year. The terms of Mr. Shugrue's
agreement provide for an annual base salary of $450,000, with annual cost
of living increases at the end of years one, two and four and a $50,000
increase at the end of year three. The agreement also provides for a
signing bonus of $75,000, an annual bonus with a target of $200,000 which
is subject each year to the attainment of goals to be established by the
Board of Directors of Loews Cineplex, reimbursement of relocation and
related transportation expenses and an automobile allowance of $1,200 per
month. Pursuant to the agreement, Mr. Shugrue was granted a non-qualified
stock option with respect to 225,000 shares of Common Stock. If Mr.
Shugrue's employment is terminated by Loews Cineplex for cause, he will be
entitled to accrued salary through the date of termination and any accrued
but unpaid bonus. If Loews Cineplex terminates Mr. Shugrue's employment
without cause, he will be entitled to his base salary and bonus through the
end of the contract term, reduced by any compensation paid or payable to
Mr. Shugrue in respect of subsequent employment for the same period.
John Walker and Loews Cineplex have agreed to enter into an amendment
to his employment agreement with Loews Cineplex, effective on May 1, 1998,
which has a term of three years with an option of the Company to renew for
an additional two years. Mr. Walker's employment agreement provides for an
annual base salary of $275,000, which will be adjusted each year to reflect
the increase (if any) in the cost of living during the previous year, an
annual bonus targeted at $125,000 and a $50,000 increase in the event the
Company exercises its renewal option. Receipt of the annual bonus is
subject to the attainment of performance goals established each year by the
Board of Directors of Loews Cineplex. Mr. Walker was also granted a
non-qualified stock option with respect to 150,000 shares of Common Stock.
John C. McBride, Jr. began his employment with Loews Cineplex on
January 19, 1998 under terms of employment set forth in a letter agreement
between Loews Cineplex and Mr. McBride dated November 17, 1997 (the
"McBride Agreement"). The McBride Agreement provides for a term of
employment expiring January 18, 2003. Pursuant to the McBride Agreement,
Mr. McBride shall receive an annual base salary of $325,000, which will be
adjusted each year to reflect the increase (if any) in the cost of living
during the previous year, and an annual bonus targeted at between $75,000
and $125,000. Receipt of the annual bonus is subject to the attainment of
performance goals established each year by the Board of Directors of Loews
Cineplex. Pursuant to the McBride Agreement, Mr. McBride received a signing
bonus of $25,000 and is entitled to reimbursement of relocation expenses.
If Loews Cineplex terminates Mr. McBride without cause prior to January 18,
2003, it is obligated to pay his base salary and his target bonus through
such date, reduced by any compensation paid or payable to Mr. McBride in
respect of subsequent employment (including self-employment) for the same
period. Pursuant to the McBride Agreement, Mr. McBride was granted a
non-qualified stock option with respect to 150,000 shares of Common Stock.
Seymour Smith entered into an employment agreement with Loews Cineplex
on May 1, 1990, which has been subsequently amended and expired on April
30, 1998. Mr. Smith's employment agreement provided for an annual base
salary (currently $362,098), which was adjusted each year to reflect the
increase (if any) in the cost of living during the previous year, and an
annual bonus in an amount determined by Loews Cineplex. Mr. Smith was also
granted a non-qualified stock option with respect to 50,000 shares of
Common Stock.
Mindy Tucker entered into an employment agreement with the Company on
December 15, 1997 to serve as Corporate Vice President for Strategic
Planning and Secretary for a term of three years, with an option by the
Company for an additional two years. Ms. Tucker's employment agreement
provides for an annual base salary of $200,000, with annual cost of living
increases and a $25,000 increase in the event the Company exercises its
option. Her employment agreement also provides for an annual bonus that
will range from $50,000 to $100,000, subject in each case to the attainment
of goals to be established each year by the Board of Directors of the
Company. In addition, Ms. Tucker was granted a non-qualified stock option
with respect to 75,000 shares of Common Stock. If Ms. Tucker's employment
is terminated by the Company for cause, she will be entitled to accrued
salary through the date of termination and any accrued but unpaid bonus. If
the Company terminates her employment without cause, she will be entitled
to receive her base salary and bonus through the balance of the contract
term, reduced by any compensation paid or payable in respect of subsequent
employment (including self-employment) for the same period.
Joseph Sparacio and Loews Cineplex have agreed to enter into an
amendment to his employment agreement with Loews Cineplex, effective May 1,
1998, which has a term of three years with a two year option by the Company
to renew. Mr. Sparacio's employment agreement provides for an annual base
salary of $200,000, with annual cost of living increases and a $25,000
increase in the event that the Company exercises the option. Mr. Sparacio's
agreement also provides for an annual bonus targeted at $75,000, subject in
each case to the attainment of goals to be established each year by the
Board of Directors of the Company. Mr. Sparacio was also granted a
non-qualified stock option with respect to 75,000 shares of Common Stock.
During the terms of their employment agreements, Messrs. Reid, Smith,
Walker and Sparacio are also entitled to participate in all employee
benefit plans of SPE or its affiliates that are applicable generally to
Loews Cineplex's executives of comparable rank and to receive either a car
allowance in the case of Mr. Reid or reimbursement for a leased car for
each of Messrs. Smith, Walker and Sparacio. Pursuant to their respective
employment agreements, if the employment of Messrs. Reid, Smith, Walker or
Sparacio terminates upon the expiration of the agreements (each, an
"Expiration Date"), or sooner by reason of death or disability, for cause
by Loews Cineplex or by Messrs. Reid, Smith, Sparacio or Walker, Loews
Cineplex is obligated to pay all accrued but unpaid salary, car allowance,
vacation and expenses and other benefits as provided under applicable
employee benefit plans.
If Loews Cineplex terminates the employment of Messrs. Reid, Smith,
Walker or Sparacio without cause prior to the applicable Expiration Date,
it is obligated to pay such employee's base salary and to continue
providing all employee benefits (excluding any car allowance or leasing
program) until such employee's Expiration Date. However, if any of Messrs.
Reid, Smith, Sparacio or Walker obtains other employment, any amounts
payable under his employment agreement shall be offset by compensation
received with respect to such other employment prior to the applicable
Expiration Date.
1997 STOCK INCENTIVE PLAN
On December 16, 1997, the Company's Board of Directors Board of
Directors unanimously adopted, and the stockholders of the Company
approved, the LTM Holdings, Inc. 1997 Stock Incentive Plan (the "Stock
Incentive Plan"). The Company's Board of Directors believes that, in order
to attract, retain and reward valuable personnel, it is important for Loews
Cineplex to adopt a flexible, long-term incentive plan. The principal
provisions of the Stock Incentive Plan are summarized below. This summary,
however, does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Stock Incentive Plan, a copy of which
was filed on February 13, 1998 as an exhibit to the LTM Holdings, Inc.'s
Registration Statement on Form S-4 (No. 333-46313). Terms not defined
herein shall have the meanings set forth in the Stock Incentive Plan.
The purpose of the Stock Incentive Plan is to strengthen Loews
Cineplex by providing an incentive to its employees, officers, directors,
consultants and advisors through the granting or awarding of incentive and
nonqualified stock options, stock appreciation and dividend equivalent
rights, restricted stock, performance units, and performance shares to
employees (including individuals who have received a formal, written offer
of employment), officers, directors, consultants and advisors of Loews
Cineplex or an affiliate (collectively or individually, "Awards"), thereby
encouraging them to devote their abilities and energies to the success of
Loews Cineplex.
The Stock Incentive Plan is to be administered by a committee
consisting of at least two directors of Loews Cineplex (the "Plan
Committee"), and it may be administered by the entire Board of Directors.
If the Plan Committee consists of less than the entire Board of Directors,
each member will be a "nonemployee director" within the meaning of Rule
16b-3 promulgated under the Exchange Act. To the extent necessary for any
Award to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), each member of
the Plan Committee will be an "outside director" within the meaning of
Section 162(m) of the Code.
Each Award under the Stock Incentive Plan will be evidenced by an
agreement that sets forth the terms of the grant. Under the Stock Incentive
Plan, the Plan Committee has the authority to, among other things: (i)
select the individuals to whom Awards will be granted, (ii) determine the
type, size and the terms and conditions of Awards and (iii) establish the
terms for treatment of Awards upon a termination of employment.
Under the Stock Incentive Plan, 4,520,000 shares of authorized and
unissued Common Stock (less the number of shares of Common Stock subject to
options held by Cineplex Odeon employees that were to be converted into
options to acquire Loews Cineplex Common Stock pursuant to the plan of
arrangement governing the Combination) will be available for the grant of
Awards to Eligible Individuals, provided that the maximum number of shares
with respect to which Awards may be granted to any individual during any
calendar year is 900,000. In the event of any Change in Capitalization,
however, the Plan Committee may adjust the maximum number and class of
shares with respect to which Awards may be granted, the number and class of
shares which are subject to outstanding Awards and the purchase price
thereof. Of the total number of shares allotted under the Stock Incentive
Plan, not more than one-third of the number of allotted shares may be used
for grants of restricted stock. The maximum dollar amount that an
individual may receive during the term of the Plan in respect of
cash-denominated performance units may not exceed $2 million.
STOCK OPTIONS
The Plan Committee will determine whether any option is a nonqualified
or incentive stock option at the time of grant. The per share exercise
price of an option granted under the Stock Incentive Plan will be
determined by the Plan Committee at the time of grant and set forth in the
option agreement, provided that the purchase price per share under each
incentive stock option must not be less than 100% of the fair market value
of Common Stock subject to the option at the date of grant (110% in the
case of an incentive stock option granted to a Ten Percent Stockholder),
and each option will be exercisable at such dates and in such installments
as determined by the Plan Committee. All outstanding options will become
fully exercisable upon a Change in Control. In addition, the Plan Committee
reserves the authority to accelerate the exercisability of any option at
any time. Each option terminates at the time determined by the Plan
Committee provided that the term of each option may not exceed ten years
(five years in the case of any incentive stock option granted to a Ten
Percent Stockholder). The Plan Committee may accept the surrender of
outstanding options and may grant new options in substitution for them.
Options are not transferable except by will or the laws of descent and
distribution or pursuant to a domestic relations order. Notwithstanding the
foregoing, the Plan Committee may set forth in the option agreement, at the
time of grant or at any time thereafter, that the option may be transferred
to members of the optionee's immediate family, to trusts solely for the
benefit of such immediate family members and to partnerships in which such
family members and/or trusts are the only partners. Options may be
exercised during the optionee's lifetime only by the grantee or his
guardian or legal representative. In the discretion of the Plan Committee,
the purchase price for shares may be paid (i) in cash, (ii) by transferring
shares of Common Stock to Loews Cineplex (provided such shares have been
held by the optionee for at least six (6) months prior to the exercise of
the option) or (iii) by a combination of the foregoing. In addition,
options may be exercised through a registered broker-dealer pursuant to
such cashless exercise procedures which are, from time to time, deemed
acceptable by the Plan Committee.
The Plan Committee will determine, at the time the option is granted
or thereafter, and will set forth in the option agreement, the terms and
conditions applicable to such option upon a termination or change in the
status of the employment or service of the optionee by Loews Cineplex, a
subsidiary or a division (including a termination or change by reason of
the sale of a subsidiary or a division).
STOCK APPRECIATION RIGHTS ("SARS")
The Stock Incentive Plan permits the granting of SARs either in
connection with the grant of an option or as a freestanding right. A SAR
permits a grantee to receive upon exercise of the SAR, cash and/or shares,
at the discretion of the Plan Committee, in an amount equal in value to the
excess, if any, of the then per share fair market value over the per share
fair market value on the date the SAR was granted (or option exercise price
in the case of a SAR granted in connection with an option). When a SAR is
granted, however, the Plan Committee may establish a limit on the maximum
amount a grantee may receive on exercise. The Plan Committee will decide at
the time the SAR is granted the date or dates at which it will become
vested and exercisable; however, in the event of a Change in Control, all
SARs become immediately and fully exercisable. The Plan Committee may
accept the surrender of outstanding SARs and may grant new Awards in
substitution for them.
DIVIDEND EQUIVALENT RIGHTS ("DERS")
DERs may be granted in tandem with any Award under the Stock Incentive
Plan and may be payable currently or deferred until the lapsing of the
restrictions on the DERs or until the vesting, exercise, payment,
settlement or other lapse of restrictions on the related Award. DERs may be
settled in cash or Common Stock or a combination thereof, in a single or
multiple installments.
RESTRICTED STOCK
The Plan Committee will determine the terms of each restricted stock
Award at the time of grant, including the price, if any, to be paid by the
grantee for the restricted stock, the restrictions placed on the shares,
and the time or times when the restrictions will lapse. In addition, at the
time of grant, the Plan Committee, in their discretion, may decide: (i)
whether any deferred dividends will be held for the account of the grantee
or deferred until the restrictions thereon lapse, (ii) whether any deferred
dividends will be reinvested in additional Common Stock or held in cash,
(iii) whether interest will be accrued on any dividends not reinvested in
additional shares of restricted stock and (iv) whether any stock dividends
paid will be subject to the restrictions applicable to the restricted stock
Award. Unless otherwise provided at the time of grant, the restrictions on
the restricted stock will lapse upon a Change in Control. Shares of
restricted stock are non-transferable until such time as all restrictions
upon such shares lapse. The Plan Committee may accept the surrender of
outstanding shares of restricted stock and may grant new Awards in
substitution for them.
PERFORMANCE UNITS AND PERFORMANCE SHARES
Performance units and performance shares will be awarded as the Plan
Committee may determine, and the vesting of performance units and
performance shares will be based upon the Company's attainment within an
established period of specified performance objectives to be determined by
the Plan Committee among the following: earnings per share, share price,
pre-tax profits, net earnings, return on equity or assets (including return
on specified assets), revenues, EBITDA, market share or market penetration,
free cash flow or any combination of the foregoing. In the event of a
Change in Control, all or a portion of the performance units will vest and
the restrictions on all or a portion of the performance shares will lapse,
in either case, as determined by the Plan Committee at the time of grant
and as set forth in the agreement evidencing the Award of performance
shares or performance units. The Plan Committee may accept the surrender of
outstanding performance Awards and may grant new Awards in substitution for
them.
AMENDMENTS AND TERMINATION
The Stock Incentive Plan will terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board. The Board may at any
time and from time to time amend or terminate the Stock Incentive Plan;
provided, however, that, to the extent necessary under applicable law, no
such change will be effective without the requisite approval of Loews
Cineplex's stockholders. In addition, no such change may alter or adversely
impair any rights or obligations under any Awards previously granted,
except with the written consent of the grantee.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess
of $1 million in any taxable year to the chief executive officer or any of
the four other most highly compensated executive officers who are employed
by the corporation on the last day of the taxable year, but does allow a
deduction for "performance-based compensation". The Company has structured
and intends to implement and administer the Stock Incentive Plan (except
with respect to any stock options granted with an exercise price less than
the fair market value of the underlying shares on the date of grant) so
that compensation resulting from stock options, SARs and performance awards
can qualify as "performance-based compensation". The Plan Committee,
however, has the discretion to grant such Awards with terms that will
result in the Awards not constituting performance-based compensation. Loews
Cineplex will seek, at its 1999 annual meeting of stockholders, stockholder
approval of the Stock Incentive Plan and the material terms of the
performance goals applicable to performance units under the Stock Incentive
Plan to allow such options and SARs granted and other such compensation
paid after such meeting to qualify as performance based compensation.
Under certain circumstances, the accelerated vesting or exercise of
options or stock appreciation rights, or the accelerated lapse of
restrictions with respect to other Awards, in connection with a Change of
Control might be deemed an "excess parachute payment" for purposes of the
golden parachute tax provisions of Section 280G of the Code. To the extent
it is so considered, the grantee may be subject to a 20% excise tax, and
Loews Cineplex may be denied a federal income tax deduction.
AWARDS GRANTED UNDER THE STOCK INCENTIVE PLAN
On December 16, 1997, the Plan Committee granted nonqualified stock
options under the Stock Incentive Plan in respect of 900,000, 250,000,
225,000, 150,000, 150,000, 75,000, 75,000 and 50,000 shares of Common Stock
to Lawrence J. Ruisi, Travis Reid, J. Edward Shugrue, John C. McBride, Jr.,
John J. Walker, Joseph Sparacio, Mindy Tucker and Seymour Smith,
respectively. Each option was granted at an exercise price of $13.125 per
share, the fair market value for such shares on the date of grant. The
terms and conditions of each grant were set forth in a form option
agreement (the "Option Agreement"), which is identical for each of the
individuals listed above (other than as described below with respect to
certain options granted to Mr. Ruisi). The Option Agreement incorporates by
reference the terms and conditions of the Stock Incentive Plan.
Under the Option Agreement (other than options granted to Mr. Ruisi to
purchase 900,000 shares of Common Stock, 500,000 of which were vested upon
grant and the remainder of which will become exercisable in respect of
100,000 shares covered thereby on the first through fourth anniversaries of
the Combination) each option becomes vested and exercisable with respect to
twenty percent of the aggregate number of Loews Cineplex Common Shares
covered by such option on each of the first, second, third, fourth and
fifth anniversaries of the closing of the Combination, but in any event
will be fully vested and exercisable as of the fifth anniversary of the
date of grant. Under the Option Agreement, if an optionee's employment is
terminated by Loews Cineplex without Cause, or as a result of the
optionee's death or Disability, the option becomes immediately and fully
vested and is exercisable at any time within one year after the date of
such termination of employment. If an optionee's employment is terminated
as a result of his Retirement, the option shall, to the extent vested on
the date of Retirement, remain exercisable for three years thereafter. If
the optionee's employment is terminated for any other reason (including the
optionee ceasing to be employed by a subsidiary or division of Loews
Cineplex as a result of the sale of such subsidiary or division), the
option shall, to the extent vested on the date of such termination, remain
exercisable for ninety days thereafter, except for options held by Mr.
Ruisi, which shall remain exercisable for a period of one year following
any such termination. In the event that an optionee's employment is
terminated following a Change in Control, the option shall remain
exercisable for one year following such termination. In no event, however,
is the option exercisable beyond its stated term of ten years.
COMPENSATION OF DIRECTORS
The Company currently pays each independent director an annual stipend
of $30,000 plus $1,000 for each meeting of the Board or Committees of the
Board attended by the director. The Company may in the future adopt a stock
compensation program for directors.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SPE and Universal are major film studios and distributors. Loews
Cineplex has exhibited films distributed by SPE and Universal in the past
and expects to continue to do so in the future. Payments are made based on
negotiated and/or contracted rates established on terms that management
believes are equivalent to an arm's-length basis. At February 28, 1998 and
February 28, 1997, respectively, Loews Cineplex owed SPE and its affiliates
approximately $2.5 million and approximately $6.4 million under film
licensing agreements. Loews Cineplex has recognized approximately $30.4
million in film rental expenses relating to the exhibition of films
distributed by SPE for the year ended February 28, 1998. For its fiscal
year ended December 31, 1997, Cineplex Odeon paid an aggregate of $27.5
million in film licensing fees to Universal or subsidiaries thereof in the
ordinary course of business. A Canadian division of Cineplex Odeon has
provided certain video distribution services to Universal for which
Universal paid Cineplex Odeon approximately $1.0 million during its fiscal
year ended December 31, 1997.
Loews Cineplex and SCA (or its affiliates) have entered into (a) a
trademark agreement governing the ongoing and future use of the "Sony"
trademark in connection with the operation of certain Loews Cineplex
theatres (the "Trademark Agreement"), (b) a tax sharing and indemnity
agreement regarding certain tax, ERISA and other matters (the "Tax Sharing
and Indemnity Agreement") and (c) a transition services agreement (the
"Transition Services Agreement"). Pursuant to the Trademark Agreement, SCA
has granted the Company the right to use the trademark "Sony" and all
goodwill associated therewith (i) in respect of the Sony Lincoln Square
Theatre, until May 14, 2003 (ii) in respect of the Yerba Buena facility (as
defined below), for a period expiring five years from the latest to occur
of (a) May 14, 2003 and (b) the date which is five years from the date on
which theatre operations begin at the Yerba Buena facility; and (iii) in
respect of certain other theatres operated by the Company, until November
14, 1998. Pursuant to the Tax Sharing and Indemnity Agreement: (i) SCA will
be responsible for and will indemnify the Company and its U.S. subsidiaries
against certain consolidated, combined and unitary federal, state, local
and foreign income, franchise and capital taxes for all taxable years
ending on or prior to the closing date of the Combination, except for such
taxes incurred after the closing date of the Combination by the Company and
its U.S. subsidiaries arising by reason of an audit or court proceeding;
(ii) procedures are set forth for (a) the preparation and filing of certain
consolidated combined and unitary federal and state income, franchise and
capital tax returns with respect to taxable years ending on or prior to the
closing date of the Combination and (b) the conduct and settlement of
certain tax audits and proceedings with respect to such taxable years; and
(iii) the Company has agreed to indemnify and hold harmless SCA and SPE,
and their respective successors and assigns, with respect to certain
liabilities that may arise in connection with certain other agreements.
Pursuant to the Transition Services Agreement, SCA and SPE will provide
Loews Cineplex with certain administrative services currently performed by
SPE or its affiliates on behalf of Loews Cineplex to the extent such
services are required by Loews Cineplex to conduct its operations in the
ordinary course of business following the Combination. Such services will
be provided at such prices and rates, and subject to termination, as may be
agreed upon by SPE and Loews Cineplex but pursuant to terms no less
favorable to Loews Cineplex than would be obtainable from unaffiliated
third parties.
An affiliate of SCA is developing an entertainment/retail complex in
San Francisco, California ("Yerba Buena"). Loews Cineplex has entered into
a lease on terms that management believes are equivalent to arm's-length
terms with SCA's affiliate with respect to the operation of a 3D IMAX(R)
theatre and a state-of-the-art 15-screen multiplex theatre to be located at
Yerba Buena.
Jim Loeks and Barrie Lawson-Loeks, who were co-chairmen of Loews
Cineplex until April 1998, are also 50% partners in Loeks-Star Theatres
through their ownership interest in Loeks Michigan Theatres, Inc.
In connection with Cineplex Odeon's sale of its remaining 51% interest
in the Film House Partnership to The Rank Organization PLC ("Rank") in
March 1990, Cineplex Odeon agreed to provide, without cost, on-screen
advertisements of Universal Studios, Florida and Universal Studios,
California until March 2000. Universal Studios, Florida, a motion picture
and television theme amusement park, is a joint venture between Universal
and Rank. Universal Studios, California, a motion picture and television
theme amusement park, is owned by Universal.
Cineplex Odeon has, since 1984, participated in a joint venture with a
group of investors which developed a theatre complex at the southwest
corner of Yonge and Eglinton Streets in Toronto. The investor group, in
which Senator Kolber, a director of Loews Cineplex, and/or associates of
Senator Kolber, have a minority interest, contributed Cdn$3.3 million of
the total financing required to complete the project and is entitled to
repayment thereof, together with interest thereon, and to ongoing
participation in the revenue derived from the project.
In September 1990, Cineplex Odeon sold its interest in the Universal
City Cinema to Universal. Cineplex Odeon has been retained to manage the
theatre on a long-term basis for a fee based on 3% of gross revenue plus 3%
of net cash flow from the multiplex. In addition, Universal has the right
to "put" such theatre to the Company on the terms described below.
The number of shares of Common Stock issued to Universal pursuant to
the Subscription Agreement at the closing of the Combination was subject to
adjustment pursuant to anti-dilution provisions contained in the
Subscription Agreement. In accordance with these provisions, Loews Cineplex
was required to issue, subject to applicable stock exchange requirements,
additional shares of Common Stock to Universal for no additional
consideration if Loews Cineplex issued or sold any Common Stock (other than
in connection with the Combination, employee stock options or the
conversion of Loews Cineplex non-voting capital stock) in certain types of
transactions to any person other than Universal or any of its affiliates (a
"Sale"), including issuances upon conversion, exchange or exercise of
voting share equivalents, whether in one or a series of transactions, for
consideration (the "Subsequent Sale Price") of less than $19.0891 per
share, subject to adjustment. Upon the closing of the first Sale having a
Subsequent Sale Price of less than $19.0891 per share, the number of
additional shares issuable to Universal was equal to (a) the quotient of
$84.5 million divided by the Subsequent Sale Price, minus (b) 4,426,606
shares of Common Stock. Accordingly, upon consummation of the Equity
Offering, the Company issued an additional 3,255,212 shares of Common Stock
to Universal for no additional consideration. These adjustment provisions,
which only applied to the first $100 million of additional issuances,
terminated once the aggregate proceeds of all Sales equaled or exceeded
$100 million. Accordingly, these provisions terminated upon consummation of
the Equity Offering and the Universal Issuance.
From and after the later of (i) the second anniversary of the closing
date of the Combination and (ii) the fifteenth day of the month following
the first month end as of which the outstanding debt of Loews Cineplex is
less than 4.75 times the consolidated EBITDA of Loews Cineplex for the
12-month period then ended (the "Start Date"), Universal will have the
right (the "Put Right") to cause Loews Cineplex to lease the Universal City
Cinema motion picture theatre facility located at the Universal City,
California retail and entertainment complex (the "Universal City Cinema")
pursuant to a 20-year lease (the "Lease"). If Universal exercises the Put
Right, on the date the Lease is signed (the "Lease Signing Date") Loews
Cineplex will pay to Universal cash consideration for entering into the
Lease and the conveyance of the related personal property equal to (i) ten
times the cash flow of the Universal City Cinema for the 12-month period
ended on the last day of the month preceding Universal's giving notice (the
"Put Notice") of its exercise of the put minus (ii) (if applicable) the
cost of eliminating any deficiencies from the operating requirements and
standards set forth in the Lease specifically listed on a certificate
executed by an officer of Universal, which cost shall be estimated by an
engineering firm or other expert selected by Universal and reasonably
acceptable to Loews Cineplex. The Put Right terminates on the third
anniversary of the Start Date if the Put Notice has not been delivered
prior to such date. Loews Cineplex must provide to Universal not less than
five days prior written notice of the Start Date, and, if it fails to
provide such notice, the Start Date is tolled until the fifth day following
delivery of such notice.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's voting securities by (a) each person
who is known to the Company to be the beneficial owner of more than five
percent of the Company's voting securities, (b) each director of the
Company, (c) each of the Named Executive Officers and (d) all directors and
executive officers of the Company as a group. Except as otherwise
indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of the Company's voting
securities owned by them, except to the extent such power may be shared
with a spouse.
SHARES BENEFICIALLY
OWNED
-------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ ------ -------
COMMON STOCK, PAR VALUE $.01 PER SHARE 5%
STOCKHOLDERS:
Sony Pictures Entertainment Inc. 23,137,111(1) 39.5%
550 Madison Avenue
New York, New York 10022
Universal Studios, Inc. 14,946,461(1) 25.5%
100 Universal City Plaza
Universal City, CA 91608
The Claridge Group 4,324,003(1)(2) 7.4%
c/o Claridge Inc.
1170 Peel Street, 8th Floor
Montreal, Quebec H3B 4P2
DIRECTORS:
George Cohon 900 *
Marinus N. Henny 5,000(3) *
Hon. E. Leo Kolber 350,309 *
Kenneth Lemberger (3) *
Ron Meyer (5) *
Brian C. Mulligan (5) *
Yuki Nozoe (3) *
Karen Randall (5) *
Stanley Steinberg 1,000(3) *
Howard Stringer (3) *
Robert J. Wynne (3) *
Mortimer B. Zuckerman 1,000 *
EXECUTIVE OFFICERS:
Lawrence J. Ruisi 510,100(6) *
Allen Karp 500,114(7) *
Barrie Lawson-Loeks -- *
Jim Loeks -- *
Travis Reid -- *
Seymour Smith -- *
All Directors and Executive Officers as a Group 1,376,223 2.4%
(23 persons)
CLASS B NON-VOTING COMMON STOCK, PAR VALUE $.01
PER SHARE
Universal Studios, Inc. 80,000 95.2%
100 Universal City Plaza
Universal City, CA 91608
- -----------------------------------------
* Indicates beneficial ownership or control of less than 1.0% of the
outstanding shares of Loews Cineplex Common Stock.
(1) All of such shares are subject to the terms of the Stockholders
Agreement described below.
(2) Members of the Claridge Group and their holdings of voting securities
are as follows: (i) The Charles Rosner Bronfman Discretionary
Trust--1,918,907 shares; (ii) The Charles Bronfman Trust--1,000,000
shares; (iii) The Charles R. Bronfman Trust--1,000,000 shares; (iv)
The Phyllis Lambert Foundation--31,410 shares; (v) Bojil Equities
Inc.--350,309 shares with respect to which Senator Kolber exercises
voting control, but disclaims any pecuniary interests; and (vi) Louis
Ludwick--23,377 shares. Charles Rosner Bronfman may be deemed to share
beneficial ownership of the shares held by the three trusts listed
above. The number of shares does not include 9,926 shares and 7,500
shares owned by the wives of Mr. Bronfman and Senator Kolber,
respectively, as to which beneficial ownership has been disclaimed.
(3) Does not include 23,137,111 shares of Loews Cineplex Common Stock
owned by SPE. Messrs. Henny, Lemberger, Nozoe, Steinberg, Stringer and
Wynne, officers of SPE or its affiliates, disclaim beneficial
ownership of all Loews Cineplex shares owned by SPE.
(4) Includes 350,309 shares of Loews Cineplex Common Stock over which
Senator Kolber has voting control but which are owned directly by
Bojil Equities Inc. and as to which Senator Kolber disclaims
beneficial ownership. Excludes 7,500 shares of Loews Cineplex Common
Stock beneficially owned by Senator Kolber's wife, as to which he
disclaims beneficial ownership.
(5) Does not include 14,946,461 shares of Common Stock and 80,000 shares
of Class B Non-Voting Common Stock owned by Universal. Messrs. Meyer
and Mulligan and Ms. Randall, officers of Universal or its affiliates,
disclaim beneficial ownership of all Loews Cineplex shares owned by
Universal.
(6) This number includes 500,000 options exercisable.
(7) Includes 1,714 shares of Loews Cineplex Common Stock which are
beneficially owned by the Allen and Sharon Karp Trust, as to which Mr.
Karp disclaims beneficial ownership, and 498,400 shares of Loews
Cineplex Common Stock which relate to options exercisable.
Universal (in which The Seagram Company Ltd. ("Seagram") owns an
approximately 84% indirect interest) beneficially owns the Loews Cineplex
shares set forth on the table above (the "Seagram Shares"). Based on the
most recent publicly available information related to Seagram: (i)
descendants of the late Samuel Bronfman and trusts established for their
benefit (the "Bronfman Trusts") beneficially owned, directly or indirectly,
an aggregate of 119,923,154 of then outstanding Seagram Shares,
constituting approximately 34.5% of then outstanding Seagram Shares, which
amount includes the approximately 14.8% of then outstanding Seagram Shares
owned by trusts established for the benefit of Charles R. Bronfman, and his
descendants, including, without limitation, the Charles Rosner Bronfman
Discretionary Trust and (ii) pursuant to two voting trust agreements,
Charles R. Bronfman served as the voting trustee for approximately 33.3% of
the outstanding Seagram Shares and a voting trustee for approximately 0.7%
of then outstanding Seagram Shares, which shares are beneficially owned by
the Bronfman Trusts and certain other entities.
<PAGE>
THE STOCKHOLDERS AGREEMENT
The following is a brief summary of certain provisions of the
Stockholders Agreement. A copy of the Stockholders Agreement has been filed
as an exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1998. The following description does not purport to
be complete and is subject in all respects to the detailed provisions of
the Stockholders Agreement. Capitalized terms used in this section without
definition elsewhere in this Prospectus shall have the meanings specified
in the Stockholders Agreement, as the context requires.
The Stockholders Agreement provides for certain board, voting,
consent, standstill, purchase, transfer and other rights and obligations
for the parties thereto.
THE BOARD OF DIRECTORS
Pursuant to the Stockholders Agreement, the Company's Board of
Directors is to comprise 16 members, consisting initially of six designees
of SPE (the "SPE Directors"), three designees of Universal (the "Universal
Directors"), one designee of the Claridge Group (the "Claridge Director"),
two Management Directors and four Independent Directors. The designees of
SPE, Universal and the Claridge Group were designated by such parties prior
to the closing of the Combination. Two of the Independent Directors were
designated by mutual agreement of the Company, SPE, Universal and a
majority of the members of the Independent Committee prior to the closing
of the Combination. The other two Independent Directors have not yet been
designated, and the Company, SPE and Universal have each agreed to use
their best efforts to cause such additional Independent Directors to be
elected as soon as possible. Pursuant to the Stockholders Agreement, the
Management Directors will be the two most senior executive officers of
Loews Cineplex; provided that Allen Karp shall be one of the Management
Directors as long as he is an executive officer of the Company or an
affiliate. The initial Management Directors are Lawrence J. Ruisi, who is
the President and Chief Executive Officer of Loews Cineplex, and Allen
Karp, who is Chairman and Chief Executive Officer of Cineplex Odeon. For
purposes of this Prospectus, an "Independent Director" is any director who
(a) is free from any relationship that, in the opinion of the nominating
committee of the Company's Board of Directors, would interfere with the
exercise of independent judgment as a director, (b) is not an affiliate of
Loews Cineplex, SPE, Universal or the Claridge Group or a current or former
officer of the Company or any of its subsidiaries or a current or former
officer or director of SPE or Universal or any of their respective
subsidiaries, (c) does not, in addition to such individual's role as a
member of the Company's Board of Directors, also act on a regular basis as
an individual or representative of an organization serving as a
professional advisor, legal counsel or consultant to management of the
Company or SPE, Universal or the Claridge Group or any of their respective
subsidiaries and (d) does not represent, and is not a member of the
immediate family of, a person who does not satisfy the requirements of
foregoing clauses (a), (b) or (c) ("Independent Directors").
The Stockholders Agreement provides that SPE, Universal and the
Claridge Group, subject to the exceptions and limitations described below,
are entitled to designate for nomination for election to the Company's
Board of Directors, the number of directors of Loews Cineplex that
generally corresponds to such Stockholder's "Applicable Percentage" set
forth on the following chart (the "Directors Chart"):
NUMBER OF
APPLICABLE PERCENTAGE DIRECTORS
----------------------------------------------- -----------
Greater than 6.25% and less than 9.375%........ 1
Greater than 9.375% and less than 15.625%...... 2
Greater than 15.625% and less than 21.875%..... 3
Greater than 21.875% and less than 28.125%..... 4
Greater than 28.125% and less than 34.375%..... 5
Greater than 34.375% and less than 40.625%..... 6
Greater than 40.625% and less than 46.875%..... 7
Greater than 46.875% and less than 53.125%..... 8
Greater than 53.125% and less than 59.375%..... 9
Greater than 59.375% and less than 65.625%..... 10
Greater than 65.625% and less than 71.875%..... 11
Greater than 71.875% and less than 78.125%..... 12
Greater than 78.125% and less than 84.375%..... 13
84.375% and greater............................ 14
provided, however, that
(i) (x) until May 14, 2003, the Claridge Group shall be entitled
to designate one Loews Cineplex director if its Applicable Percentage
exceeds 3.5%, and, thereafter, if its Applicable Percentage exceeds
5%, and (y) the Claridge Group's entitlement to designate two or more
Loews Cineplex directors shall be determined in accordance with the
Stockholders Agreement on the same basis as the entitlement of the
other Stockholders;
(ii) if, pursuant to the Directors Chart, the Stockholders would
in the aggregate be entitled to designate more than 14 Loews Cineplex
directors, each reference to a percentage in the Directors Chart under
the "Applicable Percentage" column will be increased by the least
number of percentage points that would result in the Stockholders in
the aggregate being entitled to designate 14 Loews Cineplex directors
(after giving effect to the provisions of clause (i)(x) above); and
(iii) prior to the four-year anniversary of the Closing, no
Stockholder will be entitled to designate more than eight Loews
Cineplex directors; provided, however, that if any Stockholder would
be entitled to designate more than eight Loews Cineplex directors
pursuant to the Directors Chart based on such Stockholder's Adjusted
Applicable Percentage (rather than such Stockholder's Applicable
Percentage), (x) such Stockholder will be entitled to designate the
number of Loews Cineplex directors set forth in the Directors Chart
based on such Stockholder's Applicable Percentage and (y) the
limitation contained in this clause (iii) regarding a Stockholder's
entitlement to designate Loews Cineplex directors will thereupon
terminate.
Each of SPE and Universal have agreed with the other and each member
of the Claridge Group has agreed with each of SPE and Universal that,
notwithstanding the foregoing:
(i) no Stockholder shall be entitled to designate more than six
Loews Cineplex directors; provided, however, that if any Stockholder
would be entitled to designate more than eight Loews Cineplex
directors pursuant to the Directors Chart based on such Stockholder's
Adjusted Applicable Percentage (rather than such Stockholder's
Applicable Percentage), such Stockholder shall be entitled to
designate such greater number of Loews Cineplex directors and the
limitation contained in this clause (i) regarding a Stockholder's
entitlement to designate Loews Cineplex directors will thereupon
terminate; provided, further, that, if at any time commencing on the
three-year anniversary of the Closing, any Stockholder's Applicable
Percentage exceeds 45%, the limitation contained in this clause (i)
regarding a Stockholder's entitlement to designate Loews Cineplex
directors will be increased from six Loews Cineplex directors to seven
Loews Cineplex directors;
(ii) at any time that SPE's Applicable Percentage equals or
exceeds 40.625%, but the number of SPE Directors is limited to six by
the immediately preceding clause (i) of this paragraph, Universal has
agreed with SPE that one of the individuals designated by Universal to
serve as a Loews Cineplex director shall be an Independent Director so
long as Universal's Applicable Percentage equals or exceeds 21.875%;
and
(iii) at any time that Universal's Applicable Percentage equals
or exceeds 40.625%, but the number of Universal Directors is limited
to six by clause (i) of this paragraph, SPE has agreed with Universal
that one of the individuals designated by SPE to serve as a Loews
Cineplex director shall be an Independent Director so long as SPE's
Applicable Percentage exceeds 21.875%.
If the Stockholders collectively have the right to designate at least
13 of the members of the Company's Board of Directors pursuant to the
provisions described above, SPE and Universal have agreed that at least one
of the individuals designated by each such Stockholder to serve as a Loews
Cineplex director shall be an Independent Director; provided that if one of
such Stockholders shall be entitled to designate only one Director, such
Stockholder shall not be required to designate an Independent Director and
the other such Stockholder shall be required to designate two Independent
Directors.
The parties to the Stockholders Agreement have agreed that, except for
the designees of the Stockholders and for the Management Directors,
individuals to be nominated for election as Loews Cineplex directors shall
all be Independent Directors (unless the Independent Directors shall
otherwise agree), and there shall be at least two Independent Directors and
two Management Directors nominated in each such election. Each Stockholder
has agreed to vote (and to cause its affiliates to vote) any Voting Shares
beneficially owned by it to cause the designees of SPE, Universal and the
Claridge Group and each of the Independent Directors and Management
Directors designated by the Nominating Committee (as described below) to be
elected to the Company's Board of Directors, and Loews Cineplex has agreed
to use its best efforts to cause the election of each such designee,
including nominating such individuals to be elected as members of the
Company's Board of Directors, as provided in the Stockholders Agreement.
In connection with each election of members of the Company's Board of
Directors, the Management Directors and the Independent Directors will be
designated by a nominating committee of the Company's Board of Directors
(the "Nominating Committee"), which will be established to determine
whether prospective nominees as Management Directors and Independent
Directors meet the criteria for such positions. The Nominating Committee
will be comprised of four directors, consisting of (x) two Independent
Directors designated by a majority of the Independent Directors and (y) one
SPE Director and one Universal Director; provided that if at any time there
shall cease to be at least one SPE Director or Universal Director, then the
Nominating Committee will include two SPE Directors or two Universal
Directors, as the case may be, to the extent that SPE or Universal, as
applicable, then has two designees serving as Loews Cineplex directors.
The Stockholders Agreement provides that all other committees of the
Company's Board of Directors will include, subject to any applicable stock
exchange or Exchange Act requirements, a number of SPE Directors and
Universal Directors equivalent to the proportion of such directors then
serving on the whole Company's Board of Directors multiplied by the total
number of members comprising such committee. The Stockholders Agreement
contains other provisions relating to committees of the Company's Board of
Directors and various provisions relating to the procedures, including
meetings and agendas, and the powers of the Company's Board of Directors.
Each Stockholder has agreed that it will not without the prior written
consent of each of SPE and Universal (i) seek the election or removal of
any Loews Cineplex director, except in accordance with the terms of the
Stockholders Agreement; (ii) deposit any shares of Common Stock in a voting
trust or subject any shares of Common Stock to any arrangement with respect
to the voting of such shares (other than a voting trust or arrangement
solely among members of the Claridge Group); (iii) subject to certain
exceptions, engage in any "solicitation" (within the meaning of Rule 14a-11
under the Exchange Act) of proxies or consents or become a "participant" in
any "election contest" (within the meaning of Rule 14a-11 under the
Exchange Act) with respect to Loews Cineplex; or (iv) form a Group with
respect to any shares of Common Stock, other than a Group consisting
exclusively of Stockholders, any of their affiliates or permitted
transferees.
CONSENT RIGHTS
The Stockholders Agreement provides SPE and Universal with specified
consent rights in respect of specified actions by Loews Cineplex and its
Subsidiaries, so long as their respective Applicable Percentages equal or
exceed the Minimum Percentage. These events include: (a) voluntary
bankruptcy filings by Loews Cineplex or any "significant subsidiary"; (b)
acquisitions and dispositions meeting specified tests of materiality; (c)
entering into or engaging in any business other than the exhibition of
films with certain limited exceptions; (d) any transaction or series of
related transactions with SPE or Universal or any of their respective
affiliates involving more than $1,000,000 per calendar year (excluding
arm's-length transactions in the ordinary course of business, including
film booking arrangements); (e) changing the number of directors comprising
the entire Company's Board of Directors; (f) with certain exceptions,
issuing or selling any Voting Shares or Voting Share Equivalents exceeding
specified thresholds; (g) paying cash dividends on, or making any other
cash distributions on or redeeming or otherwise acquiring for cash, any
shares of capital stock of Loews Cineplex, or any warrants, options, rights
or securities convertible into, exchangeable or exercisable for, capital
stock of Loews Cineplex exceeding specified thresholds; (h) incurring any
debt in excess of specified amounts with certain specified exceptions; (i)
hiring, or renewing the employment contract (including option renewals) of,
either of the two most senior executive officers of Loews Cineplex; (j)
entering into any arrangement (other than the Stockholders Agreement or
pursuant thereto) with any holder of Voting Shares in such holder's
capacity as a holder of Voting Shares which subjects actions taken by Loews
Cineplex or any Subsidiary to the prior approval of any Person; (k)
entering into certain discriminatory shareholder arrangements including any
stockholders rights plan; and (l) amending the Company's By-Laws by action
of the Company's Board of Directors.
Under the Stockholders Agreement, SPE and Universal are entitled to
certain additional consent rights if Loews Cineplex fails to meet certain
budgeted financial targets and their respective Applicable Percentages then
equal or exceed the Minimum Percentage. These rights include the right to
approve a new five-year strategic business plan for Loews Cineplex and the
following actions by Loews Cineplex or any Subsidiary thereof: (a) making
capital expenditures exceeding specified thresholds; (b) incurring any debt
in excess of specified amounts with certain specified exceptions; (c)
incurring liens to secure unsecured debt; and (d) with certain exceptions,
issuing or selling any capital stock of Loews Cineplex.
If Loews Cineplex and either SPE or Universal, as the case may be,
disagree in good faith as to whether the consent rights of such Stockholder
described above are triggered in connection with an action proposed to be
taken by Loews Cineplex, the parties have agreed to submit such a dispute
to arbitration by an independent arbitrator. Pending resolution of such
dispute (which generally must be resolved within ten business days of the
submission of the dispute), Loews Cineplex may not take the action which is
the subject of the dispute and its operations may be interrupted or delayed
during such time period as a result.
In addition to the foregoing consent rights, in connection with any
vote or action by written consent of the Company's Board of Directors
related to any (a) merger, (b) voluntary liquidation, dissolution or
winding up of Loews Cineplex (a "Dissolution"), (c) amendment or
restatement of the Company's Charter or (d) amendment or repeal of any
provision of, or addition of any provision to, the Company's By-laws (a
"By-law Amendment"), each Stockholder has agreed to use its best efforts to
cause the Loews Cineplex directors designated by such Stockholder to vote
against such action at the request of SPE or Universal if its Applicable
Percentage exceeds the Minimum Percentage. The Stockholders have also
agreed to vote (and not to consent to) the Voting Shares beneficially owned
by them against any of the foregoing items in connection with any vote or
action by written consent of the stockholders of Loews Cineplex related
thereto at the request of SPE or Universal if its Applicable Percentage
exceeds the Minimum Percentage.
So long as the Applicable Percentage of SPE or Universal equals or
exceeds the Minimum Percentage, (i) the Company's Charter provides that
effecting a Merger or Dissolution or adopting an amendment or restatement
of the Company's Charter or adopting a By-law Amendment by action of the
stockholders of Loews Cineplex shall require the affirmative vote or
written consent of the holders of at least 80% of the outstanding shares of
Common Stock; provided that in the case of any of the foregoing matters
(other than adopting a By-law Amendment by action of the stockholders) such
80% stockholder approval requirement shall not be applicable if 14 members
of the Company's Board of Directors shall have approved such matter;
provided, further, that in the case of any Merger that is approved by 14
members of the Company's Board of Directors, such Merger shall require the
affirmative vote or written consent of the holders of at least 66 2/3% of
the outstanding shares of Common Stock and (ii) no Stockholder shall vote
in favor of, consent in writing to, or take any other action to effect an
amendment or repeal of such provisions of the Company's Charter.
APPROVAL OF CERTAIN COMBINATIONS BY DISINTERESTED DIRECTORS
The Stockholders Agreement provides that so long as the Applicable
Percentage of SPE or Universal equals or exceeds the Minimum Percentage,
neither SPE nor any of its affiliates, nor Universal nor any of its
affiliates, as the case may be, shall enter into any contract with Loews
Cineplex or any Subsidiary thereof, nor shall Loews Cineplex otherwise
engage in or become obligated to engage in any transaction or series of
related transactions with SPE and/or its affiliates, or Universal and/or
its affiliates, as the case may be, in any case involving more than
$1,000,000 per calendar year, unless such contract or transaction shall
have been approved by a majority of the disinterested directors following
disclosure of the material facts of the contract or transaction to the
disinterested directors. The approval requirement does not apply to
contracts or transactions in the ordinary course of Loews Cineplex's
business, including film booking arrangements.
RESTRICTIONS ON TRANSFERS OF LOEWS CINEPLEX STOCK BY THE STOCKHOLDERS
The Stockholders Agreement includes the following restrictions on
transfers by SPE and Universal:
RESTRICTIONS ON TRANSFER BY SPE AND UNIVERSAL THROUGH NOVEMBER 14,
1998. Without the consent of a majority of the Independent Directors, each
of SPE and Universal has agreed not to transfer in privately negotiated
transactions more than 20% of its initial equity interest in the Company
prior to November 14, 1998. This restriction does not apply to transfers
(i) to a permitted transferee, (ii) to another Stockholder or its permitted
transferees, (iii) pursuant to a merger or consolidation in which Loews
Cineplex is a constituent corporation or (iv) pursuant to a bona fide third
party tender offer or exchange offer which was not induced directly or
indirectly by such Stockholder or any of its affiliates.
TAG-ALONG RIGHTS FOR ALL LOEWS CINEPLEX STOCKHOLDERS INCLUDING PUBLIC
STOCKHOLDERS. Neither SPE nor Universal nor any of their respective
affiliates may transfer, individually or collectively, an aggregate of more
than 50% of the outstanding Loews Cineplex Stock in one or a series of
related transactions to a third party transferee (or to one or more third
party transferees constituting a Group) unless each stockholder of Loews
Cineplex has the right to participate in such transfer on the same basis as
the proposed transferor(s), subject to the prior right of first refusal of
SPE and Universal described below to purchase the shares so being
transferred if such party is not the transferring stockholder.
TAG-ALONG RIGHTS OF UNIVERSAL AND THE CLARIDGE GROUP. Neither SPE nor
any of its affiliates may transfer an aggregate of more than 50% of SPE's
Initial Interest to any Person (including any Group), other than an SPE
permitted transferee, in one or a series of related transactions, unless
Universal and the Claridge Group each has the right to participate in such
transfer on the same basis as SPE and its affiliates.
RIGHT OF FIRST REFUSAL OF SPE AND UNIVERSAL. The following transfers
of Voting Shares by SPE or Universal or their respective affiliates (the
proposed transferor, the "Transferring Party") will be subject to the right
of first refusal in favor of the other: (a) any transfer in one or a series
of related privately negotiated transactions or a public offering if (i) 5%
or more of the then outstanding Voting Shares are subject to the transfer,
(ii) any transferee, or any Group of which a transferee is a member, would,
following such transfer, beneficially own 5% or more of the outstanding
Voting Shares (except, in the case of any public offering, the limitation
set forth in this clause (ii) shall not be applicable if the Transferring
Party has taken all reasonable steps to assure that such limitation shall
have been satisfied) or (iii) in the case of any transfer by SPE or any of
its affiliates, SPE's Applicable Percentage exceeds 25%; (b) any transfer
pursuant to a bona fide third party tender offer or exchange offer; (c) any
transfer to Loews Cineplex or to a subsidiary of Loews Cineplex pursuant to
a self-tender offer or otherwise; and (d) any transfer in a Market Sale. No
right of first refusal applies to any transfer between SPE or Universal and
any of their respective permitted transferees.
STANDSTILL AGREEMENTS
Each of SPE and Universal and each member of the Claridge Group has
agreed with Loews Cineplex and with each of SPE and Universal not to, and
to cause its affiliates not to, acquire, directly or indirectly, the
beneficial ownership of any additional Voting Shares, except for: (a)
acquisitions of up to an aggregate of 5% of the outstanding Voting Shares
during any twelve-month period, subject to certain price restrictions and
(b) acquisitions in privately negotiated transactions from five or fewer
Persons pursuant to offers not made generally to holders of Voting Shares
and pursuant to which the value of any consideration paid for any Voting
Shares, including brokerage fees or commissions, does not exceed 115% of
the "Market Price" (as determined in accordance with the regulations under
the Securities Act (Ontario)). The exceptions described in clauses (a) and
(b) above are not available to a Stockholder whose Applicable Percentage
would equal or exceed 25% after the acquisition if, as a result of such
acquisition, the Public Stockholders would beneficially own less than 20%
of the outstanding Voting Shares.
There are additional exceptions for acquisitions, (i) from a
Stockholder, (ii) pursuant to the exercise of equity purchase rights (see
"--Equity Purchase Rights" below), (iii) on terms and conditions approved
by the Independent Directors, (iv) pursuant to a tender or exchange offer
made in accordance with applicable law, (v) to restore a Stockholder's
percentage interest following a dilutive issuance of Voting Shares or (vi)
acquisitions of Shares of Common Stock upon the conversion of Non-Voting
Stock.
The Stockholders have agreed that, in the case of any acquisition
permitted pursuant to the foregoing provisions that would constitute a
"Rule 13e-3 transaction" (as defined in Rule 13e-3 under the Exchange Act),
prior to the consummation of any such transaction (x) a nationally
recognized investment bank shall have delivered an opinion to the Company's
Board of Directors that such transaction is fair from a financial point of
view to the stockholders of Loews Cineplex, other than the applicable
Stockholder, (y) a majority of the Independent Directors shall have
approved the transaction and (z) if the public stockholders of Loews
Cineplex beneficially own more than 20% of the Voting Shares and if
approval of stockholders of Loews Cineplex is required by the DGCL or the
Company's Charter, a majority of the shares of Common Stock held by such
public stockholders shall have been voted in favor of the transaction.
The restrictions described in the preceding three paragraphs terminate
on the earlier of (x) May 14, 2004 and (y) any time after May 14, 2002 upon
the Claridge Group ceasing to have the right to designate a Loews Cineplex
director pursuant to the Stockholders Agreement, or upon the occurrence of:
(i) a bona fide tender or exchange offer to acquire more than 20%
of the Voting Shares having been made by any Person (except that such
restrictions shall not terminate as to any Stockholder if such tender
or exchange offer is made by such Stockholder or any of its affiliates
or by any Person acting in concert with such Stockholder or any of its
affiliates or is induced by such Stockholder or any of its
affiliates); provided that if such offer is withdrawn or expires
without being consummated, such restrictions shall be reinstated (but
no such reinstatement shall prohibit any Stockholder from thereafter
purchasing Voting Shares pursuant to a contract entered into prior to
the withdrawal or expiration of such tender offer or exchange offer or
pursuant to a tender offer or exchange offer commenced by a
Stockholder prior to such time);
(ii) the Applicable Percentage of SPE, Universal or the Claridge
Group equaling or exceeding 80%; provided that, in the case of
Universal, such percentage shall be 33 1/3% at any time Universal and
its affiliates beneficially own more Voting Shares than any other
holder of shares of Common Stock;
(iii) with respect to any Stockholder, such Stockholder's
Applicable Percentage being less than 15% (provided that such
restrictions shall be reinstated if such Stockholder's Applicable
Percentage equals or exceeds 15% within one year thereafter);
(iv) any person (other than a Stockholder or a permitted
transferee) beneficially owning more than 20% of the Voting Shares,
excluding from the Voting Shares beneficially owned by such person and
Voting Shares acquired from a Stockholder, a permitted transferee or
Loews Cineplex; or
(v) the public stockholders beneficially owning more than 66 2/3%
of the Voting Shares.
Each of SPE and Universal has agreed with the other and each member of
the Claridge Group has agreed with each of SPE and Universal that neither
such Stockholder nor any of its affiliates will acquire, directly or
indirectly, the beneficial ownership of any Voting Shares if immediately
prior to such acquisition such Stockholder's Applicable Percentage exceeds
50%, excluding Voting Shares acquired from another Stockholder or its
permitted transferees, or if, as a result of such acquisition, (i) such
Stockholder and its affiliates would beneficially own an aggregate of more
than 50% of the Voting Shares, excluding Voting Shares acquired from
another Stockholder or its permitted transferees, or (ii) the Public
Stockholders would beneficially own less than 20% of the outstanding Voting
Shares. The restrictions described in clause (ii) does not apply to a
Stockholder and its affiliates, if, upon consummation of such acquisition,
such Stockholder's Applicable Percentage would be less than 25%. This
restriction does not prohibit the acquisition of shares of Common Stock
upon the conversion of Non-Voting Stock.
The restrictions described in the preceding paragraph will terminate
if: (a) the Applicable Percentage of either SPE or Universal is less than
10% (provided that such restrictions shall be reinstated if such
Stockholder's Applicable Percentage equals or exceeds 10% within one year
thereafter); (b) a bona fide tender or exchange offer to acquire more than
15% of the outstanding Voting Shares is made by any person (except that
such restrictions shall not terminate as to any Stockholder if such tender
or exchange offer is made by such Stockholder or any of its affiliates or
by any person acting in concert with such Stockholder or any of its
affiliates or is induced by such Stockholder or any of its affiliates);
provided that if such offer is withdrawn or expires without being
consummated, such restrictions shall be reinstated (but no such
reinstatement shall prohibit any Stockholder from thereafter purchasing
Voting Shares pursuant to a contract entered into prior to the withdrawal
or expiration of such tender offer or exchange offer or pursuant to a
tender offer or exchange offer commenced by a Stockholder prior to such
time); or (c) any person (other than a Stockholder or a permitted
transferee) beneficially owns more than 15% of the Voting Shares, excluding
Voting Shares acquired from a Stockholder or a permitted transferee, but
only if the sum of the Applicable Percentages of SPE and Universal is less
than 45%.
REGISTRATION RIGHTS
The Stockholders Agreement grants to the Stockholders certain demand
and piggyback registration rights with respect to the registration under
the Securities Act of shares of Common Stock (including any shares of
Common Stock issuable upon conversion of Non-Voting Stock) owned by them.
At any time after May 14, 1999, the Stockholders will be able to make
demands for registration ("Demand Registration") under the Securities Act
of shares of Common Stock owned by them, subject to certain limitations. In
no event shall the Company be required to effect, in the case of each of
SPE and Universal, more than four Demand Registrations, in the case of the
Claridge Group, more than one Demand Registration, and in the aggregate,
nine Demand Registrations. In addition, at any time following the
completion of the sale for cash by the Company in one or more underwritten
public offerings of Common Stock for an aggregate offering price of $200
million (before deducting underwriting discounts and commissions), the
Stockholders will have piggyback rights to include shares of Common Stock
owned by them in any registration statement filed by the Company with
respect to its Common Stock, subject to certain exceptions.
EQUITY PURCHASE RIGHTS
The Stockholders Agreement provides that if Loews Cineplex proposes to
issue or sell any Voting Shares pursuant to a transaction in respect of
which SPE or Universal shall have the right to consent under the
Stockholders Agreement, each such Stockholder will have the right,
exercisable in whole or in part and subject to the applicable rules of any
stock exchange on which shares of Common Stock shall then be listed, to
acquire from Loews Cineplex a portion of the Voting Shares proposed to be
issued or sold to Persons other than such Stockholder and its affiliates
(the "Issuance Shares") up to an amount equal to the number of Issuance
Shares multiplied by such Stockholder's then Applicable Percentage, prior
to giving effect to the consummation of the proposed issuance or sale and
any acquisition by a Stockholder pursuant to the exercise of such rights.
ASSIGNMENTS OF RIGHTS AND OBLIGATIONS TO TRANSFEREES
Permitted transferees of a Stockholder will be subject to the terms
and conditions of the Stockholders Agreement as if such permitted
transferees were SPE (in the case SPE or a permitted transferee of SPE is
the transferor), Universal (in the case Universal or a permitted transferee
of Universal is the transferor) or a member of the Claridge Group (in the
case a member of the Claridge Group or a permitted transferee thereof is
the transferor). Third party transferees of a Stockholder will be subject
to certain terms and conditions in the Stockholders Agreement. In certain
circumstances, third party transferees will have the right to designate
directors and may also be entitled to registration rights. Third party
transferees will not receive the tag-along rights, rights of first refusal
or equity purchase rights described above. In addition, the rights of SPE
and Universal to consent to certain significant corporate events described
under "--Consent Rights" above may not be assigned to third parties.
CERTAIN REMEDIES
In the event that SPE or Universal has a good faith belief that Loews
Cineplex or any other Stockholder is likely to breach, or has breached, in
any material respect, certain of its obligations under the Stockholders
Agreement (including those described under "--The Board of Directors"
(other than the penultimate paragraph thereof), "--Consent Rights" and
"--Standstill Agreements" above) such Stockholder may deliver notice of
such belief to Loews Cineplex and/or such other Stockholder, as the case
may be. Upon receipt of such notice and until the dispute is resolved (by a
court of competent jurisdiction, an independent arbitrator or otherwise),
neither Loews Cineplex nor any other Stockholder may take any action that
would facilitate such a breach and shall take reasonable actions to prevent
such breach, if it has not yet occurred, or to minimize any adverse
consequences to the aggrieved Stockholder of any such breach. The
operations of Loews Cineplex may be interrupted or delayed pending such
resolution. In addition, in the event that SPE or Loews Cineplex breaches
in any material respect any of their obligations to Universal under the
Stockholders Agreement, SPE and Loews Cineplex shall, at the request of
Universal, use their best efforts to amend the Company's Charter to
authorize a new class of common stock to be issued by Loews Cineplex to
Universal and its permitted transferees in exchange for the Common Stock
held by them. Such new class would be identical in all respects to the
Common Stock, except that such class would entitle the holders thereof to
proportionate representation on the Company's Board of Directors on the
same basis that Universal is entitled to representation thereon pursuant to
the Stockholders Agreement, and that the rights described under "--Consent
Rights" above would be incorporated in such class, and SPE and Universal
will cease to have any consent rights under the Stockholders Agreement.
Such new class of common stock, if issued, would be convertible into shares
of Common Stock on a one-for-one basis at any time at the discretion of the
holder.
TERMINATION
Except as otherwise described in the Stockholders Agreement, the
rights and obligations of a Stockholder and its permitted transferees under
the Stockholders Agreement shall terminate upon such Stockholder's
Applicable Percentage equaling less than 6.25% (or, in the case of the
Claridge Group, 3.5% until May 14, 2003 and 5% thereafter), subject to an
exception in circumstances where a Stockholder's Applicable Percentage is
reduced as a result of the issuance of additional Voting Shares by Loews
Cineplex.
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following statements are brief summaries of certain provisions
with respect to the Bank Credit Facilities and the Plitt Notes. The credit
agreement (the "Credit Agreement") relating to the Bank Credit Facilities
and the indenture under which the Plitt Notes were issued (the "Original
Plitt Indenture") are filed as exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998. The amendments to
the Original Plitt Indenture (as amended, the "Plitt Indenture") effected
in connection with the consummation of the At-the-Market Offer are filed as
exhibits to the Registration Statement (File No. 333-56897) in respect of
the Equity Offering. The following description does not purport to be
complete and is subject in all respects to the detailed provisions of the
Credit Agreement and the Plitt Indenture. Capitalized terms used in this
section without definition shall have the meanings specified in the Credit
Agreement or the Plitt Indenture, as the context requires.
CREDIT AGREEMENT
FACILITIES
The Bank Credit Facilities consists of a revolving credit facility in
an aggregate principal amount of up to $750,000,000 for purposes of
financing the Combination, future acquisitions, capital expenditures,
permitted investments, working capital and other general corporate purposes
and for the issuance of letters of credit. The credit facilities extended
to Loews Cineplex pursuant to the Credit Agreement (including the
uncommitted portion) constitute the "Bank Credit Facilities" for purposes
of the Indenture and are senior to the Plitt Notes. See "Risk
Factors--Effective Ranking; Subordination of the Notes; Asset Encumbrances"
and "--Restrictions Imposed by Bank Credit Facilities; Variable Interest
Rates".
INTEREST RATES
The Bank Credit Facilities provide for two pricing options: (i) Loans
on which interest is payable quarterly at a Base Rate equal to the higher
of (x) the rate of interest per annum publicly announced from time to time
by the Bankers Trust Company at its prime commercial lending rate in effect
at its principal office in New York City, or (y) the rate which is 1/2 of
1% in excess of the Federal Funds Effective Rate; and (ii) Loans on which
interest accrues for one, two, three, six or if, generally available, nine
or twelve month interest periods (but is payable not less frequently than
every three months) at a rate of interest per annum equal to (x) the
Adjusted Eurodollar Rate, plus (z) an Applicable Margin initially equal to
1.75% per annum and subject to adjustment downward based on improvements in
the Leverage Ratio and Senior Debt Rating of Loews Cineplex.
COMMITMENT FEES
Commitment Fees initially equal to 0.25% per annum (the "Commitment
Fee Percentage") will be payable quarterly in arrears with respect to the
average daily unused portion of the revolving loan commitments. The
Commitment Fee Percentage is subject to adjustment downward based on
improvements in the Leverage Ratio and the Senior Debt Rating of Loews
Cineplex.
FACILITY FEES
Certain other facility fees may be payable to the Administrative
Agent, the Co-Syndication Agents and the Lenders and from time to time, in
the amounts and at the times, separately agreed upon between Loews Cineplex
and the Administrative Agent, Co-Syndication Agents and the Lenders.
SECURITY
The obligations of Loews Cineplex under the Credit Agreement and the
other Loan Documents are secured by a first priority Lien on substantially
all of the personal property of Loews Cineplex, including without
limitation, a pledge of 100% of the equity interests of Loews Cineplex in
each of its Domestic Subsidiaries and 100% of the equity interests of Loews
Cineplex in each of its Foreign Subsidiaries, up to a maximum of 65% of the
total equity interests of each such Foreign Subsidiary.
GUARANTY
The obligations of Loews Cineplex under the Credit Agreement and the
other Loan Documents are jointly and severally guaranteed by each Domestic
Subsidiary of Loews Cineplex, including Plitt, and each guarantor,
including Plitt and each of Plitt's subsidiaries, has secured its
obligations under the guaranty by a first priority Lien on substantially
all of its personal property, including without limitation, a pledge of
100% of the equity interests of such Domestic Subsidiary in each of its
Domestic Subsidiaries and 100% of the equity interests of such Domestic
Subsidiary in each of its Foreign Subsidiaries, up to a maximum of 65% of
the total equity interests of each such Foreign Subsidiary.
NEGATIVE COVENANTS
The Credit Agreement contains covenants and provisions that restrict,
among other things, the ability of Loews Cineplex and its Subsidiaries to:
(i) incur Indebtedness; (ii) create, incur or suffer to exist Liens on any
of its property or assets; (iii) enter into guaranties or become liable
with respect to other Contingent Obligations; (iv) make Investments or
enter into joint venture arrangements; (v) make restricted junior payments
(including dividends); (vi) engage in mergers, consolidations and sales of
all or substantially all their assets; (vii) enter into agreements
restricting dividends and advances by their Subsidiaries; and (viii) engage
in transactions with Affiliates.
FINANCIAL COVENANTS
The Credit Agreement requires Loews Cineplex and its Subsidiaries on a
consolidated basis to satisfy certain financial performance criteria.
Specifically, Loews Cineplex will not (i) permit at the end of any Fiscal
Quarter (x) the ratio of Wholly-Owned Total Debt to Annualized Pro Forma
Wholly Owned EBITDA, or (y) the ratio of Consolidated Debt to Annualized
Pro Forma EBITDA, to exceed the maximum amounts set forth in the Credit
Agreement for such Fiscal Quarters or (ii) permit at the end of the fiscal
periods specified in the Credit Agreement, the ratio of (z) Annualized Pro
Forma Wholly Owned EBITDA to (y) the sum of (A) Wholly-Owned Total Debt
Interest Expense for such period plus (B) Wholly-Owned Rent Expense for
such period to be less than the minimum amounts set forth in the Credit
Agreement for such fiscal period.
PREPAYMENTS
The Credit Agreement provides that the Loans may be prepaid and the
revolving loan commitments may be permanently reduced without penalty, in
whole or in part, at any time; provided that Eurodollar Rate Loans may be
prepaid only on the expiration of the applicable Interest Period unless
certain breakage costs are reimbursed to the Lenders. In addition, the
Loans are subject to mandatory prepayment and, under certain circumstances,
reduction in the commitments out of (i) certain Net Asset Sales Proceeds,
(ii) Net Insurance/Condemnation Proceeds, (iii) Net Debt Securities
Proceeds and (iv) commencing with the fiscal year beginning March 1, 1999,
50% of the Excess Cash Flow of Loews Cineplex and its Subsidiaries. The
Loans are also subject to mandatory prepayment, without a corresponding
reduction in the commitments, to the extent that Available Cash on any date
exceeds $20,000,000.
THE PLITT NOTES
Plitt has outstanding approximately $6 million in aggregate principal
amount of the Plitt Notes. The Plitt Notes are guaranteed unconditionally
by Loews Cineplex (which guaranty is subordinated to the Bank Credit
Facilities and ranks pari passu with the Notes) under the Indenture. Plitt
may, at its option, on or after June 15, 1999, redeem all or any portion of
the outstanding Plitt Notes in exchange for a redemption price equal to (i)
105.438%, plus accrued interest, for Plitt Notes redeemed prior to June 15,
2000, (ii) 102.719%, plus accrued interest, for Plitt Notes redeemed on or
after June 15, 2000 but prior to June 15, 2001 and (iii) 100%, plus accrued
interest, for Plitt Notes redeemed on or after June 15, 2001 but before the
stated maturity date of the Plitt Notes.
The Plitt Notes are general obligations of Plitt and, accordingly, the
claims of the holders thereof to the assets and cash flow of Plitt
effectively rank superior to the claims of the holders of the Notes. See
"Risk Factors--Holding Company Structure".
<PAGE>
DESCRIPTION OF NEW NOTES
The New Notes are to be issued under an Indenture, dated as of August
5, 1998 (the "Indenture"), between the Company and The Bank of New York, a
New York banking corporation, as trustee (the "Trustee") and are
substantially identical to the Old Notes, which were issued under the
Indenture.
The Indenture is, by its terms, subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements under this
caption relating to the New Notes and the Indenture are summaries and do
not purport to be complete, and are subject to, and are qualified in their
entirety by reference to, all provisions of the Indenture, including the
definitions of certain terms therein. Wherever defined terms or particular
sections of the Indenture are referred to, such defined terms and sections
are incorporated herein by reference. Copies of the Indenture are available
at the corporate trust office of the Trustee. All references in this
section to the "Company" refer solely to Loews Cineplex Entertainment
Corporation, the issuer of the New Notes, and not to its subsidiaries.
GENERAL
The New Notes will be unsecured obligations of the Company, will be
limited to $300 million aggregate principal amount and will mature on
August 1, 2008.
The New Notes will bear interest at the rate per annum shown on the
front cover of this Prospectus from August 5, 1998 or from the most recent
Interest Payment Date to which interest has been paid or provided for,
payable semi-annually on February 1 and August 1 of each year, commencing
February 1, 1999, to the Person in whose name the Note (or any predecessor
Note) is registered at the close of business on the preceding January 15 or
July 15, as the case may be. Settlement for the New Notes will be made in
immediately available funds and payments by the Company in respect of the
New Notes (including principal, premium, if any, and interest) will be made
in immediately available funds. Interest on the New Notes will be computed
on the basis of a 360-day year comprised of twelve 30-day months. (ss.ss.
202, 301, 308 and 311)
Principal of and premium, if any, and interest on the New Notes will
be payable, and the New Notes may be presented for registration of transfer
and exchange, at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, provided that,
at the option of the Company, payment of interest on the New Notes may be
made by check mailed to the address of the Person entitled thereto as it
appears in the Note Register. Until otherwise designated by the Company,
such office or agency will be the corporate trust office of the Trustee, as
Paying Agent and Registrar. (ss.ss. 301, 306 and 1002)
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons in denominations of $1,000 and integral
multiples thereof. New Notes will not be issued in bearer form. Except as
described below, the New Notes will be deposited upon issuance with the
Trustee as Custodian for DTC in global form (the "Global Certificate").
DTC has advised the Company that it is (i) a limited purpose trust
company organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York banking law, (iii) a
member of the Federal Reserve System, (iv) a "clearing corporation" within
the meaning of the Uniform Commercial Code, as amended, and (v) a "Clearing
Agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to
the accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. Participants include securities
brokers and dealers (including the Initial Purchasers), banks and trust
companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by DTC (i)
upon deposit of the Global Certificate representing New Notes, DTC will
credit the account of Participants tendering Old Notes in exchange for New
Notes with an interest in the Global Certificate and (ii) ownership of
beneficial interests therein will be effected only through records
maintained by DTC (with respect to interests of Participants), Participants
and Indirect Participants. The laws of some states require that certain
persons take physical delivery in definitive form of securities that they
own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer the New Notes or to pledge the New
Notes as collateral to persons in such states will be limited to such
extent.
So long as DTC or its nominee is the registered owner of a Global
Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the New Notes represented by the Global
Certificate for all purposes under the Indenture and the New Notes. Except
as provided below, owners of beneficial interests in a Global Certificate
will not be entitled to have New Notes represented by such Global
Certificate registered in their names, will not receive or be entitled to
receive physical delivery of Certificated New Notes, and will not be
considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction, instruction
or approval to the Trustee thereunder. As a result, the ability of a person
having a beneficial interest in New Notes represented by a Global
Certificate to pledge or transfer such interest to persons or entities that
do not participate in DTC's system or otherwise to take action with respect
to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Accordingly, each holder of New Notes owning a beneficial interest in
a Global Certificate must rely on the procedures of DTC and, if such holder
of New Notes is not a Participant or an Indirect Participant, on the
procedures of the Participant through which such holder of New Notes owns
its interest, to exercise any rights of a holder of Notes under the
Indenture. The Company understands that under existing industry practice,
in the event the Company requests any action of a holder of New Notes or a
holder of New Notes that is an owner of a beneficial interest in a Global
Certificate desires to take any action that DTC, as the holder of such
Global Certificate, is entitled to take, DTC would authorize the
Participant to take such action or would otherwise act upon the instruction
of such holder of New Notes. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to
or payments made on account of the New Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such New Notes or
for any other matter relating to the actions or procedures of DTC.
Payments with respect to the principal of, premium, if any, and
interest on, any New Notes represented by a Global Certificate registered
in the name of DTC or its nominee on the applicable record date will be
payable by the Trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the Global Certificate representing
such New Notes under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the persons in whose names the New Notes,
including the Global Certificate, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will
have any responsibility or liability for the payment of such amounts to
beneficial owners of interests in the Global Certificate (including
principal, premium, if any, and interest), or to immediately credit the
accounts of the relevant Participants with such payment, in an amount
proportionate to their respective holdings in principal amount of the
Global Certificate as shown on the records of DTC. The Company expects that
payments by the Participant and the Indirect Participant to the beneficial
owners of interests in the Global Certificate will be governed by standing
instructions and customary practice and will be the responsibility of the
Participant or the Indirect Participant and DTC.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from the sources the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no
longer willing or able to act as a depository or DTC ceases to be
registered as a clearing agency under the Exchange Act and the Company is
unable to locate a qualified successor within 90 days, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of New Notes in definitive form under the Indenture or (iii) upon
the occurrence of certain other events, then, upon surrender by DTC of its
Global Certificate, then Certificated New Notes will be issued to each
person that DTC identifies as the beneficial owner of the New Notes
represented by the Global Certificate. In addition, subject to certain
conditions, any person having a beneficial interest in a Global Certificate
may, upon request to the Trustee, exchange such beneficial interest for
Certificated New Notes. Upon any such issuance, the Trustee is required to
register such Certificated New Notes in the name of such person or persons
(or the nominee of any thereof), and cause the same to be delivered
thereto.
OPTIONAL REDEMPTION
The New Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after August 1, 2003 and
prior to maturity, upon not less than 30 nor more than 60 days' notice
mailed to each Holder of New Notes to be redeemed at such Holder's address
appearing in the Note Register, in amounts of $1,000 or an integral
multiple of $1,000, at the following Redemption Prices (expressed as
percentages of the principal amount) plus accrued and unpaid interest, if
any, to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date), if
redeemed during the 12-month period beginning August 1 of the years
indicated:
REDEMPTION
YEAR PRICE
------------------------ -----------------
2003..................... 104.437%
2004..................... 102.958%
2005..................... 101.479%
2006 and thereafter...... 100.000%
(ss.ss. 203, 1101, 1105 and 1107)
In addition, if on or before August 1, 2001 the Company receives net
proceeds from the sale of its Common Stock in one or more Public Equity
Offerings, the Company may, at its option, use an amount equal to all or a
portion of any such net proceeds to redeem New Notes in an aggregate
principal amount of up to 33 1/3% of the original aggregate principal
amount of the New Notes, provided, however, that New Notes having a
principal amount equal to at least 66 2/3% of the original aggregate
principal amount of the New Notes remain outstanding after such redemption.
Such redemption must occur on a Redemption Date within 90 days of such sale
and upon not less than 30 or more than 60 days' notice mailed to each
Holder of New Notes to be redeemed at such Holder's address appearing in
the Note Register, in amounts of $1,000 or an integral multiple of $1,000,
at a redemption price of 108.875% of the principal amount of the New Notes
plus accrued and unpaid interest, if any, to but excluding the Redemption
Date (subject to the right of Holders of record on the relevant Regular
Record Date to receive interest due on an Interest Payment Date that is on
or prior to the Redemption Date).
If less than all the New Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the
particular New Notes to be redeemed or any portion thereof that is an
integral multiple of $1,000. (ss. 1101)
The New Notes will not have the benefit of any sinking fund.
SUBORDINATION
The indebtedness evidenced by the New Notes will, to the extent set
forth in the Indenture, be subordinate in right of payment to the prior
payment in full of all Senior Debt. Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of
assets of the Company, whether voluntary or involuntary, or any bankruptcy,
insolvency, receivership or similar proceedings of the Company, the holders
of all Senior Debt will first be entitled to receive payment in full of
such Senior Debt, or provision made for such payment, in cash or Cash
Equivalents or otherwise in a manner satisfactory to the holders of such
Senior Debt, before the Holders of the New Notes will be entitled to
receive any payment in respect of the principal of or premium, if any, or
interest on, or any obligation to repurchase, the New Notes. In the event
that notwithstanding the foregoing, the Trustee or the Holder of any New
Note receives any payment or distribution of assets of the Company of any
kind or character (including any such payment or distribution which may be
payable or deliverable by the reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the New
Notes), before all the Senior Debt is so paid in full, then such payment or
distribution will be required to be paid over or delivered forthwith to the
trustee in bankruptcy or other person making payment or distribution of
assets of the Company for application to the payment of all Senior Debt
remaining unpaid, to the extent necessary to pay the Senior Debt in full in
cash or Cash Equivalents or otherwise in a manner satisfactory to the
holders of such Senior Debt.
No payments on account of principal of, premium, if any, or interest
on, or in respect of the purchase or other acquisition of, the New Notes,
and no defeasance of the New Notes, may be made if there shall have
occurred and be continuing a Senior Payment Default. "Senior Payment
Default" means any default in the payment of any principal of or premium,
if any, or interest on Designated Senior Debt when due, whether at the due
date of any such payment or by declaration of acceleration, call for
redemption or otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt of
written notice by the Company and the Trustee of the occurrence of such
Senior Nonmonetary Default from any holder of Designated Senior Debt (or
any trustee, agent or other representative for such holder) which is the
subject of such Senior Nonmonetary Default, no payments on account of
principal of, premium, if any, or interest on, or in respect of the
purchase or other acquisition of, the New Notes, and no defeasance of the
New Notes, may be made for a period (the "Payment Blockage Period")
commencing on the date of the receipt of such notice and ending on the
earlier of (i) the date on which such Senior Nonmonetary Default shall have
been cured or waived or ceased to exist or all Designated Senior Debt the
subject of such Senior Nonmonetary Default shall have been discharged and
(ii) the 179th day after the date of the receipt of such notice. No Senior
Nonmonetary Default that existed or was continuing on the date of the
commencement of a Payment Blockage Period may be made the basis of the
commencement of a subsequent Payment Blockage Period whether or not within
a period of 360 consecutive days, unless such Senior Nonmonetary Default
shall have been cured for a period of not less than 90 consecutive days;
provided, however, any breach of any financial covenant for a period
commencing after the expiration of a Payment Blockage Period that would
give rise to a new event of default, even though such breach is a breach of
a provision under which a prior event of default previously existed, shall
constitute a new event of default for this purpose. In any event,
notwithstanding the foregoing, no more than one Payment Blockage Period may
be commenced during any 360-day period and there shall be a period of at
least 181 days during each 360-day period when no Payment Blockage Period
is in effect. "Senior Nonmonetary Default" means the occurrence or
existence and continuance of an event of default with respect to Senior
Debt, other than a Senior Payment Default, permitting the holders of the
Designated Senior Debt (or a trustee or other agent on behalf of the
holders thereof) then to declare such Designated Senior Debt due and
payable prior to the date on which it would otherwise become due and
payable.
The failure to make any payment on the New Notes by reason of the
provisions of the Indenture described under this caption "--Subordination"
will not be construed as preventing the occurrence of an Event of Default
with respect to the New Notes arising from any such failure to make
payment. Upon termination of any Payment Blockage Period the Company shall
resume making any and all required payments in respect of the New Notes,
including any missed payments.
"Senior Debt" means (i) the principal of (and premium, if any) and
interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding) on, and penalties and any obligation of the Company for
reimbursement, indemnities and fees relating to, the Senior Bank Facility,
(ii) the principal of (and premium, if any) and interest on Debt of the
Company for money borrowed, whether Incurred on or prior to the date of
original issuance of the New Notes or thereafter, and any amendments,
renewals, extensions, modifications, refinancings and refundings of any
such Debt and (iii) Permitted Interest Rate Agreements and Permitted
Currency Agreements entered into with respect to Debt described in clauses
(i) and (ii) above; provided, however, that the following shall not
constitute Senior Debt: (1) any Debt as to which the terms of the
instrument creating or evidencing the same provide that such Debt is not
superior in right of payment to the New Notes, (2) any Debt which is
subordinated in right of payment in any respect to any other Debt of the
Company, (3) Debt evidenced by the New Notes, (4) any Debt owed to a Person
when such Person is a Subsidiary of the Company, (5) any obligation of the
Company arising from Redeemable Stock of the Company, (6) that portion of
any Debt which is Incurred in violation of the Indenture and (7) Debt
which, when Incurred and without respect to any election under Section
1111(b) of Title 11, United States Code, is without recourse to the
Company. (Article Twelve)
The New Notes will rank pari passu with any Old Notes that remain
outstanding following the Termination Date and with the guarantee by the
Company of the Plitt Notes.
By reason of such subordination, in the event of insolvency by the
Company, creditors of the Company who are not holders of Senior Debt or of
the New Notes may recover less, ratably, than holders of Senior Debt and
more, ratably, than Holders of the New Notes.
The subordination provisions described above will not be applicable to
payments in respect of the New Notes from a defeasance trust established in
connection with any defeasance or covenant defeasance of the New Notes as
described under "--Defeasance".
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, Incur any Debt unless immediately after giving pro forma
effect to the Incurrence of such Debt and the receipt and application of
the proceeds thereof, the Consolidated Cash Flow Coverage Ratio of the
Company would be greater than 2.0 to 1; provided that if the Debt which is
the subject of the determination under this provision is Acquired Debt, the
Consolidated Cash Flow Coverage Ratio of the Company shall be determined by
giving effect (on a pro forma basis, as if the transaction had occurred at
the beginning of the immediately preceding four-quarter period) to both the
Incurrence or assumption of such Acquired Debt by the Company and the
inclusion in the Consolidated Cash Flow Available for Fixed Charges of the
Person whose Debt would constitute Acquired Debt.
Notwithstanding the foregoing limitation, the Company may, and may
permit any Restricted Subsidiary to, incur the following Debt:
(i) Debt under the Senior Bank Facility in an aggregate principal
amount at any one time not to exceed $1 billion, less any amounts by
which any revolving credit facility commitments under the Senior Bank
Facility are permanently reduced pursuant to the "Limitation on Asset
Dispositions" covenant below (so long as and to the extent that any
required payments in connection therewith are actually made);
(ii) the original issuance by the Company of the Debt evidenced
by the Old Notes and the New Notes;
(iii) Debt (other than Debt described in another clause of this
paragraph) outstanding on the date of original issuance of the Old
Notes after giving effect to the application of the proceeds of the
Old Notes, as described in a schedule to the Indenture;
(iv) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Subsidiary of the Company
to the Company or a Wholly Owned Restricted Subsidiary of the Company;
provided, however, that (a) any such Debt owing by the Company to a
Wholly Owned Restricted Subsidiary shall be Subordinated Debt
evidenced by an intercompany promissory note and (b) upon either (1)
the transfer or other disposition by such Wholly Owned Restricted
Subsidiary or the Company of any Debt so permitted to a Person other
than the Company or another Wholly Owned Restricted Subsidiary of the
Company or (2) the issuance (other than directors' qualifying shares),
sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Wholly Owned Restricted
Subsidiary to a Person other than the Company or another such Wholly
Owned Restricted Subsidiary, the provisions of this clause (iv) shall
no longer be applicable to such Debt and such Debt shall be deemed to
have been Incurred at the time of such transfer or other disposition;
(v) Debt consisting of Permitted Interest Rate, Currency or
Commodity Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are
used to refinance or refund, or any extension or renewal of,
outstanding Debt Incurred pursuant to the preceding paragraph or
clauses (ii) or (iii) of this paragraph (each of the foregoing, a
"refinancing") in an aggregate principal amount not to exceed the
principal amount of the Debt so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt so refinanced or the amount of any
premium (including consent payments) reasonably determined by the
Company as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase, plus the expenses of
the Company or the Restricted Subsidiary, as the case may be, incurred
in connection with such refinancing; provided, however, that (A) Debt
the proceeds of which are used to refinance the New Notes or Debt
which is pari passu with or subordinate in right of payment to the New
Notes shall only be permitted if (x) in the case of any refinancing of
the New Notes or Debt which is pari passu to the New Notes, the
refinancing Debt is made pari passu to the New Notes or subordinated
to the New Notes, and (y) in the case of any refinancing of Debt which
is subordinated to the New Notes, the refinancing Debt constitutes
Subordinated Debt; (B) the refinancing Debt by its terms, or by the
terms of any agreement or instrument pursuant to which such Debt is
issued, (1) does not provide for payments of principal of such Debt at
the stated maturity thereof or by way of a sinking fund applicable
thereto or by way of any mandatory redemption, defeasance, retirement
or repurchase thereof (including any redemption, defeasance,
retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder), in
each case prior to the stated maturity of the Debt being refinanced
and (2) does not permit redemption or other retirement (including
pursuant to an offer to purchase) of such debt at the option of the
holder thereof prior to the final stated maturity of the Debt being
refinanced), other than a redemption or other retirement at the option
of the holder of such Debt (including pursuant to an offer to
purchase) which is conditioned upon provisions substantially similar
to those described under "--Change of Control" and "--Limitation on
Asset Dispositions"; and (C) in the case of any refinancing of Debt
Incurred by the Company, the refinancing Debt may be Incurred only by
the Company, and in the case of any refinancing of Debt Incurred by a
Restricted Subsidiary, the refinancing Debt may be Incurred only by
such Restricted Subsidiary; provided, further, that Debt Incurred
pursuant to this clause (vi) may not be Incurred more than 45 days
prior to the application of the proceeds to repay the Debt to be
refinanced;
(vii) Acquired Debt, provided that such Debt if incurred by the
Company would be in compliance with the first paragraph of this
covenant; and
(viii) Debt not otherwise permitted to be Incurred pursuant to
clauses (i) through (vii) above, which, together with any other
outstanding Debt Incurred pursuant to this clause (viii), has an
aggregate principal amount not in excess of $50 million at any time
outstanding. (ss. 1008)
LIMITATION ON SENIOR SUBORDINATED DEBT
The Company may not Incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in
right of payment to the New Notes. (ss. 1009)
LIMITATION ON ISSUANCE OF GUARANTEES OF SUBORDINATED DEBT
The Company may not permit any Restricted Subsidiary, directly or
indirectly, to assume, guarantee or in any other manner become liable with
respect to any Debt of the Company that by its terms is pari passu or
junior in right of payment to the New Notes. (ss. 1010)
LIMITATION ON LIENS
The Company may not, and may not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on or with respect to any
property or assets of the Company or any such Restricted Subsidiary now
owned or hereafter acquired except for (i) Liens incurred after the date of
the Indenture securing Debt of the Company that ranks pari passu or junior
in right of payment to the New Notes, if the New Notes are secured equally
and ratably with such Debt; (ii) Liens outstanding on the date of the
Indenture; (iii) Liens for taxes, assessments, governmental charges or
claims not yet delinquent or which are being contested in good faith by
appropriate proceedings, provided, that adequate reserves with respect
thereto are maintained on the books of the Company or its Restricted
Subsidiaries, as the case may be, in conformity with generally accepted
accounting principles; (iv) landlords', carriers', warehousemen's,
mechanics', material men's, repairmen's or the like Liens arising by
contract or statute in the ordinary course of business and with respect to
amounts which are not yet delinquent or are being contested in good faith
by appropriate proceedings; (v) pledges or deposits made in the ordinary
course of business (A) in connection with leases, performance bonds and
similar obligations, or (B) in connection with workers' compensation,
unemployment insurance and other social security legislation; (vi)
easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar encumbrances which, in the aggregate, do not
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Restricted Subsidiary; (vii) any attachment or judgment
Lien that does not constitute an Event of Default; (viii) Liens securing
Acquired Debt, provided, that such Liens attach solely to the acquired
assets or the assets of the acquired entity and do not extend to or cover
any other assets of the Company or any of its Restricted Subsidiaries; (ix)
Liens to secure Senior Debt; (x) Liens in favor of the Trustee for its own
benefit and for the benefit of the Holders; (xi) any interest or title of a
lessor pursuant to a lease constituting a Capital Lease Obligation; (xii)
pledges or deposits made in connection with acquisition agreements or
letters of intent entered into in respect of a proposed acquisition; (xiii)
Liens in favor of prior holders of leases on property acquired by the
Company or of sublessors under leases on the Company property; (xiv) Liens
incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, banker's acceptances, surety
and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money); (xv) Liens (including extensions and renewals thereof) upon real or
personal property acquired after the date of the Indenture; provided that
(a) any such Lien is created solely for the purpose of securing Debt
incurred, in accordance with the "Limitation on Consolidated Debt"
covenant, (1) to finance the cost (including the cost of improvement or
construction) of the item, property or assets subject thereto and such Lien
is created prior to, at the time of or within six months after the later of
the acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Debt previously so
secured, (b) the principal amount of the Debt secured by such Lien does not
exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (xvi) leases or subleases granted to others that
do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries, taken as a whole; (xvii) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xviii) Liens on property of, or on shares of stock or Debt of, any
Person existing at the time such Person becomes, or becomes a part of, any
Restricted Subsidiary, provided that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other
than the property or assets acquired; (xix) Liens in favor of the Company
or any Restricted Subsidiary; (xx) Liens encumbering deposits securing Debt
under Permitted Interest Rate, Currency or Commodity Price Agreements;
(xxi) Liens arising out of conditional sale, title retention, consignment
or similar arrangements for the sale of goods entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Restricted
Subsidiaries; (xxii) Liens on or sales of receivables; (xxiii) the rights
of film distributors under film licensing contracts entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business on a basis customary in the movie exhibition industry; (xxiv)
Liens arising from licenses of patents, trademarks and other intellectual
property rights granted in the ordinary course of business and not
interfering in any material respect with the ordinary conduct of the
business of the Company and its Subsidiaries; and (xxv) any renewal of or
substitution of any Liens permitted by any of the preceding clauses,
provided that the Debt secured is not increased (other than by any premium
and accrued interest, plus customary fees, consent payments, expenses and
costs related to such renewal or substitution of Liens or the incurrence of
any related refinancing of Debt) and the Liens are not extended to any
additional assets (other than proceeds and accessions). This covenant does
not authorize the incurrence of any Debt not otherwise permitted by the
"Limitation on Consolidated Debt" covenant. (ss. 1011)
LIMITATION ON RESTRICTED PAYMENTS
The Company (i) may not, directly or indirectly, declare or pay any
dividend or make any distribution (including any payment in connection with
any merger or consolidation derived from assets of the Company or any
Restricted Subsidiary) in respect of its Capital Stock or to the holders
thereof, excluding any dividends or distributions by the Company payable
solely in shares of its Capital Stock (other than Redeemable Stock) or in
options, warrants or other rights to acquire its Capital Stock (other than
Redeemable Stock), (ii) may not, and may not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise acquire or retire for value
(a) any Capital Stock of the Company or any Related Person of the Company
or (b) any options, warrants or other rights to acquire shares of Capital
Stock of the Company or any Related Person of the Company or any securities
convertible or exchangeable into shares of Capital Stock of the Company or
any Related Person of the Company, (iii) may not make, or permit any
Restricted Subsidiary to make, any Investment other than a Permitted
Investment, and (iv) may not, and may not permit any Restricted Subsidiary
to, redeem, repurchase, defease or otherwise acquire or retire for value
prior to any scheduled maturity, repayment or sinking fund payment Debt of
the Company which is subordinate in right of payment to the New Notes (each
of clauses (i) through (iv) being a "Restricted Payment") if: (1) an Event
of Default, or an event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default, shall have occurred
and is continuing or would result from such Restricted Payment, or (2)
after giving pro forma effect to such Restricted Payment as if such
Restricted Payment had been made at the beginning of the applicable
four-fiscal-quarter period, the Company could not Incur at least $1.00 of
additional Debt pursuant to the terms of the Indenture described in the
first paragraph of "Limitation on Consolidated Debt" above, or (3) upon
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments from the date of issuance of the New Notes exceeds the sum of: (a)
50% of cumulative Consolidated Net Income (or, in the case Consolidated Net
Income shall be negative, less 100% of such deficit) of the Company since
the date of issuance of the Old Notes through the last day of the last full
fiscal quarter ending immediately preceding the date of such Restricted
Payment for which quarterly or annual financial statements are available
(taken as a single accounting period); plus (b) $75 million; provided,
however, that the Company or a Restricted Subsidiary may make any
Restricted Payment with the aggregate net proceeds received by the Company
on or after the date of original issuance of the Old Notes (including any
aggregate net proceeds received by the Company from the Equity Offering),
including the fair market value of property other than cash (determined in
good faith by the Board of Directors as evidenced by a resolution of the
Board of Directors filed with the Trustee), from contributions of capital
or the issuance and sale (other than to a Restricted Subsidiary) of Capital
Stock (other than Redeemable Stock) of the Company, options, warrants or
other rights to acquire Capital Stock (other than Redeemable Stock) of the
Company and Debt of the Company that has been converted into or exchanged
for Capital Stock (other than Redeemable Stock and other than by or from a
Restricted Subsidiary) of the Company after the date of original issuance
of the Old Notes, provided that any such net proceeds received by the
Company from an employee stock ownership plan financed by loans from the
Company or a Restricted Subsidiary of the Company shall be included only to
the extent such loans have been repaid with cash on or prior to the date of
determination. Not less than semiannually, the Company shall deliver to the
Trustee an Officers' Certificate setting forth any Restricted Payments made
since the last period for which such certificate has been delivered, and
the computations by which the determinations required by clauses (2) and
(3) above were made and stating that no Event of Default, or event that
with the passing of time or the giving of notice, or both, would constitute
an Event of Default, has occurred and is continuing or will result from
such Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or
would result therefrom, (i) the Company may pay any dividend on Capital
Stock of any class within 60 days after the declaration thereof if, on the
date when the dividend was declared, the Company could have paid such
dividend in accordance with the foregoing provisions; (ii) the Company may
refinance any Debt otherwise permitted by clause (vi) of the second
paragraph under "Limitation on Consolidated Debt" above or solely in
exchange for or out of the net proceeds of the substantially concurrent
sale (other than from or to a Restricted Subsidiary or from or to an
employee stock ownership plan financed by loans from the Company or a
Restricted Subsidiary of the Company) of shares of Capital Stock (other
than Redeemable Stock) of the Company, provided that the amount of net
proceeds from such exchange or sale shall be excluded from the calculation
of the amount available for Restricted Payments pursuant to the preceding
paragraph; (iii) the Company may purchase, redeem, acquire or retire any
shares of Capital Stock of the Company solely in exchange for or out of the
net proceeds of the substantially concurrent sale (other than from or to a
Restricted Subsidiary or from or to an employee stock ownership plan
financed by loans from the Company or a Restricted Subsidiary of the
Company) of shares of Capital Stock (other than Redeemable Stock) of the
Company; (iv) the Company or a Restricted Subsidiary may purchase or redeem
any Debt from Net Available Proceeds to the extent permitted under
"Limitation on Asset Dispositions"; and (v) the Company and its Restricted
Subsidiaries may make Investments, in an aggregate amount not to exceed
$200 million outstanding at any time, in entities engaged in owning,
leasing, developing or constructing motion picture theatres or principally
engaged in the business of exhibiting motion pictures. Any payment made
pursuant to clause (i), (iii) or (v) of this paragraph shall be a
Restricted Payment for purposes of calculating aggregate Restricted
Payments pursuant to the preceding paragraph. (ss. 1012)
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay dividends (in cash or
otherwise) or make any other distributions in respect of its Capital Stock
or pay any Debt or other obligation owed to the Company or any other
Restricted Subsidiary; (ii) to make loans or advances to the Company or any
other Restricted Subsidiary; or (iii) to transfer any of its property or
assets to the Company or any other Restricted Subsidiary. Notwithstanding
the foregoing, the Company may, and may permit any Restricted Subsidiary
to, suffer to exist any such encumbrance or restriction (a) pursuant to any
agreement in effect on the date of original issuance of the Old Notes as
described in a schedule to the Indenture; (b) pursuant to an agreement
relating to any Debt Incurred by a Person (other than a Restricted
Subsidiary of the Company existing on the date of original issuance of the
Old Notes or any Restricted Subsidiary carrying on any of the businesses of
any such Restricted Subsidiary) prior to the date on which such Person
became a Restricted Subsidiary of the Company and outstanding on such date
and not Incurred in anticipation of becoming a Restricted Subsidiary, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired; (c)
pursuant to an agreement effecting a renewal, refunding or extension of
Debt Incurred pursuant to an agreement referred to in clause (a) or (b)
above, provided, however, that the provisions contained in such renewal,
refunding or extension agreement relating to such encumbrance or
restriction are no more restrictive in any material respect than the
provisions contained in the agreement the subject thereof, as determined in
good faith by the Board of Directors; (d) in the case of clause (iii)
above, restrictions contained in any security agreement (including a
capital lease) securing Debt of a Restricted Subsidiary otherwise permitted
under the Indenture, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (e) in the
case of clause (iii) above, customary nonassignment provisions entered into
in the ordinary course of business consistent with past practices in leases
and other contracts to the extent such provisions restrict the transfer or
subletting or licensing of any such lease or the assignment or licensing of
rights under any such contract; (f) any restriction with respect to a
Restricted Subsidiary of the Company imposed pursuant to an agreement which
has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary, provided
that consummation of such transaction would not result in an Event of
Default or an event that, with the passing of time or the giving of notice
or both, would constitute an Event of Default, that such restriction
terminates if such transaction is closed or abandoned and that the closing
or abandonment of such transaction occurs within one year of the date such
agreement was entered into; or (g) such encumbrance or restriction is the
result of applicable corporate law or regulation relating to the payment of
dividends or distributions. (ss. 1013)
LIMITATION ON ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary to,
make any Asset Disposition in one or more related transactions unless: (i)
the Company or the Restricted Subsidiary, as the case may be, receives
consideration for such disposition at least equal to the fair market value
for the assets sold or disposed of as determined by the Board of Directors
in good faith; (ii) at least 75% of the consideration for such disposition
consists of cash or readily marketable cash equivalents or Qualifying
Theater Assets or the assumption of Debt (other than Debt that is
subordinated to the New Notes) relating to such assets and release from all
liability on the Debt assumed; and (iii) all Net Available Proceeds, less
any amounts invested or committed to be invested within 360 days of such
disposition in assets related to the business of the Company, are applied
within 360 days of such disposition (1) first, to the permanent repayment
or reduction of Senior Debt then outstanding under any agreements or
instruments which would require such application or prohibit payments
pursuant to clause (2) following, (2) second, to the extent of remaining
Net Available Proceeds, to make an Offer to Purchase outstanding New Notes
at 100% of their principal amount plus accrued interest to the date of
purchase and, to the extent required by the terms thereof, any other Debt
of the Company that is pari passu with the New Notes at a price no greater
than 100% of the principal amount thereof plus accrued interest to the date
of purchase, (3) third, to the extent of any remaining Net Available
Proceeds following the completion of the Offer to Purchase, to the
repayment of other Debt of the Company or Debt of a Restricted Subsidiary
of the Company, to the extent permitted under the terms thereof and (4)
fourth, to the extent of any remaining Net Available Proceeds, to any other
use as determined by the Company which is not otherwise prohibited by the
Indenture. (ss. 1014)
TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, enter into any transaction (or series of related
transactions) with an Affiliate or Related Person of the Company (other
than the Company or a Wholly Owned Restricted Subsidiary of the Company),
including any Investment, either directly or indirectly, unless such
transaction is on terms no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained in a comparable arm's-length
transaction with an entity that is not an Affiliate or Related Person. For
any transaction that involves in excess of $1,000,000 but less than or
equal to $5,000,000, the Chief Executive Officer of the Company shall
determine that the transaction satisfies the above criteria and shall
evidence such a determination by a certificate filed with the Trustee. For
any transaction that involves in excess of $5,000,000, a majority of the
disinterested members of the Board of Directors of the Company shall
determine that the transaction satisfies the above criteria and shall
evidence such a determination by a Board Resolution filed with the Trustee.
For any transaction that involves in excess of $10,000,000, the Company
shall also obtain an opinion from a nationally recognized expert with
experience in appraising the terms and conditions of the type of
transaction (or series of related transactions) for which the opinion is
required stating that such transaction (or series of related transactions)
is on terms no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained in a comparable arm's-length transaction
with an entity that is not an Affiliate or Related Person of the Company,
which opinion shall be filed with the Trustee. (ss. 1015)
Notwithstanding anything to the contrary contained in the Indenture,
the foregoing provisions shall not apply to (i) transactions with any
employee, officer or director of the Company or any of its Restricted
Subsidiaries pursuant to employee benefit plans or compensation
arrangements or agreements entered into in the ordinary course of business,
(ii) transactions with any Affiliate or Related Person in which such
Affiliate or Related Person acquires or purchases the capital stock of the
Company or any Restricted Subsidiary at fair market value, (iii) commercial
transactions, including without limitation film rentals, in the ordinary
course of business with Affiliates of the Company on terms that are
customary in the motion picture exhibition industry or consistent with past
practice, or (iv) the performance of any agreement as in effect on the date
of original issuance of the Old Notes.
CHANGE OF CONTROL
Within 30 days of the occurrence of a Change of Control, the Company
will be required to make an Offer to Purchase all Outstanding New Notes at
a purchase price equal to 101% of their principal amount plus accrued and
unpaid interest, if any, to the date of purchase. A "Change of Control"
will be deemed to have occurred at such time as either (a) any Person
(other than a Permitted Holder) or any Persons acting together that would
constitute a "group" (a "Group") for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto (other than Permitted
Holders), together with any Affiliates or Related Persons thereof, shall
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act,
or any successor provision thereto), directly or indirectly, at least 50%
of the aggregate voting power of all classes of Voting Stock of the Company
(for the purposes of this clause (a) a person shall be deemed to
beneficially own the Voting Stock of a corporation that is beneficially
owned (as defined above) by another corporation (a "parent corporation"),
if such person beneficially owns (as defined above) at least 50% of the
aggregate voting power of all classes of Voting Stock of such parent
corporation); or (b) any Person or Group (other than Permitted Holders),
together with any Affiliates or Related Persons thereof, shall succeed in
having a sufficient number of its nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company after
such election who was a nominee of or is an Affiliate or Related Person of
such Person or Group, will constitute a majority of the Board of Directors
of the Company. (ss. 1016)
A Change of Control may also constitute an event of default under the
Senior Bank Facility in which case the lenders thereunder shall have the
right to declare all or any portion of the amounts outstanding under the
Senior Bank Facility immediately due and payable. If that occurs and the
Company defaults in the payment of such amounts, a Senior Payment Default
will have occurred and the Company will be prohibited from commencing the
Offer to Purchase. See "--Subordination".
In the event that the Company makes an Offer to Purchase the New
Notes, the Company intends to comply with any applicable securities laws
and regulations, including any applicable requirements of Section 14(e) of,
and Rule 14e-1 under, the Exchange Act.
PROVISION OF FINANCIAL INFORMATION
For so long as any of the New Notes are outstanding, the Company shall
file with the Commission the annual reports, quarterly reports and other
documents which a reporting company is required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor
provisions thereto. (ss. 1017)
UNRESTRICTED SUBSIDIARIES
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary
and each other Person that is then or thereafter becomes a Subsidiary of
such Subsidiary will be deemed to be an Unrestricted Subsidiary.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such by
the Board of Directors as set forth below where (a) neither the Company nor
any of its other Subsidiaries (other than another Unrestricted Subsidiary)
(i) provides credit support for, or any Guarantee of, any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or (ii) is directly or
indirectly liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such Subsidiary
or any Subsidiary of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Debt of
the Company and its Subsidiaries (other than another Unrestricted
Subsidiary) to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity
and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien
on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an
Unrestricted Subsidiary, provided that either (x) the Subsidiary to be so
designated has total assets of $1,000 or less or (y) immediately after
giving effect to such designation, the Company could Incur at least $1.00
of additional Debt pursuant to the first paragraph under "--Limitation on
Consolidated Debt" and provided, further, that the Company could make a
Restricted Payment in an amount equal to the greater of the fair market
value and book value of such Subsidiary pursuant to "Limitation on
Restricted Payments" and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder. (ss. 1018)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit
any other Person to consolidate with or merge into the Company and (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all
or substantially all of its assets unless: (1) in a transaction in which
the Company does not survive or in which the Company sells, leases or
otherwise disposes of all or substantially all of its assets, the successor
entity to the Company is organized under the laws of the United States of
America or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee in form satisfactory to the Trustee, all of the Company's
obligations under the Indenture; (2) immediately before and after giving
effect to such transaction and treating any Debt which becomes an
obligation of the Company or a Restricted Subsidiary as a result of such
transaction as having been Incurred by the Company or such Restricted
Subsidiary at the time of the transaction, no Event of Default or event
that with the passing of time or the giving of notice, or both, would
constitute an Event of Default shall have occurred and be continuing; (3)
immediately after giving effect to such transaction, the Consolidated Net
Worth of the Company (or other successor entity to the Company) is equal to
or greater than that of the Company immediately prior to the transaction;
(4) immediately after giving effect to such transaction and treating any
Debt which becomes an obligation of the Company or a Restricted Subsidiary
as a result of such transaction as having been Incurred by the Company or
such Restricted Subsidiary at the time of the transaction, the Company
(including any successor entity to the Company) could Incur at least $1.00
of additional Debt pursuant to the provisions of the Indenture described in
the first paragraph under "Limitation on Consolidated Debt" above; and (5)
certain other conditions are met. (ss. 801)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the Indenture. Reference is made to the Indenture for the full definition
of all such terms, as well as any other terms used herein for which no
definition is provided. (ss. 101)
"Acquired Debt" of any particular Person means Debt of any other
Person existing at the time such other Person merged with or into or became
a Subsidiary of such particular Person or assumed by such particular Person
in connection with the acquisition of assets from any other Person, and not
Incurred by such other Person in connection with, or in contemplation of,
such other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including any issuance or sale by a Restricted Subsidiary of
Capital Stock of such Restricted Subsidiary, and including a consolidation
or merger or other sale of any such Restricted Subsidiary with, into or to
another Person in a transaction in which such Restricted Subsidiary ceases
to be a Restricted Subsidiary, but excluding a disposition by a Restricted
Subsidiary of such Person to such Person or a Wholly Owned Restricted
Subsidiary of such Person or by such Person to a Wholly Owned Restricted
Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person, (ii) substantially all of the assets of such
Person or any of its Restricted Subsidiaries representing a division or
line of business or (iii) other assets or rights of such Person or any of
its Restricted Subsidiaries outside of the ordinary course of business,
provided in each case that the aggregate consideration for such transfer,
conveyance, sale, lease or other disposition is equal to $2 million or
more. The term "Asset Disposition" shall not include (i) any sale and
leaseback of Qualifying Theater Assets effected at fair market value, and
(ii) any swap or exchange of Qualifying Theater Assets of the Company or
its Subsidiaries for Qualifying Theater Assets of another Person, provided
that if the fair market value of the assets exchanged by the Company or its
Subsidiary exceeds the fair market value of the assets to be received, in
each case as determined in good faith by the Board of Directors of the
Company, such excess shall be subject to the "Limitation on Asset
Dispositions" covenant.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which
is required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles. The stated maturity of such
obligation shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. The principal
amount of such obligation shall be the capitalized amount thereof that
would appear on the face of a balance sheet of such Person in accordance
with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock
or other equity participations, including partnership interests, whether
general or limited, of such Person.
"Cash Equivalents" means (i) direct obligations of the United States
of America or any agency thereof having maturities of not more than one
year from the date of acquisition, (ii) time deposits and certificates of
deposit of any domestic commercial bank of recognized standing having
capital and surplus in excess of $500 million, with maturities of not more
than one year from the date of acquisition, (iii) repurchase obligations
issued by any bank described in clause (ii) above with a term not to exceed
30 days, (iv) commercial paper rated at least A-1 or the equivalent thereof
by S&P or at least P-1 or the equivalent thereof by Moody's, in each case
maturing within one year after the date of acquisition and (v) shares of
any money market mutual fund, or similar fund, in each case having excess
of $500 million, which invests predominantly in investments of the types
described in clauses (i) through (iv) above.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" for any period
means the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated
Interest Expense of the Company and its Restricted Subsidiaries for such
period, plus (ii) Consolidated Income Tax Expense of the Company and its
Restricted Subsidiaries for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of
the Company and its Restricted Subsidiaries for such period, plus (iv) all
other non-cash items reducing Consolidated Net Income of the Company and
its Restricted Subsidiaries, less all non-cash items increasing
Consolidated Net Income of the Company and its Restricted Subsidiaries;
provided, however, that there shall be excluded therefrom the Consolidated
Cash Flow Available for Fixed Charges (if positive) of any Restricted
Subsidiary of the Company (calculated separately for such Restricted
Subsidiary in the same manner as provided above for the Company) that is
subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary of
the Company to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) Consolidated Cash Flow Available for
Fixed Charges of the Company and its Restricted Subsidiaries for the period
of the most recently completed four consecutive fiscal quarters for which
quarterly or annual financial statements are available to (ii) Consolidated
Fixed Charges of the Company and its Restricted Subsidiaries for such
period; provided, however, that Consolidated Fixed Charges shall be
adjusted to give effect on a pro forma basis to any Debt that has been
Incurred by the Company or any Restricted Subsidiary since the beginning of
such period that remains outstanding and to any Debt that is proposed to be
Incurred by the Company or any Restricted Subsidiary as if in each case
such Debt had been Incurred on the first day of such period and as if any
Debt that (i) is or will no longer be outstanding as the result of the
Incurrence of any such Debt or (ii) had been repaid or retired during such
period had not been outstanding as of the first day of such period;
provided, however, that in making such computation, the Consolidated
Interest Expense of the Company and its Restricted Subsidiaries
attributable to interest on any proposed Debt bearing a floating interest
rate shall be computed on a pro forma basis as if the rate in effect on the
date of computation had been the applicable rate for the entire period; and
provided further that, in the event the Company or any of its Restricted
Subsidiaries has made Asset Dispositions or acquisitions of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such
period, such computation shall be made on a pro forma basis as if the Asset
Dispositions or acquisitions had taken place on the first day of such
period.
"Consolidated Fixed Charges" for any period means the sum of (i)
Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such
period calculated in accordance with generally accepted accounting
principles.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in
accordance with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without
deduction of interest income) of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in
accordance with generally accepted accounting principles, including without
limitation or duplication (or, to the extent not so included, with the
addition of), (i) the amortization of Debt discounts; (ii) any commissions,
fees or other payments (except reimbursement payments) with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees
with respect to interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements; (iv) Preferred Stock
dividends of Restricted Subsidiaries of the Company (other than with
respect to Redeemable Stock) declared and paid or payable to Persons other
than the Company or any Restricted Subsidiary; (v) accrued Redeemable Stock
dividends of the Company and its Restricted Subsidiaries payable to Persons
other than the Company or any Restricted Subsidiary, whether or not
declared or paid; (vi) interest on Debt guaranteed by the Company and its
Restricted Subsidiaries; and (vii) the portion of any rental obligation
allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with generally
accepted accounting principles; provided that there shall be excluded
therefrom (a) the net income (or loss) of any Person acquired by the
Company or a Restricted Subsidiary of the Company in a pooling-of-interests
transaction for any period prior to the date of such transaction, (b) the
net income (or loss) of any Person that is not a Subsidiary of the Company
except to the extent of the amount of dividends or other distributions
actually paid to the Company or a Subsidiary of the Company by such Person
during such period, (c) gains or losses on Asset Dispositions by the
Company or its Restricted Subsidiaries, (d) all extraordinary gains and
extraordinary losses, (e) the cumulative effect of changes in accounting
principles, (f) non-recurring and other one-time non-operating expenses and
(g) the tax effect of any of the items described in clauses (a) through (f)
above; provided, further, that for purposes of any determination pursuant
to the provisions described under "Limitation on Restricted Payments",
there shall further be excluded therefrom the net income (but not net loss)
of any Restricted Subsidiary of the Company that is subject to a
restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary of the
Company to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with
respect to the Company, adjustments following the date of the Indenture to
the accounting books and records of the Company in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto) or otherwise resulting from the acquisition of control of the
Company by another Person shall not be given effect to.
"Consolidated Tangible Assets" of any Person means, as of any date,
the amount which, in accordance with GAAP, would be set forth under the
caption "Total Assets" (or any like caption) on a consolidated balance
sheet of such Person and its Restricted Subsidiaries, less all intangible
assets, including, without limitation, goodwill, organization costs,
patents, trademarks, copyrights, franchises, and research and development
costs.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
Incurred in connection with the acquisition of property, assets or
businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services
(including securities repurchase agreements but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business
which are not overdue or which are being contested in good faith), (v)
every Capital Lease Obligation of such Person, (vi) all Receivables Sales
of such Person, together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or
other amounts in connection therewith, (vii) all Redeemable Stock issued by
such Person, (viii) Preferred Stock of Restricted Subsidiaries of such
Person held by Persons other than such Person or one of its Wholly Owned
Restricted Subsidiaries, (ix) every obligation under Interest Rate,
Currency or Commodity Price Agreements of such Person and (x) every
obligation of the type referred to in clauses (i) through (ix) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The "amount" or "principal
amount" of Debt at any time of determination as used herein represented by
(a) any Receivables Sale, shall be the amount of the unrecovered capital or
principal investment of the purchaser (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment, (b) any
Redeemable Stock, shall be the maximum fixed redemption or repurchase price
in respect thereof and (c) any Permitted Interest Rate, Currency or
Commodity Price Agreements shall be zero.
"Designated Senior Debt" shall mean (i) the obligations of the Company
under the Senior Bank Facility and (ii) any other Senior Debt of the
Company permitted under the Indenture the principal amount of which at
original issuance is $25 million or more and that has been designated by
the Company as Designated Senior Debt.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
of such Debt, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Debt of the payment of such Debt, or
(iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings correlative to the foregoing); provided,
however, that the Guarantee by any Person shall not include endorsements by
such Person for collection or deposit, in either case, in the ordinary
course of business.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Debt or
other obligation or the recording, as required pursuant to generally
accepted accounting principles or otherwise, of any such Debt or other
obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to
the foregoing); provided, however, that a change in generally accepted
accounting principles that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt.
"Interest Rate, Currency or Commodity Price Agreement" of any Person
means any forward contract, futures contract, swap, option or other
financial agreement or arrangement (including, without limitation, caps,
floors, collars and similar agreements) relating to, or the value of which
is dependent upon, interest rates, currency exchange rates or commodity
prices or indices (excluding contracts for the purchase or sale of goods in
the ordinary course of business).
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers
of cash or other property to others or payments for property or services
for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities
or evidence of Debt issued by, any other Person, including any payment on a
Guarantee of any obligation of such other Person.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability),
encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with
respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiree of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, provincial, foreign and local taxes
required to be accrued as a liability as a consequence of such Asset
Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Debt which is secured by such assets in accordance with
the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such
Asset Disposition or by applicable law, be repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person or
joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts to be provided by such Person or any Restricted Subsidiary thereof,
as the case may be, as a reserve in accordance with generally accepted
accounting principles against any liabilities associated with such assets
and retained by such Person or any Restricted Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, in each
case as determined by the Board of Directors, in its reasonable good faith
judgment evidenced by a resolution of the Board of Directors filed with the
Trustee; provided, however, that any reduction in such reserve following
the consummation of such Asset Disposition will be treated for all purposes
of the Indenture and the New Notes as a new Asset Disposition at the time
of such reduction with Net Available Proceeds equal to the amount of such
reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Note Register on the date of the Offer offering to
purchase up to the principal amount of New Notes specified in such Offer at
the purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be, subject to any contrary requirements of applicable law, not
less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of New Notes within five
Business Days after the Expiration Date. The Company shall notify the
Trustee at least 15 Business Days (or such shorter period as is acceptable
to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by
the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain a description of the
events requiring the Company to make the Offer to Purchase and any other
information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such
Holders to tender New Notes pursuant to the Offer to Purchase. The Offer
shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding New Notes
offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such
amount has been determined pursuant to the Indenture provision
requiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of New Notes accepted for payment (as
specified pursuant to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the New
Notes registered in the name of such Holder and that any portion of a
Note tendered must be tendered in an integral multiple of $1,000
principal amount;
(6) the place or places where New Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any New Note not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due
and payable upon each New Note being accepted for payment pursuant to
the Offer to Purchase and that interest thereon shall cease to accrue
on and after the Purchase Date;
(9) that each Holder electing to tender a New Note pursuant to
the Offer to Purchase will be required to surrender such New Note at
the place or places specified in the Offer prior to the close of
business on the Expiration Date (such New Note being, if the Company
or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion
of New Notes tendered if the Company (or its Paying Agent) receives,
not later than the close of business on the Expiration Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the New Note the Holder
tendered, the certificate number of the New Note the Holder tendered
and a statement that such Holder is withdrawing all or a portion of
his tender;
(11) that (a) if New Notes in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such New Notes and (b) if New Notes in an aggregate
principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase New Notes having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only New Notes in denominations of $1,000
or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose New Note is purchased
only in part, the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such New Note without
service charge, a new New Note or New Notes, of any authorized
denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the New
Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance
with the Offer for such Offer to Purchase.
"Permitted Holder" means each of Sony Pictures Entertainment Inc. and
Universal Studios, Inc. and their respective Affiliates.
"Permitted Interest Rate, Currency or Commodity Price Agreement" of
any Person means any Interest Rate, Currency or Commodity Price Agreement
entered into with one or more financial institutions in the ordinary course
of business that is designed to protect such Person against fluctuations in
interest rates or currency exchange rates with respect to Debt Incurred and
which shall have a notional amount no greater than the payments due with
respect to the Debt being hedged thereby, or in the case of currency or
commodity protection agreements, against currency exchange rate or
commodity price fluctuations in the ordinary course of business relating to
then existing financial obligations or then existing or sold production and
not for purposes of speculation.
"Permitted Investments" means (i) an Investment in the Company or a
Restricted Subsidiary of the Company; (ii) an Investment in a Person, if
such Person or a Subsidiary of such Person will, as a result of the making
of such Investment and all other contemporaneous related transactions,
become a Restricted Subsidiary of the Company or be merged or consolidated
with or into or transfer or convey all or substantially all its assets to
the Company or a Restricted Subsidiary of the Company; (iii) a Temporary
Cash Investment; (iv) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with generally accepted accounting principles; (v)
stock, obligations or securities received in settlement of debts owing to
the Company or a Restricted Subsidiary of the Company as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection,
enforcement or agreement in lieu of foreclosure of any Lien in favor of the
Company or a Restricted Subsidiary of the Company; (vi) refundable
construction advances made with respect to the construction of properties
of a nature or type that are used in a business of or similar or related to
the business of the Company or its Restricted Subsidiaries in the ordinary
course of business; (vii) advances or extensions of credit on terms
customary in the industry in the form of accounts or other receivables
incurred, or pre-paid film rentals, and loans and advances made in
settlement of such accounts receivable, all in the ordinary course of
business; (viii) Investments in the Old Notes and the New Notes; (ix) any
consolidation or merger of a Restricted Subsidiary of the Company to the
extent otherwise permitted under the Indenture; (x) Investments in
Permitted Interest Rate Currency or Commodity Price Agreements; (xi) entry
into and Investments in joint ventures, partnerships and other Persons
engaged or proposing to engage in the indoor motion picture exhibition
business, provided that the amount of such Investment, valued at the time
made, together with all Investments previously made pursuant to this clause
(xi), valued at the respective times made, shall not exceed 10% of the
Consolidated Tangible Assets of the Company as of the last day of the full
fiscal quarter ending immediately prior to the date of such Investment; and
(xii) other Investments not to exceed $20 million.
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Qualifying Theater Assets" means all motion picture theaters (whether
owned in fee or leased), all other motion picture theater assets,
including, without limitation, theater furniture and fixtures, all real
property acquired for the purpose of motion picture theater development or
construction, and joint venture interests or partnership interests in
Persons owning, leasing, developing or constructing motion picture theaters
or principally engaged in the business of exhibiting motion pictures.
"Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person
relating thereto or a disposition of defaulted Receivables for purpose of
collection and not as a financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon
the occurrence of an event) matures or is required to be redeemed (pursuant
to any sinking fund obligation or otherwise) or is convertible into or
exchangeable for Debt or is redeemable at the option of the holder thereof,
in whole or in part, at any time prior to the final Stated Maturity of the
New Notes; provided that "Redeemable Stock" shall not include any Capital
Stock that is payable at maturity, or upon required redemption or
redemption at the option of the holder thereof, or that is automatically
convertible or exchangeable, solely in or into Common Stock of such Person.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the Outstanding Common Stock of such
Person (or, in the case of a Person that is not a corporation, 5% or more
of the equity interest in such Person) or (b) 5% or more of the combined
voting power of the Voting Stock of such Person.
"Restricted Subsidiary" means any Subsidiary, whether existing on or
after the date of the Indenture, unless such Subsidiary is an Unrestricted
Subsidiary.
"Senior Bank Facility" means the Credit Agreement, dated as of May 14,
1998, among the Company, as borrower, the lenders listed therein, as
lenders, Bankers Trust Company, as administrative agent and co-syndication
agent and Bank of America NT&SA, The Bank of New York and Credit Suisse
First Boston, as co-syndication agents, as it may be amended or restated
from time to time, and any renewal, extension, refinancing, refunding or
replacement thereof.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior
payment in full of the New Notes to at least the following extent: (i) no
payments of principal of (or premium, if any) or interest on or otherwise
due in respect of such Debt may be permitted for so long as any default in
the payment of principal (or premium, if any) or interest on the New Notes
exists; (ii) in the event that any other default that with the passing of
time or the giving of notice, or both, would constitute an event of default
exists with respect to the New Notes, upon notice by 25% or more in
principal amount of the New Notes to the Trustee, the Trustee shall have
the right to give notice to the Company and the holders of such Debt (or
trustees or agents therefor) of a payment blockage, and thereafter no
payments of principal of (or premium, if any) or interest on or otherwise
due in respect of such Debt may be made for a period of 179 days from the
date of such notice; and (iii) such Debt may not (x) provide for payments
of principal of such Debt at the stated maturity thereof or by way of a
sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each
case prior to the final Stated Maturity of the New Notes or (y) permit
redemption or other retirement (including pursuant to an offer to purchase
made by the Company) of such other Debt at the option of the holder thereof
prior to the final Stated Maturity of the New Notes, other than a
redemption or other retirement at the option of the holder of such Debt
(including pursuant to an offer to purchase made by the Company) which is
conditioned upon a change of control of the Company pursuant to provisions
substantially similar to those described under "Change of Control" (and
which shall provide that such Debt will not be repurchased pursuant to such
provisions prior to the Company's repurchase of the New Notes required to
be repurchased by the Company pursuant to the provisions described under
"Change of Control").
"Subsidiary" of any Person means (i) a corporation more than 50% of
the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and
one or more other Subsidiaries thereof, directly or indirectly, has at
least a majority ownership and power to direct the policies, management and
affairs thereof.
"Temporary Cash Investments" means any Investment in the following
kinds of instruments: (A) readily marketable obligations issued or
unconditionally guaranteed as to principal and interest by the United
States of America or by any agency or authority controlled or supervised by
and acting as an instrumentality of the United States of America if, on the
date of purchase or other acquisition of any such instrument by the Company
or any Restricted Subsidiary of the Company, the remaining term to maturity
or interest rate adjustment is not more than two years; (B) obligations
(including, but not limited to, demand or time deposits, bankers'
acceptances and certificates of deposit) issued or guaranteed by a
depository institution or trust company incorporated under the laws of the
United States of America, any state thereof or the District of Columbia,
provided that (1) such instrument has a final maturity not more than one
year from the date of purchase thereof by the Company or any Restricted
Subsidiary of the Company and (2) such depository institution or trust
company has at the time of the Company's or such Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment,
(x) capital, surplus and undivided profits (as of the date of such
institution's most recently published financial statements) in excess of
$100 million and (y) the long-term unsecured debt obligations (other than
such obligations rated on the basis of the credit of a Person other than
such institution) of such institution, at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment
providing for such Investment, are rated in the highest rating category of
both Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("S&P"), and Moody's Investors Service, Inc. ("Moody's"); (C) commercial
paper issued by any corporation, if such commercial paper has, at the time
of the Company's or any Restricted Subsidiary's Investment therein or
contractual commitment providing for such Investment credit ratings of at
least A-1 by S&P and P-1 by Moody's; (D) money market mutual or similar
funds having assets in excess of $100 million; (E) readily marketable debt
obligations issued by any corporation, if at the time of the Company's or
Restricted Subsidiary's Investment therein or contractual commitment
providing for such Investment (1) the remaining term to maturity is not
more than two years and (2) such debt obligations are rated in one of the
two highest rating categories of both S&P and Moody's; (F) demand or time
deposit accounts used in the ordinary course of business with commercial
banks the balances in which are at all times fully insured as to principal
and interest by the Federal Deposit Insurance Corporation or any successor
thereto; and (G) to the extent not otherwise included herein, Cash
Equivalents. In the event that either S&P or Moody's ceases to publish
ratings of the type provided herein, a replacement rating agency shall be
selected by the Company with the consent of the Trustee, and in each case
the rating of such replacement rating agency most nearly equivalent to the
corresponding S&P or Moody's rating, as the case may be, shall be used for
purposes hereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only
so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more
Wholly Owned Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a)
failure to pay principal of (or premium, if any, on) any New Note when due;
(b) failure to pay any interest on any New Note when due, continued for 30
days; (c) default in the payment of principal and interest on New Notes
required to be purchased pursuant to an Offer to Purchase as described
under "Change of Control" and "Limitation on Certain Asset Dispositions"
when due and payable; (d) failure to perform or comply with the provisions
described under "Merger, Consolidation and Certain Sales of Assets"; (e)
failure to perform any other covenant or agreement of the Company under the
Indenture or the New Notes continued for 60 days after written notice to
the Company by the Trustee or Holders of at least 25% in aggregate
principal amount of Outstanding New Notes; (f) default under the terms of
any instrument evidencing or securing Debt for money borrowed by the
Company or any Restricted Subsidiary having an outstanding principal amount
of $15 million individually or in the aggregate which default results in
the acceleration of the payment of such indebtedness or constitutes the
failure to pay such indebtedness at final maturity after expiration of any
applicable grace period; (g) the rendering of a final judgment or judgments
(not subject to appeal) against the Company or any Restricted Subsidiary in
an amount in excess of $15 million which remains undischarged or unstayed
for a period of 60 days after the date on which the right to appeal has
expired; and (h) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any Restricted Subsidiary. (ss. 501) Subject to
the provisions of the Indenture relating to the duties of the Trustee in
case an Event of Default shall occur and be continuing, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (ss. 603)
Subject to such provisions for the indemnification of the Trustee, the
Holders of a majority in aggregate principal amount of the Outstanding New
Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (ss. 512)
If an Event of Default (other than an Event of Default described in
Clause (h) above) shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding
New Notes may accelerate the maturity of all New Notes; provided, however,
that so long as any Senior Debt under the Senior Bank Facility is
outstanding, any such acceleration shall not be effective until the earlier
of (a) five Business Days after notice of such acceleration is delivered to
the Administrative Agent for the Senior Bank Facility and (b) the
acceleration of any Senior Debt under the Senior Bank Facility; provided,
further, that after such acceleration, but before a judgment or decree
based on acceleration, the Holders of a majority in aggregate principal
amount of Outstanding New Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the
non-payment of accelerated principal, have been cured or waived as provided
in the Indenture. Notwithstanding the foregoing, if an Event of Default
specified in Clause (h) above occurs, the Outstanding New Notes will ipso
facto become immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. (ss. 502) For information as
to waiver of defaults, see "Modification and Waiver".
No Holder of any New Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default (as defined) and unless also the
Holders of at least 25% in aggregate principal amount of the Outstanding
New Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding New Notes a direction inconsistent with
such request and shall have failed to institute such proceeding within 60
days. (ss. 507) However, such limitations do not apply to a suit instituted
by a Holder of a New Note for enforcement of payment of the principal of
and premium, if any, or interest on such New Note on or after the
respective due dates expressed in such New Note. (ss. 508)
The Company will be required to furnish to the Trustee quarterly a
statement as to the performance by the Company of certain of its
obligations under the Indenture and as to any default in such performance.
(ss. 1019)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding
New Notes (except as to (i) rights of registration of transfer and exchange
and the Company's right of optional redemption, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen New Notes, (iii)
rights of Holders to receive payment of principal and interest on the New
Notes, (iv) rights, obligations and immunities of the Trustee under the
Indenture and (v) rights of the Holders of the New Notes as beneficiaries
of the Indenture with respect to any property deposited with the Trustee
payable to all or any of them), if (x) the Company will have paid or caused
to be paid the principal of and interest on the Notes as and when the same
will have become due and payable or (y) all outstanding New Notes (except
lost, stolen or destroyed New Notes which have been replaced or paid) have
been delivered to the Trustee for cancellation.
DEFEASANCE
The Indenture provides that, at the option of the Company, (A) if
applicable, the Company will be discharged from any and all obligations in
respect of the Outstanding New Notes or (B) if applicable, the Company may
omit to comply with certain restrictive covenants, that such omission shall
not be deemed to be an Event of Default under the Indenture and the New
Notes, in either case (A) or (B) upon irrevocable deposit with the Trustee,
in trust, of money and/or U.S. Government Obligations which will provide
money in an amount sufficient in the opinion of a nationally recognized
firm of independent certified public accountants to pay the principal of
and premium, if any, and each installment of interest, if any, on the
outstanding New Notes. With respect to clause (B), the obligations under
the Indenture other than with respect to such covenants and the Events of
Default other than the Events of Default relating to such covenants above
shall remain in full force and effect. Such trust may only be established
if, among other things (i) with respect to clause (A), the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling or there has been a change in law, which in the opinion of counsel
provides that Holders of the New Notes will not recognize gain or loss for
Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; or, with respect to
clause (B), the Company has delivered to the Trustee an Opinion of Counsel
to the effect that the Holders of the New Notes will not recognize gain or
loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred; (ii) no Event of Default or
event that with the passing of time or the giving of notice, or both, shall
constitute an Event of Default shall have occurred or be continuing; (iii)
the Company has delivered to the Trustee an Opinion of Counsel to the
effect that such deposit shall not cause the Trustee or the trust so
created to be subject to the Investment Company Act of 1940; and (iv)
certain other customary conditions precedent are satisfied. (Article 13)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding New Notes; provided, however,
that no such modification or amendment may, without the consent of the
Holder of each Outstanding New Note affected thereby, (a) change the stated
maturity of the principal of, or any installment of interest on, any New
Note, (b) reduce the principal amount of, or the premium or interest on,
any New Note, (c) change the place or currency of payment of principal of,
or premium or interest on, any New Note, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any New Note,
(e) reduce the above-stated percentage of Outstanding New Notes necessary
to modify or amend the Indenture, (f) reduce the percentage of aggregate
principal amount of Outstanding New Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of
certain defaults, or (g) modify any provisions of the Indenture relating to
the modification and amendment of the Indenture or the waiver of past
defaults or covenants, except as otherwise specified. (ss. 902)
The Holders of a majority in aggregate principal amount of the
Outstanding New Notes, on behalf of all Holders of New Notes, may waive
compliance by the Company with certain restrictive provisions of the
Indenture. (ss. 1020) Subject to certain rights of the Trustee, as provided
in the Indenture, the Holders of a majority in aggregate principal amount
of the Outstanding New Notes, on behalf of all Holders of New Notes, may
waive any past default under the Indenture, except a default in the payment
of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase. (ss. 513)
GOVERNING LAW
The Indenture and the New Notes are governed by the laws of the State
of New York.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically
set forth in the Indenture. During the existence of an Event of Default,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of
such person's own affairs. (ss. 601)
The Indenture and provisions of the Trust Indenture Act incorporated
by reference therein contain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect
of any such claim as security or otherwise. The Trustee is permitted to
engage in other transactions with the Company or any Affiliate, provided,
however, that if it acquires any conflicting interest (as defined in the
Indenture or in the Trust Indenture Act), it must eliminate such conflict
or resign. (ss.ss. 608, 613)
<PAGE>
CERTAIN FEDERAL TAX
CONSEQUENCES OF AN INVESTMENT IN THE NEW NOTES
The following is a summary of certain U.S. federal income tax
consequences (and, in the case of Non-U.S. Holders (as defined below)
certain U.S. federal estate tax consequences) of the acquisition, ownership
and disposition of New Notes by investors that acquire New Notes in the
Exchange Offer. This summary does not discuss all of the aspects of U.S.
federal income and estate taxation which may be relevant to certain
investors in light of their particular investment or other circumstances.
In addition, this summary does not discuss any U.S. state or local income
or foreign income or other tax consequences. This summary is based upon the
provisions of the Code, Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect as of
the date of this Prospectus and all of which are subject to change or
differing interpretation, possibly with retroactive effect. The discussion
below deals only with New Notes held as capital assets (generally, property
held for investment) and does not address holders of New Notes that may be
subject to special rules (including, without limitation, certain U.S.
expatriates, financial institutions, insurance companies, tax-exempt
entities, dealers in securities or currencies, traders in securities that
elect mark-to-market accounting treatment, and persons who hold New Notes
as part of a straddle, hedge, conversion or other integrated transaction).
Prospective investors should consult their own tax advisors regarding the
particular U.S. federal, state and local and foreign income and other tax
consequences of acquiring, owning and disposing of the New Notes that may
be applicable to them.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
For purposes of the following discussion, a "U.S. Holder" means a
beneficial owner of a New Note that is, for U.S. federal income tax
purposes, (i) a citizen or individual resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of
its source or (iv) a trust if, in general, the trust is subject to the
supervision of a court within the United States and the control of one or
more United States persons as described in section 7701(a)(30) of the Code.
TAXATION OF STATED INTEREST. In general, stated interest paid on a New
Note will be taxable to a U.S. Holder as ordinary income at the time it is
received or accrued in accordance with the U.S. Holder's regular method of
accounting for federal income tax purposes.
MARKET DISCOUNT AND BOND PREMIUM. If a U.S. Holder purchases a New
Note (or purchased the Old Note for which the New Note was exchanged, as
the case may be) at a price that is less than its principal amount, the
excess of the principal amount over the U.S. Holder's purchase price will
be treated as "market discount." However, such market discount will be
considered to be zero if it is less than 1/4 of 1% of the principal amount
multiplied by the number of complete years to maturity from the date the
U.S. Holder purchased such New Note (or Old Note). Under the market
discount rules of the Code, a U.S. Holder generally will be required to
treat any principal payment on, or any gain realized on the sale, exchange,
retirement or other disposition of, a New Note as ordinary income
(generally treated as interest income) to the extent of the market discount
which accrued but was not previously included in income. In addition, the
U.S. Holder may be required to defer, until the maturity of the New Note or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued
to purchase or carry such New Note (or the Old Note for which the New Note
was exchanged, as the case may be). In general, market discount will be
considered to accrue ratably during the period from the date of acquisition
of the New Note (or Old Note for which the New Note was exchanged, as the
case may be) to the maturity date of the New Note, unless the U.S. Holder
makes an irrevocable election (on an instrument-by-instrument basis) to
accrue market discount under a constant yield method. A U.S. Holder may
elect to include market discount currently as it accrues (under either a
ratable or constant yield method), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of
the New Note and upon the receipt of certain payments and the deferral of
interest deductions will not apply. The election to include market discount
in income currently, once made, applies to all market discount obligations
acquired on or after the first day of the first taxable year to which the
election applies, and may not be revoked without the consent of the
Internal Revenue Service.
If a U.S. Holder purchases a New Note (or purchased the Old Note for
which the New Note was exchanged, as the case may be) for an amount in
excess of the amount payable at maturity of the New Note, such holder will
be considered to have purchased the New Note (or Old Note) with "bond
premium" equal to the excess of the U.S. Holder's purchase price over the
amount payable at maturity (or on an earlier call date if it results in a
smaller amortizable bond premium). A U.S. Holder may elect to amortize such
premium using a constant yield method over the remaining term of the New
Note (or until an earlier call date if it resulted in a smaller amortizable
bond premium). The amortized amount of such premium for a taxable year
generally will be treated first as a reduction of interest on such New Note
included in such taxable year to the extent thereof, then as a deduction
allowed in that taxable year to the extent of the U.S. Holder's prior
interest inclusions on such New Note, and finally as a carryforward
allowable against the U.S. Holder's future interest inclusions on such New
Note. Such election, once made, is irrevocable without the consent of the
Internal Revenue Service and applies to all taxable bonds held during the
taxable year for which the election is made or subsequently acquired.
DISPOSITIONS. Upon the sale, exchange or retirement of a New Note, a
U.S. Holder generally will recognize taxable gain or loss in an amount
equal to the difference, if any, between the amount realized on such sale,
exchange or retirement and such holder's adjusted tax basis in the New
Note. A U.S. Holder's adjusted tax basis in a New Note will generally equal
the cost of such New Note (or, in the case of a New Note acquired in
exchange for an Old Note in the Exchange Offer, the tax basis of such Old
Note, as discussed above under "Certain Federal Income Tax Consequences of
the Exchange Offer"), increased by the amount of any market discount
previously included in the U.S. Holder's gross income, and reduced by the
amount of any amortizable bond premium applied to reduce, or allowed as a
deduction against, interest with respect to such New Note. Gain or loss
recognized by a U.S. Holder on the sale, exchange or retirement of a New
Note generally will be capital gain or loss (except with respect to amounts
received upon a disposition attributable to accrued but unpaid interest or
accrued market discount not previously included in income, which in either
case will be taxable as ordinary income). Such capital gain or loss will be
long-term capital gain or loss if the New Note has been held for more than
one year at the time of the disposition.
BACKUP WITHHOLDING. In general, "backup withholding" at a rate of 31%
may apply to payments of principal and interest made on a New Note, and to
the proceeds of a sale or exchange of a New Note before maturity, that are
made to a non-corporate U.S. Holder if such holder fails to provide a
correct taxpayer identification number or otherwise comply with applicable
requirements of the backup withholding rules. The backup withholding tax is
not an additional tax and may be credited against a U.S. Holder's U.S.
federal income tax liability, provided that correct information is provided
to the Internal Revenue Service.
CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
For purposes of the following discussion, a "Non-U.S. Holder" is a
beneficial owner of a New Note that is not, for U.S. federal income tax
purposes, a U.S. Holder (as defined above). An individual may, subject to
certain exceptions, be deemed to be a resident alien (as opposed to a
non-resident alien) by virtue of being present in the United States on at
least 31 days in the calendar year and for an aggregate of at least 183
days during a three-year period ending in the current calendar year
(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident
aliens are subject to U.S. federal tax as if they were U.S. citizens.
Under present U.S. federal income and estate tax law and subject to
the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest on a New
Note by the Company or any agent of the Company to any Non-U.S. Holder
will not be subject to withholding of U.S. federal income tax,
provided that in the case of interest (1) the Non-U.S. Holder does not
directly or indirectly, actually or constructively, own 10 percent or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, (2) the Non-U.S. Holder is not (x) a
controlled foreign corporation that is related to the Company through
sufficient stock ownership, or (y) a bank receiving interest described
in Section 881(c)(3)(A) of the Code, and (3) either (A) the beneficial
owner of the New Note certifies to the Company or its agent, under
penalties of perjury, that it is not a "United States person" (as
defined in the Code) and provides its name and address, or (B) a
securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade
or business (a "financial institution") and holds the New Note on
behalf of the beneficial owner certifies to the Company or its agent
under penalties of perjury that such statement has been received from
the beneficial owner by it or by the financial institution between it
and the beneficial owner and furnishes the payor with a copy thereof;
(ii) a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain or income realized on the sale, exchange, redemption,
retirement at maturity or other disposition of a New Note (provided
that, in the case of proceeds representing accrued interest, the
conditions described in paragraph (i) above are met) unless (1) such
Non-U.S. Holder is an individual who is present in the United States
for 183 days or more during the taxable year and certain other
conditions are met, or (2) such gain is effectively connected with the
conduct of a U.S. trade or business by such Non-U.S. Holder, or if an
income tax treaty applies, is generally attributable to a U.S.
"permanent establishment" maintained by such Non-U.S. Holder; and
(iii) a New Note held by an individual who at the time of death
is not a citizen or resident of the United States will not be subject
to U.S. federal estate tax as a result of such individual's death if,
at the time of such death, (1) the individual did not directly or
indirectly, actually or constructively, own 10 percent or more of the
total combined voting power of all classes of stock of the Company
entitled to vote, and (2) the income on the New Note would not have
been effectively connected with the conduct of a trade or business by
the individual in the United States.
If a Non-U.S. Holder is engaged in a trade or business in the United
States and interest on the New Note is effectively connected with the
conduct of such trade or business (or, if an income tax treaty applies, and
the Non-U.S. Holder maintains a U.S. "permanent establishment" to which the
interest is generally attributable), the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraph (i) (provided
that such holder furnishes a properly executed United States Internal
Revenue Service ("IRS") Form 4224 or successor form on or before any
payment date to claim such exemption), may be subject to U.S. federal
income tax on such interest on a net basis in the same manner as if it were
a U.S. Holder.
In addition, a foreign corporation that is a holder of a New Note may
be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments, unless it qualifies for a lower rate under an applicable
income tax treaty. For this purpose, interest on a New Note or gain
recognized on the disposition of a New Note will be included in earnings
and profits if such interest or gain is effectively connected with the
conduct by the foreign corporation of a trade or business in the United
States.
Recently finalized Treasury Regulations generally effective for
payments made after December 31, 1999 (the "Final Regulations") will
provide alternative methods for satisfying the certification requirement
described in paragraph (i)(3) above and will require a Non-U.S. Holder
which provides an IRS Form 4224 or successor form (as discussed above), and
may also require a Non-U.S. Holder claiming the benefit of an income tax
treaty, to also provide its U.S. taxpayer identification number. The Final
Regulations generally also will require, in the case of a New Note held by
a foreign partnership, that (x) the certification described in paragraph
(i)(3) above be provided by the partners and (y) the partnership provide
certain information, including a U.S. taxpayer identification number. A
look-through rule will apply in the case of tiered partnerships.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent
thereof (in its capacity as such) to a Non-U.S. Holder of a New Note if
such holder has provided the required certification that it is not a United
States person as set forth in paragraph (i) above, provided that neither
the Company nor its agent has actual knowledge that the holder is a United
States person. The Company or its agent may, however, report payments of
interest on the New Notes. Payments of the proceeds from a disposition by a
Non-U.S. Holder of a New Note made to or through a foreign office of a
broker will not be subject to information reporting or backup withholding,
except that information reporting may apply to such payments if the broker
is (i) a United States person, (ii) a controlled foreign corporation for
U.S. federal income tax purposes, (iii) a foreign person 50% or more of
whose gross income is effectively connected with a U.S. trade or business
for a specified three-year period, or (iv) with respect to payments made
after December 31, 1999, a foreign partnership, if at any time during its
tax year, one or more of its partners are U.S. persons (as defined in
Treasury regulations) who in the aggregate hold more than 50% of the income
or capital interest in the partnership or if, at any time during its tax
year, such foreign partnership is engaged in a U.S. trade or business.
Payments of the proceeds from a disposition by a Non-U.S. Holder of a New
Note made to or through the U.S. office of a broker is subject to
information reporting and backup withholding unless the holder or
beneficial owner certifies as to its taxpayer identification number or
otherwise establishes an exemption from information reporting and backup
withholding.
Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder would be allowed as a refund or a credit against such
holder's U.S. federal income tax liability, provided the required
information is furnished to the IRS.
<PAGE>
PLAN OF DISTRIBUTION
Except as described below, (i) a broker-dealer may not participate in
the Exchange Offer in connection with a distribution of the New Notes, (ii)
such broker-dealer would be deemed an underwriter in connection with such
distribution and (iii) such broker-dealer would be required to comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transactions. A broker-dealer may,
however, receive New Notes for its own account pursuant to the Exchange
Offer in exchange for Old Notes when such Old Notes were acquired as a
result of market-making activities or other trading activities. Each such
broker-dealer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer
(other than an "affiliate" of the Company) in connection with resales of
such New Notes. The Company has agreed to make this Prospectus, as amended
or supplemented, available to any such broker-dealer for use in connection
with any such resale for a period of 180 days after the Expiration Date or,
earlier, if all New Notes have been disposed of by such broker-dealers.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market in negotiated
transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes
that were received by it for its own account pursuant to the Exchange Offer
may be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any such resale of the New Notes and any commissions
or concessions received by an such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states
that by acknowledging that it will deliver and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-dealer
that requests such documents in a Letter of Transmittal for a period of 180
days after the Expiration Date or, earlier, if all New Notes have been
disposed of by such broker-dealers. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or
concessions of any brokers and dealers and transfer taxes and will
indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities
Act.
The New Notes will constitute a new issue of securities with no
established trading market and, accordingly, no assurance can be given that
an active public or other market will develop for the New Notes or as to
the liquidity of or the trading market for the New Notes. If a trading
market does not develop or is not maintained, holders of the New Notes may
experience difficulty in reselling the New Notes or may be unable to sell
them at all. If a market for the New Notes develops, any such market may
cease to continue at any time. In addition, if a market for the New Notes
develops, the market prices of the New Notes may be volatile. Factors such
as fluctuations in the Company's earnings and cash flow, the difference
between the Company's actual results and results expected by investors and
analysts could cause the market prices of the New Notes to fluctuate
substantially.
<PAGE>
VALIDITY OF THE NEW NOTES
The validity of the New Notes will be passed upon for the Company by
Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York, counsel for the Company.
EXPERTS
The consolidated financial statements of Loews Cineplex and
subsidiaries as of February 28, 1998 and 1997 and for each of the three
fiscal years in the period ended February 28, 1998 and the financial
statements of Loeks-Star Partners at February 26, 1998 and February 27,
1997 and for each of the three fiscal years in the period ended February
26, 1998, included in this Prospectus have been so included in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Cineplex Odeon Corporation as
of December 31, 1997 and December 31, 1996 and for each of the years in the
three year period ended December 31, 1997 have been included in this
Prospectus in reliance upon the report of KPMG, independent chartered
accountants, appearing elsewhere herein, and upon the authority of the said
firm as experts in accounting and auditing.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
Three Months ended May 31, 1998 and May 31, 1997
Unaudited Condensed Consolidated Balance Sheets ........................F-2
Unaudited Condensed Consolidated Statements of Operations...............F-3
Unaudited Condensed Consolidated Statements of Cash Flows...............F-4
Notes to Unaudited Condensed Consolidated Financial Statements .........F-5
Three years ended February 28, 1998, February 28, 1997
and February 29, 1996
Report of Independent Accountants......................................F-12
Consolidated Balance Sheet.............................................F-13
Consolidated Statement of Operations...................................F-14
Consolidated Statement of Changes in Stockholder's Equity..............F-15
Consolidated Statement of Cash Flows...................................F-16
Notes to Consolidated Financial Statements.............................F-17
LOEKS-STAR PARTNERS
Three year periods ending February 26, 1998, February 27, 1997
and February 29, 1996
Report of Independent Accountants......................................F-28
Balance Sheet..........................................................F-29
Statements of Income...................................................F-30
Statements of Partners' Capital........................................F-31
Statements of Cash Flows...............................................F-32
Notes to Financial Statements..........................................F-33
CINEPLEX ODEON CORPORATION
Three years ended December 31, 1997, 1996 and 1995
Independent Auditors' Report...........................................F-37
Consolidated Balance Sheet.............................................F-38
Consolidated Income Statement..........................................F-39
Consolidated Statement of Changes in Cash Resources....................F-40
Consolidated Statement of Changes in Shareholders' Equity..............F-41
Notes to the Consolidated Financial Statements.........................F-42
Three month periods ended March 31, 1998 and 1997 (unaudited)
Consolidated Balance Sheet.............................................F-54
Consolidated Income Statement..........................................F-55
Consolidated Statement of Changes in Cash Resources....................F-56
Notes to the Consolidated Financial Statements.........................F-57
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
FEBRUARY 28,
MAY 31, 1998 1998
------------ -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 37,785 $ 9,064
Accounts receivable........................... 15,374 5,479
Inventories................................... 4,659 1,146
Prepaid expenses and other current assets..... 14,114 2,520
----------- -----------
TOTAL CURRENT ASSETS....................... 71,932 18,209
PROPERTY, EQUIPMENT AND LEASEHOLDS, NET......... 1,180,376 609,152
EXCESS PURCHASE PRICE........................... 224,304 --
OTHER ASSETS
Long-term investments and advances to
partnerships................................. 28,941 31,763
Goodwill, net................................. 83,913 53,143
Other intangible assets, net.................. 6,503 6,005
Deferred charges and other assets............. 21,318 10,279
----------- -----------
TOTAL ASSETS............................... $ 1,617,287 $ 728,551
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses......... $ 230,471 $ 62,934
Due to Sony affiliates........................ -- 3,810
Deferred revenue.............................. 22,122 --
Current maturities of long-term debt and
other obligations............................ 9,785 770
----------- -----------
TOTAL CURRENT LIABILITIES....................... 262,378 67,514
DEFERRED INCOME TAXES........................... 16,174 18,299
LONG-TERM DEBT AND OTHER OBLIGATIONS............ 720,056 10,513
DEBT DUE TO SONY AFFILIATES..................... -- 292,523
PENSION AND OTHER POSTRETIREMENT OBLIGATIONS.... 9,668 3,791
OTHER LIABILITIES............................... 13,743 11,400
----------- -----------
TOTAL LIABILITIES.......................... 1,022,019 404,040
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 13).........
STOCKHOLDERS' EQUITY............................
Common stock ($.01 par value, 300,000,000
shares authorized; 44,079,924 shares issued
and outstanding at May 31, 1998 and
19,270,321 shares issued and outstanding at
February 28, 1998)........................... 441 193
Common stock-Class A non-voting ($.01 par
value, 10,000,000 authorized; 1,202,486
shares issued and outstanding at May 31,
1998 and February 28, 1998).................. 12 12
Common stock-Class B non-voting ($.01 par
value, 10,000,000 shares authorized; 84,000
shares issued and outstanding at May 31,
1998 and nil issued and outstanding at
February 28, 1998)........................... 1 --
Additional paid-in capital.................... 591,613 299,277
Retained earnings............................. 3,201 25,029
----------- -----------
TOTAL STOCKHOLDERS' EQUITY................. 595,268 324,511
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. $ 1,617,287 $ 728,551
=========== ===========
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
FOR THE THREE MONTHS ENDED
---------------------------
MAY 31,
1998 (B) MAY 31, 1997
------------ ------------
REVENUES
Admissions..................................... $ 83,207 $ 67,370
Concessions.................................... 31,170 23,486
Other.......................................... 3,437 2,360
---------- ----------
117,814 93,216
---------- ----------
EXPENSES
Theatre operations and other expenses.......... 85,115 67,400
Cost of concessions............................ 4,828 3,695
General and administrative..................... 7,946 5,937
Depreciation and amortization.................. 14,681 12,597
---------- ----------
112,570 89,629
---------- ----------
INCOME FROM OPERATIONS........................... 5,244 3,587
INTEREST EXPENSE................................. 6,106 3,622
---------- ----------
LOSS BEFORE INCOME TAXES......................... (862) (35)
INCOME TAX (BENEFIT)/ EXPENSE.................... (119) 365
---------- ----------
NET LOSS......................................... $ (743) $ (400)
========== ==========
Weighted Average Shares Outstanding--basic (A).. 24,619,805 20,472,807
Weighted Average Shares Outstanding--diluted (A) 24,984,549 20,472,807
Loss per Share--basic........................... $ (.03) $ (.02)
========== ==========
Loss per Share--diluted......................... $ (.03) $ (.02)
========== ==========
- --------------------------------------------------
(A) The quarter ended May 31, 1997 has been restated to reflect a stock
dividend declared on February 5, 1998.
(B) Includes the operating results of Cineplex Odeon Corporation from May
15, 1998 through May 31, 1998.
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
FOR THE THREE
MONTHS ENDED
---------------------------
MAY 31, MAY 31,
1998 1997
------------- -------------
OPERATING ACTIVITIES
Net loss..................................... $ (743) $ (400)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization............... 14,681 12,597
Equity earnings from long-term investments, (514) 640
net of distributions received.............
Changes in operating assets and liabilities:
Decrease in deferred taxes.................. (2,125) (953)
(Increase)/decrease in accounts receivable.. 291 491
Increase/(decrease) in accounts payable and
accrued expenses.......................... 12,030 (1,652)
Increase/(decrease) in other operating
assets and liabilities, net............... 3,672 (749)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 27,292 9,974
------------- -------------
INVESTING ACTIVITIES
Repayments/(borrowings) from partnerships.... 5,994 (3,556)
Investments in partnerships.................. (2,658) --
Capital expenditures......................... (16,117) (5,404)
Merger related costs......................... (5,809) --
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES.......... (18,590) (8,960)
------------- -------------
FINANCING ACTIVITIES
(Repayment)/borrowing of debt due to Sony
affiliates.................................. (299,487) 10,535
Proceeds from bank credit facility........... 500,000 --
Repayment of long-term debt.................. (179,294) (86)
Proceeds on exercise of stock options........ 351 --
Deferred financing fees from bank credit
facility.................................... (5,943) --
Dividend paid to Sony affiliate on
Combination................................. (80,108) --
Proceeds from issuance of common stock to
Universal on Combination.................... 84,500 --
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES...... 20,019 10,449
------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS.......... 28,721 11,463
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....................................... 9,064 2,160
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 37,785 $ 13,623
============= ============
Supplemental Cash Flow Information:
Income taxes paid, net of refunds
received................................. $ 600 $ 917
Interest paid (including $6,942 and ============= ============
$6,609 paid to Sony affiliates).......... $ 9,121 $ 6,861
============= ============
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)
NOTE 1--THE COMPANY AND BASIS OF PRESENTATION
Loews Cineplex Entertainment Corporation ("LCP" or the "Company",
formerly LTM Holdings, Inc.), is a major motion picture theatre exhibition
company with operations in North America and Europe. The Company conducts
business under the Loews Theatres, Sony Theatres, Cineplex Odeon Theatres,
Star Theatres, Magic Johnson Theatres and Yelmo Cineplex Theatres marquees.
As of May 31, 1998, LCP owns, or has interests in, and operates 2,794
screens at 450 theatres in 22 states and the District of Columbia, 6
Canadian provinces, Hungary and Turkey. The Company's principal markets
include New York, Boston, Chicago, Baltimore, Dallas, Houston, Detroit, Los
Angeles, Seattle, Washington D.C., Toronto, Montreal and Vancouver. The
Company holds a 50% partnership interest in each of the Loeks-Star Theatres
("LST") and Magic Johnson Theatres ("MJT") partnerships. LST and MJT hold
interests in and operate 12 locations, comprising a total of 149 screens.
Screens and locations for the partnerships are included in the Company
amounts referred to above. Since June 10, 1998, the Company also has a 50%
interest in 108 screens in 13 theatre locations in Spain through a joint
venture with Yelmo Films S.A., called Yelmo Cineplex de Espana.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information; therefore, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included. The business combination with Cineplex Odeon has been accounted
for under the purchase method of accounting, and, therefore, the unaudited
consolidated financial statements include the operating results of Cineplex
Odeon Corporation from the date of combination (May 15, 1998) to May 31,
1998. Operating results for the three months ended May 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ending February 28, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended February 28, 1998.
NOTE 2--BUSINESS COMBINATION
On May 14, 1998, pursuant to the Amended and Restated Master Agreement
(the "Master Agreement") dated September 30, 1997, LTM Holdings, Inc. and
Cineplex Odeon Corporation ("Cineplex" or "Cineplex Odeon"), another motion
picture exhibitor with operations in the U.S. and Canada, combined (the
"Combination"). As called for in the Master Agreement, on the date of the
Combination, the outstanding common shares of Cineplex Odeon were exchanged
for LCP shares on a ten for one basis.
At the closing of the Combination, the Company issued 7,264,642 shares
of Common Stock and 80,000 shares of Class B Non-Voting Common Stock to
Universal Studios, Inc. ("Universal"), 4,324,003 shares of Common Stock and
4,000 shares of Class B Non-Voting Common Stock to the Charles Rosner
Bronfman Family Trust and certain related shareholders (the "Claridge
Group") and 6,111,269 shares of common stock to the other shareholders of
record of Cineplex Odeon Corporation, for an aggregate value of
approximately $266.8 million, in exchange for the outstanding shares of
Cineplex Odeon Corporation and its wholly-owned subsidiary, Plitt Theatres,
Inc. In addition, the Company issued 4,426,607 shares of common stock to
Universal for consideration of $84.5 million as required under a
subscription agreement and 2,664,304 shares of common stock in connection
with the transfer by Sony Pictures Entertainment Inc. ("SPE") of its
interest in Star Theatres of Michigan, Inc. ("Star") and S&J Theatres, Inc.
("S&J") to the Company.
As a result of the Combination, SPE, Universal, the Claridge Group and
others own 51.1% (49.9% voting common stock), 26.0% (26.6% voting common
stock), 9.6% and 13.3%, respectively, of LCP common stock.
The Combination has been accounted for under the purchase method of
accounting and, accordingly, the cost to acquire Cineplex Odeon will be
allocated to the assets acquired and liabilities assumed of Cineplex Odeon
based on their respective fair values, with the excess to be allocated to
goodwill. The Company has arranged for an independent valuation and other
studies required to determine the fair value of the assets acquired and
liabilities assumed. These valuations and studies have not been completed
and, accordingly, the balances reflected in the unaudited consolidated
statement of financial position as of May 31, 1998 are preliminary and
subject to further revision and adjustments. For purposes of these
unaudited financial statements, the carrying value of the Cineplex Odeon
net assets acquired was assumed to approximate fair value. Therefore, the
$224.3 million of excess purchase price over the historical net book value
of the net assets of Cineplex Odeon (excluding $31 million of historical
goodwill) has been classified on the unaudited balance sheet as Excess
Purchase Price and the related amortization expense reflected in the
unaudited consolidated statement of operations and the following unaudited
pro forma results of operations for the three months ended May 31, 1998 has
been recorded on a straight line basis over a forty year period.
Upon completion of the determination of fair value, the Excess
Purchase Price will be allocated to specific assets and liabilities of
Cineplex Odeon. It is anticipated that there will be reductions in the
carrying value associated with certain assets, and alternatively the fair
value of certain other assets and liabilities may exceed carrying value.
Accordingly, the final valuation could result in materially different
amounts and allocations of Excess Purchase Price from the amounts and
allocations reflected in the following unaudited pro forma results of
operations and the unaudited consolidated financial statements, primarily
between goodwill, property, equipment and leaseholds and certain
liabilities resulting in corresponding changes in depreciation and
amortization amounts. For every one million dollars of Excess Purchase
Price allocated to fixed assets, depreciation and amortization will
increase $25 annually (assuming an average 20 year service life for fixed
assets and straight line depreciation). Based on preliminary estimates of
fair value related to certain assets and liabilities, additional Excess
Purchase Price of between $100 million and $150 million could result at the
conclusion of the valuation. The Company currently anticipates that the
necessary valuations and related allocations will be completed by the end
of fiscal 1999.
The unaudited condensed pro forma results of operations presented
below assumes that the Combination occurred at the beginning of each period
presented. The unaudited pro forma information is not necessarily
indicative of the combined results of operations of LCP and Cineplex Odeon
that would have occurred if the transaction had occurred on the dates
previously indicated nor are they necessarily indicative of future
operating results of the combined company.
THREE MONTHS ENDED
---------------------------
MAY 31, 1998 MAY 31, 1997
------------- -------------
Revenues....................................... $ 214,325 $ 228,358
============= =============
Net loss....................................... $ (14,536) $ (8,310)
============= =============
Net loss per common share...................... $ (0.32) $ (0.18)
============= =============
NOTE 3--ACCOUNTS RECEIVABLE
As of May 31, 1998, accounts receivable consisted of trade receivables
of $12,248 and other receivables of $3,126. As of February 28, 1998,
accounts receivable consisted of trade receivables of $1,885 and other
receivables of $3,594.
NOTE 4--PROPERTY, EQUIPMENT AND LEASEHOLDS
Property, equipment and leaseholds totaled $1,180,376 and $609,152 as
of May 31, 1998 and February 28, 1998, respectively. The increase
experienced during the period is primarily due to the inclusion of the net
book value of the property, equipment and leaseholds of Cineplex Odeon
Corporation in conjunction with the Combination. As more fully described in
Note 2, for purposes of these unaudited consolidated financial statements,
the historical carrying value of Cineplex Odeon property, equipment and
leaseholds was assumed to approximate fair value and is subject to further
revision and adjustment.
NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
MAY 31, FEBRUARY 28,
1998 1998
------------ ------------
Accounts payable--trade........................... $ 80,973 $ 36,924
Accrued expenses and other....................... 149,498 $ 26,010
------------ ------------
$ 230,471 $ 62,934
============ ============
NOTE 6--LONG-TERM DEBT AND OTHER OBLIGATIONS
Long-term debt and other obligations consist of:
MAY 31, FEBRUARY 28,
1998 1998
------------ ------------
Mortgages payable-Non-recourse, payable from
1998 through 2008. Interest rates from
5.61% to 11.5%............................. $ 27,373 $ 250
Capitalized lease obligations payable in
various amounts through 2017. Interest
rates range from 8% to 16%................. 29,468 11,033
Bankers Trust revolving credit facility of
up to $750,000, with interest at Base Rate
(as defined) (8.5% at May 31, 1998) due
2003....................................... 473,000 --
Plitt Theatres, Inc. Senior Subordinated
Notes with interest at 10.875% due 2004.... 200,000 --
------------ ------------
729,841 11,283
Less: Current maturities..................... 9,785 770
------------ ------------
$ 720,056 $ 10,513
============ ============
On May 14, 1998, in connection with the Combination, the Company
entered into a $1 billion senior credit facility with Bankers Trust
Company, as administrative agent. The new credit facility has been used to
repay all intercompany amounts due to Sony Corporation of America and
affiliates and has replaced Cineplex Odeon's existing credit facility. This
credit facility is comprised of a $750 million senior secured revolving
credit facility, secured by substantially all of the assets of LCP and its
subsidiaries, and a $250 million uncommitted facility. The credit facility
bears interest, at a rate of either the current prime rate as offered by
Bankers Trust Company or an Adjusted Eurodollar rate plus an applicable
margin based on the Company's Leverage Ratio (as defined). The senior
credit facility includes various financial covenants, including a leverage
test and interest coverage test, as well as customary restrictive
covenants, including: (i) limitations on indebtedness, (ii) limitations on
dividends and other payment restrictions, (iii) limitations on asset sales,
(iv) limitations on transactions with affiliates, (v) limitations on the
issuance and sale of capital stock of subsidiaries, (vi) limitations on
lines of business, (vii) limitations on merger, consolidation or sale of
assets and (viii) certain reporting requirements. The Company's initial
borrowing under the new credit facility to fund the aforementioned
transactions at the time of closing was $500 million.
The Company's revolving credit facility and Plitt Theatres, Inc. note
indenture contain certain covenants including those related to the
maintenance of maximum leverage ratios and a minimum debt service coverage
ratio, as defined by the agreements.
At February 28, 1998, the Company had debt due to a Sony Corporation
of America affiliate totaling $296,333 carrying an interest rate of 5.9%.
Concurrently with the closing of the Combination the Company repaid this
debt on May 14, 1998.
<PAGE>
NOTE 7--STOCKHOLDERS' EQUITY
The following table reconciles the Company's stockholders' equity for
the period from February 28, 1998 to May 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B
NON- NON- ADDITIONAL
VOTING VOTING VOTING PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
----------- -------- -------- ------- -------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
February
28, 1998.... 19,270,321 $ 193 1,202,486 $ 12 -- $ -- $ 299,277 $ 25,029
Net loss
through
May 14, 1998 -- -- -- -- -- -- -- (3,944)
Exchange of
existing
Cineplex
Odeon
shares in
conjunction
with the
Combination. 17,699,914 177 -- -- 84,000 1 266,579 --
Issuance of
shares to
Universal
under a
subscription
agreement... 4,426,607 44 -- -- -- -- 84,456 --
Issuance of
shares to
Sony
affiliates
for Star
Theatres
and S&J
Theatres.... 2,664,304 27 -- -- -- -- (27) --
Stock Options
Exercise.... 18,778 -- -- -- -- -- 351 --
Dividend to
Sony
affiliate... -- -- -- -- -- -- (59,023) (21,085)
---------- ------ ---------- ------ ------ ----- ---------- -------
44,079,924 441 1,202,486 12 84,000 1 591,613 --
Results from
May 14, to
May 31, 1998 -- -- -- -- -- -- -- 3,201
---------- ------ ---------- ------ ------ ----- ---------- ------
Balance at
May 31, 1998 44,079,92 $ 441 1,202,486 $ 12 84,000 $ 1 $ 591,613 $3,201
========== ====== ========== ====== ====== ===== ========== ======
</TABLE>
NOTE 8--LEASES
The Company conducts a significant part of its operations in leased
premises. Leases generally provide for minimum rentals plus percentage
rentals based upon sales volume and also require the tenant to pay a
portion of real estate taxes and other property operating expenses. Lease
terms generally range from 20 to 40 years and contain various renewal
options, generally in intervals of 5 to 10 years.
Future minimum rental commitments at May 31, 1998 and February 28,
1998, related to operating and capital leases, having an initial or
remaining noncancelable lease term of one or more years, aggregated
$1,838,309 and $521,469, respectively. The increase in future minimum lease
commitments experienced during the period was primarily due to the
inclusion of the Cineplex Odeon commitments assumed as a result of the
consummation of the Combination.
NOTE 9--EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128
replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated, to conform with the requirements of SFAS No. 128. A
reconciliation of the number of shares used in the computations for basic
and diluted net loss per share is as follows:
THREE MONTHS ENDED MAY 31, 1998
-------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ----------- ------------
Basic EPS net loss applicable to common ($ 743) 24,619,805 ($ 0.03)
stock....................................
Effect of dilutive securities............ -- 364,744 --
---------- ----------- ------------
Diluted EPS net loss..................... ($ 743) 24,984,549 ($ 0.03)
========== =========== ============
THREE MONTHS ENDED MAY 31, 1997
-------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ----------- ------------
Basic EPS net loss applicable to common ($ 400) 20,472,807 ($ 0.02)
stock..................................
Effect of dilutive securities............ -- -- --
---------- ----------- ------------
Diluted EPS net loss..................... ($ 400) 20,472,807 ($ 0.02)
========== =========== ============
NOTE 10--STOCK OPTIONS
Pursuant to the Combination, the Company has converted the outstanding
Cineplex Odeon stock options as of May 14, 1998 into the Company's stock
options. As a result, the Company has a total of 3,413,633 stock options at
a weighted average exercise price of $13.05 outstanding at May 31, 1998. Of
the total options outstanding as of that date a total of 1,526,360 are
currently exercisable.
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT
The following new pronouncement has been issued but is not yet
effective:
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activity," is effective for all the Company's fiscal quarters for all
fiscal years beginning February 28, 2000. This statement standardizes the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that the Company
recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value.
The Company expects to adopt the above standard when required and does
not believe that it will have a significant impact on its financial
position or operating results.
NOTE 12--SUBSEQUENT EVENTS
Plitt Tender Offer
As a result of the Combination, Plitt Theatres, Inc. ("Plitt"),
Cineplex Odeon's U.S. theatre group became a wholly owned subsidiary of the
Company. Plitt has outstanding $200 million aggregate principal amount of
its 10 7/8% Senior Subordinated Notes due 2004 (the "Plitt Notes").
Additionally, a "change of control" was triggered under provisions of the
indenture under which the Plitt Notes were issued (the "Plitt Indenture").
Accordingly, on June 15, 1998, Plitt commenced an offer to purchase (the
"Change of Control Offer") any and all of the Plitt Notes for cash in an
amount equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to (but excluding) the date of purchase.
On June 15, 1998, Plitt commenced an at-the-market tender offer and
consent solicitation (the "At-the-Market Offer" and, together with the
Change of Control Offer, the "Plitt Note Repurchase") for any and all
outstanding Plitt Notes. Under the terms of the At-the-Market Offer, as
amended on June 26, 1998, Plitt has offered to purchase the outstanding
Plitt Notes for cash at a purchase price to be determined by reference to a
fixed spread of 55 basis points over the yield to maturity of the United
States Treasury 6.25% Bonds due May 31, 1999 (the "Reference Security") on
the second business day preceding the expiration date of the At-the-Market
Offer (the "Rate Date"), plus accrued and unpaid interest to (but
excluding) the date of payment. The consent solicitation sought noteholder
approval to amend the indenture in order to eliminate substantially all of
the restrictive covenants contained in the indenture. The consent
solicitation expired on July 1, 1998, when a supplemental indenture
effecting the proposed amendments was executed. On July 2, 1998, the
Company announced that the holders of more than 95% of the outstanding
principal amount of the Plitt Notes consented, in connection with the
at-the-market offer, to the above mentioned amendments. However, the
proposed amendments will only become operative upon consummation of the
At-the-Market Offer. The At-the-Market Offer, which expires on August 4,
1998, is subject to various conditions, including no event continuing that
could materially impair the benefits to the Company of the offer and
consent solicitation contemplated at the time that the offer was commenced.
Equity Offering
On June 15, 1998, the Company filed a Registration Statement on Form
S-1 under the Securities Act of 1933 offering to sell 10 million shares of
Common Stock, plus up to an additional 1.5 million shares under an
over-allotment option to be granted to the underwriters.
If the offering is consummated, the Company may be obligated to issue
additional shares of Common Stock to Universal for no additional
consideration pursuant to anti-dilution provisions in the Company's
subscription agreement with Universal.
Debt Offering
On June 17, 1998, the Company commenced an offering of $200 million
aggregate principal amount of Senior Subordinated Notes due 2008 to
qualified institutional buyers in reliance on Rule 144A under the
Securities Act of 1933.
Subsequent Events - August
As a result of the consummation of the Combination, Loews Cineplex was
obligated to offer to purchase the outstanding Plitt Notes for a price
equal to 101% of the outstanding principal amount plus accrued and unpaid
interest. In order to satisfy this requirement and retire the Plitt Notes,
on June 15, 1998, Plitt commenced the At-the-Market Offer, which terminated
on August 4, 1998. Pursuant to the At-the-Market Offer, Plitt purchased 97%
of the outstanding Plitt Notes for $216 million or 109.261% of the
outstanding principal amount of the Plitt Notes, plus accrued and unpaid
interest, leaving approximately $6 million of the Plitt Notes outstanding.
In connection with closing the Combination, the Company guaranteed the
Plitt Notes on a senior subordinated basis, and Cineplex Odeon was released
from its guarantee of the Plitt Notes.
On August 5, 1998, the Company simultaneously completed a public
offering of 10 million shares of its common stock at a price of $11 a share
and the issuance of $300 million of 8 7/8% Senior Subordinated Notes due
2008 through a private placement. The Company used $215.7 million of the
proceeds from these offerings to acquire the Plitt Notes and the remaining
amount to reduce Bank Credit Facilities and pay fees and expenses
associated with these offerings.
Under the terms of an agreement with the DOJ, which was entered into
in connection with its approval of the Combination, the Company agreed to
divest 25 theatres, representing 85 screens in the New York and Chicago
areas. The sale of these theatres is subject to approval by the DOJ. On
August 27, 1998, the Company announced that it had reached an agreement to
sell 31 theatres in the New York City, Chicago and suburban New York areas
for $92 million to Cablevision, one of the nation's leading
telecommunications and entertainment companies, subject to certain
conditions, including DOJ approval. The Company is in discussions with
Cablevision regarding obtaining DOJ approval. These 31 theatres include an
additional seven theatres, representing 21 screens, in the suburban New
York area, which will be sold, subject to certain conditions, in a separate
transaction unrelated to the agreement with the DOJ. The theatres being
sold represent approximately 3.6% of the Company's total screens and 6.8%
of total box office receipts on an annual basis. Proceeds from the sale are
expected to be used to reduce borrowings under the Bank Credit Facilities
and for general corporate purposes. Subject to DOJ approval, the Company
expects to close these transactions in the third quarter ending November
30, 1998.
Two of the Company's leased drive-in motion picture theaters in the
State of Illinois are located on properties on which certain third parties
disposed of substantial quantities of auto shredder residue and other
debris. Such materials may contain hazardous substances. With respect to
one of these sites, located in Cicero, Illinois, the Company has been named
as one of two defendants in a lawsuit commenced in August 1998 by the
Illinois Attorney General's Office at the request of the Illinois
Environmental Protection Agency. The action was brought pursuant to the
Illinois Environmental Protection Act and alleges, among other things, that
the Company caused or allowed the disposal of certain wastes bearing
hazardous substances on the theater property. The action seeks civil
penalties and various forms of equitable relief, including the removal of
all wastes allegedly present at the property, soil and groundwater testing
and remediation, if necessary. The Company's range of liability with
respect to this action cannot be precisely estimated at this time due to
several unknown factors, including the scope of contamination at the
theater property, the allocation of such liability, if any, to other
responsible parties, and the ability of such parties to satisfy their share
of such liability. The Company has accrued an amount that it believes
represents the minimum amount of the Company's potential liability relating
to the action. The Company will continue to evaluate future information and
developments with respect to conditions at the theater property and will
periodically reassess any liability and adjust its accrual accordingly.
Based on the foregoing, there can be no assurance that the Company's
liability in connection with this action will not be material.
NOTE 13--COMMITMENTS AND CONTINGENCIES
The Company has entered into commitments for the future development
and construction of theatre properties aggregating approximately $290.0
million (including letters of credit in the amount of $23.1 million). The
Company has also guaranteed an additional $45.4 million related to
obligations under lease agreements entered into by MJT. The Company is of
the opinion that MJT will be able to perform under its respective
obligations and that no payment will be required and no losses will be
incurred under these guarantees.
Additionally, the Company is committed, under the terms of the joint
venture agreement dated June 10, 1998 with Yelmo Films S.A., to provide
funding for the future development and construction of theatre properties
aggregating up to approximately $50 million. This acquisition will be
accounted for under the purchase method of accounting and the operating
results of the joint venture will be included from the date of acquisition.
The Company is a defendant in various lawsuits arising in the ordinary
course of business and is involved in certain environmental matters. It is
the opinion of management that any liability to the Company which may arise
as a result of these matters will not have a material adverse effect on its
financial condition.
<PAGE>
1177 Avenue of the Americas
New York, NY 10036
Telephone 212 596 7000
Facsimile 212 596 8910
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Loews Cineplex
Entertainment Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Loews Cineplex Entertainment Corporation and its
subsidiaries at February 28, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended February 28, 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
New York, New York
May 21, 1998
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
FEBRUARY 28,
---------------------------
1998 1997
------------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................... $ 9,064 $ 2,160
Accounts receivable............................ 5,479 4,437
Inventories.................................... 1,146 1,455
Prepaid expenses and other current assets...... 2,520 2,235
------------- ----------
TOTAL CURRENT ASSETS........................ 18,209 10,287
PROPERTY, EQUIPMENT AND LEASEHOLDS, NET.......... 609,152 613,692
OTHER ASSETS
Long-term investments and advances to
partnerships.................................. 31,763 23,642
Goodwill (less accumulated amortization of
$17,989 in 1998 and $16,200 in 1997).......... 53,143 54,932
Other intangible assets (less accumulated
amortization of $3,165 in 1998 and
$3,088 in 1997)............................... 6,005 6,340
Deferred charges and other assets.............. 10,279 12,479
------------- ----------
TOTAL ASSETS................................ $ 728,551 $ 721,372
============= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.......... $ 62,934 $ 55,685
Due to SCA affiliates.......................... 3,810 1,323
Current maturities of long-term debt and other
obligations................................... 770 508
------------- ----------
TOTAL CURRENT LIABILITIES................... 67,514 57,516
DEFERRED INCOME TAXES............................ 18,299 22,111
LONG-TERM DEBT AND OTHER OBLIGATIONS............. 10,513 11,284
DEBT DUE TO SCA AFFILIATES....................... 292,523 293,227
ACCRUED POST RETIREMENT BENEFITS................. 3,791 3,483
OTHER LIABILITIES................................ 11,400 9,101
------------- ----------
TOTAL LIABILITIES........................... 404,040 396,722
------------- ----------
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDER'S EQUITY
Common stock ($.01 par value, 25,000,000
shares authorized; 19,270,321 shares issued
and outstanding in 1998 and $200 par value
1,000 shares authorized; 972.75 issued and
outstanding in 1997).......................... 193 195
Common stock--Class A non-voting ($.01 par
value, 10,000,000 shares authorized,
1,202,486 shares issued and outstanding in
1998; no shares authorized in 1997)........... 12 --
Additional paid-in capital..................... 299,277 299,082
Retained earnings.............................. 25,029 25,373
------------- ----------
TOTAL STOCKHOLDER'S EQUITY.................. 324,511 324,650
------------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.. $ 728,551 $ 721,372
============= ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
FOR THE YEARS ENDED
-------------------------------------
FEBRUARY FEBRUARY FEBRUARY
28, 28, 29,
1998 1997 1996
------------ ---------- -----------
REVENUES
Admissions............................. $ 296,933 $ 273,498 $ 264,585
Concessions............................ 104,009 90,643 84,358
Other.................................. 12,568 11,204 10,153
------------ ---------- -----------
413,510 375,345 359,096
------------ ---------- -----------
EXPENSES
Theatre operations and other expenses.. 291,421 266,846 261,286
Cost of concessions.................... 16,147 15,634 16,089
General and administrative............. 28,917 21,447 20,282
Depreciation and amortization.......... 52,307 44,576 41,273
Loss on sale/disposals of theatres..... 7,787 9,951 7,249
------------ ---------- -----------
396,579 358,454 346,179
------------ ---------- -----------
INCOME FROM OPERATIONS................... 16,931 16,891 12,917
INTEREST EXPENSE......................... 14,319 14,776 15,376
------------ ---------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES........ 2,612 2,115 (2,459)
INCOME TAX EXPENSE....................... 2,751 2,295 309
------------ ---------- -----------
NET LOSS................................. $ (139) $ (180) $ (2,768)
============ ========== ===========
Weighted Average Shares
Outstanding--basic (A)................. 20,472,807 20,472,807 20,472,807
============ ========== ===========
Weighted Average Shares
Outstanding--diluted (A)............... 20,924,890 20,472,807 20,472,807
============ ========== ===========
Loss per Share--basic................... $ (.01) $ (.01) $ (.14)
============ ========== ===========
Loss Per Share--diluted................. $ (.01) $ (.01) $ (.14)
============ ========== ===========
- ---------------------------------------
(A) Fiscal years ended February 28, 1997 and February 29, 1996 have been
restated to reflect a stock dividend declared on February 5, 1998.
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------------------------
CLASS A ADDITIONAL
VOTING NON-VOTING PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------------ ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, MARCH 1, 1995... 972.75 $ 195 -- $ -- $ 299,082 $ 28,321
YEAR ENDED FEBRUARY 29,
1996:
Net loss................ -- -- -- -- -- (2,768)
------------ ---------- --------- --------- --------- ----------
BALANCES, FEBRUARY 29, 1996 972.75 195 -- -- 299,082 25,553
YEAR ENDED FEBRUARY 28,
1997:
Net loss................ -- -- -- -- -- (180)
------------ ---------- --------- --------- --------- ----------
BALANCES, FEBRUARY 28, 1997 972.75 195 -- -- 299,082 25,373
YEAR ENDED FEBRUARY 28,
1998:
Stock dividend.......... 19,269,348.25 (2) 1,202,486 12 195 (205)
Net loss................ -- -- -- -- -- (139)
-------------- ---------- --------- --------- --------- ----------
BALANCES, FEBRUARY 28, 1998 19,270,321 $ 193 1,202,486 $ 12 $ 299,277 $ 25,029
============== ========== ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
FOR THE YEARS ENDED
-----------------------------------
FEBRUARY FEBRUARY FEBRUARY
28, 28, 29,
1998 1997 1996
------------ ----------- ----------
OPERATING ACTIVITIES
Net loss.............................. $ (139) $ (180) $ (2,768)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization...... 52,307 44,576 41,273
Loss on sale/disposals of theatres. 7,787 9,951 7,249
Equity earnings from long-term
investments, net of
distributions received............ 887 (553) (1,974)
Changes in operating assets and
liabilities:
Increase/(Decrease) in due to SCA
affiliates........................ 2,487 (1,154) (1,840)
Decrease in deferred income taxes.. (3,812) (2,806) (1,998)
Increase in accounts receivable.... (1,042) (846) (1,992)
Increase in accounts payable and
accrued expenses.................. 7,249 977 11,850
Increase in other operating assets
and liabilities, net.............. (1,539) (1,989) (3,474)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 64,185 47,976 46,326
----------- ----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of assets.......... -- 1,043 17,707
(Advances to)/Repayments from
partnerships......................... (9,008) 6,623 1,090
Capital contributions to partnerships. -- -- (1,500)
Capital expenditures.................. (42,431) (60,920) (51,987)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES... (51,439) (53,254) (34,690)
----------- ----------- -----------
FINANCING ACTIVITIES
(Repayment)/Borrowing of debt due to
SCA affiliate........................ (5,333) 5,575 (13,421)
Repayments of long-term debt.......... (509) (527) (584)
----------- ----------- -----------
NET CASH (USED)/PROVIDED BY FINANCING
ACTIVITIES............................ (5,842) 5,048 (14,005)
----------- ----------- -----------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 6,904 (230) (2,369)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR............................... 2,160 2,390 4,759
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,064 $ 2,160 $ 2,390
=========== =========== ===========
Supplemental Cash Flow Information:
Income taxes paid, net of refunds
received.......................... $ 1,934 $ 1,414 $ 385
Interest paid (including $14,638, =========== =========== ===========
$15,394 and $15,194 paid to SCA
affiliates)...................... $ 15,823 $ 16,488 $ 16,393
=========== =========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED)
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Loews Cineplex Entertainment Corporation ("LCP", "Loews Cineplex" or
the "Company"), formerly LTM Holdings, Inc., is one of the major motion
picture exhibitors in the United States and conducts business under the
Loews, Sony, Star, and Magic Johnson Theatres marquees. At February 28,
1998, LCP was an indirect wholly owned subsidiary of Sony Pictures
Entertainment Inc. ("SPE"), which itself is an indirect wholly owned
subsidiary of Sony Corporation of America ("SCA"). LCP owns, or has
interests in, and operates 1,035 screens at 139 theatres in 16 states as of
February 28, 1998. The Company's principal markets include New York,
Boston, Chicago, Dallas, Houston, Baltimore and Detroit.
Business Combination
On May 14, 1998, pursuant to the Amended and Restated Master Agreement
(the "Master Agreement") dated September 30, 1997, LTM Holdings, Inc. and
Cineplex Odeon Corporation ("Cineplex" or "Cineplex Odeon"), another major
motion picture exhibitor with operations in the U.S. and Canada, combined
(the "Combination"). As called for in the Master Agreement, the outstanding
common shares of Cineplex Odeon were exchanged for LCP shares on a ten for
one basis. Universal Studios, Inc., a major shareholder of Cineplex Odeon,
contributed cash of $84.5 million to the Company in exchange for additional
shares of stock in the Company. SPE and its affiliates have received a cash
payment of approximately $395 million (subject to certain final closing
adjustments) representing (i) a cash payment to satisfy all intercompany
indebtedness to affiliates of SCA as of the closing date, (ii) a cash
payment equal to the fair value of certain transferred assets, and (iii)
the payment of a dividend of approximately $80 million to a subsidiary of
SPE. The combination will be accounted for by LCP under the purchase method
of accounting and any excess of purchase price over the fair value of the
net assets of Cineplex Odeon will be recorded as goodwill.
At the closing of the Combination, the Company issued 11,691,249
shares of Common Stock and 80,000 shares of Class B Non-Voting Common Stock
to Universal Studios, Inc., 4,324,003 shares of Common Stock and 4,000
shares of Class B Non-Voting Common Stock to the Claridge Group and
6,013,456 shares of common stock to the other shareholders of record of
Cineplex Odeon Corporation in exchange for the outstanding shares of
Cineplex Odeon Corporation and its wholly-owned subsidiary, Plitt Theatres,
Inc. on that day. In addition, the Company issued 2,664,304 shares of
common stock in connection with the transfer of SPE's interest in Star
Theatres of Michigan, Inc. ("Star") and S&J Theatres, Inc. ("S&J") to the
Company.
As a result of the Combination, SPE, Universal Studios, Inc., the
Claridge Group and others own 51.1% (49.9% voting common stock), 26.0%
(26.6% voting common stock), 9.6% and 13.3%, respectively, of LCP common
stock.
Credit Facility
On May 14, 1998, LCP entered into a $1 billion senior credit facility
with Bankers Trust Company, as administrative agent. This new credit
facility replaces all existing credit facilities and/or credit arrangements
of Cineplex Odeon and LTM (see Note 6 for additional information).
At the closing, the Company guaranteed on a senior subordinated basis
$200 million outstanding principal amount of the 10 7/8% Senior
Subordinated Notes due 2004 of Plitt Theatres, Inc.
Department of Justice Settlement
On April 16, 1998, Loews Theatres and Cineplex Odeon reached an
agreement with the Department of Justice allowing the Combination to
proceed. This agreement has also been approved by the Attorneys General of
New York and Illinois, who had opposed the proposed merger under the
antitrust laws. Under the terms of the agreement, which is subject to court
approval following a public comment period, LCP will divest itself of
certain theatres in New York and Illinois.
Basis of Presentation and Consolidation: The consolidated financial
statements include the accounts of Loews Cineplex Entertainment Corporation
and its wholly-owned subsidiaries. As part of the Combination with Cineplex
Odeon, SPE and its affiliates have transferred their interests in S&J,
which owns a 50% interest in the Magic Johnson Theatre Partnership ("MJT"),
and Star, which indirectly owns a 50% interest in the Loeks-Star Theatre
Partnership ("LST"), and certain other exhibition assets to subsidiaries of
LCP. As these transfers were among parties under common control, LCP has
included the assets, liabilities and results of operations of S&J and Star
in these financial statements for all periods included herein on an as if
pooled basis. Majority owned companies are consolidated and 50% or less
owned investments in which the Company has significant influence are
accounted for under the equity method of accounting. Significant
intercompany accounts and transactions have been eliminated.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenues and Expenses: Substantially all revenues are recognized when
admission and concession sales are received at the theatres. Other revenues
include the Company's equity earnings from long-term investments. Film
rental costs are accrued based on a percentage of box office receipts under
the terms of the film license arrangements.
Cash and Cash Equivalents: The Company considers all operating funds
held in financial institutions, cash held by the theatres and all highly
liquid investments with original maturities of three months or less when
purchased to be cash equivalents.
Fair Value of Financial Instruments: Cash, accounts receivable,
accounts payable, accrued liabilities and notes payable are reflected in
the financial statements at carrying value which approximates fair value.
Long-term debt principally consists of obligations which carry floating
interest rates that approximate current market rates.
Inventories: Inventories of concession products are stated at the
lower of cost (determined on the first-in, first-out method) or market.
Long-term Investments and Advances to Partnerships: Investments in
partnerships are recorded under the equity method of accounting whereby the
cost of the investment is adjusted to reflect the Company's proportionate
share of the partnerships' operating results. Advances to partners
represent advances to respective partnerships, in which LCP has interests,
for working capital and other capital requirements.
Deferred Charges and Other Assets: Deferred charges consist
principally of prepaid costs associated with recently opened theatres which
are generally amortized over three years, construction advances subject to
repayment and certain merger related costs.
Property, Equipment and Leaseholds: Property, equipment and leaseholds
are stated at historical cost less accumulated depreciation and
amortization. The Company has acquired the rights to use certain theatre
facilities under previously existing operating leases from other motion
picture exhibitors. Purchase values assigned to these theatre lease rights
acquired are capitalized and amortized over future periods.
<PAGE>
Depreciation and amortization are provided on the straight-line basis
over the following useful lives:
YEARS
-----
Buildings.............. 30-40
Equipment.............. 5-10
Leasehold Improvements. Life of lease but not in excess of useful lives
or 40 years
Theatre Lease Rights... Life of lease but not in excess of useful lives
or 40 years
Interest costs during the period of development and construction of
new theatre properties are capitalized as part of the historical cost of
the asset. Interest capitalized was $741, $586 and $139, respectively,
during the fiscal years ended February 28, 1998, February 28, 1997 and
February 29, 1996.
Goodwill and other intangible assets: Goodwill, which represents the
excess of the purchase price over the fair values of net assets acquired,
is amortized using the straight-line method over 40 years. Other intangible
assets are amortized over their estimated useful lives which range from 5
to 40 years. Management continuously assesses the recoverability of the net
unamortized goodwill and other intangibles by determining whether the
amortization of these balances over the remaining life can be recovered
through projected future undiscounted income from operations.
Long-Lived Assets: Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" requires the recoverability of the
carrying value of long-lived assets to be evaluated when changes occur in
historical operating results, future projections and economic and
competitive factors, among others. The Company continuously assesses the
recoverability of its long-lived assets in accordance with SFAS No. 121, by
determining whether the carrying value of these balances over the remaining
life can be recovered through projected future cash flows. Based upon these
measures, management has determined that the carrying value of its
long-lived assets is recoverable and fairly stated.
Stock Based Compensation: As permitted under SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company elected to account for its stock
based compensation plans under the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. The Company has complied with the disclosure
requirements of SFAS No. 123 (see Note 12 to these Consolidated Financial
Statements).
Earnings Per Share: In 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings per Share." SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented, and where appropriate,
restated to conform with the requirements of SFAS No. 128. A reconciliation
of the number of shares used in the computations for basic and diluted net
loss per share is as follows:
NUMBER OF SHARES
FEBRUARY 28, 1998
-----------------
Basic loss per shares.......................... 20,472,807
Weighted average dilution under stock plans.... 452,083
----------------
Weighted average diluted loss per share........ 20,924,890
================
Net loss used in the computation of basic and diluted net loss per
share is not affected by the assumed issuance of stock under the Company's
stock plans and is therefore the same for both calculations.
Seasonality: The Company's business is seasonal with a substantial
portion of its revenues being derived during the summer months and holiday
season.
Income Taxes: For periods prior to the closing of the Combination, the
Company filed a consolidated tax return with SCA for federal income tax
purposes and combined tax returns with SCA in certain state and local
jurisdictions. However, for financial reporting purposes the Company
calculates federal, state and local income taxes as if it filed its tax
returns on a stand-alone basis. Any federal, state or local income tax
liability, resulting from the consolidated or combined filings with SCA, is
recorded as a payable to a SCA affiliate. Any state or local income tax
liability resulting from a separately filed tax return by the Company is
recorded as state or local income taxes payable. The Company accounts for
income taxes in accordance with SFAS No. 109 "Accounting for Income Taxes,"
following the liability method whereby deferred income tax assets and
liabilities are established annually based on the temporary differences
between the financial statement and tax recorded basis of assets and
liabilities, including assets and liabilities acquired in business
combinations, at currently enacted tax rates.
New Accounting Pronouncements: The following new pronouncements have
been issued but are not yet effective:
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for the Company's fiscal year ending February
28, 1999. The standard requires the Company to disclose financial
information about business segments including certain information about
products and services, activities in different geographic areas and other
information.
SFAS No. 132, "Employer's Disclosure about Pensions and Other
Post-Retirement Benefits," is effective for the Company's fiscal year
ending February 28, 1999. SFAS No. 132 standardizes the disclosure
requirements for pension and other post-retirement plans; the standard does
not change the measurement or recognition of such plans.
The Company expects to adopt the above standards when required and
does not believe they will have a significant impact.
NOTE 2--ACCOUNTS RECEIVABLE
As of February 28, 1998, accounts receivable consisted of trade
receivables of $1,885 and other receivables of $3,594. As of February 28,
1997, accounts receivable consisted of trade receivables of $2,455 and
other receivables of $1,982.
NOTE 3--PROPERTY, EQUIPMENT AND LEASEHOLDS
Property, equipment and leaseholds consists of:
FEBRUARY FEBRUARY
28, 28,
1998 1997
----------- ----------
Land................................................. $ 42,173 $ 42,173
Buildings........................................ 227,782 218,420
Equipment........................................ 149,468 132,236
Leasehold Improvements........................... 101,440 100,954
Theatre Lease Rights............................. 346,176 351,747
Construction in Progress......................... 30,859 18,758
----------- ----------
TOTAL PROPERTY, EQUIPMENT AND LEASEHOLDS......... 897,898 864,288
Less: Accumulated Depreciation and Amortization...... 288,746 250,596
----------- ----------
$ 609,152 $ 613,692
=========== ==========
The cost of property and equipment under capital leases amounted to
$12,971 and $13,330 with accumulated depreciation of $4,584 and $4,191 as
of February 28, 1998 and February 28, 1997, respectively. Depreciation
expense of property and equipment under capital leases is included in
depreciation and amortization expense.
During fiscal 1998, the Company continued to review the assets and
related intangibles of its motion picture theatres for impairment in
accordance with the provisions of SFAS No. 121. As a result of this
process, the Company has recognized a provision for asset impairment of
$4,409 which is included in depreciation and amortization in the
Consolidated Statement of Operations.
NOTE 4--LONG-TERM INVESTMENTS AND ADVANCES TO PARTNERSHIPS
As discussed in Note 1, effective May 14, 1998, SPE has contributed
its interests in S&J and Star, whose principal assets are investments in
LST and MJT. The historical carrying values for investments in S&J and Star
totaled $22,100 and $18,100 at February 28, 1998 and February 28, 1997,
respectively.
The Company's long-term investments consist of a 50% interest in LST
which operated 9 theatres with 108 screens and a 50% interest in MJT which
operated 3 theatres with 36 screens at February 28, 1998. The Company
accounts for these investments following the equity method of accounting.
The Company's carrying value of its investment in LST was
approximately $11,102 and $11,100 as of February 28, 1998 and February 28,
1997, respectively. The Company's carrying value in its investment in MJT
was approximately $370 and $1,300 at February 28, 1998 and February 28,
1997, respectively.
The Company's equity share of earnings in LST and MJT for the fiscal
years ended February 28, 1998, February 28, 1997 and February 29, 1996 was
approximately $2,905, $2,900 and $2,800, respectively.
As of February 28, 1998 and February 28, 1997, the Company had a
receivable from LST of $10,955 and $5,421, respectively. This receivable
was in the form of both notes and working fund advances. As of February 28,
1998 and February 28, 1997, the Company had a receivable from MJT of $9,336
and $5,862, respectively.
The following table presents condensed financial information for the
LST and MJT partnerships on a combined basis:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY FEBRUARY FEBRUARY
28, 28, 29,
1998 1997 1996
------------- ---------- ----------
<S> <C> <C> <C>
Admissions Revenue........................ $ 48,036 $ 34,248 $ 30,980
Concession and Other Revenues......... 22,461 15,378 13,514
------------- ---------- ----------
Total Revenues........................ 70,497 49,626 44,494
Theatre Operating Costs (including
cost of concessions).................. 55,769 38,281 33,467
General and Administrative Costs...... 2,051 1,516 1,429
------------- ---------- ----------
12,677 9,829 9,598
Depreciation and Amortization......... 5,459 3,157 2,870
------------- ---------- ----------
Income from Operations................ $ 7,218 $ 6,672 $ 6,728
============= ========== ==========
Net Income............................ $ 5,810 $ 5,786 $ 5,639
============= ========== ==========
Current Assets........................ $ 2,949 $ 2,109
============= ==========
Noncurrent Assets..................... $ 50,697 $ 42,946
============= ==========
Current Liabilities................... $ 16,963 $ 10,708
============= ==========
Noncurrent Liabilities................ $ 14,112 $ 9,629
============= ==========
</TABLE>
On April 27, 1998, LST refinanced the debt then outstanding with the
Company. The new facility is a line of credit with a third-party financial
institution which matures on April 30, 2003. The proceeds of this line of
credit were used to repay the outstanding affiliate debt due to the
Company.
NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
FEBRUARY FEBRUARY
28, 28,
1998 1997
------------ ----------
Accounts payable--trade.......................... $ 36,924 $ 31,957
Accrued expenses and other....................... 26,010 23,728
------------ ----------
$ 62,934 $ 55,685
============ ==========
NOTE 6--LONG-TERM DEBT AND OTHER OBLIGATIONS
Long-term debt and other obligations consist of:
FEBRUARY FEBRUARY
28, 28,
1998 1997
---------- -----------
Mortgages payable--Non-recourse, payable
through 1999. Interest rates from
8.5% to 9%.................................. $ 250 $ 254
Capitalized lease obligations related to
theatre leases, payable in various amounts
through 2011. Interest rates range from 8%
to 16%...................................... 11,033 11,538
---------- -----------
11,283 11,792
Less: Current Maturities...................... 770 508
---------- -----------
$ 10,513 $ 11,284
========== ===========
Annual maturities of obligations under capital leases and long-term
debt for the next five fiscal years and thereafter are set forth as
follows:
YEAR ENDING FEBRUARY CAPITAL LEASES DEBT TOTAL
-------------------- -------------- ---------- ------------
1999............................ $ 520 $ 250 $ 770
2000............................ 568 -- 568
2001............................ 620 -- 620
2002............................ 675 -- 675
2003............................ 701 -- 701
Thereafter...................... 7,949 -- 7,949
-------------- ---------- -------------
$ 11,033 $ 250 $ 11,283
============== ========== =============
On May 14, 1998, in connection with the Combination, the Company
entered into a $1 billion senior credit facility with Bankers Trust
Company, as administrative agent. The new credit facility has been used to
repay all intercompany amounts due to SCA and affiliates and has replaced
Cineplex Odeon's existing credit facility. This credit facility is
comprised of a $750 million senior secured revolving credit facility,
secured by substantially all of the assets of LCP and its U.S.
subsidiaries, and a $250 million uncommitted facility. The credit facility
bears interest, at a rate of either the current prime rate as offered by
Bankers Trust Company or an Adjusted Eurodollar rate plus an applicable
margin based on the Company's Leverage Ratio (as defined). The senior
credit facility includes various financial covenants, including a leverage
test and interest coverage test, as well as customary restrictive
covenants, including: (i) limitations on indebtedness, (ii) limitations on
dividends and other payment restrictions, (iii) limitations on asset sales,
(iv) limitations on transactions with affiliates, (v) limitations on the
issuance and sale of capital stock of subsidiaries, (vi) limitations on
lines of business, (vii) limitations on merger, consolidation or sale of
assets and (viii) certain reporting requirements. The Company's initial
borrowing under the new credit facility to fund the aforementioned
transactions at the time of closing was $500 million.
NOTE 7--LEASES
The Company conducts a significant part of its operations in leased
premises. Leases generally provide for minimum rentals plus percentage
rentals based upon sales volume and also require the tenant to pay a
portion of real estate taxes and other property operating expenses. Lease
terms generally range from 20 to 40 years and contain various renewal
options, generally in intervals of 5 to 10 years.
Future minimum rental commitments at February 28, 1998 under the above
mentioned operating and capital leases, having an initial or remaining
noncancelable lease term of one or more years are set forth as follows:
OPERATING CAPITAL
YEAR ENDING FEBRUARY LEASES LEASES
-------------------- ----------- ----------
1999............................................ $ 35,860 $ 1,416
2000............................................ 35,419 1,415
2001............................................ 34,719 1,416
2002............................................ 34,168 1,415
2003............................................ 33,164 1,368
Thereafter...................................... 337,106 10,892
---------- ----------
Total Minimum Rentals........................... $ 510,436 17,922
Less Amount Representing Interest............... ========== 6,889
----------
Present Value of Net Minimum Rentals............ $ 11,033
==========
Minimum rental expense aggregated $31,368, $30,200 and $29,900 for the
years ended February 28, 1998, February 28, 1997 and February 29, 1996,
respectively, related to operating leases. Percentage rental expense for
those same periods aggregated $3,449, $2,918 and $2,571, respectively.
NOTE 8--EMPLOYEE AND POST-RETIREMENT BENEFIT PLANS
The Company accrues amounts ranging from 20% to 23% of gross salaries
for fringe benefits (i.e. Medical, Dental, FICA and Savings Plan
Contributions), which approximates actual costs incurred and SPE billings
on behalf of the Company.
Profit Sharing and Savings Plan: The Company has a defined
contribution Profit Sharing and Savings Plan ("Savings Plan") for
substantially all eligible salaried employees under which the Company
contributes by matching 50% of the employee contribution up to a maximum of
6% of the statutory limit of eligible compensation. A participant may elect
to contribute up to an additional 10% of eligible compensation (subject to
the statutory limit), however this amount is not eligible for matching
contributions by the Company. The Savings Plan also provides for special
profit sharing contributions, the annual amount of which is determined at
the discretion of the Company. The expense recorded by the Company related
to contributions to the Savings Plan aggregated $1,670, $1,204 and $1,037
for the years ended February 28, 1998, February 28, 1997 and February 29,
1996, respectively.
Employee Health and Welfare and Other Post-retirement Benefits:
Employee health and welfare benefits and post-retirement benefits are
administered and provided for by SPE. Costs related to post-retirement
benefits are allocated to the Company based on actuarially determined
amounts. The Company has accrued post-retirement benefits of $3,791 and
$3,483 at February 28, 1998 and February 28, 1997, respectively, and
recognized an annual cost of $339, $262 and $137 for the years ended
February 28, 1998, February 28, 1997 and February 29, 1996, respectively.
Other Plans: Various employees are covered by union sponsored pension
plans. The contributions are determined in accordance with provisions of
negotiated labor contracts. Under these agreements, pension expense
aggregated $1,204, $1,471 and $1,429 for the years ended February 28, 1998,
February 28, 1997 and February 29, 1996, respectively.
NOTE 9--RELATED PARTY TRANSACTIONS
The Company has exhibited films distributed by SPE in the past, and
expects to continue to do so in the future. Payments are based on
negotiated and/or contracted rates established on terms that management
believes are equivalent to an arm's-length basis. At February 28, 1998 and
February 28, 1997, the Company owed SPE and affiliates $2,521 and $6,352,
respectively, under film licensing agreements. The Company has recognized
film rental expenses relating to the exhibition of films distributed by SPE
in the amount of $30,399, $16,189 and $16,668 for the years ended February
28, 1998, February 28, 1997 and February 29, 1996, respectively.
<PAGE>
The debt due to (from) SCA affiliates at February 28, 1998 and
February 28, 1997, consists of the following:
FEBRUARY FEBRUARY
28, 28,
1998 1997
------------ ----------
Short Term:
Due from affiliates............................. $ -- $(2,683)(C)
Accrued interest payable........................ 3,810(A) 4,006(A)
------------ ----------
TOTAL SHORT-TERM............................. 3,810 1,323
------------ ----------
Long Term:
Promissory Notes due to affiliates.............. 182,170(A) 184,420(A)
Debt due to SCA affiliate....................... 66,135(B) 69,218(B)
------------ ----------
248,305 253,638
Payable due to SCA Affiliate in lieu of income
taxes (Note 10)................................. 44,218 39,589
------------ ----------
TOTAL LONG-TERM.............................. 292,523 293,227
------------ ----------
TOTAL........................................ $296,333 $294,550
============ ==========
Interest expense incurred on the "Debt due to SCA Affiliates" was
$14,638, $14,934 and $15,218 for the years ended February 28, 1998,
February 28, 1997 and February 29, 1996, respectively.
(A) Represents promissory notes payable to an affiliate of SCA.
The notes bear interest at an intercorporate rate determined by SCA
which is in effect thirty days prior to the commencement date of each
quarter (the "SCA Intercorporate Rate"). Interest is payable on
November 1 and May 1, of each fiscal year. Interest rates were 5.9%,
6.1% and 6.2% as of February 28, 1998, February 28, 1997 and February
29, 1996, respectively. The notes mature in the form of a balloon
payment due October 31, 1998 and are subordinate to all other existing
and future liabilities of the Company. As described in Note 6 the
Company has negotiated a new credit facility which has replaced the
SCA credit facilities. The new credit facility is a long-term facility
and since its proceeds have, in part, been used to pay off the
existing intercompany debt, all intercompany debt is being reported by
the Company as long-term.
(B) Prior to the closing of the Combination, the Company
periodically transferred excess cash to a SCA affiliate for cash
management purposes and in turn receives cash advances from the SCA
affiliate to fund the Company's short-term working capital
requirements. The balance "Debt due to SCA Affiliate" represents the
amount of cash provided by a SCA affiliate to fund the Company's
working capital needs and capital expenditure requirements in excess
of cash repatriated. This working fund bore interest at the SCA
Intercorporate Rate. As described in Note 6, the Company has
negotiated a new credit facility which has replaced the SCA credit
facilities. The new credit facility is a long-term facility and since
its proceeds have, in part, been used to pay off the existing
intercompany debt, all intercompany debt is being reported by the
Company as long-term.
(C) Represents the amount due from a SCA affiliate for equipment
purchases.
In addition to the above related party transactions, SCA affiliates
provide certain services relating to the following activities: Insurance
and risk management services including excess liability, workman's
compensation and officers and directors coverage among others, benefits
administration and payroll processing, and tax processing services. LCP
provides certain services to SCA affiliates relating to the following
activities: Finance, Administrative and MIS support. The net amount charged
to the Company for these services amounted to $570, $1,207 and $1,325 for
the years ended February 28, 1998, February 28, 1997 and February 29, 1996,
respectively. For the years ended February 28, 1998, February 28, 1997 and
February 29, 1996, the Company was also charged by a SCA affiliate for
certain administrative related services in the amounts of $1,835, $1,667,
and $1,716, respectively. The Company believes the costs of the above
mentioned services are commensurate with that which would be charged by
third parties for similar services.
NOTE 10--INCOME TAXES
For periods prior to the closing of the Combination, the Company filed
a consolidated tax return with SCA for federal income tax purposes and
combined tax returns with SCA in certain state and local jurisdictions.
However, for financial reporting purposes, the Company calculates federal,
state and local income taxes as if it filed its returns on a stand-alone
basis. Any federal, state or local income tax liability resulting from the
consolidated or combined filing with SCA is included in the balance sheet
under the caption "Debt due to SCA affiliate" (see Note 9). Any state or
local income tax liability resulting from a separately filed tax return by
the Company is recorded as state and local income taxes payable.
The provision for income taxes consists of the following:
FEBRUARY FEBRUARY FEBRUARY
28, 28, 29,
1998 1997 1996
---------- ---------- ----------
Current tax expense
U.S. Federal........................ $ 4,013 $ 3,269 $ 1,263
State and Local..................... 2,551 1,832 1,044
---------- ---------- ----------
Total Current.................... 6,564 5,101 2,307
Deferred tax expense/(benefit)
U.S. Federal........................ (2,744) (2,019) (1,438)
State and Local..................... (1,069) (787) (560)
---------- ---------- -----------
Total tax provision.............. $ 2,751 $ 2,295 $ 309
========== ========== ===========
Reconciliation of the provision for income taxes to the statutory
federal income tax rate follows:
FEB. FEB. FEB.
28, 28, 29,
1998 % 1997 % 1996 %
--------- ----- ------- ----- ------ ----
Provision/(benefit) on
pre-tax income/(loss) at
statutory federal income
tax rate.................... $ 914 35.0% $ 741 35.0% $(861) 35.0%
Provision for state and local
taxes (net of federal
income tax benefit)......... 963 36.9 679 32.1 315 (12.8)
Other non-deductible expenses
(primarily amortization of
goodwill and other
intangible assets).......... 874 33.5 875 41.4 855 (34.8)
------- ----- ------- ----- ------ ------
$2,751 105.4% $2,295 108.5% $ 309 (12.6)%
======= ===== ======= ===== ====== ======
Net deferred tax assets and liabilities are comprised of the following:
FEBRUARY FEBRUARY
28, 28,
1998 1997
------------- ----------
Net deferred tax assets
Loss on sale/disposals of theatres.............. $ 6,683 $ 3,540
Accrued post retirement benefits................ 1,623 1,491
Other........................................... 189 1,242
------------- ----------
Total Net Deferred Tax Assets................ 8,495 6,273
------------- ----------
Net deferred tax liabilities......................
Depreciation--Property, equipment and leaseholds. 23,733 24,974
Amortization--Other intangible assets............ 3,061 3,410
------------- ----------
Total Net Deferred Tax Liabilities........... 26,794 28,384
------------- ----------
Net Deferred Tax Liability................... $ 18,299 $ 22,111
============= ==========
NOTE 11--LOSS ON SALE/DISPOSALS OF THEATRES
Aggregate losses on sale/disposals of theatres were $7,787, $9,951 and
$7,249 during the fiscal years ended February 28, 1998, February 28, 1997
and February 29, 1996, respectively, and were recorded primarily in
connection with management's decision to dispose of several theatres during
those fiscal years.
NOTE 12--STOCK OPTION PLAN
The Company has adopted the 1997 Stock Incentive Plan (the "Plan")
providing for the granting of options to employees, officers, directors,
consultants and advisors of the Company or an affiliate. The Plan is
administered by a committee of the Board of Directors (the "Committee").
The Plan provides for the grants or awards of incentive and non-qualified
stock options, stock appreciation and dividend equivalent rights,
restricted stock, performance units and performance shares. During December
1997, the Company granted non-qualified stock options to certain key
employees. Except in the case of 500,000 options granted, which vest
immediately, the options granted generally vest and become exercisable
ratably over a five year period commencing on the first anniversary of the
closing date of the Combination, but in any event, will be fully vested and
exercisable as of the fifth anniversary of the date of grant. The options
generally expire ten years after grant.
The following table summarizes information about stock options
outstanding at February 28, 1998:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- ----------
Shares under option:
Outstanding at beginning of year.................. -- $ --
Granted......................................... 2,170,000 13.125
Exercised....................................... -- --
Forfeited....................................... -- --
Outstanding at end of year........................ 2,170,000 $13.125
Options exercisable at year-end................... 500,000 $13.125
Weighted average fair value of options granted
during 1998..................................... $4.36
The fair value of each stock option granted during fiscal 1998 is
estimated on the date of grant utilizing the Black-Scholes options pricing
model based on the following assumptions:
Expected life (years).......................... 5.0
Expected volatility............................ 23.46%
Expected dividend yield........................ --
Risk free interest rate........................ 5.77%
The Company applies APB No. 25 and related interpretations in
accounting for the Plan. Accordingly, as the exercise price at the date of
grant equaled the estimated fair value of a common share, no compensation
cost has been recognized in connection with the issuance of options under
the Plan. Had compensation cost for the Plan been determined based upon the
fair value at the date of grant, consistent with the methodology under SFAS
No. 123, the Company's net loss and loss per share for the year ended
February 28, 1998 would have been increased to the pro forma amounts
indicated below:
FOR THE
YEAR ENDED
FEBRUARY
28,
1998
----------
Net loss.......................................... As reported $ (139)
==========
Pro forma $ (1,555)
==========
Loss per share--basic.............................. As reported $ (0.01)
==========
Pro forma $ (0.08)
==========
Loss per share--diluted............................ As reported $ (0.01)
==========
Pro forma $ (0.07)
==========
The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts. The Company anticipates granting
additional awards in future years.
NOTE 13--COMMITMENTS AND CONTINGENCIES
The Company has entered into commitments for the future development
and construction of theatre properties aggregating approximately $177,777
(including letters of credit in the amount of $17,242). The Company has
also guaranteed an additional $45,860 related to obligations under lease
agreements entered into by MJT. The Company is of the opinion that MJT will
be able to perform under its respective obligations and that no payment
will be required and no losses will be incurred under these guarantees.
The Company is a defendant in various lawsuits arising in the ordinary
course of business and is involved in certain environmental matters. It is
the opinion of management that any liability to the Company which may arise
as a result of these matters will not have a material adverse effect on its
financial condition.
Additionally, as a result of the consummation of the Combination the
Company is obligated to offer to purchase all of the outstanding 10 7/8%
Senior Subordinated Notes due June 15, 2004 of Plitt Theatres, Inc. ("Plitt
Notes") at a price equal to 101% of the outstanding principal amount
thereof plus accrued interest. If all such notes are tendered, the amount
required to be paid could be approximately $202 million. The Company
anticipates utilizing a portion of the Credit Facility should any
bondholders accept the tender offer. In connection with the Combination,
the Company guaranteed the obligations of Plitt Theatres under the Plitt
Notes on a senior subordinated basis, and Cineplex Odeon was released from
its guarantee of such notes.
NOTE 14--STOCKHOLDER'S EQUITY
On December 16, 1997, the Company's Board of Directors passed a
resolution increasing the number of common shares authorized from 1,000
shares to 2,000 shares. Subsequently, on February 5, 1998, the Company's
Board of Directors passed an additional resolution further increasing the
number of common shares authorized from 2,000 to 25,000,000, as well as
authorizing the issuance of up to 10,000,000 shares of Class A Non-Voting
$.01 par value Common Stock.
Additionally, on February 5, 1998, the Board of Directors declared,
and the Company paid, a stock dividend of 19,269,348.25 shares of common
stock and 1,202,486 shares of Class A Non-Voting Common Stock. As a result
of the stock dividend, approximately $205,000 was transferred from retained
earnings to additional paid-in-capital and common stock.
On May 7, 1998, the Company's Board of Directors passed a resolution
increasing the number of common shares authorized from 25,000,000 to
300,000,000. Additionally, the resolution included the authorization to
issue up to 10,000,000 shares of Class B Non-Voting $.01 par value Common
Stock and 10,000,000 shares of $.01 par value preferred stock. This action
was taken in conjunction with the anticipated closing of the Combination on
May 14, 1998.
<PAGE>
67 West Michigan Avenue, Suite 600
Telephone 616-965-1351
P.O. Box 1637
Battle Creek, MI 49016
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Loeks-Star Partners
In our opinion, the accompanying balance sheet and the related
statements of income, of partners' capital and of cash flows present
fairly, in all material respects, the financial position of Loeks-Star
Partners at February 26, 1998 and February 27, 1997 and the results of its
operations and its cash flows for the fifty-two weeks ended February 26,
1998, the fifty-two weeks ended February 27, 1997 and the fifty-three weeks
ended February 29, 1996, respectively, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Battle Creek, Michigan
April 15, 1998
<PAGE>
LOEKS-STAR PARTNERS
BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
FEBRUARY FEBRUARY
26, 27,
1998 1997
------------ ----------
ASSETS
Current assets:
Cash............................................. $ 730 $ 156
Accounts receivable.............................. 596 206
Inventories...................................... 164 109
Prepaid expenses and other....................... 1,042 715
------------ ----------
TOTAL CURRENT ASSETS.......................... 2,532 1,186
Property and equipment, net........................ 27,393 23,767
Investment in Star Southfield Center, L.L.C........ 6,485 5,450
Goodwill, less accumulated amortization ($1,690 in
1998 and $1,509 in 1997) ........................ 4,461 4,642
------------ ----------
TOTAL ASSETS................................ $ 40,871 $ 35,045
============ ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable to partner--current portion........ $ 1,000 $ 2,000
Accounts payable................................. 2,704 2,413
Accrued film rental.............................. 6,143 3,885
Other............................................ 1,582 809
------------ ----------
TOTAL CURRENT LIABILITIES..................... 11,429 9,107
Deferred state taxes............................... 610 580
Notes payable to partner........................... 7,000 3,200
Partners' capital.................................. 21,832 22,158
------------ ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL....... $ 40,871 $ 35,045
============ ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LOEKS-STAR PARTNERS
STATEMENTS OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)
FIFTY-TWO FIFTY-TWO FIFTY-THREE
WEEKS WEEKS WEEKS
ENDED ENDED ENDED
FEBRUARY FEBRUARY FEBRUARY
26, 27, 29,
1998 1997 1996
----------- ---------- ----------
REVENUES:
Box office receipts.................... $ 39,005 $ 27,992 $ 27,344
Concessions............................ 18,327 12,887 12,208
Other.................................. 902 611 509
----------- ---------- ----------
TOTAL REVENUES...................... 58,234 41,490 40,061
----------- ---------- ----------
EXPENSES:
Operating expenses..................... 44,170 30,460 28,958
General and administrative............. 2,253 1,678 1,397
Depreciation and amortization.......... 2,490 2,371 2,323
Amortization of pre-opening expenses... 1,237 -- --
----------- ---------- ----------
TOTAL EXPENSES...................... 50,150 34,509 32,678
----------- ---------- ----------
OPERATING INCOME......................... 8,084 6,981 7,383
----------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income........................ 74 63 342
Interest expense....................... (640) (644) (1,460)
----------- ---------- ----------
(566) (581) (1,118)
----------- ---------- ----------
Income before equity in net loss of Star
Southfield Center, L.L.C............... 7,518 6,400 6,265
Equity in net loss of Star Southfield
Center, L.L.C.......................... (265) -- --
----------- ---------- ----------
NET INCOME.......................... $ 7,253 $ 6,400 $ 6,265
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LOEKS-STAR PARTNERS
STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS OF U.S. DOLLARS)
LOEKS STAR
PARTNER PARTNER TOTAL
----------- ---------- ---------
Partners' capital--February 23, 1995...... $7,934.1 $7,934.1 $15,868.2
Net income allocated...................... 3,132.3 3,132.3 6,264.6
Distributions to partners................. (888.5) (888.5) (1,777.0)
----------- ---------- ---------
Partners' capital--February 29, 1996...... 10,177.9 10,177.9 20,355.8
Net income allocated...................... 3,199.9 3,199.9 6,399.8
Distributions to partners................. (2,298.8) (2,298.8) (4,597.6)
----------- ---------- ---------
Partners' capital--February 27, 1997...... 11,079.0 11,079.0 22,158.0
Net income allocated...................... 3,626.4 3,626.4 7,252.8
Distributions to partners................. (3,789.4) (3,789.4) (7,578.8)
----------- ---------- ---------
PARTNERS' CAPITAL--FEBRUARY 26, 1998...... $10,916.0 $10,916.0 $21,832.0
=========== ========== =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LOEKS-STAR PARTNERS
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-THREE
WEEKS ENDED WEEKS ENDED WEEKS ENDED
FEBRUARY 26, FEBRUARY 27, FEBRUARY 29,
1998 1997 1996
---------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .............................................................. $ 7,253 $ 6,400 $ 6,265
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation ......................................................... 2,309 2,190 2,142
Amortization ......................................................... 181 181 181
Equity in net loss of Star
Southfield Center, L.L.C............................................. 265 -- --
Deferred state taxes ................................................. 30 -- (45)
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable......................................................... (390) 15 166
(Increase) decrease in
inventories ....................................................... (55) 3 (7)
(Increase) decrease in prepaid
expenses and other................................................. (327) (99) 89
Increase (decrease) in accounts
payable............................................................ 291 541 (168)
Increase in accrued film rental ..................................... 2,258 783 251
Increase (decrease) in other
current liabilities................................................ 774 (332) (22)
------ -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ........................................... 12,589 9,682 8,852
------ -------- --------
INVESTING ACTIVITIES:
Acquisition of property and equipment ................................... (5,936) (873) (382)
Construction advances--Star
Southfield Center, L.L.C................................................ -- (55) (1,086)
Cash contribution to Star Southfield
Center, L.L.C........................................................... (1,300) (4,309) --
------ -------- --------
NET CASH USED IN INVESTING
ACTIVITIES...................................................... (7,236) (5,237) (1,468)
------ -------- --------
FINANCING ACTIVITIES:
Net borrowings under the revolving
credit line............................................................. 1,000 -- --
Principal payments on note payable
to partner.............................................................. (2,000) (17,663) (1,971)
Proceeds from borrowings on note
payable to partner...................................................... 3,800 6,500 --
Distributions to partners ............................................... (7,579) (4,598) (1,777)
------ -------- --------
NET CASH USED IN FINANCING
ACTIVITIES...................................................... (4,779) (15,761) (3,748)
------ -------- --------
NET INCREASE (DECREASE) IN CASH ........................................... 574 (11,316) 3,636
CASH AT BEGINNING OF YEAR ................................................. 156 11,472 7,836
------ -------- --------
CASH AT END OF YEAR ....................................................... $ 730 $ 156 $ 11,472
====== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest ................................................................ $ 511 $ 1,001 $ 1,412
State and local taxes ................................................... $ 291 $ 300 $ 373
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LOEKS-STAR PARTNERS
NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)
1. ORGANIZATION
Loeks-Star Partners (the Partnership) consists of two partners, Loeks
Michigan Theatres, Inc. (Loeks) and Star Theatres of Michigan, Inc. (Star),
a wholly-owned subsidiary of Sony Pictures Entertainment, Inc. (Sony). The
Partnership is engaged in the business of motion picture exhibition in the
State of Michigan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenues and Expenses
Substantially all revenues are recognized when box office receipts and
concession sales are received at the theatres. Film rentals are accrued
based on percentage of box office receipts under the terms of the film
licensee arrangements.
Property and Equipment
Land, buildings and equipment are stated at cost and include
expenditures for major renewals and betterments. Maintenance and repairs
that do not improve or extend the lives of the respective assets are
expensed as incurred.
Depreciation is computed using the straight-line method and is
recognized over the estimated useful lives of the related assets which
range from 10 to 31.5 years. Interest costs related to the period of
development and construction of new theatre properties are capitalized as
part of the historical cost of the asset.
Income Taxes
No federal income taxes are provided in the Partnership financial
statements as the Partnership results of operations are included in the
federal income tax returns of the individual partners. The Partnership
conducts operations in the State of Michigan, which imposes a tax based, in
part, on factors other than income, and requires the Partnership entity
rather than the individual partners to pay the tax. This tax is included in
general and administrative expenses.
The future tax consequences of current Michigan capital acquisitions
are recognized as deferred state taxes in the year of acquisition.
Goodwill
Goodwill represents the excess of the Loeks credited capital
contribution over the net book value of assets contributed upon Partnership
formation. Goodwill is being amortized over approximately thirty-five years
on a straight-line basis.
Retirement Plan
The Partnership has a 401(k) plan for full-time employees with over
one year of service. The Partnership, at its discretion, may elect to match
employee contributions up to 5% of each employee's gross wages. In 1998,
1997 and 1996, the Partnership expense for matching contributions
approximated $91, $73 and $56, respectively.
Theatre Pre-opening Expenses
Expenses associated with new theatre openings are expensed as
incurred. Pre-opening expenses incurred during 1998 aggregated $1,237. No
pre-opening expenses were incurred in 1997 or 1996.
Reclassifications
Certain amounts in the 1997 financial statements and related notes
have been reclassified to conform with the 1998 presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
FEBRUARY FEBRUARY
26, 27,
1998 1997
----------- ----------
Land.............................................. $ 849 $ 249
Land and leasehold improvements................... 23,424 20,538
Structures........................................ 2,120 2,118
Sound and projection equipment.................... 4,401 3,851
Furniture and fixtures............................ 7,381 6,766
Concession equipment.............................. 1,624 1,592
Other equipment................................... 2,714 2,712
Construction-in-progress.......................... 1,479 231
----------- ----------
43,992 38,057
-- --
Less--allowance for depreciation.................. (16,599) (14,290)
----------- ----------
$ 27,393 $ 23,767
=========== ==========
4. LEASES AND COMMITMENTS
The Partnership leases the land and/or buildings for eight of its nine
theatres. These leases are classified as operating leases and certain
leases require contingent lease payments, primarily based on a percentage
of box office receipts in excess of stated minimum amounts. The leases also
contain provisions (a series of renewal options) for each theatre which can
extend lease terms up to forty years beyond the initial lease term at the
option of the Partnership.
Total rent expense included in operating expenses is comprised of the
following:
FEBRUARY FEBRUARY FEBRUARY
26, 27, 29,
1998 1997 1996
---------- --------- --------
Minimum lease payments................ $3,650 $1,513 $1,512
Contingent lease payments............. 432 295 267
Rentals under cancelable leases....... 28 30 20
---------- --------- --------
$4,110 $1,838 $1,799
========== ========= ========
Future minimum lease payments as of February 26, 1998 are as follows:
1999.......................................................... $4,212
2000.......................................................... 4,183
2001.......................................................... 4,233
2002.......................................................... 4,169
2003.......................................................... 4,144
Thereafter.................................................... 47,822
------------
$68,763
============
5. NOTES PAYABLE TO PARTNER
Partnership debt payable to Star is as follows:
FEBRUARY FEBRUARY
26, 27,
1998 1997
--------- ----------
Revolving credit line with interest payable
semi-annually, plus interest at a rate of 7.31%
at February 26, 1998, due April 1, 2000......... $ 1,000 $ --
Term loan, payable in semi-annual installments of
$1,000 plus interest at a rate of 7.31% at
February 26, 1998, due April 1, 2001............ 7,000 5,200
--------- ----------
8,000 5,200
Less: current portion............................. (1,000) (2,000)
--------- ----------
$ 7,000 $ 3,200
========= ==========
On April 27, 1998, the Partnership refinanced the debt then
outstanding under the Partnership credit facility in place at February 26,
1998. Classification of the debt outstanding at February 26, 1998 is based
on the terms of the new credit facility except for the $1,000 payment made
on April 1, 1998 under the old credit facility. The new credit facility is
a $50,000 line of credit which matures on April 30, 2003. Interest on
borrowings under the line of credit bear interest at a fixed or variable
LIBOR based rate at the borrower's option, as defined by the credit
agreement, and is payable monthly. In addition, a commitment fee equal to
1/4% of the daily average unused portion of the line of credit is payable
quarterly. The credit agreement also includes certain financial covenants
which the Partnership must comply with during the term of the agreement.
6. RELATED PARTY TRANSACTIONS
Each partner is reimbursed for expenses incurred for services
provided. Loeks was reimbursed $1,200, $911 and $903 in 1998, 1997 and 1996
respectively, for management services. Star was paid $60 in 1998, 1997 and
1996 for film-buying services.
Star, in its capacity as film buying agent, has retained Sony Theatres
Management Corp., an affiliate, as its agent to negotiate film rental
terms. The Partnership recognized film rental expense of $20,552, $14,640
and $13,756 in 1998, 1997 and 1996 respectively.
The Partnership also purchased $601, $110 and $394 of equipment at
Loeks' cost from Loeks in 1998, 1997 and 1996 respectively.
7. INVESTMENT IN STAR SOUTHFIELD CENTER, L.L.C.
In 1996, the Partnership entered into a joint venture with Millennium
Partners LCC (Millennium Entertainment Partners L.P. prior to May 28, 1997)
to form Star Southfield Center, L.L.C. for the purpose of constructing and
leasing a twenty screen motion picture theatre and retail complex. The
total investment at February 27, 1997 consisted of $1,141 of construction
advances and $4,309 of cash contributions. An additional cash contribution
of $1,300 was made during 1998. The complex opened for operations in June
1997.
The investment is carried at cost and adjusted to reflect the
Partnership's equity in earnings or losses and distributions of the joint
venture.
<PAGE>
The Partnership holds a 50% voting interest in the joint venture and
operating results are allocated as defined in the operating agreement.
Condensed balance sheets of Star Southfield Center, L.L.C. which has a
fiscal year ending October 31 are as follows:
<TABLE>
<CAPTION>
UNAUDITED AUDITED
------------ -----------------------
FEBRUARY 28, OCTOBER 31, OCTOBER 31,
1998 1997 1996
----------- --------- -----------
<S> <C> <C> <C>
Current assets .................. $ 565 $ 987 $ 590
Properties, net ................. 40,144 40,247 16,121
Other ........................... 265 278 315
---------- -------- -------
Total assets ................. $ 40,974 $ 41,512 $17,026
========= ========= =======
Current liabilities ............. $ 3,532 $ 4,505 $ 3,944
Notes payable-long-term ......... 24,471 23,848 2,182
Partners' capital ............... 12,971 13,159 10,900
Total liabilities and members' --------- -------- -------
equity ..................... $ 40,974 $ 41,512 $17,026
========= ========= =======
</TABLE>
The Partnership's equity in the net loss of Star Southfield Center
L.L.C. through February 28, 1998 is $265. The operating results of Star
Southfield Center L.L.C. through February 28, 1998 are as follows:
AUDITED
------------
UNAUDITED NOVEMBER 1,
------------ 1997 FISCAL YER
TOTAL THROUGH THROUGH ENDED
FEBRUARY 28, FEBRUARY 28, OCTOBER 31,
1998 1998 1997
------------ ------------ ------------
Total revenues.................... $ 3,044 $ 1,601 $ 1,443
Expenses:
Operating expenses.............. 902 477 425
Depreciation and amortization... 1,501 693 808
------------ ------------ ------------
Total expenses.................. 2,403 1,170 1,233
------------ ------------ ------------
Operating income.................. 641 431 210
Interest expense, net............. 1,170 619 551
------------ ------------ ------------
Net loss........................ $ (529) $ (188) $ (341)
============ ============ ============
<PAGE>
LOGO
KPMG Suite 3300
Chartered Accountants Commerce Court West Telephone (416) 777-8500
PO Box 31 Telefax (416) 777-8818
Stn Commerce Court http://www.kpmg.ca
Toronto Ontario M5L 1B2
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Cineplex Odeon Corporation
We have audited the consolidated balance sheets of Cineplex Odeon
Corporation as at December 31, 1997 and December 31, 1996 and the
consolidated statements of income and changes in shareholders' equity and
cash resources for each of the years in the three year period ended
December 31, 1997. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Corporation
as at December 31, 1997 and December 31, 1996 and the results of its
operations and the changes in its shareholders' equity and cash resources
for each of the years in the three year period ended December 31, 1997 in
accordance with generally accepted accounting principles.
KPMG
Chartered Accountants
Toronto, Canada
February 13, 1998
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
DECEMBER DECEMBER
31, 31,
1997 1996
------------ ----------
ASSETS
CURRENT ASSETS
Cash............................................. $ 3,505 $ 2,718
Accounts receivable (note 3)..................... 13,222 9,552
Other............................................ 9,315 8,852
------------ ----------
26,042 21,122
PROPERTY, EQUIPMENT AND LEASEHOLDS (note 4)........ 567,431 579,841
OTHER ASSETS
Long-term investments and receivables............ 2,206 2,535
Goodwill (less accumulated amortization of
$12,382; 1996-$11,281).......................... 31,687 32,816
Deferred charges (less accumulated amortization
of $5,194; 1996-$3,671)......................... 8,109 7,857
------------ ----------
42,002 43,208
------------ ----------
TOTAL ASSETS....................................... $ 635,475 $ 644,171
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals (note 5)........... $ 91,849 $ 59,474
Deferred income (note 6)......................... 20,364 17,150
Current portion of long-term debt and other
obligations..................................... 27,446 6,926
------------ ----------
139,659 83,550
LONG-TERM DEBT (note 7)............................ 333,523 326,058
CAPITALIZED LEASE OBLIGATIONS (note 11)............ 6,271 8,317
DEFERRED INCOME (note 6)........................... 3,965 6,594
PENSION OBLIGATION (note 9)........................ 875 1,072
SHAREHOLDERS' EQUITY
Capital stock (note 10).......................... 555,400 555,374
Translation adjustment........................... 939 4,016
Retained earnings (deficit)...................... (405,157) (340,810)
------------ ----------
151,182 218,580
------------ ----------
COMMITMENTS AND CONTINGENCIES (note 11)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $ 635,475 $ 644,171
============ ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995
----------- ---------- -----------
REVENUE
Admissions............................. $ 399,171 $ 358,973 $ 365,220
Concessions............................ 147,892 126,636 126,319
Other.................................. 26,714 24,083 21,611
------ ------ ------
573,777 509,692 513,150
EXPENSES
Theatre operations and other expenses.. 462,738 418,328 418,731
Cost of concessions.................... 28,705 22,357 22,016
General and administrative............. 20,313 18,192 17,575
Depreciation and amortization.......... 45,715 43,648 42,621
------ ------ ------
557,471 502,525 500,943
------- ------- -------
Income before the undernoted (note 17)... 16,306 7,167 12,207
Other expenses (note 12)................. (43,401) (1,377) (2,862)
-------- ------- -------
Income/(loss) before interest on long-
term debt and income taxes (note 17).... (27,095) 5,790 9,345
Interest on long-term debt............... 33,900 35,482 40,983
------ ------ ------
Loss before income taxes................. (60,995) (29,692) (31,638)
Income taxes (note 13)................... 1,072 1,390 1,269
----- ----- -----
NET LOSS................................. $ (62,067) $ (31,082) $ (32,907)
=========== =========== ===========
BASIC
Weighted average shares outstanding......176,795,000 163,473,000 114,764,000
Loss per share............................ $ (0.35) $ (0.19) $ (0.29)
FULLY DILUTED
Weighted average shares outstanding......191,304,000 176,107,000 122,616,000
Loss per share............................ $ (0.35) $ (0.19) $ (0.29)
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995
-------------- ----------- ----------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss................................ $ (62,067) $ (31,082) $ (32,907)
Depreciation and amortization........... 45,715 43,648 42,621
Write down of property, equipment and
leaseholds............................. 24,591 -- --
Other non-cash items.................... (6,617) (2,098) 1,258
------------- ----------- ---------
1,622 10,468 10,972
Net change in non-cash working capital.. 29,158 1,948 (7,450)
------------- ----------- ---------
30,780 12,416 3,522
------------- ----------- ---------
FINANCING ACTIVITIES
Decrease in long-term debt and other
obligations............................ (5,275) (58,411) (9,289)
Increase in long-term debt and other
obligations............................ 31,017 -- 14,085
Issue of share capital, net of issue
costs.................................. 26 82,895 64
Other................................... 2,936 175 (615)
------------- ----------- ---------
28,704 24,659 4,245
------------- ----------- ---------
INVESTMENT ACTIVITIES
Additions to property, equipment and
leaseholds............................. (66,203) (36,989) (30,749)
Long-term investments................... 4,270 -- (109)
Proceeds on sale of certain theatre
properties............................. 3,563 1,974 23,674
Proposed merger costs................... (2,280) -- --
Other................................... 1,953 (946) (530)
------------- ----------- ----------
(58,697) (35,961) (7,714)
------------- ----------- ----------
NET INCREASE DURING YEAR.................. 787 1,114 53
CASH AT BEGINNING OF YEAR................. 2,718 1,604 1,551
------------- ----------- ----------
CASH AT END OF YEAR....................... $ 3,505 2,718 $ 1,604
============= =========== ==========
CASH FLOW FROM OPERATING ACTIVITIES PER
SHARE
Basic................................... $ 0.17 $ 0.08 $ 0.03
Fully Diluted........................... $ 0.16 $ 0.07 $ 0.03
CHANGE IN NON-CASH WORKING CAPITAL
Current assets
Accounts receivable..................... $ (3,938) $ 1,117 $ 629
Other................................... (214) (1,024) 1,383
Current liabilities
Accounts payable and accruals........... 29,660 (998) (9,509)
Deferred income......................... 3,276 2,157 508
Income taxes payable.................... 374 696 (461)
------------- ----------- ---------
$ 29,158 $ 1,948 $ (7,450)
============= =========== =========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest on long-term debt paid......... $ 33,900 $ 35,482 $ 40,983
============= =========== ==========
Income taxes paid....................... $ 1,072 $ 1,390 $ 1,269
============= =========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES)
SUBORDINATING
RESTRICTED
COMMON STOCK VOTING SHARES RETAINED TOTAL
----------------------- --------------------- EARNINGS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT (DEFICIT) ADJUSTMENT EQUITY
----------- ---------- ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31,
1994.......... 65,541,677 $213,890 49,204,245 $258,525 $ (276,821) $ 581 $196,175
Exercise of
options...... 38,950 64 64
Net loss...... (32,907) (32,907)
Translation
adjustment... 2,660 2,660
BALANCE AT ----------- ---------- ---------- -------- ---------- ----------- ------------
DECEMBER 31,
1995.......... 65,580,627 213,954 49,204,245 258,525 (309,728) 3,241 165,992
Exercise of
options...... 276,118 375 375
Net loss...... (31,082) (31,082)
Translation
adjustment... 775 775
Issue of
shares....... 37,477,412 49,187 24,242,181 33,333 82,520
----------- ---------- ---------- -------- ---------- ----------- -----------
BALANCE AT
DECEMBER 31,
1996.......... 103,334,157 263,516 73,446,426 291,858 (340,810) 4,016 218,580
Exercise of
options...... 18,750 26 26
Net loss...... (62,067) (62,067)
Proposed
merger costs
(note 20).... (2,280) (2,280)
Translation
adjustment... (3,077) (3,077)
------------ ---------- ---------- --------- ---------- ----------- ---------
BALANCE AT
DECEMBER 31,
1997.......... 103,352,907 $263,542 73,446,426 $291,858 $(405,157) $ 939 $151,182
============ ========== ========== ========= ========== =========== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)
1. GENERAL
The Corporation is incorporated under the Ontario Business
Corporations Act.
The financial results of the Corporation's operations are presented in
United States dollars, as approximately two-thirds of the Corporation's
activities emanate from the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada, which, except as
described in note 17, conform in all material respects with accounting
principles generally accepted in the United States. A summary of
significant accounting policies is set out below.
Principles of Consolidation: The consolidated financial statements
include the accounts of the Corporation and its subsidiaries. Intercompany
accounts and transactions have been eliminated. The Corporation accounts
for its interests in joint ventures through the proportionate consolidation
method.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out basis) and net realizable value.
Property, Equipment and Leaseholds: Property, equipment and leaseholds
are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are calculated using the following methods
and annual rates:
Buildings.......................... Straight-line over 40 years
Projection equipment............... Straight-line over 20 years
Other equipment.................... Straight-line over 15 years
Leaseholds......................... Straight-line over periods from 15 to
40 years
Construction in progress is depreciated from the date the asset is
ready for productive use.
Goodwill: Goodwill represents the excess of the purchase price of
certain businesses over the fair value of the net identifiable assets
acquired and is being amortized, on a straight-line basis, over 40 years.
The Corporation regularly reviews the recoverability of goodwill by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected future undiscounted
income from operations before interest on long-term debt and effects of
goodwill amortization.
Deferred Income: Advance payments received under a strategic marketing
relationship with a major supplier, advance sales of admissions, the sale
of gift certificates and income from certain promotional programs are
included as deferred income, and are recognized as income when services are
rendered.
Deferred Charges: Deferred charges, consisting primarily of costs
associated with debt refinancing, are amortized over the term of the
related debt.
Foreign Currency Translation: Assets and liabilities denominated in a
currency other than U.S. dollars are translated to U.S. dollars at exchange
rates in effect at the balance sheet date. The resulting gains or losses
are accumulated in a separate component of shareholders' equity under the
caption "Translation adjustment". Revenue and expense items are translated
at average exchange rates prevailing during the year.
Admissions Revenue: Admissions revenue from the exhibition of motion
pictures is recognized on the dates of exhibition.
Earnings Per Share: Basic earnings per share are calculated using the
weighted daily average number of Common Shares and Subordinate Restricted
Voting Shares outstanding. Fully diluted earnings per share are calculated
assuming the exercise of stock options at the beginning of the year, or for
those stock options issued during the year, at the date of the grant to the
extent the impact is dilutive.
Interest Rate Hedging Activities: The Corporation uses interest rate
swaps to manage interest rate risk. These financial instruments are not
held for trading purposes and any payments or receipts under such contracts
are recognized as adjustments to interest expense.
Measurement Uncertainty: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period. Actual results could
differ from those estimates.
3. ACCOUNTS RECEIVABLE
DECEMBER DECEMBER
31, 1997 31, 1996
------------ ----------
Trade............................................. $10,246,000 $8,446,000
Current portion of long-term receivables.......... 162,000 150,000
Other............................................. 3,021,000 1,098,000
Employee loans.................................... 210,000 323,000
Allowance for doubtful accounts................... (417,000) (465,000)
------------ ----------
$13,222,000 $9,552,000
============ ==========
4. PROPERTY, EQUIPMENT AND LEASEHOLDS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C> <C>
Land.............................................. $62,436,000 $63,116,000
-------------- -------------
Buildings Cost.................... 123,023,000 126,217,000
Accumulated depreciation (25,700,000) (19,919,000)
-------------- -------------
97,323,000 106,298,000
-------------- -------------
Equipment Cost.................... 141,499,000 136,521,000
Accumulated depreciation (76,384,000) (70,851,000)
-------------- -------------
65,115,000 65,670,000
-------------- -------------
Leaseholds Cost.................... 566,754,000 537,153,000
(including capital Accumulated depreciation (230,490,000) (197,688,000)
leases) -------------- -------------
336,264,000 339,465,000
-------------- -------------
Construction in progress.......................... 6,293,000 5,292,000
-------------- -------------
$567,431,000 $579,841,000
============== =============
</TABLE>
The net book value of assets held under capital leases at December 31,
1997 was $18,734,000 (1996-$20,508,000), net of accumulated amortization of
$9,053,000 (1996-$7,700,000).
5. ACCOUNTS PAYABLE AND ACCRUALS
DECEMBER DECEMBER
31, 1997 31, 1996
---------- -----------
Trade......................................... $49,851,000 $40,332,000
Accrued liabilities........................... 20,554,000 9,809,000
Sales and other taxes......................... 9,817,000 8,517,000
Other......................................... 11,627,000 816,000
----------- -----------
$91,849,000 $59,474,000
=========== ===========
6. DEFERRED INCOME
DECEMBER DECEMBER
31, 1997 31, 1996
------------ -----------
Strategic marketing relationship.............. $5,665,000 $8,296,000
Advance admission sales....................... 11,452,000 9,678,000
Gift certificates............................. 5,522,000 5,001,000
Promotional programs.......................... 1,401,000 491,000
Other......................................... 289,000 278,000
------------ ----------
24,329,000 23,744,000
Less: Current portion......................... 20,364,000 17,150,000
------------ ----------
$3,965,000 $6,594,000
------------ ----------
7. LONG-TERM DEBT
DECEMBER DECEMBER
31, 1997 31, 1996
---------- ------------
Senior subordinated notes maturing
June 15, 2004, bearing interest
at 10.875%.................................. $200,000,000 $200,000,000
Bank credit facilities of $158,530,000
maturing December 31, 1999.................. 110,957,000 79,940,000
Various notes and mortgages (interest
rates from 5.61% to 11.50%)................. 47,071,000 49,877,000
----------- -------------
358,028,000 329,817,000
Less: Current portion......................... 24,505,000 3,759,000
------------ -------------
$333,523,000 $326,058,000
============ =============
The bank credit facilities bear interest at variable rates based upon
an applicable margin over LIBOR or the bank's reference rate. The
applicable margin for LIBOR borrowings will vary from a maximum of 2.25% to
a minimum of 1.25% based upon the Corporation meeting certain financial
ratios. During 1997, the Corporation reached an agreement with the bank
syndicate participating in the bank credit facilities to (1) defer a
commitment reduction scheduled for December 31, 1997 in the amount of
$10,000,000; and (2) provide the Corporation with an additional commitment
of $20,600,000. Based on the above information, commitment reductions under
the bank credit facility are $40,000,000 in 1998 with the balance due in
1999. The bank credit facilities are secured by certain assets of the
Corporation and its subsidiaries.
The bank credit facilities contain restrictive covenants which require
the Corporation to maintain certain financial ratios. Given the uncertainty
with respect to the admission and concession revenue that the Corporation
will generate, the Corporation may not meet certain financial covenants as
early as the first quarter end during the next fiscal year. The Corporation
believes that the bank syndicate participating in the bank credit
facilities would waive the particular financial covenants if the
Corporation is not in compliance at a measurement date during the next
twelve month period.
Principal repayments on long-term debt during each of the next five
years approximate the following:
1998............................................. $24,505,000
1999............................................. 119,047,000
2000............................................. 2,083,000
2001............................................. 1,169,000
2002............................................. 4,034,000
Thereafter....................................... 207,190,000
------------------
$358,028,000
==================
8. FINANCIAL INSTRUMENTS
(i) Swap Agreements--The Corporation has entered into interest rate
swap agreements to manage its interest rate exposure. At December 31, 1997
the Corporation had outstanding two interest rate swap agreements with a
commercial bank. The details of the swaps are as follows:
(a) Notional principal--$15,000,000. The Corporation pays 5.74%
per annum, payable on a quarterly basis and receives three month LIBOR
rate. This swap expires November 30, 1998.
(b) Notional principal--$20,000,000. The Corporation pays 5.72%
per annum, payable on a quarterly basis and receives three month LIBOR
rate. This swap expires November 30, 1998.
The Corporation is exposed to credit loss in the event of
non-performance by the other party to the interest rate swap agreements.
However, the Corporation does not anticipate non-performance by the
counterparty.
(ii) Currency Options--The Corporation has entered into three currency
option agreements to manage its exposure to movements in the Canadian
dollar relative to the United States dollar. These agreements are for a
total notional principal of $6,000,000 Canadian, $44,000,000 Canadian and
$50,000,000 Canadian and expire on January 14, 1998, January 28, 1998 and
March 30, 1998 respectively. The Corporation is exposed to credit loss in
the event of non-performance by the other party to the currency option.
However, the Corporation does not anticipate non-performance by the
counterparty.
(iii) Fair Value of Financial Instruments--The carrying value of cash,
accounts receivable, accounts payable and accruals and the current portion
of long-term debt and other obligations approximates fair value due to the
short term maturities of these instruments. Financial instruments with a
carrying value different from their fair value include:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets
Long-term investments and
receivables
--Practicable to
estimate fair value. $ 631,000 $ 7,135,000 $ 935,000 $ 7,873,000
--Not practicable..... $1,575,000 $ -- $1,600,000 $ --
Financial liabilities
Long-term debt.......... $333,523,000 $347,523,000 $326,058,000 $326,558,000
Swap agreements net
receivable............. $ -- $ 32,000 $ -- $ 123,000
</TABLE>
The fair value of long-term investments and receivables is based on
quoted market prices (where applicable) or by discounting future cash
flows, including interest payments, using rates currently available for
similar investments and receivables. The fair value of long-term debt is
based on quoted market prices (where applicable) or by discounting future
cash flows, including interest payments, using rates currently available
for debt of similar terms and maturity. The fair value of interest rate
swap agreements are the estimated amounts that the Corporation would
receive upon termination of the agreements.
9. PENSION OBLIGATION
The Corporation has a defined benefit pension plan covering full-time
employees in the United States. The benefits under this plan are based upon
years of service and the employees' compensation for certain periods during
the last years of employment. This plan is non-contributory and the
Corporation's funding policy is to make the minimum annual contribution
required by the applicable regulations. At December 31, 1997, approximately
52% of the assets of this plan were held in bonds, 36% in treasury bills,
11% in equities, and 1% in cash. The most recent actuarial estimate for the
plan covering these employees as at December 31, 1997 indicates pension
fund assets of $6,679,000 (1996--$6,557,000) and accrued pension benefits
of $12,779,000 (1996--$12,185,000).
The Corporation has a pension plan covering full time employees in
Canada. Prior to January 1, 1993 this plan was a defined benefit plan and
effective on that date it was converted to a defined contribution plan. At
the date of the conversion benefits under the defined benefit plan were
frozen. The most recent actuarial estimate for the plan covering Canadian
employees indicates a surplus of pension fund assets over accrued benefits
of approximately $2,101,000.
At December 31, 1997, the Corporation's pension obligation is
$1,846,000, of which $875,000 is the long-term portion ($2,145,000 at
December 31, 1996 of which $1,072,000 was the long-term portion).
10. CAPITAL STOCK
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
Authorized:
Unlimited number of Common Shares, no par value......................
Unlimited number of First Preference Shares
issuable in series, no par value....................................
Unlimited number of Subordinate Restricted
Voting Shares, no par value.........................................
Issued:
103,352,907 Common Shares (December 31,
1996--103,334,157).................................................. $ 263,542,000 $263,516,000
73,446,426 Subordinate Restricted Voting Shares
(December 31, 1996--73,446,426)...................................... $ 291,858,000 $291,858,000
--------------- ------------
$ 555,400,000 $555,374,000
=============== ============
</TABLE>
(i) On March 20, 1996 the Corporation filed a supplemented short form
prospectus in Canada and the United States pursuant to the
multi-jurisdictional disclosure system with respect to an offering of
25,000,000 Common Shares to the public at a price of $1.375 per share, for
an aggregate consideration of $34,375,000. In addition, in accordance with
the provisions of the Amended and Restated Subscription Agreement,
Universal Studios, Inc. (Universal) (formerly MCA INC.) and the Charles
Rosner Bronfman Trust (the Trust) agreed to subscribe for 24,242,181
Subordinate Restricted Voting (SRV) Shares and 12,121,454 Common Shares
respectively, at the same price as the offering to the public, for
aggregate consideration of $50,000,000. The public offering and the
subscriptions by Universal and the Trust were completed on March 28, 1996.
On April 16, 1996, the Corporation issued 355,958 Common Shares at a price
of $1.375 per share as part of the over-allotment option provided to the
underwriters pursuant to the public offering. The net proceeds from the
issuance of the Common and SRV Shares were used to reduce indebtedness
owing under the Corporation's revolving bank credit facilities.
(ii) The SRV Shares are held by Universal. Under the terms of the
shares, Universal is entitled to exercise no more than one-third less one
vote of the voting rights applicable to all issued voting shares.
(iii) In 1996 the Amended and Restated Stock Option Plan (the Option
Plan) was approved. The Option Plan provides for the granting of rights to
purchase Common Shares under both incentive and non-incentive stock option
agreements. The options granted under the Option Plan are for 10 year terms
and vest over various periods to a maximum of 5 years. The maximum number
of options which can be granted under the Option Plan is 17,646,716.
The following options to purchase Common Shares expire between October
15, 2001 and December 18, 2007:
DECEMBER 31,
OPTION PRICE PER SHARE 1997
---------------------- ------------
$1.70 Canadian............................................ 8,450
1.87 Canadian............................................ 14,323,939
2.00 Canadian............................................ 106,750
2.60 Canadian............................................ 15,000
1.31 United States....................................... 1,000,000
---------
Options outstanding end of year 15,454,139
==========
Stock option transactions for the respective years were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------- ---------------------
NUMBER WEIGHTED AV. NUMBER WEIGHTED AV.
OF EXERCISE OF EXERCISE
OPTIONS PRICE($CDN) OPTIONS PRICE ($CDN)
---------- ----------- ------- ------------
<S> <C> <C> <C> <C>
Options outstanding beginning
of year.................................. 14,503,239 1.87 7,835,289 3.06
Additional options granted ................ 1,121,750 1.79 8,019,020 1.87
Less options exercised .................... 18,750 1.87 276,118 1.87
Less options terminated,
canceled or expired................... 152,100 1.87 1,074,952 2.74
---------- ----- ---------- ----
Options outstanding end of year............ 15,454,139 1.86 14,503,239 1.87
========== ===== ========== ====
</TABLE>
At December 31, 1997 there were 10,385,334 options exercisable and
1,621,666 options available for grant.
(iv) Under the Corporation's current financing arrangements, the
Corporation is prohibited from paying any Common Share or Subordinate
Restricted Voting Share dividends unless it is in compliance with specified
financial ratios. The Corporation is not currently in compliance with such
financial ratios. Any such payment of dividends is further subject to
annual limitations.
11. COMMITMENTS AND CONTINGENCIES
(i) Certain theatre properties and theatre equipment are subject to
lease agreements. Certain of the property leases require the Corporation to
pay additional rent and to pay all business and realty taxes and a
proportion of the landlord's operating costs in respect of the leased
premises. Future minimum payments, by year and in the aggregate, under
theatre operating leases and theatre and equipment capital leases, as at
December 31, 1997, are as follows:
CAPITAL LEASES OPERATING
LEASES
-------------- ----------
1998 .................................. $ 2,613,000 $ 86,846,000
1999 .................................. 2,441,000 85,702,000
2000 .................................. 2,316,000 83,682,000
2001 .................................. 1,085,000 81,360,000
2002 .................................. 520,000 78,118,000
Thereafter ............................ 1,521,000 755,759,000
--------- ------------
Total minimum lease payments .......... 10,496,000 $1,171,467,000
===============
Less: Imputed interest at rates between
7.5% and 8.5%........................ 2,255,000
Current portion ....................... 1,970,000
----------
$ 6,271,000
==========
(ii) The Corporation and its subsidiaries are currently subject to
audit by taxation authorities in several jurisdictions. The taxation
authorities have proposed to reassess taxes in respect of certain
transactions and income and expense items. The Corporation and its
subsidiaries are vigorously contesting the adjustments proposed by the
taxation authorities. Although such matters cannot be predicted with
certainty, management does not consider the Corporation's exposure to such
proposed reassessments to be material to these financial statements.
(iii) The Corporation and its subsidiaries are also involved in
certain litigation arising out of the ordinary course and conduct of its
business. The outcome of this litigation is not currently determinable.
Although such matters cannot be predicted with certainty, management does
not consider the Corporation's exposure to such litigation to be material
to these financial statements.
<PAGE>
12. OTHER INCOME (EXPENSES)
Other income(expenses) is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------ ---------------
<S> <C> <C> <C>
Net loss on sale or write down of
theatre related assets.................... $(46,239,000) $ (14,000) $ (3,014,000)
Net gain on sale or realization of
non-theatre related assets................ 3,787,000 -- 1,175,000)
Other .................................... (949,000) (1,363,000) (1,023,000)
------------- ------------ ---------------
$(43,401,000) $(1,377,000) $ (2,862,000)
============ ============ ===============
</TABLE>
During the year ended December 31, 1997 the Corporation conducted a
review of its operating assets and identified a select number of theatres
for disposal. Accordingly, the Corporation took a charge of $46,239,000
representing the costs associated with terminating certain leases and
disposing of certain properties and the write-off of the net book value
attributable to the related properties. It is anticipated that the disposal
plan will be substantially completed by the end of fiscal 1998. An amount
of $10,307,000, representing remaining lease termination payments, is
included in accounts payable as at December 31, 1997.
13. INCOME TAXES
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
-------------- ------------- -------------
Current.................... $1,072,000 $1,390,000 $1,269,000
============== ============= =============
The Corporation's income tax provision based upon income (loss) from
continuing operations before income taxes is made up as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
Statutory income tax rate .................. 44.0% 44.0% 44.0%
Provision based on statutory income
tax rate................................. $(27,173,000) $(13,064,000) $(13,921,000)
Increase (decrease) in income tax
provision resulting from:
Tax exempt portion of capital
gains .................................. (359,000) (6,000) (48,000)
Permanent differences other than
capital gains........................... 519,000 62,000 766,000
Non-recognition of tax benefit of
current year's losses for tax
purposes:
Canada ................................... -- -- 1,290,000
United States ............................ 35,130,000 14,050,000 11,913,000
Recognition of tax benefit of prior
years' losses for tax purposes:
Canada ................................... (8,117,000) (1,042,000) --
United States ............................ -- -- --
----------- ------------ ------------
Large Corporations Tax and state
taxes.................................. 1,072,000 1,390,000 1,269,000
----------- ------------ ------------
Income tax provision ..................... $ 1,072,000 $ 1,390,000 $ 1,269,000
=========== ============ ============
</TABLE>
For taxation purposes there are net operating loss carryforwards of
approximately $272,000,000 available to offset future taxable income. These
losses expire between the years 1998 and 2012. A portion of the United
States net operating loss carryforwards, in the amount of $41,000,000, are
subject to annual limitations under Section 382 of the Internal Revenue
Code of 1986, as amended.
<PAGE>
14. SEGMENTED INFORMATION
Substantially all of the Corporation's operations are in the
exhibition business, including the exhibition and distribution of motion
picture films. The geographic distribution of revenue, income(loss) before
income taxes, income taxes, income (loss) and assets are shown below:
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenue
Canada ......................... $206,547,000 $159,068,000 $150,026,000
United States .................. 367,230,000 350,624,000 363,124,000
------------ ------------ ------------
$573,777,000 $509,692,000 $513,150,000
============ ============ ============
Income (loss) before income taxes
Canada ......................... $19,236,000 $2,394,000 $ (2,788,000)
United States .................. (80,231,000) (32,086,000) (28,850,000)
------------ ------------ ------------
$(60,995,000) $(29,692,000) $(31,638,000)
============ ============ ============
Income taxes
Canada .......................... $ 323,000 $ 235,000 $ 126,000
United States ................... 749,000 1,155,000 1,143,000
------------ ------------ ------------
$ 1,072,000 $ 1,390,000 $ 1,269,000
============ ============ ============
Income (loss)
Canada .......................... $ 18,913,000 $2,159,000 $ (2,914,000)
United States ................... (80,980,000) (33,241,000) (29,993,000)
------------ ------------ ------------
$(62,067,000) $(31,082,000) $(32,907,000)
============ ============ ============
</TABLE>
DECEMBER 31, DECEMBER 31,
1997 1996
----------------- --------------------
Assets
Canada................ $163,323,000 $142,448,000
United States......... 472,152,000 501,723,000
----------------- -----------------
$635,475,000 $644,171,000
================= =================
Film exhibition operations outside of Canada and the United States are
currently limited to one theatre (six screens) in Budapest, Hungary. This
location is not material to the Corporation's financial position or results
of operations and is included with Canada for segmented disclosure
purposes.
15. SUMMARY FINANCIAL INFORMATION OF PLITT THEATRES, INC. (PLITT)
The following is summarized consolidated financial information of
Plitt:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Revenue ........................ $367,230,000 $350,624,000 $363,124,000
============ ============ ============
Income (loss) from continuing
operations before general and
administrative expenses,
depreciation and amortization,
interest on long-term debt and
income taxes.................. $ (1,813,000) $ 45,847,000 $ 46,148,000
------------ ------------ ------------
Net loss ....................... $(80,980,000) $(33,241,000) $(29,993,000)
============ ============ ============
</TABLE>
<PAGE>
The results for the year ended December 31, 1997 include $1,313,000 of
costs charged to Plitt by the Corporation (1996-$1,799,000; 1995-$Nil).
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
Current assets.................. $ 14,382,000 $ 17,105,000
Noncurrent assets............... $457,770,000 $484,618,000
Current liabilities............. $130,838,000 $ 55,078,000
Noncurrent liabilities.......... $256,008,000 $265,386,000
============ ============
Current liabilities at December 31, 1997 include a net payable to the
Corporation and other corporations within the consolidated group in the
amount of $32,477,000 (1996--$9,551,000). Noncurrent liabilities at
December 31, 1997 and December 31, 1996 include $10,000,000 that is owed to
the Corporation.
16. RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere in these financial
statements include film distribution and exhibition agreements which the
Corporation enters into with Universal. These agreements are conducted in
accordance with normal business terms and conditions. Pursuant to these
agreements, the Corporation, in the year ended December 31, 1997, paid
approximately $27,459,000 in film licensing fees to Universal
(1996--$20,631,000, 1995--$31,198,000) and received from Universal
approximately $1,010,000 (1996--$666,000, 1995--$576,000) relating to
distribution services.
17. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
(i) The Corporation has adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109), for its financial statements presented under United States accounting
principles. Under FAS 109 the Corporation's method of accounting for income
taxes changes from the deferred method, as recorded under Canadian
accounting principles, to an asset and liability approach. Under the asset
and liability method of FAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.
The income tax provision for the year ended December 31, 1997
calculated in accordance with United States accounting principles was the
same as that reported under Canadian accounting principles after reflecting
a net decrease in the valuation allowance of $58,600,000 (1996--net
increase of $19,400,000, 1995--net increase of $22,700,000).
The application of the above noted United States accounting principles
on the balance sheet of the Corporation as at December 31, 1997 resulted in
no net difference in deferred taxes from that reported under Canadian
accounting principles. Net deferred tax assets and liabilities are
comprised of the following:
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
Deferred Tax Assets
Non capital losses............. $22,378,000 $98,039,000
Depreciation................... 27,225,000 25,922,000
Loss on disposals.............. 13,729,000 --
Other.......................... 13,768,000 15,039,000
----------- -----------
77,100,000 139,000,000
Less: Valuation allowance...... (44,400,000) (103,000,000)
----------- ------------
$32,700,000 $36,000,000
=========== ============
Deferred Tax Liabilities
Depreciation.................... $32,134,000 $34,755,000
Other.......................... 566,000 1,245,000
----------- -----------
$32,700,000 $36,000,000
=========== ============
(ii) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, all operating
income and expenses, such as those listed in note 12 to the consolidated
financial statements, are required to be included in any subtotal
purporting to represent income (loss) from operations. Therefore, under
U.S. GAAP, income (loss) from operations as cross-referenced from the
income statement to this note would be as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31,1996 DECEMBER 31, 1995
----------------- ---------------- -----------------
$ (27,095,000) $ 5,790,000 $ 9,345,000
================= ================ =================
(iii) The Corporation applies APB Opinion No. 25 in accounting for its
stock options under United States GAAP. Beginning in 1996, United States
GAAP encourages, but does not require, the recording of compensation cost
for stock options at fair value. The new United States accounting
pronouncement, SFAS No. 123, does however, require the disclosure of pro
forma net income and earnings per share information as if the Corporation
had accounted for its stock options issued in 1997, 1996 and 1995 under the
fair value method. Accordingly, the fair value of these options has been
estimated at the date of grant or re-issue using the Black-Scholes option
pricing model with the following assumptions for 1997 and 1996: weighted
average risk free interest rate of 5.83% and 5.96%; dividend yield of 0%;
volatility factor of the expected market price of the Corporation's Common
Shares of 0.42 and 0.60; and a weighted average expected life of the
options of 2.0 and 2.9 years. The weighted-average grant-date fair value of
the options issued in 1997 was Canadian $0.48 and in 1996 was Canadian
$0.80. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period which
ranges from upon issuance or re-issue to four years. Retroactive
application of the fair value method to prior years is not permitted,
therefore the full effect of the fair value method will not be reflected in
the pro forma disclosures until it has been applied to all non-vested
options. Assuming the Corporation has accounted for its stock options
issued under the fair value method, United States GAAP pro forma net loss
and net loss per share for the years ended December 31, 1997 and 1996 would
have been $63,559,000 ($0.36 per share) and $35,059,000 ($0.21 per share)
respectively. Compensation cost for the year ended December 31, 1995 has
not been estimated as the number of options issued in the year was
insignificant.
(iv) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, presentation of
Cash Flow from Operating Activities per Share is not permitted on the face
of the Statement of Changes in Cash Resources.
(v) In accordance with FAS 87 the following disclosures are made:
DEFINED BENEFIT PENSION PLAN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Periodic Pension Cost
Service cost ................... $ 315,000 $ 332,000 $ 318,000
Interest cost .................. 899,000 896,000 926,000
Return on assets ............... (554,000) (537,000) (460,000)
Other .......................... 214,000 529,000 263,000
----------- ----------- -----------
$ 874,000 $ 1,220,000 $ 1,047,000
=========== =========== ===========
Key assumptions
Discount rate .................. 7.75% 7.50% 8.00%
Expected long term
return on assets ............. 8.50% 8.50% 8.50%
Compensation increase rate ..... 6.00% 6.00% 6.00%
</TABLE>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- ------------
Reconciliation of Funded Status
Projected benefit obligation ....... $(12,779,000) $(12,185,000)
Plan assets at fair value .......... 6,679,000 6,557,000
Unrecognized net loss .............. 3,384,000 2,515,000
Prior service costs not yet
recognized ....................... 108,000 129,000
Unrecognized net transition
obligation ....................... 824,000 989,000
Other .............................. (62,000) (150,000)
----------- -----------
$(1,846,000) $(2,145,000)
=========== ===========
DEFINED CONTRIBUTION PENSION PLAN
No cost is recognized in any of the three years ended December 31,
1997 with respect to this plan.
(vi) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, costs related to
the proposed merger in the amount of $2,280,000, which have been charged to
retained earnings under Canadian GAAP, would be charged to expense under
U.S. GAAP. Accordingly, the following tabular reconciliation is provided
for net loss in accordance with U.S. GAAP:
YEAR ENDED
DECEMBER 31,
1997
-------------
Net loss as reported on the consolidated
income statement............................... $(62,067,000)
Proposed merger costs............................ 2,280,000
------------
Net loss in accordance with U.S. GAAP ........... $(64,347,000)
============
In accordance with U.S. GAAP the basic and fully diluted loss per
share is $0.36. Shareholders' equity is unaffected.
18. JOINT VENTURES
The Corporation's prorata share of the joint venture operations
through which it carries out part of its activities is summarized below.
The Balance Sheet amounts below reflect the elimination of accounts between
these joint ventures and the Corporation.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Revenue.................................. $8,367,000 $4,727,000 $3,624,000
Expenses................................. 4,881,000 3,519,000 2,588,000
---------- ---------- ----------
Net income............................... $3,486,000 $1,208,000 $1,036,000
========== ========== ==========
Cash flow from operations................ $3,969,000 $1,589,000 $1,251,000
========== ========== ==========
</TABLE>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
Current assets............................ $2,281,000 $966,000
Noncurrent assets......................... $12,833,000 $10,953,000
Current liabilities....................... $2,305,000 $1,629,000
Noncurrent liabilities.................... $2,381,000 $2,167,000
=========== ===========
19. RECLASSIFICATIONS
Certain prior years' balances have been reclassified to conform with
the financial statement presentation adopted in the current year.
20. PROPOSED MERGER
On September 30, 1997, the Corporation announced that it has entered
into an agreement with Sony Pictures Entertainment Inc. (SPE) and LTM
Holdings, Inc. (LTM) which provides for the combination of the businesses
of the Corporation and LTM. LTM is a private Delaware Corporation
wholly-owned by SPE. The transaction will involve combining the Corporation
with the Loews Theatres Exhibition Group, which consists of Sony/Loews
Theatres and its joint ventures with Star Theatres and Magic Johnson
Theatres. It is proposed that the combined company will be named Loews
Cineplex Entertainment Corporation (LCE). It is anticipated that LCE will
have over 2,700 screens in approximately 450 locations in North America.
Pursuant to a series of related transactions to be effected pursuant
to a Plan of Arrangement under the Business Corporations Act (Ontario), the
Corporation's shares will be exchanged for shares of LCE with the result
that the Corporation will become a wholly-owned subsidiary of LCE. Upon
closing of the transaction, SPE will own approximately 51.1% of LCE's
shares (representing 49.9% of LCE's voting shares); Universal will own
approximately 26.0% of LCE's shares (subsequent to a cash subscription of
approximately $84.5 million); the Charles Rosner Bronfman Family Trust and
certain related parties (the "Bronfman Trusts") will own approximately 9.6%
of LCE's shares; and the shareholders of the Corporation, other than SPE,
Universal and the Bronfman Trusts, will own approximately 13.3% of LCE's
shares. It is intended that the LCE shares will be listed on the New York
Stock Exchange and the Toronto Stock Exchange.
The merger is subject to approval by the shareholders of the
Corporation and regulatory approval in both Canada and the United States.
The special meeting of shareholders is scheduled for March 26, 1998. It is
anticipated that closing of this transaction will take place in the second
quarter of 1998.
During the year ended December 31, 1997 the Corporation incurred
legal, investment banking and other costs directly attributable to the
proposed merger. Such costs are considered to be a capital transaction
under Canadian GAAP and accordingly have been charged to retained earnings
(note 17).
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash..................................... $ 2,794 $ 3,505
Accounts receivable...................... 11,404 13,222
Other.................................... 9,573 9,315
------------ -----------
23,771 26,042
PROPERTY, EQUIPMENT AND LEASEHOLDS......... 562,220 567,431
OTHER ASSETS
Long-term investments and receivables.... 5,291 2,206
Goodwill................................. 31,414 31,687
Deferred Charges......................... 7,951 8,109
------------ -----------
44,656 42,002
------------ -----------
TOTAL ASSETS............................... $ 630,647 $ 635,475
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals............ $ 89,289 $ 91,849
Deferred income.......................... 19,301 20,364
Current portion of long-term debt and
other obligations...................... 29,418 27,446
------------ -----------
138,008 139,659
LONG-TERM DEBT............................. 336,601 333,523
CAPITALIZED LEASE OBLIGATIONS.............. 5,676 6,271
DEFERRED INCOME............................ 3,369 3,965
PENSION OBLIGATION......................... 601 875
SHAREHOLDERS' EQUITY
Capital stock............................ 555,714 555,400
Translation adjustment................... 625 939
Retained earnings (deficit).............. (409,947) (405,157)
------------ -----------
146,392 151,182
COMMITMENTS AND CONTINGENCIES (note 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. $ 630,647 $ 635,475
============ ===========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)
3 MONTHS 3 MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
------------ -----------
(UNAUDITED)
REVENUE
Admissions........................................ $ 101,731 $ 106,392
Concessions....................................... 38,718 38,347
Other............................................. 6,262 5,807
-------------- ----------
146,711 150,546
EXPENSES
Theatre operations and other expenses............. 120,870 116,485
Cost of concessions............................... 7,422 7,114
General and administrative ....................... 5,163 5,167
Depreciation and amortization..................... 10,936 11,021
-------------- ----------
144,391 139,787
-------------- ----------
Income before the undernoted........................ 2,320 10,759
Other income (expenses)............................. 3,330 (73)
-------------- ----------
Income before interest on long-term debt and 5,650 10,686
income taxes......................................
Interest on long-term debt.......................... 9,198 8,273
-------------- ----------
Income/(loss) before income taxes................... (3,548) 2,413
Income taxes........................................ 283 306
-------------- ----------
NET INCOME/(LOSS)................................... $ (3,831) $ 2,107
============== ==========
BASIC
Weighted average shares outstanding............... 176,878,000 176,784,000
Income/(loss) per share........................... ($0.02) $0.01
FULLY DILUTED
Weighted average shares outstanding............... 192,236,000 191,291,000
Income/(loss) per share........................... ($0.02) $0.01
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)
3 MONTHS 3 MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
-------------- ------------
(UNAUDITED)
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss)/income................................ $ (3,831) $ 2,107
Depreciation and amortization.................... 10,936 11,021
Other non-cash items............................. (4,050) (717)
-------------- ------------
3,055 12,411
Net change in non-cash working capital........... (2,025) 3,792
-------------- ------------
1,030 16,203
-------------- ------------
FINANCING ACTIVITIES
Decrease in long-term debt and other obligations. (2,403) (9,207)
Increase in long-term debt and other obligations. 6,584 214
Issue of share capital, net of issue costs....... 314 11
Other............................................ (1,496) (340)
-------------- ------------
2,999 (9,322)
-------------- ------------
INVESTMENT ACTIVITIES
Additions to property, equipment and leaseholds.. (13,801) (9,567)
Long-term investments............................ 3,402 --
Proceeds on sale of certain theatre properties... 2,169 2,626
Proposed merger costs............................ (959) --
Other............................................ 4,449 (164)
-------------- ------------
(4,740) (7,105)
-------------- ------------
NET DECREASE DURING PERIOD......................... (711) (224)
CASH AT BEGINNING OF PERIOD........................ 3,505 2,718
CASH AT END OF PERIOD.............................. $ 2,794 $ 2,494
============== ============
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic............................................ $ 0.01 $ 0.09
Fully Diluted.................................... $ 0.01 $ 0.08
SUPPLEMENTAL CASH FLOW INFORMATION
Interest on long-term debt paid.................. $ 9,198 $ 8,273
============== ============
Income taxes paid................................ $ 283 $ 306
============== ============
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(IN U.S. DOLLARS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements in this document are prepared in
accordance with accounting principles generally accepted in Canada. For the
three months ended March 31, 1998, the application of accounting principles
generally accepted in the United States did not have a material effect on
the measurement of the Corporation's net loss and shareholders' equity. For
information on differences between Canadian and United States generally
accepted accounting principles, reference is made to the Corporation's
consolidated financial statements for the year ended December 31, 1997.
The consolidated financial statements in this document are based in
part on estimates, and include all adjustments consisting of normal
recurring accruals that management believes are necessary for a fair
presentation of the Corporation's financial position as at March 31, 1998,
and the results of its operations for the three months then ended.
Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
The consolidated financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods; consequently they do not include all
generally accepted accounting disclosures required for annual consolidated
financial statements. For more complete information these consolidated
financial statements should be read in conjunction with the Corporation's
consolidated financial statements for the year ended December 31, 1997.
2. COMMITMENTS AND CONTINGENCIES
(i) The Corporation and its subsidiaries are currently subject to
audit by taxation authorities in several jurisdictions. The taxation
authorities have proposed to reassess taxes in respect of certain
transactions and income and expense items. The Corporation and its
subsidiaries are vigorously contesting the adjustments proposed by the
taxation authorities. Although such matters cannot be predicted with
certainty, management does not consider the Corporation's exposure to such
litigation to be material to these financial statements.
(ii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its business.
The outcome of this litigation is not currently determinable. Although such
matters cannot be predicted with certainty, management does not consider
the Corporation's exposure to such litigation to be material to these
financial statements.
(iii) The Corporation has not completed its test for compliance with
the financial covenants contained in its bank credit facilities as of March
31, 1998. Given the uncertainty with respect to the admission and
concession revenues that the Corporation will generate, there is a
possibility that the Corporation may not meet certain financial covenants
in current and future periods. The Corporation believes that the banking
syndicate participating in the bank credit facilities would waive the
particular financial covenants if the Corporation is not in compliance at a
measurement date during the next twelve month period.
3. PROPOSED COMBINATION
On September 30, 1997, the Corporation announced that it has entered
into an agreement with Sony Pictures Entertainment Inc. (SPE) and LTM
Holdings, Inc. (LTM) which provides for the combination of the businesses
of the Corporation and LTM. LTM is a private Delaware corporation wholly
owned by SPE. The transaction will involve combining the Corporation with
the Loews Theatres Exhibition Group, which consists of Sony/Loews Theatres
and its joint ventures with Loeks-Star Theatres and Magic Johnson Theatres.
It is proposed that the combined company will be named Loews Cineplex
Entertainment Corporation (LCE). LCE will have approximately 2,600 screens
in approximately 450 locations in North America.
Pursuant to a series of related transactions to be effected pursuant
to a Plan of Arrangement under the Business Corporations Act (Ontario), the
Corporation's shares will be exchanged for shares of LCE with the result
that the Corporation will become a wholly owned subsidiary of LCE. Upon
closing of the transaction, SPE will own approximately 51.1% of LCE's
shares (representing 49.9% of LCE's voting shares); Universal Studios, Inc.
(Universal) will own approximately 26% of LCE's shares (subsequent to a
cash subscription of approximately $84.5 million); the Charles Rosner
Bronfman Family Trust and certain related parties (the "Bronfman Trusts")
will own approximately 9.6% of LCE's shares; and the shareholders of the
Corporation, other than SPE, Universal and the Bronfman Trusts, will own
approximately 13.3% of LCE's shares. It is intended that LCE's voting
shares will be listed on The New York Stock Exchange and The Toronto Stock
Exchange. On March 26, 1998, the shareholders of the Corporation voted to
approve the combination.
4. RECLASSIFICATION
Certain of the prior period's balances have been reclassified to
conform with the presentation adopted in the current period.
<PAGE>
====================================== =====================================
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR
AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH $300,000,000
OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR LOEWS CINEPLEX
THAT THE INFORMATION HEREIN IS ENTERTAINMENT CORPORATION
CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
TABLE OF CONTENTS
8 7/8% Senior Subordinated Notes due
2008
PAGE
----
Available Information..............4
Cautionary Statement Concerning
Forward-Looking Statements.......5
Prospectus Summary.................6
Risk Factors......................21
Capitalization....................28
The Exchange Offer................29
Certain Federal Income
Tax Consequences of the
Exchange Offer...................38
Selected Historical
and Unaudited Pro Forma
Financial Information............39
Unaudited Pro Forma Financial
Information......................45
Management's
Discussion and Analysis of
Financial Condition and Results
of Operations....................51
The Motion Picture
Exhibition Industry..............60
Business..........................63
Management........................73
Certain Relationships
and Related Transactions.........85
Security Ownership
of Certain Beneficial Owners
and Management...................87
The Stockholders
Agreement........................89
Description of Certain -------------------------------------
Indebtedness.....................97
Description of New Notes..........99 PROSPECTUS
Certain Federal Tax
Consequences of an Investment -------------------------------------
in the New Notes................120
Plan of Distribution.............124
Validity of the New Notes........125
Experts..........................125
Index to Financial Statements....F-1
====================================== =====================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement in connection with
specified actions, suits, proceedings whether civil, criminal,
administrative, or investigative (other than action by or in the right of
the corporation -- a "derivative action"), if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such action, and
the statute requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable to the
corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement, or otherwise.
Article VIII of the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") requires Loews Cineplex to
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of Loews Cineplex) by reason of the fact that he
or she is or was a director or officer of Loews Cineplex, or, while a
director or officer of Loews Cineplex, is or was serving at the request of
Loews Cineplex as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
best interests of Loews Cineplex, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
for (i) any breach of the director's duty of loyalty to the corporation or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of
unlawful dividends or unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Article IX of the Restated Certificate provides that to the fullest
extent that the DGCL, as it now exists or may hereafter be amended, permits
the limitation or elimination of the liability of directors, a director of
Loews Cineplex shall not be liable to Loews Cineplex or its stockholders
for monetary damages for breach of fiduciary duty as a director. Any
amendment to or repeal of, or adoption of any provision of the Restated
Certificate inconsistent with, such Article IX shall not adversely affect
any right or protection of a director of Loews Cineplex for or with respect
to any acts or omissions of such director occurring prior to such amendment
or repeal.
Loews Cineplex has entered into indemnification agreements with its
directors and officers substantially in the form attached to this
registration statement as Exhibit 10.7. These agreements provide, in
general, that Loews Cineplex will indemnify such directors and officers
for, and hold them harmless from and against, any and all amounts paid in
settlement or incurred by, or assessed against, such directors and officers
arising out of or in connection with the service of such directors and
officers as a director or officer of Loews Cineplex or its Affiliates (as
defined therein) to the fullest extent permitted by Delaware law. Each
indemnification agreement terminates upon the later of (a) 10 years after
the director or officer ceases to be an officer or director of Loews
Cineplex (or any other entity at the request of Loews Cineplex) and (b) one
year after the final termination of all pending or threatened proceedings
for which such director or officer is or may be entitled to indemnification
under such agreement.
Loews Cineplex maintains directors' and officers' liability insurance
which provides for payment, on behalf of the directors and officers of
Loews Cineplex and its subsidiaries, of certain losses of such persons
(other than matters uninsurable under law) arising from claims, including
claims arising under the Securities Act, for acts or omissions by such
persons while acting as directors or officers of Loews Cineplex and/or its
subsidiaries, as the case may be.
Insofar as limitations of, or indemnification for, liabilities arising
under the Securities Act may be permitted for directors and executive
officers pursuant to the foregoing provisions, the Company understands
that, in the opinion of the Commission, such limitations of, and
indemnification for, liabilities is against public policy as expressed in
the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2.1(1) -- Amended and Restated Master Agreement among Sony
Pictures Entertainment Inc., Registrant and Cineplex
Odeon Corporation dated as of September 30, 1997
2.2(4) -- Amending Agreement dated May 14, 1998
2.3(l) -- Subscription Agreement by and between Registrant and
Universal Studios, Inc. dated as of September 30, 1997
2.4(1) -- Plan of Arrangement
3.1(4) -- Amended and Restated Certificate of Incorporation of
Registrant
3.2(5) -- Amended and Restated By-laws of Registrant
4.1(2) -- Indenture dated as of June 23, 1994, by and among Plitt
Theatres, Inc., Cineplex Odeon Corporation and The Bank
of New York, as Trustee
4.2(4) -- Supplemental Indenture dated as of May 14, 1998, among
Plitt Theatres, Inc., Registrant and The Bank of New
York, as Trustee
4.3(5) -- Second Supplemental Indenture dated as of July 1, 1998,
among Plitt Theatres, Inc., Registrant and The Bank of
New York, as Trustee
4.4 -- Indenture dated as of August 5, 1998, by and among
Registrant and Bankers Trust Company, as Trustee
4.5 -- Form of New Note (included in Exhibit 4.4 above)
4.6 -- Exchange and Registration Rights Agreement dated as of
August 5, 1998 by and among Registrant and the initial
purchasers of the New Notes
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company, as to the validity of the
securities being registered
10.1(1) -- Amended and Restated Stockholders Agreement among
Registrant, Sony Pictures Entertainment Inc., Universal
Studios, Inc., Charles Rosner Bronfman Family Trust and
Other Parties thereto dated as of September 30, 1997
10.2(4) -- Tax Sharing and Indemnity Agreement dated as of May 14,
1998 by and among Registrant and Sony Corporation of
America
10.3(4) -- Sony Trademark Agreement dated May 14, 1998 by and
among Registrant and Sony Corporation of America
10.4(4) -- Transition Services Agreement dated May 14, 1998 among
Registrant, Sony Corporation of America and Sony
Pictures Entertainment Inc.
10.5(4) -- Sony Entertainment Center Lease made as of May 9, 1997
between SRE San Francisco Retail Inc. and Loews
California Theatres Inc. (portions of such exhibit were
previously filed separately with the Commission under
an application for confidential treatment pursuant to
Rule 83 of the Commission Rules on Organization,
Conduct and Ethics, and Information and Regulation (17
CFR (S) 200.83))
10.6(4) -- Sony YBG Entertainment Center Tenant Work Agreement
10.7(l) -- Form of Director Indemnification Agreement
10.8(l) -- Loews Cineplex Entertainment Corporation 1997 Stock
Incentive Plan
10.9(4) -- Credit Agreement dated as of May 14, 1998 among
Registrant, as Borrower, the lenders listed therein, as
Lenders, Bankers Trust Company, as Administrative Agent
and Co-Syndication Agent and Bank of America NT&SA, The
Bank of New York and Credit Suisse First Boston, as
Co-Syndication Agents
10.10(4) -- Employment Agreement between Registrant and Lawrence J.
Ruisi, dated May 14, 1998
10.11(3) -- Employment Agreement between Cineplex Odeon Corporation
and Allen Karp, dated July 4, 1996
10.12(5) -- Amended and Restated Employment Agreement between
Cineplex Odeon Corporation and Allen Karp, dated
November 28, 1997
10.13(4)-- Assumption dated May 14, 1998 of Allen Karp Employment
Agreement by Registrant
10.14(l) -- Agreement between Registrant and Seymour H. Smith,
dated May 1, 1990, including Letter Amendments dated
November 14, 1991, March 9, 1993, May 10, 1995, April
11, 1996 and June 6, 1997
10.15(l) -- Agreement between Registrant and Travis Reid, dated
October 21, 1995
10.16(l) -- Agreement between Registrant and Joseph Sparacio, dated
August 20, 1994, including Term Extension Letter dated
March 5, 1997
10.17(l) -- Agreement between Registrant and John J. Walker, dated
June 1, 1993, including Term Extension Letter dated
March 5, 1997
10.18(l) -- Letter Agreement between Registrant and John C.
McBride, Jr., dated November 17, 1997
10.19(4) -- Letter Agreement between Registrant and Mindy Tucker,
dated December 15, 1997
10.20(5) -- Letter Agreement between Registrant and J. Edward
Shugrue, dated December 15, 1997
10.21 -- Purchase Agreement, dated as of July 31, 1998, by and
among Loews Cineplex Entertainment Corporation and
Goldman, Sachs & Co., BT Alex Brown Incorporated,
Credit Suisse First Boston Corporation and Salomon
Brothers Inc
10.22 -- Amendment to the Purchase Agreement, dated as of August
4, 1998, by and among Loews Cineplex Entertainment
Corporation and Goldman, Sachs & Co., BT Alex Brown
Incorporated, Credit Suisse First Boston Corporation
and Salomon Brothers Inc
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1(5) -- Subsidiaries of the Registrant
23.1 -- Consent of KPMG
23.2 -- Consent of PricewaterhouseCoopers LLP
23.3 -- Consent of Fried, Frank, Harris, Shriver & Jacobson
(included as part of Exhibit 5.1)
24.1 -- Powers of Attorney (included in the signature page
to the Registration Statement)
25.1 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 (T-1) of Bankers Trust
Company (bound separately)
27.1(5) -- Financial Data Schedule (for SEC use only)
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
(1) Incorporated by reference to the Company's Registration Statement on
Form S-4 filed on February 13, 1998, Commission file number 333-46313.
(2) Incorporated by reference to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 of Cineplex Odeon Corporation, Commission
file number 1-9454.
(3) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 of Cineplex Odeon Corporation,
Commission file number 1-9454.
(4) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended February 28, 1998 of Registrant, as amended,
Commission file number 1-14099.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-1 filed on June 15, 1998, as amended, Commission file number
333-56897.
(b) Schedules
Schedule II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in
the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the questions whether such
indemnification by them is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue;
(2) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective;
and
(3) for purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
filed shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(5) every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933, as amended, and is used in
connection with an offering of securities subject to Rule 415, will be
filed as part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(6) it shall file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act ("Act") in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the
Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 30th day of
September, 1998.
LOEWS CINEPLEX
ENTERTAINMENT CORPORATION
By: /s/ Lawrence J. Ruisi
-----------------------------------
Lawrence J. Ruisi
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures
appear below, constitute and appoint Mindy Tucker, John J. Walker and John
C. McBride, Jr., and each of them as their true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for them and in their names, places, and steads, in any and
all capacities, to sign the Registration Statement to be filed in
connection with the exchange offer of 8 7/8% Senior Subordinated Notes due
2008 of Loews Cineplex Entertainment Corporation and any and all amendments
(including post-effective amendments) to the Registration Statement under
the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and the other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall
constitute one Instrument.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Lawrence J. Ruisi President and Chief September 30, 1998
- -------------------------- Executive Officer
Lawrence J. Ruisi (Principal Executive
Officer) and Director
/s/ John J. Walker Senior Vice President, September 30, 1998
- -------------------------- Chief Financial Officer
John J. Walker and Treasurer
(Principal Financial
Officer)
/s/ Joseph Sparacio Vice President, Finance September 30, 1998
- -------------------------- and Controller (Principal
Joseph Sparacio Accounting Officer)
/s/ George A. Cohon Director September 30, 1998
- -------------------------
George A. Cohon
/s/ Marinus N. Henny Director September 30, 1998
- -------------------------
Marinus N. Henny
Director
- -------------------------
Allen Karp
Director
- -------------------------
Ernest Leo Kolber
/s/ Kenneth Lemberger Director September 30, 1998
- -------------------------
Kenneth Lemberger
/s/ Ron Meyer Director September 30, 1998
- -------------------------
Ron Meyer
Director
- -------------------------
Brian C. Mulligan
/s/ Yuki Nozoe Director September 30, 1998
- -------------------------
Yuki Nozoe
/s/ Karen Randall Director September 30, 1998
- -------------------------
Karen Randall
/s/ Stanley Steinberg Director September 30, 1998
- -------------------------
Stanley Steinberg
/s/ Howard Stringer Director September 30, 1998
- -------------------------
Howard Stringer
Director
- -------------------------
Robert J. Wynne
/s/ Mortimer Zuckerman Director September 30, 1998
- -------------------------
Mortimer Zuckerman
<PAGE>
SCHEDULE II
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
BALANCE (CHARGED
AT TO COSTS DEDUCTIONS BALANCE AT
BEGINNING AND AND OTHER END OF
OF PERIOD EXPENSES) CHARGES PERIOD
-------------- ------------ ----------- ------------
YEAR ENDED FEBRUARY 28, 1998
Reserve for net book value
of property, equipment and $ 3,979 $ 4,409 $ 2,389 $ 5,999
leaseholds ..............
Reserve for other costs ... $ 0 $ 4,656 $ 859 $ 3,797
YEAR ENDED FEBRUARY 28, 1997
Reserve for net book value
of property, equipment and $ 4,663 $ 4,036 $ 4,720 $ 3,979
leaseholds...............
YEAR ENDED FEBRUARY 29, 1996
Reserve for net book value
of property, equipment and $ 3,150 $ 5,663 $ 4,150 $ 4,663
leaseholds...............
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
- ---------- -------------------- ------------
2.1(1) -- Amended and Restated Master Agreement among Sony
Pictures Entertainment Inc., Registrant and Cineplex
Odeon Corporation dated as of September 30, 1997
2.2(4) -- Amending Agreement dated May 14, 1998
2.3(l) -- Subscription Agreement by and between Registrant and
Universal Studios, Inc. dated as of September 30, 1997
2.4(l) -- Plan of Arrangement
3.1(4) -- Amended and Restated Certificate of Incorporation of
Registrant
3.2(5) -- Amended and Restated By-laws of Registrant
4.1(2) -- Indenture dated as of June 23, 1994, by and among Plitt
Theatres, Inc., Cineplex Odeon Corporation and The Bank
of New York, as Trustee
4.2(4) -- Supplemental Indenture dated as of May 14, 1998, among
Plitt Theatres, Inc., Registrant and The Bank of New
York, as Trustee
4.3(5) -- Second Supplemental Indenture dated as of July 1, 1998,
among Plitt Theatres, Inc., Registrant and The Bank of
New York, as Trustee
4.4 -- Indenture dated as of August 5, 1998, by and among
Registrant and Bankers Trust Company, as Trustee
4.5 -- Form of New Note (included in Exhibit 4.4 above)
4.6 -- Exchange and Registration Rights Agreement dated as of
August 5, 1998 by and among Registrant and the initial
purchasers of the New Notes
5.1 -- Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company, as to the validity of the
securities being registered
10.1(1) -- Amended and Restated Stockholders Agreement among
Registrant, Sony Pictures Entertainment Inc., Universal
Studios, Inc., Charles Rosner Bronfman Family Trust and
Other Parties thereto dated as of September 30, 1997
10.2(4) -- Tax Sharing and Indemnity Agreement dated as of May 14,
1998 by and among Registrant and Sony Corporation of
America
10.3(4) -- Sony Trademark Agreement dated May 14, 1998 by and
among Registrant and Sony Corporation of America
10.4(4) -- Transition Services Agreement dated May 14, 1998 among
Registrant, Sony Corporation of America and Sony
Pictures Entertainment Inc.
10.5(4) -- Sony Entertainment Center Lease made as of May 9, 1997
between SRE San Francisco Retail Inc. and Loews
California Theatres Inc. (portions of such exhibit were
previously filed separately with the Commission under
an application for confidential treatment pursuant to
Rule 83 of the Commission Rules on Organization,
Conduct and Ethics, and Information and Regulation (17
CFR (S) 200.83))
10.6(4) -- Sony YBG Entertainment Center Tenant Work Agreement
10.7(l) -- Form of Director Indemnification Agreement
10.8(l) -- Loews Cineplex Entertainment Corporation 1997 Stock
Incentive Plan
10.9(4) -- Credit Agreement dated as of May 14, 1998 among
Registrant, as Borrower, the lenders listed therein, as
Lenders, Bankers Trust Company, as Administrative Agent
and Co-Syndication Agent and Bank of America NT&SA, The
Bank of New York and Credit Suisse First Boston, as
Co-Syndication Agents
10.10(4) -- Employment Agreement between Registrant and Lawrence J.
Ruisi, dated May 14, 1998
10.11(3) -- Employment Agreement between Cineplex Odeon Corporation
and Allen Karp, dated July 4, 1996
10.12(5) -- Amended and Restated Employment Agreement between
Cineplex Odeon Corporation and Allen Karp, dated
November 28, 1997
10.13(4) -- Assumption dated May 14, 1998 of Allen Karp Employment
Agreement by Registrant
10.14(l) -- Agreement between Registrant and Seymour H. Smith,
dated May 1, 1990, including Letter Amendments dated
November 14, 1991, March 9, 1993, May 10, 1995, April
11, 1996 and June 6, 1997
10.15(l) -- Agreement between Registrant and Travis Reid, dated
October 21, 1995
10.16(l) -- Agreement between Registrant and Joseph Sparacio, dated
August 20, 1994, including Term Extension Letter dated
March 5, 1997
10.17(l) -- Agreement between Registrant and John J. Walker, dated
June 1, 1993, including Term Extension Letter dated
March 5, 1997
10.18(l) -- Letter Agreement between Registrant and John C.
McBride, Jr., dated November 17, 1997
10.19(4) -- Letter Agreement between Registrant and Mindy Tucker,
dated December 15, 1997
10.20(5) -- Letter Agreement between Registrant and J. Edward
Shugrue, dated December 15, 1997
10.21 -- Purchase Agreement, dated as of July 31, 1998, by and
among Loews Cineplex Entertainment Corporation and
Goldman, Sachs & Co., BT Alex Brown Incorporated,
Credit Suisse First Boston Corporation and Salomon
Brothers Inc
10.22 -- Amendment to the Purchase Agreement, dated as of August
4, 1998, by and among Loews Cineplex Entertainment
Corporation and Goldman, Sachs & Co., BT Alex Brown
Incorporated, Credit Suisse First Boston Corporation
and Salomon Brothers Inc
12.1 -- Computation of Ratio of Earnings to Fixed Charges
21.1(5) -- Subsidiaries of the Registrant
23.1 -- Consent of KPMG
23.2 -- Consent of PricewaterhouseCoopers LLP
23.3 -- Consent of Fried, Frank, Harris, Shriver & Jacobson
(included as part of Exhibit 5.1)
24.1 -- Powers of Attorney (included in the signature page
to the Registration Statement)
25.1 -- Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 (T-1) of Bankers Trust
Company (bound separately)
27.1(5) -- Financial Data Schedule (for SEC use only)
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
- -----------------------
(1) Incorporated by reference to the Company's Registration Statement on
Form S-4 filed on February 13, 1998, Commission file number 333-46313.
(2) Incorporated by reference to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 of Cineplex Odeon Corporation, Commission
file number 1-9454.
(3) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 of Cineplex Odeon Corporation,
Commission file number 1-9454.
(4) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended February 28, 1998 of Registrant, as amended,
Commission file number 1-14099.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-1 filed on June 15, 1998, as amended, Commission file number
333-56897.
EXHIBIT 4.4
------------------------------------------------------------
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
As Issuer
---------
TO
BANKERS TRUST COMPANY
As Trustee
----------
----------------
Indenture
Dated as of August 5, 1998
----------------
$300,000,000
8 7/8% Senior Subordinated Notes due 2008
------------------------------------------------------------
<PAGE>
.....................................
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of August 5, 1998
Trust Indenture Indenture
Act Section Section
- --------------- ---------
section 310(a)(1) ......................................... 609
(a)(2) ......................................... 609
(a)(3) ......................................... Not Applicable
(a)(4) ......................................... Not Applicable
(b) ......................................... 608
610
section 311(a) ......................................... 613(a)
(b) ......................................... 613(b)
(b)(2) ......................................... 703(a)(2)
703(b)
section 312(a) ......................................... 701
702(a)
(b) ......................................... 702(b)
(c) ......................................... 702(c)
section 313(a) ......................................... 703(a)
(b) ......................................... 703(b)
(c) ......................................... 703(a)
703(b)
(d) ......................................... 703(c)
section 314(a) ......................................... 704
(b) ......................................... Not Applicable
(c)(1) ......................................... 102
(c)(2) ......................................... 102
(c)(3) ......................................... Not Applicable
(d) ......................................... Not Applicable
(e) ......................................... 102
section 315(a) ......................................... 601(a)
(b) ......................................... 602
703(a)(6)
(c) ......................................... 601(b)
(d) ......................................... 601(c)
(d)(1) ......................................... 601(a)(1)
(d)(2) ......................................... 601(c)(2)
(d)(3) ......................................... 601(c)(3)
(e) ......................................... 514
section 316(a) ......................................... 101
(a)(1)(A) ......................................... 502
512
(a)(1)(B) ......................................... 513
(a)(2) ......................................... Not Applicable
(b) ......................................... 508
section 317(a)(1) ......................................... 503
(a)(2) ......................................... 504
(b) ......................................... 1003
section 318(a) ......................................... 107
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
INDENTURE.....................................................................1
RECITALS OF THE COMPANY.......................................................1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.....................................................1
Acquired Debt..........................................................2
Act....................................................................2
Affiliate..............................................................2
Agent Member...........................................................2
Applicable Procedures..................................................3
Asset Disposition......................................................3
Board of Directors.....................................................3
Board Resolution.......................................................3
Business Day...........................................................4
Capital Lease Obligation...............................................4
Capital Stock..........................................................4
Cash Equivalents.......................................................4
Cedel..................................................................4
Closing Date...........................................................4
Commission.............................................................5
Company................................................................5
Company Request........................................................5
Consolidated Cash Flow Available for
Fixed Charges........................................................5
Consolidated Cash Flow Coverage Ratio..................................6
Consolidated Fixed Charges.............................................6
Consolidated Income Tax Expense........................................6
Consolidated Interest Expense..........................................6
Consolidated Net Income................................................7
Consolidated Net Worth.................................................8
Consolidated Tangible Assets...........................................8
Corporate Trust Office.................................................8
Debt...................................................................8
Depositary.............................................................9
Designated Senior Debt.................................................9
DTC....................................................................9
Euroclear..............................................................9
Event of Default.......................................................9
Exchange and Registration Rights Agreement.............................9
Exchange Offer........................................................10
Exchange Registration Statement.......................................10
Exchange Act..........................................................10
Exchange Notes........................................................10
Global Note...........................................................10
Guarantee.............................................................10
Holder................................................................10
Incur.................................................................11
Indenture.............................................................11
Initial Purchasers....................................................11
Interest Payment Date.................................................11
Interest Rate, Currency or Commodity Price
Agreement...........................................................11
Investment............................................................11
Lien..................................................................12
Maturity..............................................................12
Moodys................................................................12
Net Available Proceeds................................................12
Note Purchase Agreement...............................................13
Notes.................................................................13
Offer to Purchase.....................................................13
Officers' Certificate.................................................15
Opinion of Counsel....................................................15
Original Notes........................................................15
Outstanding...........................................................16
Paying Agent..........................................................17
Permitted Holder......................................................17
Permitted Interest Rate, Currency or Commodity
Price Agreement.....................................................17
Permitted Investments.................................................17
Person................................................................18
Predecessor Note......................................................18
Preferred Stock.......................................................18
Public Equity Offering................................................18
Qualifying Theater Assets.............................................18
Receivables...........................................................19
Receivables Sale......................................................19
Redeemable Stock......................................................19
Redemption Date.......................................................19
Redemption Price......................................................19
Registration Default..................................................19
Registration Default Period...........................................20
Regulation S..........................................................20
Regulation S Certificate..............................................20
Regulation S Global Note..............................................20
Regulation S Legend...................................................20
Regulation S Notes....................................................20
Related Person........................................................20
Responsible Officer...................................................20
Restricted Notes......................................................21
Restricted Notes Certificate..........................................21
Restricted Notes Legend...............................................21
Restricted Period.....................................................21
Restricted Subsidiary.................................................21
Rule 144..............................................................21
Rule 144A.............................................................21
Rule 144A Notes.......................................................21
S&P...................................................................21
Securities Act........................................................21
Security Register.....................................................21
Senior Bank Facility..................................................21
Senior Debt...........................................................22
Shelf Registration Statement..........................................22
Special Interest Payments.............................................22
Special Record Date...................................................22
Stated Maturity.......................................................22
Subordinated Debt.....................................................22
Subsidiary............................................................23
Successor Note........................................................24
Temporary Cash Investments............................................24
Trust Indenture Act...................................................25
Trustee...............................................................25
U.S. Person...........................................................25
Vice President........................................................26
Voting Stock..........................................................26
Wholly Owned Restricted Subsidiary....................................26
SECTION 102. Compliance Certificates and Opinions...........................26
SECTION 103. Form of Documents Delivered to Trustee.........................27
SECTION 104. Acts of Holders; Record Date...................................28
SECTION 105. Notices, Etc., to Trustee and Company..........................29
SECTION 106. Notice to Holders; Waiver......................................30
SECTION 107. Conflict with Trust Indenture Act..............................30
SECTION 108. Effect of Headings and Table of
Contents.....................................................31
SECTION 109. Successors and Assigns.........................................31
SECTION 110. Separability Clause............................................31
SECTION 111. Benefits of Indenture..........................................31
SECTION 112. Governing Law..................................................31
SECTION 113. Legal Holidays.................................................31
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally; Initial Forms of Rule
144A and Regulation S Notes..................................32
SECTION 202. Form of Face of Note...........................................33
SECTION 203. Form of Reverse of Note........................................37
SECTION 204. Form of Trustee's Certificate of
Authentication...............................................42
ARTICLE THREE
The Notes
SECTION 301. Title and Terms................................................43
SECTION 302. Denominations..................................................44
SECTION 303. Execution, Authentication, Delivery
and Dating...................................................44
SECTION 304. Temporary Notes................................................45
SECTION 305. Global Notes...................................................46
SECTION 306. Registration, Registration of Transfer
and Exchange Generally; Restrictions on
Transfer and Exchange; Securities Act
Legends......................................................48
SECTION 307. Mutilated, Destroyed, Lost and
Stolen Notes.................................................52
SECTION 308. Payment of Interest; Interest
Rights Preserved.............................................53
SECTION 309. Persons Deemed Owners..........................................54
SECTION 310. Cancellation...................................................55
SECTION 311. Computation of Interest........................................55
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of
Indenture....................................................56
SECTION 402. Application of Trust Money.....................................57
ARTICLE FIVE
Remedies
SECTION 501. Events of Default..............................................58
SECTION 502. Acceleration of Maturity; Rescission
and Annulment................................................60
SECTION 503. Collection of Indebtedness and Suits...........................62
SECTION 504. Trustee May File Proofs of Claim...............................63
SECTION 505. Trustee May Enforce Claims.....................................63
SECTION 506. Application of Money Collected.................................64
SECTION 507. Limitation on Suits............................................64
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest.....................................................65
SECTION 509. Restoration of Rights and Remedies.............................65
SECTION 510. Rights and Remedies Cumulative.................................66
SECTION 511. Delay or Omission Not Waiver...................................66
SECTION 512. Control by Holders.............................................66
SECTION 513. Waiver of Past Defaults........................................67
SECTION 514. Undertaking for Costs..........................................67
SECTION 515. Waiver of Stay or Extension Laws...............................67
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities............................68
SECTION 602. Notice of Defaults.............................................68
SECTION 603. Certain Rights of Trustee......................................69
SECTION 604. Not Responsible for Recitals
or Issuance of Notes.........................................70
SECTION 605. May Hold Notes.................................................70
SECTION 606. Money Held in Trust............................................71
SECTION 607. Compensation and Reimbursement.................................71
SECTION 608. Disqualification; Conflicting
Interests....................................................72
SECTION 609. Corporate Trustee Required;
Eligibility..................................................72
SECTION 610. Resignation and Removal;
Appointment of Successor.....................................72
SECTION 611. Acceptance of Appointment by
Successor....................................................74
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business....................................74
SECTION 613. Preferential Collection
of Claims Against Company....................................75
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders...............................75
SECTION 702. Preservation of Information;
Communications to Holders....................................75
SECTION 703. Reports by Trustee.............................................76
SECTION 704. Reports by Company.............................................76
SECTION 705. Officers' Certificate with Respect to
Change in Interest Rates.....................................77
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets..............................................77
SECTION 802. Successor Substituted..........................................78
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders...................................78
SECTION 902. Supplemental Indentures
with Consent of Holders......................................79
SECTION 903. Execution of Supplemental
Indentures...................................................80
SECTION 904. Effect of Supplemental Indentures..............................81
SECTION 905. Conformity with Trust Indenture Act............................81
SECTION 906. Reference in Notes to
Supplemental Indentures......................................81
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest.....................................................81
SECTION 1002. Maintenance of Office or Agency................................82
SECTION 1003. Money for Note.................................................82
SECTION 1004. Existence......................................................84
SECTION 1005. Maintenance of Properties......................................84
SECTION 1006. Payment of Taxes and Other Claims..............................84
SECTION 1007. Maintenance of Insurance.......................................85
SECTION 1008. Limitation on Consolidated Debt................................85
SECTION 1009. Limitation on Senior Subordinated
Debt.........................................................88
SECTION 1010. Limitation on Issuance of Guarantees
of Subordinated Debt.........................................88
SECTION 1011. Limitation on Liens............................................88
SECTION 1012. Limitation on Restricted Payments..............................91
SECTION 1013. Limitations on Dividend and Other
Payment Restrictions Affecting
Subsidiaries ..............................................93
SECTION 1014. Limitation on Asset Disposition................................94
SECTION 1015. Transactions with Affiliates
and Related Persons..........................................95
SECTION 1016. Change of Control..............................................96
SECTION 1017. Provision of Financial Information.............................97
SECTION 1018. Unrestricted Subsidiaries......................................97
SECTION 1019. Statement by Officers as to Default;
Compliance Certificates......................................98
SECTION 1020. Waiver of Certain Covenants....................................99
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption............................................99
SECTION 1102. Applicability of Article......................................100
SECTION 1103. Election to Redeem; Notice to
Trustee.....................................................100
SECTION 1104. Selection by Trustee of Notes to Be
Redeemed....................................................100
SECTION 1105. Notice of Redemption..........................................101
SECTION 1106. Deposit of Redemption Price...................................102
SECTION 1107. Notes Payable on Redemption Date..............................102
ARTICLE TWELVE
Subordination of Notes
SECTION 1201. Notes Subordinate to Senior Debt..............................103
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc............................................103
SECTION 1203. No Payment When Senior Debt in
Default.....................................................105
SECTION 1204. Payment Permitted If No Default...............................107
SECTION 1205. Subrogation to Rights of Holders of
Senior Debt.................................................107
SECTION 1206. Provisions Solely to Define Relative
Rights......................................................107
SECTION 1207. Trustee to Effectuate Subordination...........................108
SECTION 1208. No Waiver of Subordination
Provisions..................................................108
SECTION 1209. Notice to Trustee.............................................109
SECTION 1210. Reliance on Judicial Order or
Certificate of Liquidating Agent............................109
SECTION 1211. Trustee Not Fiduciary for Holders of
Senior Debt.................................................110
SECTION 1212. Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's
Rights......................................................110
SECTION 1213. Article Applicable to Paying Agents...........................110
SECTION 1214. Defeasance of This Article Twelve.............................111
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect
Defeasance or Covenant Defeasance.........................111
SECTION 1302. Defeasance and Discharge......................................111
SECTION 1303. Covenant Defeasance...........................................112
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance.........................................112
SECTION 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions..............................115
SECTION 1306. Reinstatement.................................................116
TESTIMONIUM.................................................................117
SIGNATURES AND SEALS........................................................117
ACKNOWLEDGMENTS.............................................................118
ANNEX A Form of Regulation S Certificate....................... A-1
ANNEX B Form of Restricted Securities
Certificate........................................... B-1
ANNEX C Form of Unrestricted Securities
Certificate........................................... C-1
SCHEDULE I Use of proceeds........................................ SI-1
SCHEDULE II Certain agreements..................................... SI-2
<PAGE>
INDENTURE, dated as of August 5, 1998, between Loews Cineplex
Entertainment Corporation, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company"), having its
principal office at 711 Fifth Avenue, 11th Floor, New York, New York 10022
and Bankers Trust Company, a New York banking corporation, as Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
8 7/8% Senior Subordinated Notes due 2008 (the "Notes") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture.
All things necessary (i) to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by
the Company, the valid obligations of the Company, and (ii) to make this
Indenture a valid agreement of the Company, all in accordance with their
respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles (whether or not such is indicated herein), and,
except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles
as are generally accepted as consistently applied by the Company at
the date of such computation;
(4) unless otherwise specifically set forth herein, all
calculations or determinations of a Person shall be performed or made
on a consolidated basis in accordance with generally accepted
accounting principles; and
(5) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in
that Article.
"Acquired Debt" of any particular Person means Debt of any other
Person existing at the time such other Person merged with or into or became
a Subsidiary of such particular Person or assumed by such particular Person
in connection with the acquisition of assets from any other Person, and not
Incurred by such other Person in connection with, or in contemplation of,
such other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the
rules and procedures of the Depositary for such Note, Euroclear and Cedel,
in each case to the extent applicable to such transaction and as in effect
at the time of such transfer or transaction.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including any issuance or sale by a Restricted Subsidiary of
Capital Stock of such Restricted Subsidiary, and including a consolidation
or merger or other sale of any such Restricted Subsidiary with, into or to
another Person in a transaction in which such Restricted Subsidiary ceases
to be a Restricted Subsidiary, but excluding a disposition by a Restricted
Subsidiary of such Person to such Person or a Wholly Owned Restricted
Subsidiary of such Person or by such Person to a Wholly Owned Restricted
Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person, (ii) substantially all of the assets of such
Person or any of its Restricted Subsidiaries representing a division or
line of business or (iii) other assets or rights of such Person or any of
its Restricted Subsidiaries outside of the ordinary course of business,
provided in each case that the aggregate consideration for such transfer,
conveyance, sale, lease or other disposition is equal to $2.0 million or
more. The term "Asset Disposition" shall not include (i) any sale and
leaseback of Qualifying Theater Assets effected at fair market value, and
(ii) any swap or exchange of Qualifying Theater Assets of the Company or
its Subsidiaries for Qualifying Theater Assets of another Person, provided
that if the fair market value of the assets exchanged by the Company or its
Subsidiary exceeds the fair market value of the assets to be received, in
each case as determined in good faith by the Board of Directors of the
Company, such excess shall be subject to Section 1014 hereof.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York,
New York or in the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation to
pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital
lease or a liability on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles. The stated
maturity of such obligation shall be the date of the last payment of rent
or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty.
The principal amount of such obligation shall be the capitalized amount
thereof that would appear on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of
corporate stock or other equity participations, including partnership
interests, whether general or limited, of such Person.
"Cash Equivalents" means (i) direct obligations of the United
States of America or any agency thereof having maturities of not more than
one year from the date of acquisition, (ii) time deposits and certificates
of deposit of any domestic commercial bank of recognized standing having
capital and surplus in excess of $500 million, with maturities of not more
than one year from the date of acquisition, (iii) repurchase obligations
issued by any bank described in clause (ii) above with a term not to exceed
30 days; (iv) commercial paper rated at least A-1 or the equivalent thereof
by S&P or at least P-1 or the equivalent thereof by Moody's, in each case
maturing within one year after the date of acquisition and (v) shares of
any money market mutual fund, or similar fund, in each case having excess
of $500 million, which invests predominantly in investments of the types
describes in clauses (i) through (iv) above.
"Cedel" means Cedel, S.A. (or any successor securities clearing
agency).
"Closing Date" means August 5, 1998.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at
any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the
Trustee.
"Consolidated Cash Flow Available for Fixed Charges" for any
period means the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated
Interest Expense of the Company and its Restricted Subsidiaries for such
period, plus (ii) Consolidated Income Tax Expense of the Company and its
Restricted Subsidiaries for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of
the Company and its Restricted Subsidiaries for such period, plus (iv) all
other non-cash items reducing Consolidated Net Income of the Company and
its Restricted Subsidiaries, less all non-cash items increasing
Consolidated Net Income of the Company and its Restricted Subsidiaries;
provided, however, that there shall be excluded therefrom the Consolidated
Cash Flow Available for Fixed Charges (if positive) of any Restricted
Subsidiary of the Company (calculated separately for such Restricted
Subsidiary in the same manner as provided above for the Company) that is
subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary of
the Company to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) Consolidated Cash Flow Available for
Fixed Charges of the Company and its Restricted Subsidiaries for the period
of the most recently completed four consecutive fiscal quarters for which
quarterly or annual financial statements are available to (ii) Consolidated
Fixed Charges of the Company and its Restricted Subsidiaries for such
period; provided, however, that Consolidated Fixed Charges shall be
adjusted to give effect on a pro forma basis to any Debt that has been
Incurred by the Company or any Restricted Subsidiary since the beginning of
such period that remains outstanding and to any Debt that is proposed to be
Incurred by the Company or any Restricted Subsidiary as if in each case
such Debt had been Incurred on the first day of such period and as if any
Debt that (i) is or will no longer be outstanding as the result of the
Incurrence of any such Debt or (ii) had been repaid or retired during such
period had not been outstanding as of the first day of such period;
provided, however, that in making such computation, the Consolidated
Interest Expense of the Company and its Restricted Subsidiaries
attributable to interest on any proposed Debt bearing a floating interest
rate shall be computed on a pro forma basis as if the rate in effect on the
date of computation had been the applicable rate for the entire period; and
provided further that, in the event the Company or any of its Restricted
Subsidiaries has made Asset Dispositions or acquisitions of assets not in
the ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such
period, such computation shall be made on a pro forma basis as if the Asset
Dispositions or acquisitions had taken place on the first day of such
period.
"Consolidated Fixed Charges" for any period means the sum of (i)
Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such
period calculated in accordance with generally accepted accounting
principles.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in
accordance with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in
accordance with generally accepted accounting principles, including without
limitation or duplication (or, to the extent not so included, with the
addition of), (i) the amortization of Debt discounts; (ii) any commissions,
fees or other payments (except reimbursement payments) with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees
with respect to interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements; (iv) Preferred Stock
dividends of Restricted Subsidiaries of the Company (other than with
respect to Redeemable Stock) declared and paid or payable to persons other
than the Company or any Restricted Subsidiary; (v) accrued Redeemable Stock
dividends of the Company and its Restricted Subsidiaries payable to Persons
other than the Company or any Restricted Subsidiary, whether or not
declared or paid; (vi) interest on Debt guaranteed by the Company and its
Restricted Subsidiaries; and (vii) the portion of any rental obligation
allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated
net income (or loss) of the Company and its Restricted Subsidiaries for
such period determined on a consolidated basis in accordance with generally
accepted accounting principles; provided that there shall be excluded
therefrom (a) the net income (or loss) of any Person acquired by the
Company or a Restricted Subsidiary of the Company in a pooling-of-interests
transaction for any period prior to the date of such transaction, (b) the
net income (or loss) of any Person that is not a Subsidiary of the Company
except to the extent of the amount of dividends or other distributions
actually paid to the Company or a Subsidiary of the Company by such Person
during such period, (c) gains or losses on Asset Dispositions by the
Company or its Restricted Subsidiaries, (d) all extraordinary gains and
extraordinary losses, (e) the cumulative effect of changes in accounting
principles, (f) non-recurring and other one-time non-operating expenses and
(g) the tax effect of any of the items described in clauses (a) through (f)
above; provided, further, that for purposes of any determination pursuant
to the provisions described under Section 1012 hereof, there shall further
be excluded therefrom the net income (but not net loss) of any Restricted
Subsidiary of the Company that is subject to a restriction which prevents
the payment of dividends or the making of distributions to the Company or
another Restricted Subsidiary of the Company to the extent of such
restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with
respect to the Company, adjustments following the date of this Indenture to
the accounting books and records of the Company in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto) or otherwise resulting from the acquisition of control of the
Company by another Person shall not be given effect to.
"Consolidated Tangible Assets" of any Person means, as of any
date, the amount which, in accordance with GAAP, would be set forth under
the caption "Total Assets" (or any like caption) on a consolidated balance
sheet of such Person and its Restricted Subsidiaries, less all intangible
assets, including, without limitation, goodwill, organization costs,
patents, trademarks, copyrights, franchises, and research and development
costs.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall
be administered, which is, at the date as of which this Indenture is dated,
located at Four Albany Street, 4th Floor, New York, New York 10006,
Attention: Corporate Trust and Agency Group or at any other time at such
other address as the Trustee may designate from time to time by notice to
all Holders of the Notes.
"Corporation" means a corporation, association, company,
joint-stock company, partnership or business trust.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
Incurred in connection with the acquisition of property, assets or
businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services
(including securities repurchase agreements but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business
which are not overdue or which are being contested in good faith), (v)
every Capital Lease Obligation of such Person, (vi) all Receivables Sales
of such Person, together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or
other amounts in connection therewith, (vii) all Redeemable Stock issued by
such Person, (viii) Preferred Stock of Restricted Subsidiaries of such
Person held by Persons other than such Person or one of its Wholly Owned
Restricted Subsidiaries, (ix) every obligation under Interest Rate,
Currency or Commodity Price Agreements of such Person and (x) every
obligation of the type referred to in clauses (i) through (ix) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The "amount" or "principal
amount" of Debt at any time of determination as used herein represented by
(a) any Receivables Sale, shall be the amount of the unrecovered capital or
principal investment of the purchaser (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment, (b) any
Redeemable Stock, shall be the maximum fixed redemption or repurchase price
in respect thereof and (c) any Permitted Interest Rate, Currency or
Commodity Price Agreements shall be zero.
"Depositary" means, with respect to any Notes, a clearing agency
that is registered as such under the Exchange Act and is designated by the
Company to act as Depositary for such Notes (or any successor securities
clearing agency so registered).
"Designated Senior Debt" shall mean (i) the obligations of the
Company under the Senior Bank Facility and (ii) any other Senior Debt of
the Company permitted under the Indenture the principal amount of which at
original issuance is $25.0 million or more and that has been designated by
the Company as Designated Senior Debt.
"DTC" means The Depository Trust Company, a New York corporation.
"Euroclear" means the Euroclear Clearance System (or any
successor securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange and Registration Rights Agreement" means the Exchange
and Registration Rights Agreement, dated as of August 5, 1998, among the
Company, Goldman, Sachs & Co., as representatives of the Initial
Purchasers, and the Holders from time to time as provided therein, as such
agreement may be amended from time to time.
"Exchange Offer" means an offer made by the Company pursuant to
the Exchange and Registration Rights Agreement under the effective
registration statement under the Securities Act to exchange securities
substantially identical to Outstanding Notes (except for the differences
provided for herein) for Outstanding Notes.
"Exchange Registration Statement" means a registration statement
of the Company under the Securities Act registering Exchange Notes for
distribution pursuant to the Exchange Offer.
"Exchange Act" refers to the Securities Exchange Act of 1934 as
it may be amended and any successor act thereto.
"Exchange Notes" means the Notes issued pursuant to the Exchange
Offer and their Successor Notes.
"Global Note" means a Note that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
of such Debt, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Debt of the payment of such Debt, or
(iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings correlative to the foregoing); provided,
however, that the Guarantee by any Person shall not include endorsements by
such Person for collection or deposit, in either case, in the ordinary
course of business.
"Holder" means a Person in whose name a Note is registered in the
Note Register.
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Debt or
other obligation or the recording, as required pursuant to generally
accepted accounting principles or otherwise, of any such Debt or other
obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to
the foregoing); provided, however, that a change in generally accepted
accounting principles that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof including, for all purposes of this instrument and any such
supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively.
"Initial Purchasers" means Goldman, Sachs & Co., BT Alex. Brown
Incorporated, Credit Suisse First Boston Corporation and Salomon Brothers
Inc, as purchasers of the Notes from the Company pursuant to the Note
Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate, Currency or Commodity Price Agreement" of any
Person means any forward contract, futures contract, swap, option or other
financial agreement or arrangement (including, without limitation, caps,
floors, collars and similar agreements) relating to, or the value of which
is dependent upon, interest rates, currency exchange rates or commodity
prices or indices (excluding contracts for the purchase or sale of goods in
the ordinary course of business).
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities
or evidence of Debt issued by, any other Person, including any payment on a
Guarantee of any obligation of such other Person.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, Receivables
Sale, deposit arrangement, security interest, lien, charge, easement (other
than any easement not materially impairing usefulness or marketability),
encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with
respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing).
"Maturity", when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Moodys" means Moody's Investors Service, Inc.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiree of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, provincial, foreign and local taxes
required to be accrued as a liability as a consequence of such Asset
Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Debt which is secured by such assets in accordance with
the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such
Asset Disposition or by applicable law, be repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person or
joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts to be provided by such Person or any Restricted Subsidiary thereof,
as the case may be, as a reserve in accordance with generally accepted
accounting principles against any liabilities associated with such assets
and retained by such Person or any Restricted Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, in each
case as determined by the Board of Directors, in its reasonable good faith
judgment evidenced by a resolution of the Board of Directors filed with the
Trustee; provided, however, that any reduction in such reserve following
the consummation of such Asset Disposition will be treated for all purposes
of the Indenture and the Notes as a new Asset Disposition at the time of
such reduction with Net Available Proceeds equal to the amount of such
reduction.
"Note Purchase Agreement" means the Purchase Agreement, dated as
of July 31, 1998, between the Company and the Initial Purchasers, as such
agreement may be amended from time to time.
"Notes" means notes designated in the first paragraph of the
RECITALS OF THE COMPANY and includes the Exchange Notes.
"Offer to Purchase" means a written offer (the "Offer") sent by
the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the Note Register on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be, subject to any contrary requirements of applicable law, not
less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of Notes within five
Business Days after the Expiration Date. The Company shall notify the
Trustee at least 15 Business Days (or such shorter period as is acceptable
to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by
the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain a description of the
events requiring the Company to make the Offer to Purchase and any other
information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Offer to Purchase. The Offer shall
also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes
offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such has
been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due
and payable upon each Note accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the
Offer to Purchase will be required to surrender such Note at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing);
(10) that Holders will be entitled to withdraw all or any portion
of Notes tendered if the Company (or their Paying Agent) receives, not
later than the close of business on the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder tendered, the
certificate number of the Note the Holder tendered and a statement
that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Notes and (b) if Notes in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only
Notes in denominations of $1,000 or integral multiples thereof shall
be purchased); and
(12) that in the case of any Holder whose Note is purchased only
in part, the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service charge, a new
Note or Notes, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for
the unpurchased portion of the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, and who shall be reasonably acceptable to the
Trustee.
"Original Notes" means all Notes other than Exchange Notes.
"Outstanding", when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Notes; provided that, if such Notes are
to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee
has been made; and
(iii) Notes which have been transferred pursuant to Section 306
or in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any
such Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona
fide purchaser in whose hands such Notes are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned
by the Company or any other obligor upon the Notes or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee knows to
be so owned shall be so disregarded. Notes so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Company or any other obligor
upon the Notes or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Notes on behalf
of the Company.
"Permitted Holder" means each of Sony Pictures Entertainment Inc.
and Universal Studios, Inc. and their respective Affiliates.
"Permitted Interest Rate, Currency or Commodity Price Agreement"
of any Person means any Interest Rate, Currency or Commodity Price
Agreement entered into with one or more financial institutions in the
ordinary course of business that is designed to protect such Person against
fluctuations in interest rates or currency exchange rates with respect to
Debt Incurred and which shall have a notional amount no greater than the
payments due with respect to the Debt being hedged thereby, or in the case
of currency or commodity protection agreements, against currency exchange
rate or commodity price fluctuations in the ordinary course of business
relating to then existing financial obligations or then existing or sold
production and not for purposes of speculation.
"Permitted Investments" means (i) an Investment in the Company or
a Restricted Subsidiary of the Company; (ii) an Investment in a Person, if
such Person or a Subsidiary of such Person will, as a result of the making
of such Investment and all other contemporaneous related transactions,
become a Restricted Subsidiary of the Company or be merged or consolidated
with or into transfer or convey all or substantially all its assets to the
Company or a Restricted Subsidiary of the Company; (iii) a Temporary Cash
Investment; (iv) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses in accordance with generally accepted accounting principles; (v)
stock, obligations or securities received in settlement of debts owing to
the Company or a Restricted Subsidiary of the Company as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection,
enforcement or agreement in lieu of foreclosure of any Lien in favor of the
Company or a Restricted Subsidiary of the Company; (vi) refundable
construction advances made with respect to the construction of properties
of a nature or type that are used in a business or similar or related to
the business of the Company or its Restricted Subsidiaries in the ordinary
course of business; (vii) advances or extensions of credit on terms
customary in the industry in the form of accounts or other receivables
incurred, or pre-paid film rentals, and loans and advances made in
settlement of such accounts receivable, all in the ordinary course of
business; (viii) Investments in the Notes; (ix) any consolidation or merger
of a Wholly-Owned Restricted Subsidiary of the Company to the extent
otherwise permitted under the Indenture; (x) Investments in Permitted
Interest Rate Currency or Commodity Price Agreements; (xi) entry into and
Investments in joint ventures, partnerships and other Persons engaged or
proposing to engage in the indoor motion picture exhibition business,
provided that the amount of such Investment, valued at the time made,
together with all Investments previously made pursuant to this clause (xi),
valued at the respective times made, shall not exceed 10% of the
Consolidated Tangible Assets of the Company as of the last day of the full
fiscal quarter ending immediately prior to the date of such Investment; and
(xii) other Investments not to exceed $20.0 million.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of
a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock" of any Person means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to
the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
"Qualifying Theater Assets" means all motion picture theaters
(whether owned in fee or leased), all other motion picture theater assets,
including, without limitation, theater furniture and fixtures, all real
property acquired for the purpose of motion picture theater development or
construction, and joint venture interests or partnership interests in
Persons owning, leasing, developing or constructing motion picture theaters
or principally engaged in the business of exhibiting motion pictures.
"Receivables" means receivables, chattel paper, instruments,
documents or intangibles evidencing or relating to the right to payment of
money.
"Receivables Sale" of any Person means any sale of Receivables of
such Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person
relating thereto or a disposition of defaulted Receivables for purposes of
collection and not as a financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon
the occurrence of an event) matures or is required to be redeemed (pursuant
to any sinking fund obligation or otherwise) or is convertible into or
exchangeable for Debt or is redeemable at the option of the holder thereof,
in whole or in part, at any time prior to the final Stated Maturity of the
Notes; provided that "Redeemable Stock" shall not include any Capital Stock
that is payable at maturity, or upon required redemption or redemption at
the option of the holder thereof, or that is automatically convertible or
exchangeable, solely in or into Common Stock of such Person.
"Redemption Date", when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Default" means the occurrence of any of the
following events: (i) the Company has not filed the Exchange Registration
Statement or Shelf Registration Statement on or before the date on which
such registration statement is required to be filed pursuant to the
Exchange and Registration Rights Agreement, (ii) the Exchange Registration
Statement or Shelf Registration Statement has not become effective or been
declared effective by the Commission on or before the date on which such
registration statement is required to become or be declared effective under
the requirements of the Exchange and Registration Rights Agreement or (iii)
the Exchange Offer has not been consummated within 30 Business Days after
the initial effective date of the Exchange Registration Statement relating
to the Exchange Offer (if the Exchange Offer is then required to be made
under the Exchange and Registration Rights Agreement) or (iv) any Exchange
Registration Statement or Shelf Registration Statement required to be filed
pursuant the Exchange and Registration Rights Agreement is filed and
declared effective but shall thereafter either be withdrawn by the Company
or shall become subject to an effective stop order issued pursuant to
Section 8(d) of the Securities Act suspending the effectiveness of such
registration statement (except as specifically permitted herein) without
being succeeded immediately by an additional registration statement filed
and declared effective.
"Registration Default Period" means any period during which a
Registration Default has occurred and is continuing.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" means a certificate substantially in
the form set forth in Annex A.
"Regulation S Global Note" has the meaning specified in Section
201.
"Regulation S Legend" means a legend substantially in the form of
the legend required in the form of Note set forth in Section 202 to be
placed upon Regulation S Notes.
"Regulation S Notes" means all Notes required pursuant to Section
306(c) to bear a Regulation S Legend.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the Outstanding Common Stock of such
Person (or in the case of a Person that is not a corporation, 5% or more of
the equity interest in such Person) or (b) 5% or more of the combined
voting power of the Voting Stock of such Person.
"Responsible Officer" means when used with respect to the Trustee
any officer within the Corporate Trust Office including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary
Treasurer or Assistant Treasurer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge and familiarity with the particular subject.
"Restricted Notes" means all Notes required pursuant to Section
306(c) to bear a Restricted Notes Legend. Such term includes the Restricted
Global Notes.
"Restricted Notes Certificate" means a certificate substantially
in for form set forth in Annex B.
"Restricted Notes Legend" means a legend substantially in the
form of the legend required in the form of Note set forth in Section 202 to
be placed upon a Restricted Note.
"Restricted Period" means the period of 40 consecutive days
beginning on the later of (i) the day on which Notes are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the Closing Date.
"Restricted Subsidiary" means any Subsidiary, whether existing on
or after the date of this Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Notes" means the Notes purchased by the Initial
Purchasers from the Company pursuant to the Note Purchase Agreement, other
than the Regulation S Notes.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Securities Act" means the Securities Act of 1933, as it may be
amended and any successor act thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 306(a).
"Senior Bank Facility" means the Credit Agreement, dated as of
May 14, 1998, among the Company, as borrower, the lenders listed therein,
as lenders, Bankers Trust Company, as administrative agent and
co-syndication agent and Bank of America NT&SA, The Bank of New York and
Credit Suisse First Boston, as co-syndication agents, as it may be amended
or restated from time to time, and any renewal, extension, refinancing,
refunding or replacement thereof.
"Senior Debt" means (i) the principal of (and premium, if any)
and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company
whether or not such claim for post-petition interest is allowed in such
proceeding) on, and penalties and any obligation of the Company for
reimbursement, indemnities and fees relating to, the Senior Bank Facility,
(ii) the principal of (and premium, if any) and interest on Debt of the
Company for money borrowed, whether Incurred on or prior to the date of
original issuance of the Notes or thereafter, and any amendments, renewals,
extensions, modifications, refinancings and refundings of any such Debt and
(iii) Permitted Interest Rate Agreements and Permitted Currency Agreements
entered into with respect to Debt described in clauses (i) and (ii) above;
provided, however, that the following shall not constitute Senior Debt: (1)
any Debt as to which the terms of the instrument creating or evidencing the
same provide that such Debt is not superior in right of payment to the
Notes, (2) any Debt which is subordinated in right of payment in any
respect to any other Debt of the Company, (3) Debt evidenced by the Notes,
(4) any Debt owed to a Person when such Person is a Subsidiary of the
Company, (5) any obligation of the Company arising from Redeemable Stock of
the Company, (6) that portion of any Debt which is Incurred in violation of
the Indenture and (7) Debt which, when Incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company.
"Shelf Registration Statement" means a shelf registration
statement under the Securities Act filed by the Company, if required by,
and meeting the requirements of, the Exchange and Registration Rights
Agreement, registering Original Notes for resale.
"Special Interest Payments" has the meaning specified in the form
of Notes set forth in Section 202.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by Trustee pursuant to Section 308.
"Stated Maturity", when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as
the fixed date on which the principal of such Note or such installment of
interest is due and payable.
"Subordinated Debt" means Debt of the Company as to which the
payment of principal of (and premium, if any) and interest and other
payment obligations in respect of such Debt shall be subordinate to the
prior payment in full of the Notes to at least the following extent: (i) no
payments of principal of (or premium, if any) or interest on or otherwise
due in respect of such Debt may be permitted for so long as any default in
the payment of principal (or premium, if any) or interest on the Notes
exists; (ii) in the event that any other default that with the passing of
time or the giving of notice, or both, would constitute an event of default
exists with respect to the Notes, upon notice by 25% or more in principal
amount of the Notes to the Trustee, the Trustee shall have the right to
give notice to the Company and the holders of such Debt (or trustees or
agents therefor) of a payment blockage, and thereafter no payments of
principal of (or premium, if any) or interest on or otherwise due in
respect of such Debt may be made for a period of 179 days from the date of
such notice; and (iii) such Debt may not (x) provide for payments of
principal of such Debt at the stated maturity thereof or by way of a
sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each
case prior to the final Stated Maturity of the Notes or (y) permit
redemption or other retirement (including pursuant to an offer to purchase
made by the Company) of such other Debt at the option of the holder thereof
prior to the final Stated Maturity of the Notes, other than a redemption or
other retirement at the option of the holder of such Debt (including
pursuant to an offer to purchase made by the Company) which is conditioned
upon a change of control of the Company pursuant to provisions
substantially similar to those contained in Section 1016 hereof (and which
shall provide that such Debt will not be repurchased pursuant to such
provisions prior to the Company's repurchase of the Notes required to be
repurchased by the Company pursuant to the provisions described under
Section 1016).
"Subsidiary" of any Person means (i) a corporation more than 50%
of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and
one or more other Subsidiaries thereof, directly or indirectly, has at
least a majority ownership and power to direct the policies, management and
affairs thereof.
"Successor Note" of any particular Note means every Note issued
after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of
a mutilated, destroyed, lost or stolen Security shall be deemed to evidence
the same debt as the mutilated, destroyed, lost or stolen Note.
"Temporary Cash Investments" means any Investment in the
following kinds of instruments: (A) readily marketable obligations issued
or unconditionally guaranteed as to principal and interest by the United
States of America or by any agency or authority controlled or supervised by
and acting as an instrumentality of the United States of America if, on the
date of purchase or other acquisition of any such instrument by the Company
or any Restricted Subsidiary of the Company, the remaining term to maturity
or interest rate adjustment is not more than two years; (B) obligations
(including, but not limited to, demand or time deposits, bankers'
acceptances and certificates of deposit) issued or guaranteed by a
depository institution or trust company incorporated under the laws of the
United States of America, any state thereof or the District of Columbia,
provided that (1) such instrument has a final maturity not more than one
year from the date of purchase thereof by the Company or any Restricted
Subsidiary of the Company and (2) such depository institution or trust
company has at the time of the Company's or such Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment,
(x) capital, surplus and undivided profits (as of the date such
institution's most recently published financial statements) in excess of
$100 million and (y) the long-term unsecured debt obligations (other than
such obligations rated on the basis of the credit of a Person other than
such institution) of such institution, at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment
providing for such Investment, are rated in the highest rating category of
both S&P and Moodys; (C) commercial paper issued by any corporation, if
such commercial paper has, at the time of the Company's or any Restricted
Subsidiary's Investment therein or contractual commitment providing for
such Investment credit ratings of at least A-1 by S&P and P-1 by Moody's;
(D) money market mutual or similar funds having assets in excess of $100
million; (E) readily marketable debt obligations issued by any corporation,
if at the time of the Company's or Restricted Subsidiary's Investment
therein or contractual commitment providing for such Investment (1) the
remaining term to maturity is not more than two years and (2) such debt
obligations are rated in one of the two highest rating categories of both
S&P and Moody's; (F) demand or time deposit accounts used in the ordinary
course of business with commercial banks the balances in which are at all
times fully insured as to principal and interest by the Federal Deposit
Insurance Corporation or any successor thereto; and (G) to the extent not
otherwise included herein, Cash Equivalents. In the event that either S&P
or Moody's ceases to publish ratings of the type provided herein, a
replacement rating agency shall be selected by the Company with the consent
of the Trustee, and in each case the rating of such replacement rating
agency most nearly equivalent to the corresponding S&P or Moody's rating,
as the case may be, shall be used for purposes hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as
provided in Section 905; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act"
means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean such successor Trustee.
"U.S. Person" means (i) any individual resident in the United
States, (ii) any partnership or corporation organized or incorporated under
the laws of the United States, (iii) any estate of which an executor or
administrator is a U.S. Person (other than an estate governed by foreign
law and of which at least one executor or administrator is a non-U.S.
Person who has sole or shared investment discretion with respect to its
assets), (iv) any trust of which any trustee is a U.S. Person (other than a
trust of which at least one trustee is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets and no beneficiary
of the trust (and no settlor if the Trust is revocable) is a U.S. Person),
(v) any agency or branch of a foreign entity located in the United States,
(vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. Person, (vii) any discretionary or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other
than such an account held for the benefit or account of a non-U.S. Person),
(viii) any partnership or corporation organized or incorporated under the
laws of a foreign jurisdiction and formed by a U.S. Person principally for
the purpose of investing in securities not registered under the Securities
Act (unless it is organized or incorporated, and owned, by accredited
investors within the meaning of Rule 501(a) under the Securities Act who
are not natural persons, estates or trusts); provided, however, that the
term "U.S. Person" does not include (A) a branch or agency of a U.S. Person
that is located and operating outside the United States for valid business
purposes as a locally regulated branch or agency engaged in the banking or
insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and
documentation of a foreign country and (C) the international organizations
set forth in Section 902(o)(7) of Regulation S under the Securities Act and
any other similar international organizations, and their agencies,
affiliates and pension plans.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only
so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock
or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more Wholly
Owned Restricted Subsidiaries of such Person or by such Person and one or
more Wholly Owned Restricted Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion shall be
given in the form of an Officers' Certificate, if to be given by an officer
of the Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect
to some matters and one or more other such Persons as to other matters, and
any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
opinion of counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Date.
----------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by
Holders. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of
any such vote, prior to such vote, the record date for any such action or
vote shall be the 30th day (or, if later, the date of the most recent list
of Holders required to be provided pursuant to Section 701) prior to such
first solicitation or vote, as the case may be. With regard to any record
date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee
or the Company in reliance thereon, whether or not notation of such action
is made upon such Note.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust and Agency Group, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act, that is required under such Act to be
part of and govern this Indenture, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be. Until such time as this Indenture shall be
qualified under the Trust Indenture Act, this Indenture, the Company and
the Trustee shall be deemed for all purposes hereof to be subject to and
governed by the Trust Indenture Act to the same extent as would be the case
if this Indenture were so qualified on the date hereof.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Debt (subject to Article Twelve
hereof) and the Holders of Notes, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Note shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Notes) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date, or
Purchase Date, or at the Stated Maturity, as the case may be, provided that
no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Purchase Date or Stated Maturity, as the
case may be.
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally; Initial Forms of Rule 144A and
Regulation S Notes.
-----------------------------------------------
The Notes and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the
Notes.
The definitive Notes shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders
or may be produced in any other manner permitted by the rules of any
securities exchange on which the Notes may be listed, all as determined by
the officers executing such Notes, as evidenced by their execution thereof.
Upon their original issuance, Rule 144A Notes shall be issued in
the form of one or more Global Notes without interest coupons registered in
the name of DTC, as Depositary, or its nominee and deposited with the
Trustee, as custodian for DTC, in New York, New York, for credit by DTC to
the respective accounts of beneficial owners of the Notes represented
thereby (or such other accounts as they may direct). Such Global Notes,
together with their Successor Notes which are Global Notes other than the
Regulation S Global Note are collectively herein called the "Restricted
Global Note".
Upon their original issuance, Regulation S Notes shall be issued
in the form of one or more Global Notes without interest coupons registered
in the name of DTC, as Depositary, or its nominee and deposited with the
Trustee, as custodian for DTC, in New York, New York, for credit to Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear, and Cedel to the respective accounts of beneficial owners of the
Notes represented thereby (or such other accounts as they may direct) in
accordance with the rules thereof.
Prior to the expiration of the Restricted Period, beneficial
interests in the Regulation S Global Note may only be held through
Euroclear and Cedel (as indirect participants in DTC), unless such
interests are exchanged for corresponding interests in the Restricted
Global Note in accordance with Section 306(b)(ii) hereof.
SECTION 202. Form of Face of Note.
--------------------
[IF THE NOTE IS A RESTRICTED NOTE, THEN INSERT -- THE NOTES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON
WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS
OWN ACCOUNT OR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT,(3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN
ACCORDANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES OF AMERICA AND OTHER JURISDICTIONS.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
THE ABOVE PARAGRAPH.
THIS NOTE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER
UNLESS THE REGISTRAR OR TRANSFER AGENT IS SATISFIED THAT THE RESTRICTIONS
ON TRANSFER SET FORTH ABOVE HAVE BEEN COMPLIED WITH, ALL AS PROVIDED IN THE
INDENTURE.]
[IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- THIS NOTE IS A
GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO
TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[IF THE NOTE IS A GLOBAL NOTE AND THE DEPOSITORY TRUST COMPANY IS
TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS NOTE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
[IF THE NOTE IS A REGULATION S NOTE, THEN INSERT -- THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS
THIS NOTE IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
[If Restricted Global Note - CUSIP No. 540423AAB]
[If Regulation S Global Note - ISIN No. 454098AA3]
No. __________ $________
Loews Cineplex Entertainment Corporation, a corporation duly
organized and existing under the laws of Delaware (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________, or registered assigns, the principal sum of
______________ Dollars (such amount the "principal amount" of this Note)
[IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- , or such other principal
amount (which, when taken together with the principal amounts of all other
Outstanding Notes, shall not exceed $300,000,000 in the aggregate at any
time) as may be set forth in the records of the Trustee hereinafter
referred to in accordance with the Indenture,] on August 1, 2008 and to pay
interest thereon from August 5, 1998, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for,
semi-annually on February 1 and August 1 in each year, commencing February
1, 1999, at the rate of 8 7/8% per annum, until the principal hereof is paid
or made available for payment; provided that, if any Registration Default
occurs under the Exchange and Registration Rights Agreement, then the per
annum interest rate on this Note will increase for the period from the
occurrence of the Registration Default until such time as no Registration
Default is in effect (at which time the interest rate will be reduced to
its initial rate) at a per annum rate of 0.5% for the first 90-day period
following the occurrence of such Registration Default, and by an additional
0.5% thereafter (up to a maximum of 1.0%), and provided, further, that any
amount of interest on this Note which is overdue shall bear interest (to
the extent that payment thereof shall be legally enforceable) at the rate
per annum then borne by this Note from the date such amount is due to the
day it is paid or made available for payment, and such overdue interest
shall be payable on demand.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular Record Date
for such interest, which shall be January 15 or July 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date [IF THE NOTE IS AN ORIGINAL NOTE, THEN INSERT --, provided that any
accrued and unpaid interest (including Special Interest Payments) on this
Note upon the issuance of an Exchange Note in exchange for this Note shall
cease to be payable to the Holder hereof and shall be payable on the next
Interest Payment Date for such Exchange Note to the Holder thereof on the
related Regular Record Date]. Any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on the
relevant Regular Record Date and may either be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture. Interest on this
Note shall be computed on the basis set forth in the Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Note will be made at the office or agency of the Company
in the Borough of Manhattan, The City of New York, New York, maintained for
such purpose and at any other office or agency maintained by the Company
for such purpose, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Note Register; provided further
that all payments of the principal (and premium, if any) and interest on
Notes, the Holders of which have given wire transfer instructions to the
Company or its agent at least 10 Business Days prior to the applicable
payment date will be required to be made by wire transfer of immediately
available funds to the accounts specified by such Holders in such
instructions. Notwithstanding the foregoing, the final payment of principal
shall be payable only upon surrender of this Note to the Paying Agent.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
[SEAL]
By
--------------------------------------
Attest:
- ------------------------------
SECTION 203. Form of Reverse of Note.
-----------------------
This Note is one of a duly authorized issue of Notes of the
Company designated as its 8 7/8% Senior Subordinated Notes due 2008 (herein
called the "Notes"), limited in aggregate principal amount to $300,000,000,
issued and to be issued under an Indenture, dated as of August 5, 1998
(herein called the "Indenture", which term shall have the meaning assigned
to it in such instrument), among the Company, and Bankers Trust Company, as
Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Notes and of the terms
upon which the Notes are, and are to be, authenticated and delivered.
The Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after August 1, 2003 and
prior to maturity, upon not less than 30 nor more than 60 days' notice
mailed to each Holder of Notes to be redeemed at such Holder's address
appearing in the Note Register, in amounts of $1,000 or an integral
multiple of $1,000, at the following Redemption Prices (expressed as
percentages of the principal amount) plus accrued interest to but excluding
the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date), if redeemed during the
12-month period beginning August 1 of the years indicated:
Year Redemption
---- Price
----------
2003.............................................. 104.437%
2004.............................................. 102.958%
2005.............................................. 101.479%
2006 and thereafter............................... 100.000%
In addition, if on or before August 1, 2001 the Company receives
net proceeds from the sale of its Common Stock in one or more Public Equity
Offerings, the Company may, at its option, use an amount equal to all or a
portion of any such net proceeds to redeem Notes in an aggregate principal
amount of up to 33 1/3% of the original aggregate principal amount of the
Notes, provided, however, that Notes having a principal amount equal to at
least 66 2/3% of the original aggregate principal amount of the Notes remain
outstanding after such redemption. Such redemption must occur on a
Redemption Date within 90 days of such sale and upon not less than 30 or
more than 60 days' notice mailed to each Holder of Notes to be redeemed at
such Holder's address appearing in the Note Register, in amounts of $1,000
or an integral multiple of $1,000, at a redemption price of 108.875% of the
principal amount of the Notes plus accrued interest to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the
particular Notes to be redeemed or any portion thereof that is an integral
multiple of $1,000.
The Notes do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if
(i) certain Net Available Proceeds are available to the Company as a result
of Asset Dispositions or (ii) a Change of Control occurs, the Company shall
be required to make an Offer to Purchase for all or a specified portion of
the Notes.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Note in part only, a new Note or Notes of like tenor for
the unredeemed or unpurchased portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Note having been paid or discharged or
(ii) certain restrictive covenants and Events of Default with respect to
this Note having occurred, in each case upon compliance with certain
conditions set forth therein.
The Notes shall be subordinated in right of payment to Senior
Debt of the Company as provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under
the Indenture at any time by the Company and the Trustee with the consent
of the Holders of a majority in aggregate principal amount of the Notes at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of a majority in aggregate principal amount of the Notes at the
time Outstanding, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.
As provided in and subject to the provisions of the Indenture,
the Holder of this Note shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default with respect to the Notes, the Holders of not less than
25% in aggregate principal amount of the Notes at the time Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee
reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of Notes at the time
Outstanding a direction inconsistent with such request and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by
the Holder of this Note for the enforcement of any payment of principal
hereof or any premium (if any) or interest hereon on or after the
respective due dates expressed herein (or, in the case of redemption, on or
after the Redemption Date or, in the case of any purchase of this Note
required to be made pursuant to an Offer to Purchase, on the Purchase
Date).
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Note at the times, place and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of
New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Note Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Notes are exchangeable for a like aggregate principal amount of
Notes of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes (subject to the provisions hereof with
respect to determination of the Person to whom interest is payable),
whether or not this Note be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
Interest on this Note shall be computed on the basis of a 360-day
year of twelve 30-month days.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Note shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety
by the Company pursuant to Section 1014 or 1016 of the Indenture, check the
box:
[ ]
If you want to elect to have only a part of this Note purchased
by the Company pursuant to Section 1014 or 1016 of the Indenture, state the
principal amount of this Note you want to elect to have so purchased by the
Company: $___________
Dated:___________________ Your Signature:_____________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature Guarantee:______________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature
guarantee program" as may be determined by the Trustee
in addition to, or in substitution for STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
SECTION 204. Form of Trustee's Certificate of
Authentication.
--------------------------------
This is one of the Notes referred to in the within-mentioned
Indenture.
-----------------------------
as Trustee
By
---------------------------
Authorized Officer
ARTICLE THREE
The Notes
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $300,000,000
except for Notes authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Notes pursuant to Section 304,
305, 306, 906 or 1108 or in connection with an Offer to Purchase pursuant
to Sections 1014 and 1016.
The Notes shall be known and designated as the "8 7/8% Senior
Subordinated Notes due 2008" of the Company. Their Stated Maturity shall be
August 1, 2008 and they shall bear interest at the rate of 8 7/8% per annum,
from August 5, 1998 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semi-annually on February 1 and August 1, commencing February 1, 1999,
until the principal thereof is paid or made available for payment provided,
if any Registration Default occurs under the Exchange and Registration
Rights Agreement, then the per annum interest rate on the applicable Notes
will increase for the period from the occurrence of the Registration
Default Period until such time as no Registration Default is in effect (at
which time the interest rate will be reduced to its initial rate) by a per
annum rate of 0.50% for the first 90-day period following the occurrence of
such Registration Default, and by an additional 0.5% thereafter (up to a
maximum of 1.0%).
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any
other office or agency maintained by the Company for such purpose;
provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto
as such address shall appear in the Note Register.
The Notes shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1014 and 1016.
The Notes shall be redeemable as provided in Article Eleven.
The Notes shall be subordinated in right of payment to Senior
Debt of the Company as provided in Article Twelve.
The Notes shall be subject to defeasance at the option of the
Company as provided in Article Thirteen.
Unless the context otherwise requires, the Original Notes and the
Exchange Notes shall constitute one series for all purposes under the
Indenture, including with respect to any amendment, waiver, acceleration or
other Act of Holders, redemption or Offer to Purchase.
SECTION 302. Denominations.
-------------
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1000 and integral multiples thereof.
SECTION 303. Execution, Authentication, Delivery
and Dating.
-----------------------------------
The Notes shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Notes
or did not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Notes; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Notes as in this Indenture provided and not otherwise.
At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may
deliver Exchange Notes executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Exchange Notes and a like principal amount of Original
Notes for cancellation in accordance with this Indenture, and the Trustee
in accordance with the Company Order shall authenticate and deliver such
Notes. Prior to authenticating such Exchange Notes, and accepting any
additional responsibilities under this Indenture in relation to such Notes,
the Trustee shall be entitled to receive, if requested, and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating in substance:
(a) that all conditions hereunder precedent to the authentication
and delivery of such Exchange Notes have been complied with and that
such Exchange Notes, when such Notes have been duly authenticated and
delivered by the Trustee (and subject to any other conditions
specified in such Opinion of Counsel), have been duly issued and
delivered and will constitute valid and legally binding obligations of
the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and
(b) that the issuance of the Exchange Notes in exchange for
Original Notes has been effected in compliance with the Securities
Act.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Notes.
---------------
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes, which Notes are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Notes may determine, as
evidenced by their execution thereof.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive
Notes, upon surrender of the temporary Notes at any office or agency of the
Company designated pursuant to Section 1002, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. Global Notes.
------------
(a) Each Global Note authenticated under this Indenture shall be
registered in the name of the Depositary designated by the Company for such
Global Note or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Note shall
constitute a single Note for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Note may be exchanged in whole or in part for Notes registered, and
no transfer of a Global Note in whole or in part may be registered, in the
name of any Person other than the Depositary for such Global Note or a
nominee thereof unless (i) such Depositary (A) has notified the Company
that it is unwilling or unable to continue as Depositary for such Global
Note or (B) has ceased to be a clearing agency registered as such under the
Exchange Act, and in either case the Company fails to appoint a successor
Depositary, (ii) the Company executes and delivers to the Trustee a Company
Order stating that it elects to cause the issuance of the Notes in
certificated form and that all Global Notes shall be exchanged in whole for
Securities that are not Global Notes (in which case such exchange shall be
effected by the Trustee) or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Note.
(c) If any Global Note is to be exchanged for other Notes or
cancelled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Trustee, as Security Registrar, for
exchange or cancellation as provided in this Article Three. If any Global
Note is to be exchanged for other Notes or cancelled in part, or if another
Note is to be exchanged in whole or in part for a beneficial interest in
any Global Note, then either (i) such Global Note shall be so surrendered
for exchange or cancellation as provided in this Article Three or (ii) the
principal amount thereof shall be reduced or increased by an amount equal
to the portion thereof to be so exchanged or cancelled, or equal to the
principal amount of such other Note to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment
made on the records of the Trustee, as Security Registrar, whereupon the
Trustee, in accordance with the Applicable Procedures, shall instruct the
Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a
Global Note, the Trustee shall, subject to Section 306(c) and as otherwise
provided in this Article Three, authenticate and deliver any Notes issuable
in exchange for such Global Note (or any portion thereof) to or upon the
order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the
Trustee in connection with the occurrence of any of the events specified in
the preceding paragraph, the Company shall promptly make available to the
Trustee a reasonable supply of Notes that are not in the form of Global
Notes. The Trustee shall be entitled to rely upon any order, direction or
request of the Depositary or its authorized representative which is given
or made pursuant to this Article Three if such order, direction or request
is given or made in accordance with the Applicable Procedures.
(d) Every Note authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Note or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Note,
unless such Note is registered in the name of a Person other than the
Depositary for such Global Note or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a
Global Note, shall be the Holder of such Global Note for all purposes under
the Indenture and the Notes, and owners of beneficial interests in a Global
Note shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Note will be
shown only on, and the transfer of such interest shall be effected only
through, records maintained by the Depositary or its nominee or its Agent
Members.
SECTION 306. Registration, Registration of Transfer and
Exchange Generally; Restrictions on Transfer
and Exchange; Securities Act Legends.
--------------------------------------------
(a) Registration, Registration of Transfer and Exchange
Generally. The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in
any other office or agency of the Company designated pursuant to Section
1002 being herein sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers and exchanges of Notes. The Trustee is hereby appointed "Security
Registrar" for the purpose of registering Notes and transfers and exchanges
of Notes as herein provided. Such Security Register shall distinguish
between Original Notes and Exchange Notes.
Upon surrender for registration of transfer of any Note at an
office or agency of the Company designated pursuant to Section 1002 for
such purpose and provided that the other requirements of this Section 306
have been satisfied, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations, of a
like aggregate principal amount and bearing such restrictive legends as may
be required by this Indenture.
At the option of the Holder, and subject to the other provisions
of this Section 306, Notes may be exchanged for other Notes of any
authorized denominations, of a like aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture upon
surrender of the Notes to be exchanged at any such office or agency.
Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Notes which
the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
debt, and (except for the differences between Original Notes and Exchange
Notes provided for herein) entitled to the same benefits under this
Indenture, as the Notes surrendered upon such registration of transfer or
exchange.
Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Note Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Sections 303, 304, 305, 307, 906,
1014, 1016 or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of, or exchange any Note during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption
of Notes selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of
or exchange any Note so selected for redemption, in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(b) Certain Transfers and Exchanges. Notwithstanding any other
provision of this Indenture or the Notes, transfers and exchanges of Notes
and beneficial interests in a Global Note of the kinds specified in this
Section 306(b) shall be made only in accordance with this Section 306(b).
(i) Restricted Global Note to Regulation S Global Note. If the
owner of a beneficial interest in the Restricted Global Note wishes at
any time to transfer such interest to a Person who wishes to acquire
the same in the form of a beneficial interest in the Regulation S
Global Note (whether before or after the expiration of the Restricted
Period), such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) subject to the Applicable Procedures.
Upon receipt by the Trustee, as Security Registrar, of (A) an order
given by the Depositary or its authorized representative directing
that a beneficial interest in the Regulation S Global Note in a
specified principal amount be credited to a specified Agent Member's
account and that a beneficial interest in the Restricted Global Note
in an equal principal amount be debited from another specified Agent
Member's account and (B) a Regulation S Certificate, satisfactory to
the Trustee and duly executed by the owner of such beneficial interest
in the Restricted Global Note or his attorney duly authorized in
writing, then the Trustee, as Security Registrar shall reduce the
principal amount of the Restricted Global Note and increase the
principal amount of the Regulation S Global Note by such specified
principal amount as provided in Section 305(c).
(ii) Regulation S Global Note to Restricted Global Note. If the
owner of a beneficial interest in the Regulation S Global Note wishes
at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the
Restricted Global Note, such transfer may be effected only in
accordance with this Clause (b)(ii) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (A)
an order given by the Depositary or its authorized representative
directing that a beneficial interest in the Restricted Global Note in
a specified principal amount be credited to a specified Agent Member's
account and that a beneficial interest in the Regulation S Global Note
in an equal principal amount be debited from another specified Agent
Member's account and (B) if before the expiration of the Restricted
Period, a Restricted Notes Certificate, satisfactory to the Trustee
and duly executed by the owner of such beneficial interest in the
Regulation S Global Note or his attorney duly authorized in writing,
then the Trustee, as Security Registrar, shall reduce the principal
amount of the Regulation S Global Note and increase the principal
amount of the Restricted Global Note by such specified principal
amount as provided in Section 305(c).
(iii) Exchanges between Global Note and Non-Global Note. A
beneficial interest in a Global Note may be exchanged for a Note that
is not a Global Note as provided in Section 305, provided that, if
such interest is a beneficial interest in the Restricted Global Note,
or if such interest is a beneficial interest in the Regulation S
Global Note, then such interest shall be exchanged for a Restricted
Note (subject in each case to Section 306(c)).
(c) Securities Act Legends. Rule 144A Notes and their respective
Successor Notes shall bear a Restricted Notes Legend, and Regulation S
Notes and their Successor Notes shall bear a Regulation S Legend, subject
to the following:
(i) subject to the following Clauses of this Section 306(c), a
Note or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Note or any portion thereof shall bear the
Securities Act Legend borne by such Global Note while represented
thereby;
(ii) subject to the following Clauses of this Section 306(c), a
new Note which is not a Global Note and is issued in exchange for
another Note (including a Global Note) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by
such other Note, provided that, if such new Note is required
pursuant to Section 306(b)(iii) to be issued in the form of a
Restricted Note, it shall bear a Restricted Notes Legend and, if such
new Note is so required to be issued in the form of a Regulation S
Note, it shall bear a Regulation S Legend;
(iii) Exchange Notes shall not bear a Securities Act Legend;
(iv) at any time after the Notes may be freely transferred
without registration under the Securities Act or without being subject
to transfer restrictions pursuant to the Securities Act, a new Note
which does not bear a Securities Act Legend may be issued in exchange
for or in lieu of a Note (other than a Global Note) or any portion
thereof which bears such a legend if the Trustee has received an
Unrestricted Notes Certificate, satisfactory to the Trustee and duly
executed by the Holder of such legended Note or his attorney duly
authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new
Note in exchange for or in lieu of such other Note as provided in this
Article Three;
(v) a new Note which does not bear a Securities Act Legend may be
issued in exchange for or in lieu of a Note (other than a Global Note)
or any portion thereof which bears such a legend if, in the Company's
judgment, placing such a legend upon such new Note is not necessary to
ensure compliance with the registration requirements of the Securities
Act, and the Trustee, at the written direction of the Company, shall
authenticate and deliver such a new Note as provided in this Article
Three; and
(vi) notwithstanding the foregoing provisions of this Section
306(c), a Successor Note of a Note that does not bear a particular
form of Securities Act Legend shall not bear such form of legend
unless the Company has reasonable cause to believe that such Successor
Note is a "restricted security" within the meaning of Rule 144, in
which case the Trustee, at the written direction of the Company, shall
authenticate and deliver a new Note bearing a Restricted Notes Legend
in exchange for such Successor Note as provided in this Article Three.
SECTION 307. Mutilated, Destroyed, Lost and
Stolen Notes.
------------------------------
If any mutilated Note is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Note of like tenor and principal amount, and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Note and (ii) such security or indemnity as may be required by either of
them to save each of them, and any agent of either of them harmless, then,
in the absence of notice to the Company or the Trustee that such Note has
been acquired by a bona fide purchaser, the Company shall execute and upon
its written request the Trustee shall authenticate and deliver, in lieu of
any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost
or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 308. Payment of Interest; Interest
Rights Preserved.
-----------------------------
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Note (or one or more Predecessor Notes) is registered at
the close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Note and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as
it appears in the Note Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names
the Notes (or their respective Predecessor Notes) are registered at
the close of business on such Special Record Date and shall no longer
be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after written notice
given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such
other Note.
SECTION 309. Persons Deemed Owners.
---------------------
Prior to due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 308) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee or any agent of the Company or
the Trustee shall have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Note in global form, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any Note in global form,
nothing herein shall prevent the Company or the Trustee, or any agent of
the Company or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by any Depositary (or
its nominee), as a Holder, with respect to such Note in global form or
impair, as between such Depositary and owners of beneficial interests in
such Note in global form, the operation of customary practices governing
the exercise of the rights of such Depositary (or its nominee) as Holder of
such Note in global form.
SECTION 310. Cancellation.
------------
All Notes surrendered for payment, redemption, registration of
transfer or exchange or any Offer to Purchase pursuant to Section 1014 or
1016 shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Trustee. No Notes shall be authenticated in lieu
of or in exchange for any Notes canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Notes held by
the Trustee shall be disposed of as directed by a Company Order.
SECTION 311. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360 day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to
(i) rights of registration of transfer and exchange and the Company's right
of optional redemption, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes, (iii) rights of Holders to receive payment
of principal and interest on the Notes, (iv) rights, obligations and
immunities of the Trustee under the Indenture and (v) rights of the Holders
of the Notes as beneficiaries of the Indenture with respect to any property
deposited with the Trustee payable to all or any of them), and the Trustee,
on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture,
when
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 307 and
(ii) Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust,
as provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the
case of Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant
to this Article Four, the obligations of the Company to the Trustee under
Section 607 and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of Clause (1) of this Section, the obligations of
the Trustee under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been
deposited with the Trustee but such money need not be separated from other
funds except to the extent required by law.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be occasioned by the provisions of Article Twelve or be voluntary
or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(1) failure to pay the principal of (or premium, if any, on) any
Note at its Maturity; or
(2) failure to pay any interest upon any Note when it becomes due
and payable, and continuance of such default for a period of 30 days;
or
(3) default, on the applicable Purchase Date, in the purchase of
Notes required to be purchased by the Company pursuant to an Offer to
Purchase as described in Section 1014 herein and Section 1016 herein
when due and payable; or
(4) failure to perform or comply with the provisions of Section
801; or
(5) failure to perform any other covenant or agreement of the
Company in this Indenture or the Notes (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Notes a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(6) default under the terms of any instrument evidencing or
securing Debt for money borrowed by the Company or any Restricted
Subsidiary having an outstanding principal amount of $15.0 million
individually or in the aggregate which default results in the
acceleration of the payment of such indebtedness or constitutes the
failure to pay such indebtedness at final maturity after expiration of
any applicable grace period; or
(7) a final judgment or judgments (not subject to appeal) for the
payment of money are entered against the Company or any Restricted
Subsidiary of the Company in an amount in excess of $15.0 million by a
court or courts of competent jurisdiction, which judgments remain
undischarged or unstayed for a period of 60 days after the date on
which the right to appeal all such judgments has expired; or
(8) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any
Restricted Subsidiary of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any such Restricted Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company or any such Restricted Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any such Restricted Subsidiary of any substantial
part of the property of the Company or any such Restricted Subsidiary,
or ordering the winding up or liquidation of the affairs of the
Company or any such Subsidiary, and the continuance of any such decree
or order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(9) the commencement by the Company or any Restricted Subsidiary
of the Company of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by the Company or any such
Restricted Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Restricted Subsidiary of the Company in
an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Restricted Subsidiary of the Company, or
the filing by the Company or any such Restricted Subsidiary of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by the Company or
any such Restricted Subsidiary to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the
Company or any Restricted Subsidiary of the Company of any substantial
part of the property of the Company or any Restricted Subsidiary of
the Company, or the making by the Company or any Restricted Subsidiary
of the Company of an assignment for the benefit of creditors, or the
admission by the Company or any such Restricted Subsidiary in writing
of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company or any such Restricted
Subsidiary in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.
------------------------------------
If an Event of Default (other than an Event of Default specified
in Section 501(8) or (9)) occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes may declare all of the Notes to be due and
payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal
and any accrued interest, if any, shall become immediately due and payable;
provided, however, that so long as any Senior Debt under the Senior Bank
Facility is outstanding, any such acceleration shall not be effective until
the earlier of (a) five Business Days after Notice of such acceleration is
delivered to the Administrative Agent for the Senior Bank Facility and (b)
the acceleration of any Senior Debt under the Senior Bank Facility. If an
Event of Default specified in Section 501(8) or (9) occurs, the principal
and any accrued interest on the Notes then Outstanding shall ipso facto
become immediately due and payable without any declaration or other Act on
the part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Notes, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Notes,
(B) the principal of (and premium, if any, on) any Notes
which have become due otherwise than by such declaration of
acceleration (including any Notes required to have been purchased
on the Purchase Date pursuant to an Offer to Purchase made by the
Company) and, to the extent that payment of such interest is
lawful, interest thereon at the rate provided by the Notes,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate provided by the Notes,
and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee.
------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Note
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof or, with respect
to any Note required to have been purchased pursuant to an Offer to
Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Notes, the whole amount then due and payable on such
Notes for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the
rate provided by the Notes, if any, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Notes and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture
or in aid of the exercise of any power granted herein, or to enforce any
other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company or any
other obligor upon the Notes, or upon the property of the Company or its
creditors, the Trustee shall be entitled and empowered, by intervention in
such proceeding or otherwise, to take any and all actions authorized under
the Trust Indenture Act in order to have claims of the Holders and the
Trustee allowed in any such proceeding. In particular, the Trustee shall be
authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section
607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 505. Trustee May Enforce Claims
Without Possession of Notes.
---------------------------
All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any
of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Notes in respect
of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the extent provided in Article Twelve, to the
holders of Senior Debt in accordance with Article Twelve; and
THIRD: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for
principal (and premium, if any) and interest, respectively.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest.
---------------------------------
Notwithstanding any other provision in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 306) interest on such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the Redemption
Date or in the case of an Offer to Purchase made by the Company and
required to be accepted as to such Note, on the Purchase Date) and to
institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 307, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct in writing the time,
method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee,
provided that
(1) such written direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the
Notes waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Note (including any Note which is required to have
been purchased pursuant to an Offer to Purchase which has been made by
the Company), or
(2) in respect of a covenant or provision hereof which under
Article Ten cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of such suit,
and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided, that neither this
Section nor the Trust Indenture Act shall be deemed to authorize any court
to require such an undertaking or to make such an assessment in any suit
instituted by the Company or in any suit for the enforcement of the right
to convert any Note in accordance with Article Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
Except during the continuance of an Event of Default, the duties
and responsibilities of the Trustee shall be as expressly provided for in
the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it under the Indenture and
use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Notwithstanding the foregoing, no provision of this Indenture
shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 602. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character
specified in Section 501(4), no such notice to Holders shall be given until
at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, conclusively rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent,
attorney, custodian or nominee appointed with due care by it
hereunder;
(h) In the event that the Trustee is also acting as Paying Agent
or Registrar hereunder, the rights and protections afforded to the
Trustee pursuant to this Article Six shall also be afforded to such
Paying Agent or Registrar; and
(i) The Trustee shall not be charged with knowledge of any
Default or Event of Default unless either (i) a Responsible Officer
shall have actual knowledge of such Default or Event of Default or
(ii) written notice of such Default or Event of Default shall be given
to the Trustee by the Company or any Holder.
SECTION 604. Not Responsible for Recitals
or Issuance of Notes.
----------------------------
The recitals contained herein and in the Notes except the
Trustee's certificates of authentication, shall be taken as the statements
of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes. The Trustee shall not be
accountable for the use or application by the Company of Notes or the
proceeds thereof.
SECTION 605. May Hold Notes.
--------------
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company, in its individual or any other capacity, may become
the owner or pledgee of Notes and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Note Registrar or such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by
it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The obligations of the Company under this Section 607 to
compensate the Trustee and to pay or reimburse the Trustee for reasonable
expenses, disbursements and advances shall survive the discharge of this
Indenture or the earlier resignation or removal of the Trustee.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000 and its
Corporate Trust Office in the Borough of Manhattan, The City of New York. If
such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 610. Resignation and Removal;
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee under Section
611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in aggregate principal amount of the Outstanding Notes,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee, or (ii) subject to Section 514, any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall
be appointed by Act of the Holders of a majority in aggregate principal
amount of the Outstanding Notes delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede
the successor Trustee appointed by the Company. If no successor Trustee
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a
bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers
and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder. Upon request of the retiring Trustee, any such
successor Trustee and the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor
Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In case any
Notes shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes
so authenticated with the same effect as if such successor Trustee had
itself authenticated such Notes.
SECTION 613. Preferential Collection
of Claims Against Company.
-------------------------
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of
claims against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders.
------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in
its capacity as Note Registrar.
SECTION 702. Preservation of Information;
Communications to Holders.
----------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and
the names and addresses of Holders received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Notes and the
corresponding rights and duties of the Trustee, shall be provided by the
Trust Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason
of any disclosure of information as to the names and addresses of Holders
made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than June 30 in each
calendar year, commencing in June 1999.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Notes are listed, with the Commission and with the Company.
The Company will notify the Trustee in writing when the Notes are listed on
any stock exchange.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant to such Act; provided
that any such information, documents or reports required to be filed with
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be
filed with the Trustee within 30 days after the same is so required to be
filed with the Commission.
SECTION 705. Officers' Certificate with Respect to Change
in Interest Rates.
--------------------------------------------
Within five days after the day on which any Special Interest
begins accruing, and within five days after any Special Interest ceases to
accrue, the Company shall deliver an Officers' Certificate to the Trustee
stating the interest rate thereupon in effect for the Unregistered Notes
(if any are Outstanding) and the date on which such rate became effective.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Mergers, Consolidations and Certain Sales of Assets.
---------------------------------------------------
The Company shall not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person
or permit any other Person to consolidate with or merge into the Company
and (ii) directly or indirectly, transfer, sell, lease or otherwise dispose
of all or substantially all of its assets unless: (1) in a transaction in
which the Company does not survive or in which the Company sells, leases or
otherwise disposes of all or substantially all of its assets, the successor
entity to the Company is organized under the laws of the United States of
America or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee in form satisfactory to the Trustee, all of the Company's
obligations under the Indenture; (2) immediately before and after giving
effect to such transaction and treating any Debt which becomes an
obligation of the Company or a Restricted Subsidiary as a result of such
transaction as having been Incurred by the Company or such Restricted
Subsidiary at the time of the transaction, no Event of Default or event
that with the passing of time or the giving of notice, or both, would
constitute an Event of Default shall have occurred and be continuing; (3)
immediately after giving effect to such transaction, the Consolidated Net
Worth of the Company (or other successor entity to the Company) is equal to
or greater than that of the Company immediately prior to the transaction;
(4) immediately after giving effect to such transaction and treating any
Debt which becomes an obligation of the Company or a Restricted Subsidiary
as a result of such transaction as having been Incurred by the Company or
such Restricted Subsidiary at the time of the transaction, the Company
(including any successor entity to the Company) could Incur at least $1.00
of additional Debt pursuant to the provisions of this Indenture described
in the first paragraph under Section 1008 hereof; and (5) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel
(which Opinion of Counsel may rely, as to factual matters, on such
Officer's Certificate), each stating that such consolidation, merger,
conveyance, transfer, lease or acquisition and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, complies with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with,
and, with respect to such Officer's Certificate, setting forth the manner
of determination of the Consolidated Net Worth and the ability to Incur
Debt in accordance with Clause (4) of Section 801, the Company or, if
applicable, of the Successor Company as required pursuant to the foregoing.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any transfer, conveyance, sale, lease or
other disposition of all or substantially all of the properties and assets
of the Company as an entirety in accordance with Section 801, the Successor
Company shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Notes.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders.
--------------------------
Without the consent of any Holders, the Company, when authorized
by a Board Resolution of the Company, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Notes pursuant to the requirements of Section
1011 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the
Trust Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions
arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided such action pursuant to this
Clause (5) shall not adversely affect the interests of the Holders in
any material respect.
SECTION 902. Supplemental Indentures
with Consent of Holders.
-----------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution of the Company and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable
thereon, or change the place of payment where, or the coin or currency
in which, any Note or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date or, in the case of an
Offer to Purchase which has been made, on or after the applicable
Purchase Date), or
(2) reduce the percentage in principal amount of the Outstanding
Notes, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1020, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Note
affected thereby, or
(4) modify any of the provisions of this Indenture relating to
the subordination of the Notes in a manner adverse to the Holders.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any supplemental indenture, the
Trustee shall join the Company in the execution of any supplemental
indenture authorized or permitted by this Indenture and shall make any
further appropriate agreements and stipulations as may be contained
therein.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Notes theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Notes to
Supplemental Indentures.
-----------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Notes so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee
in exchange for Outstanding Notes.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest.
---------------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Notes in accordance with the terms of
the Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The City
of New York, an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate
Trust Office of the Trustee, and the Company hereby appoints the Trustee as
its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City
of New York) where the Notes may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York, for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any
such other office or agency.
SECTION 1003. Money for Note Payments to be Held in Trust.
-------------------------------------------
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of interest on any of the
Notes, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the
Trustee in writing of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest on any Notes, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee in writing of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Note and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due
and payable shall be paid to the Company on Company Request, or (if then
held by the Company) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in
a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Existence.
---------
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right
or franchise if the Board of Directors in good faith shall determine that
the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 1005. Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary of the Company to
be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in
this Section shall prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, as
determined by the Board of Directors in good faith, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied or imposed upon the Company or
any of its Subsidiaries or upon the income, profits or property of the
Company or any of its Subsidiaries, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon
the property of the Company or any of its Subsidiaries; provided, however,
that the Company shall not be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1007. Maintenance of Insurance.
------------------------
The Company shall, and shall cause its Subsidiaries to, keep at
all times all of their properties which are of an insurable nature insured
against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice. The Company shall, and shall cause
its Subsidiaries to, use the proceeds from any such insurance policy to
repair, replace or otherwise restore the property to which such proceeds
relate.
SECTION 1008. Limitation on Consolidated Debt.
-------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, Incur any Debt unless immediately after
giving pro forma effect to the Incurrence of such Debt and the receipt and
application of the proceeds thereof, the Consolidated Cash Flow Coverage
Ratio of the Company would be greater than 2.0 to 1; provided that if the
Debt which is the subject of the determination under this provision is
Acquired Debt, the Consolidated Cash Flow Coverage Ratio of the Company
shall be determined by giving effect (on a pro forma basis, as if the
transaction had occurred at the beginning of the immediately preceding
four-quarter period) to both the Incurrence or assumption of such Acquired
Debt by the Company and the inclusion in the Consolidated Cash Flow
Available for Fixed Charges of the Person whose Debt would constitute
Acquired Debt.
Notwithstanding the foregoing paragraph, the Company may, and may
permit any Restricted Subsidiary, to incur the following Debt:
(i) Debt under the Senior Bank Facility in an aggregate principal
amount at any one time not to exceed $1.0 billion, less any amounts by
which any revolving credit facility commitments under the Senior Bank
Facility are permanently reduced pursuant to Section 1014 (so long as
and to the extent that any required payments in connection therewith
are actually made);
(ii) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Subsidiary of the Company
to the Company or a Wholly Owned Restricted Subsidiary of the Company;
provided, however, that (a) any such Debt owing by the Company to a
Wholly Owned Restricted Subsidiary shall be Subordinated Debt
evidenced by an intercompany promissory note and (b) upon either (1)
the transfer or other disposition by such Wholly Owned Restricted
Subsidiary or the Company of any Debt so permitted to a Person other
than the Company or another Wholly Owned Restricted Subsidiary of the
Company or (2) the issuance (other than directors' qualifying shares),
sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Wholly Owned Restricted
Subsidiary to a Person other than the Company or another such Wholly
Owned Restricted Subsidiary, the provisions of this Clause (ii) shall
no longer be applicable to such Debt and such Debt shall be deemed to
have been Incurred at the time of such transfer or other disposition;
(iii) the original issuance by the Company of the Debt evidenced
by the Notes (including any Exchange Notes);
(iv) Debt (other than Debt described in another clause of this
paragraph) outstanding on the date of original issuance of the Notes
after giving effect to the application of the proceeds of the Notes as
described in Schedule I to this Indenture;
(v) Debt consisting of Permitted Interest Rate, Currency or
Commodity Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are
used to refinance or refund, or any extension or renewal of,
outstanding Debt Incurred pursuant to the preceding paragraph or
clauses (iii) or (iv) of this paragraph (each of the foregoing, a
"refinancing") in an aggregate principal amount not to exceed the
principal amount of the Debt so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt so refinanced or the amount of any
premium (including consent payments) reasonably determined by the
Company as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase, plus the expenses of
the Company or the Restricted Subsidiary, as the case may be, incurred
in connection with such refinancing; provided, however, that (A) Debt
the proceeds of which are used to refinance the Notes or Debt which is
pari passu with or subordinate in right of payment to the Notes shall
only be permitted if (x) in the case of any refinancing of the Notes
or Debt which is pari passu to the Notes, the refinancing Debt is made
pari passu to the Notes or subordinated to the Notes, and (y) in the
case of any refinancing of Debt which is subordinated to the Notes,
the refinancing Debt constitutes Subordinated Debt; (B) the
refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (1) does not provide
for payments of principal of such Debt at the stated maturity thereof
or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof
(including any redemption, defeasance, retirement or repurchase which
is contingent upon events or circumstances, but excluding any
retirement required by virtue of acceleration of such Debt upon any
event of default thereunder), in each case prior to the stated
maturity of the Debt being refinanced and (2) does not permit
redemption or other retirement (including pursuant to an offer to
purchase) of such debt at the option of the holder thereof prior to
the final stated maturity of the Debt being refinanced), other than a
redemption or other retirement at the option of the holder of such
Debt (including pursuant to an offer to purchase) which is conditioned
upon provisions substantially similar to those described under
Sections 1014 and 1016; and (C) in the case of any refinancing of Debt
Incurred by the Company, the refinancing Debt may be Incurred only by
the Company, and in the case of any refinancing of Debt Incurred by a
Restricted Subsidiary, the refinancing Debt may be Incurred only by
such Restricted Subsidiary; provided, further, that Debt Incurred
pursuant to this clause (vi) may not be Incurred more than 45 days
prior to the application of the proceeds to repay the Debt to be
refinanced;
(vii) Acquired Debt, provided that such Debt if incurred by the
Company would be in compliance with the first paragraph of this
covenant; and
(viii) Debt not otherwise permitted to be Incurred pursuant to
Clauses (i) through (vii) above, which, together with any other
outstanding Debt Incurred pursuant to this Clause (viii), has an
aggregate principal amount not in excess of $50.0 million at any time
outstanding.
SECTION 1009. Limitation on Senior Subordinated Debt.
--------------------------------------
The Company shall not Incur any Debt which by its terms is both
(i) subordinated in right of payment to any Senior Debt and (ii) senior in
right of payment to the Notes.
SECTION 1010. Limitation on Issuance of Guarantees of
Subordinated Debt.
---------------------------------------
The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to assume, guarantee or in any other manner become liable
with respect to any Debt of the Company that by its terms is pari passu or
junior in right of payment to the Notes.
SECTION 1011. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Lien on or with
respect to any property or assets of the Company or any such Restricted
Subsidiary now owned or hereafter acquired except for (i) Liens incurred
after the date of the Indenture securing Debt of the Company that ranks
pari passu or junior in right of payment to the Notes, if the Notes are
secured equally and ratably with such Debt, (ii) Liens outstanding on the
date of the Indenture, (iii) Liens for taxes, assessments, governmental
charges or claims not yet delinquent or which are being contested in good
faith by appropriate proceedings, provided, that adequate reserves with
respect thereto are maintained on the books of the Company or its
Restricted Subsidiaries, as the case may be, in conformity with generally
accepted accounting principles, (iv) landlords', carriers', warehousemen's,
mechanics', material men's, repairmen's or the like Liens arising by
contract or statute in the ordinary course of business and with respect to
amounts which are not yet delinquent or are being contested in good faith
by appropriate proceedings, (v) pledges or deposits made in the ordinary
course of business (A) in connection with leases, performance bonds and
similar obligations, or (B) in connection with workers' compensation,
unemployment insurance and other social security legislation, (vi)
easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar encumbrances which, in the aggregate, do not
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Restricted Subsidiary, (vii) any attachment or judgment
Lien that does not constitute an Event of Default, (viii) Liens securing
Acquired Debt, provided, that such Liens attach solely to the acquired
assets or the assets of the acquired entity and do not extend to or cover
any other assets of the Company or any of its Restricted Subsidiaries, (ix)
Liens to secure Senior Debt, (x) Liens in favor of the Trustee for its own
benefit and for the benefit of the Holders, (xi) any interest or title of a
lessor pursuant to a lease constituting a Capital Lease Obligation, (xii)
pledges or deposits made in connection with acquisition agreements or
letters of intent entered into in respect of a proposed acquisition; (xiii)
Liens in favor of prior holders of leases on property acquired by the
Company or of sublessors under leases on the Company property; (xiv) Liens
incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, banker's acceptances, surety
and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money); (xv) Liens (including extensions and renewals thereof) upon real or
personal property acquired after the date of the Indenture; provided that
(a) such Lien is created solely for the purpose of securing Debt incurred,
in accordance with Section 1008, (1) to finance the cost (including the
cost of improvement or construction) of the item, property or assets
subject thereto and such Lien is created prior to, at the time of or within
six months after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or (2)
to refinance any Debt previously so secured, (b) the principal amount of
the Debt secured by such Lien does not exceed 100% of such cost and (c) any
such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item; (xvi)
leases or subleases granted to others that do not materially interfere with
the ordinary course of business of the Company and its Restricted
Subsidiaries, taken as a whole; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xviii) Liens on
property of, or on shares of stock or Debt of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary,
provided that such Liens do not extend to or cover any property or assets
of the Company or any Restricted Subsidiary other than the property or
assets acquired; (xix) Liens in favor of the Company or any Restricted
Subsidiary; (xx) Liens encumbering deposits securing Debt under Permitted
Interest Rate, Currency or Commodity Price Agreements; (xxi) Liens arising
out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Restricted
Subsidiaries; (xxii) Liens on or sales of receivables; (xxiii) the rights
of film distributors under film licensing contracts entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business on a basis customary in the movie exhibition industry; (xxiv)
Liens arising from licenses of patents, trademarks and other intellectual
property rights granted in the ordinary course of business and not
interfering in any material respect with the ordinary conduct of business
of the Company and its Subsidiaries; and (xxv) any renewal of or
substitution of any Liens permitted by any of the preceding clauses,
provided that the Debt secured is not increased (other than by any premium
and accrued interest, plus customary fees, consent payments, expenses and
costs related to such renewal or substitution of Liens or the incurrence of
any related refinancing of Debt) and the Liens are not extended to any
additional assets (other than proceeds and accessions). This covenant does
not authorize the incurrence of any Debt not otherwise permitted by Section
1008.
SECTION 1012. Limitation on Restricted Payments.
---------------------------------
The Company (i) shall not, directly or indirectly, declare or pay
any dividend or make any distribution (including any payment in connection
with any merger or consolidation derived from assets of the Company or any
Restricted Subsidiary) in respect of its Capital Stock or to the holders
thereof, excluding any dividends or distributions by the Company payable
solely in shares of its Capital Stock (other than Redeemable Stock) or in
options, warrants or other rights to acquire its Capital Stock (other than
Redeemable Stock), (ii) shall not, and shall not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise acquire or retire for value
(a) any Capital Stock of the Company or any Related Person of the Company
or (b) any options, warrants or other rights to acquire shares of Capital
Stock of the Company or any Related Person of the Company or any securities
convertible or exchangeable into shares of Capital Stock of the Company or
any Related Person of the Company, (iii) shall not make, or permit any
Restricted Subsidiary to make, any Investment other than a Permitted
Investment, and (iv) shall not, and shall not permit any Restricted
Subsidiary to, redeem, repurchase, defease or otherwise acquire or retire
for value prior to any scheduled maturity, repayment or sinking fund
payment Debt of the Company which is subordinate in right of payment to the
Notes (each of clauses (i) through (iv) being a "Restricted Payment") if:
(1) an Event of Default, or an event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default, shall have
occurred and is continuing or would result from such Restricted Payment, or
(2) after giving pro forma effect to such Restricted Payment as if such
Restricted Payment had been made at the beginning of the applicable
four-fiscal-quarter period, the Company could not Incur at least $1.00 of
additional Debt pursuant to the terms of the Indenture described in the
first paragraph of Section 1008 hereof, or (3) upon giving effect to such
Restricted Payment, the aggregate of all Restricted Payments from the date
of issuance of the Notes exceeds the sum of: (a) 50% of cumulative
Consolidated Net Income (or, in the case Consolidated Net Income shall be
negative, less 100% of such deficit) of the Company since the date of
issuance of the Notes through the last day of the last full fiscal quarter
ending immediately preceding the date of such Restricted Payment for which
quarterly or annual financial statements are available (taken as a single
accounting period); plus (b) $75.0 million; provided, however, that the
Company or a Restricted Subsidiary may make any Restricted Payment with the
aggregate net proceeds received by the Company on or after the date of
original issuance of the Notes (including the aggregate net proceeds
received by the Company from any Public Equity Offering consummated on the
date of original issuance of the Notes), including the fair market value of
property other than cash (determined in good faith by the Board of
Directors as evidenced by a resolution of the Board of Directors filed with
the Trustee), from contributions of capital or the issuance and sale (other
than to a Restricted Subsidiary) of Capital Stock (other than Redeemable
Stock) of the Company, options, warrants or other rights to acquire Capital
Stock (other than Redeemable Stock) of the Company and Debt of the Company
that has been converted into or exchanged for Capital Stock (other than
Redeemable Stock and other than by or from a Restricted Subsidiary) of the
Company after the date of original issuance of the Notes, provided that any
such net proceeds received by the Company from an employee stock ownership
plan financed by loans from the Company or a Restricted Subsidiary of the
Company shall be included only to the extent such loans have been repaid
with cash on or prior to the date of determination. Not less than
semiannually, the Company shall deliver to the Trustee an Officers'
Certificate setting forth any Restricted Payments made since the last
period for which such certificate has been delivered, and the computations
by which the determinations required by clauses (2) and (3) above were made
and stating that no Event of Default, or event that with the passing of
time or the giving of notice, or both, would constitute an Event of
Default, has occurred and is continuing or will result from such Restricted
Payment.
Notwithstanding the foregoing, so long as no Event of Default, or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or
would result therefrom, (i) the Company may pay any dividend on Capital
Stock of any class within 60 days after the declaration thereof if, on the
date when the dividend was declared, the Company could have paid such
dividend in accordance with the foregoing provisions; (ii) the Company may
refinance any Debt otherwise permitted by clause (vi) of the second
paragraph under Section 1008 above or solely in exchange for or out of the
net proceeds of the substantially concurrent sale (other than from or to a
Restricted Subsidiary or from or to an employee stock ownership plan
financed by loans from the Company or a Restricted Subsidiary of the
Company) of shares of Capital Stock (other than Redeemable Stock) of the
Company, provided that the amount of net proceeds from such exchange or
sale shall be excluded from the calculation of the amount available for
Restricted Payments pursuant to the preceding paragraph; (iii) the Company
may purchase, redeem, acquire or retire any shares of Capital Stock of the
Company solely in exchange for or out of the net proceeds of the
substantially concurrent sale (other than from or to a Restricted
Subsidiary or from or to an employee stock ownership plan financed by loans
from the Company or a Restricted Subsidiary of the Company) of shares of
Capital Stock (other than Redeemable Stock) of the Company; (iv) the
Company or a Restricted Subsidiary may purchase or redeem any Debt from Net
Available Proceeds to the extent permitted under Section 1014; and (v) the
Company and its Restricted Subsidiaries may make Investments, in an
aggregate amount not to exceed $200.0 million outstanding at any time, in
entities engaging in owning, leasing, developing or constructing motion
picture theaters or principally engaged in the business of exhibiting
motion pictures. Any payment made pursuant to clause (i), (iii) or (v) of
this paragraph shall be a Restricted Payment for purposes of calculating
aggregate Restricted Payments pursuant to the preceding paragraph.
SECTION 1013. Limitations on Dividend and Other
Payment Restrictions Affecting Subsidiaries.
-------------------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability
of any Restricted Subsidiary of the Company (i) to pay dividends (in cash
or otherwise) or make any other distributions in respect of its Capital
Stock or pay any Debt or other obligation owed to the Company or any other
Restricted Subsidiary; (ii) to make loans or advances to the Company or any
other Restricted Subsidiary; or (iii) to transfer any of its property or
assets to the Company or any other Restricted Subsidiary. Notwithstanding
the foregoing, the Company may, and may permit any Restricted Subsidiary
to, suffer to exist any such encumbrance or restriction (a) pursuant to any
agreement in effect on the date of original issuance of the Notes as
described in Schedule II to this Agreement; (b) pursuant to an agreement
relating to any Debt Incurred by a Person (other than a Restricted
Subsidiary of the Company existing on the date of original issuance of the
Notes or any Restricted Subsidiary carrying on any of the businesses of any
such Restricted Subsidiary) prior to the date on which such Person became a
Restricted Subsidiary of the Company and outstanding on such date and not
Incurred in anticipation of becoming a Restricted Subsidiary, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired; (c)
pursuant to an agreement effecting a renewal, refunding or extension of
Debt Incurred pursuant to an agreement referred to in clause (a) or (b)
above, provided, however, that the provisions contained in such renewal,
refunding or extension agreement relating to such encumbrance or
restriction are no more restrictive in any material respect than the
provisions contained in the agreement the subject thereof, as determined in
good faith by the Board of Directors; (d) in the case of clause (iii)
above, restrictions contained in any security agreement (including a
capital lease) securing Debt of a Restricted Subsidiary otherwise permitted
under this Indenture, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (e) in the
case of clause (iii) above, customary nonassignment provisions entered into
in the ordinary course of business consistent with past practices in leases
and other contracts to the extent such provisions restrict the transfer or
subletting or licensing of any such lease or the assignment of rights under
any such contract; (f) any restriction with respect to a Restricted
Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in an Event of Default or
an event that, with the passing of time or the giving of notice or both,
would constitute an Event of Default, that such restriction terminates if
such transaction is closed or abandoned and that the closing or abandonment
of such transaction occurs within one year of the date such agreement was
entered into; or (g) such encumbrance or restriction is the result of
applicable corporate law or regulation relating to the payment of dividends
or distributions.
SECTION 1014. Limitation on Asset Disposition.
-------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition in one or more related
transactions unless: (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration for such disposition at least equal to
the fair market value for the assets sold or disposed of as determined by
the Board of Directors in good faith; (ii) at least 75% of the
consideration for such disposition consists of cash or readily marketable
cash equivalents or Qualifying Theater Assets or the assumption of Debt
(other than Debt that is subordinated to the Notes) relating to such assets
and release from all liability on the Debt assumed; and (iii) all Net
Available Proceeds, less any amounts invested or committed to be invested
within 360 days of such disposition in assets related to the business of
the Company, are applied within 360 days of such disposition (1) first, to
the permanent repayment or reduction of Senior Debt then outstanding under
any agreements or instruments which would require such application or
prohibit payments pursuant to clause (2) following, (2) second, to the
extent of remaining Net Available Proceeds, to make an Offer to Purchase
Outstanding Notes at 100% of their principal amount plus accrued interest
to the date of purchase and, to the extent required by the terms thereof,
any other Debt of the Company that is pari passu with the Notes at a price
no greater than 100% of the principal amount thereof plus accrued interest
to the date of purchase, (3) third, to the extent of any remaining Net
Available Proceeds following the completion of the Offer to Purchase, to
the repayment of other Debt of the Company or Debt of a Restricted
Subsidiary of the Company, to the extent permitted under the terms thereof
and (4) fourth, to the extent of any remaining Net Available Proceeds, to
any other use as determined by the Company which is not otherwise
prohibited by this Indenture.
SECTION 1015. Transactions with Affiliates
and Related Persons.
----------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, enter into any transaction (or series of
related transactions) with an Affiliate or Related Person of the Company
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), including any Investment, either directly or indirectly, unless
such transaction is on terms no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person. For any transaction that involves in excess of $1.0 million but
less than or equal to $5.0 million, the Chief Executive Officer of the
Company shall determine that the transaction satisfies the above criteria
and shall evidence such a determination by a certificate filed with the
Trustee. For any transaction that involves in excess of $5.0 million, a
majority of the disinterested members of the Board of Directors shall
determine that the transaction satisfies the above criteria and shall
evidence such a determination by a Board Resolution filed with the Trustee.
For any transaction that involves in excess of $10.0 million, the Company
shall also obtain an opinion from a nationally recognized expert with
experience in appraising the terms and conditions of the type of
transaction (or series of related transactions) for which the opinion is
required stating that such transaction (or series of related transactions)
is on terms no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained in a comparable arm's-length transaction
with an entity that is not an Affiliate or Related Person of the Company,
which opinion shall be filed with the Trustee.
Notwithstanding anything to the contrary contained in this
Indenture, the foregoing provisions shall not apply to (i) transactions
with any employee, officer or director of the Company or any of its
Restricted Subsidiaries pursuant to employee benefit plans or compensation
arrangements or agreements entered into in the ordinary course of business,
(ii) transactions with any Affiliate or Related Person in which such
Affiliate or Related Person acquires or purchases the capital stock of the
Company or any Restricted Subsidiary at fair market value, (iii) commercial
transactions, including without limitation film rentals, in the ordinary
course of business with Affiliates of the Company on terms that are
customary in the motion picture exhibition industry or consistent with past
practice, or (iv) the performance of any agreement as in effect on the date
of original issuance of the Notes.
SECTION 1016. Change of Control.
-----------------
Within 30 days of the occurrence of a Change of Control, the
Company will be required to make an Offer to Purchase all Outstanding Notes
at a purchase price equal to 101% of their principal amount plus accrued
and unpaid interest, if any, to the date of purchase. A "Change of Control"
will be deemed to have occurred at such time as either (a) any Person
(other than a Permitted Holder) or any Persons acting together that would
constitute a "group" (a "Group") for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto (other than Permitted
Holders), together with any Affiliates or Related Persons thereof, shall
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act,
or any successor provision thereto), directly or indirectly, at least 50%
of the aggregate voting power of all classes of Voting Stock of the Company
(for the purposes of this clause (a) a person shall be deemed to
beneficially own the Voting Stock of a corporation that is beneficially
owned (as defined above) by another corporation (a "parent corporation"),
if such person beneficially owns (as defined above) at least 50% of the
aggregate voting power of all classes of Voting Stock of such parent
corporation); or (b) any Person or Group (other than Permitted Holders),
together with any Affiliates or Related Persons thereof, shall succeed in
having a sufficient number of its nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company after
such election who was a nominee of or is an Affiliate or Related Person of
such Person or Group, will constitute a majority of the Board of Directors
of the Company.
In the event that the Company makes an Offer to Purchase the
Notes, the Company intends to comply with any applicable securities laws
and regulations, including any applicable requirements of Section 14(e) of,
and Rule 14e-1 under, the Exchange Act.
SECTION 1017. Provision of Financial Information.
----------------------------------
For so long as any of the Notes are outstanding, the Company
shall file with the Commission the annual reports, quarterly reports and
other documents which a reporting company is required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or any
successor provisions thereto.
SECTION 1018. Unrestricted Subsidiaries.
-------------------------
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary
and each other Person that is then or thereafter becomes a Subsidiary of
such Subsidiary will be deemed to be an Unrestricted Subsidiary.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such by
the Board of Directors as set forth below where (a) neither the Company nor
any of its other Subsidiaries (other than another Unrestricted Subsidiary)
(i) provides credit support for, or any Guarantee of, any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or (ii) is directly or
indirectly liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such Subsidiary
or any Subsidiary of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Debt of
the Company and its Subsidiaries (other than another Unrestricted
Subsidiary) to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity
and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien
on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an
Unrestricted Subsidiary, provided that either (x) the Subsidiary to be so
designated has total assets of $1,000 or less or (y) immediately after
giving effect to such designation, the Company could Incur at least $1.00
of additional Debt pursuant to the first paragraph under Section 1008
hereof and provided, further, that the Company could make a Restricted
Payment in an amount equal to the greater of the fair market value and book
value of such Subsidiary pursuant to Section 1012 hereof and such amount is
thereafter treated as a Restricted Payment for the purpose of calculating
the aggregate amount available for Restricted Payments thereunder.
SECTION 1019. Statement by Officers as to Default;
Compliance Certificates.
------------------------------------
(a) The Company will deliver to the Trustee, within 90 days after
the end of each fiscal quarter of the Company ending after the date hereof
an Officers' Certificate, stating whether or not to the best knowledge of
the signers thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of Section 801 or
Sections 1004 to 1018, inclusive, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof of which
they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible
and in any event within 10 days after the Company becomes aware or should
reasonably become aware of the occurrence of an Event of Default or an
event which, with notice or the lapse of time or both, would constitute an
Event of Default, an Officers' Certificate setting forth the details of
such Event of Default or default, and the action which the Company proposes
to take with respect thereto.
(c) The Company shall deliver to the Trustee within 90 days after
the end of each fiscal year a written statement by the Company's
independent public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture and the Notes as they
relate to accounting matters, and (B) whether, in connection with their
audit examination, any event which, with notice or the lapse of time or
both, would constitute an Event of Default has come to their attention and,
if such a default has come to their attention, specifying the nature and
period of the existence thereof.
SECTION 1020. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Section 801 and Sections 1004 to
1018, if before the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Notes shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend
to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of
the Company and the duties of the Trustee in respect of any such covenant
or condition shall remain in full force and effect; provided, however, with
respect to an Offer to Purchase as to which an Offer has been mailed, no
such waiver may be made or shall be effective against any Holder tendering
Notes pursuant to such Offer, and the Company may not omit to comply with
the terms of such Offer as to such Holder.
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption.
-------------------
The Notes may be redeemed at the option of the Company, in whole
or in part, at any time on or after August 1, 2003, and prior to maturity,
at the Redemption Prices specified in the form of Note hereinbefore set
forth together with accrued interest to, but excluding, the Redemption
Date.
In addition, if on or before August 1, 2001 the Company receives
net proceeds from the sale of its Common Stock in one or more Public Equity
Offerings, the Company may, at its option, use an amount equal to all or a
portion of any such net proceeds to redeem Notes in an aggregate principal
amount of up to 33 1/3% of the original aggregate principal amount of the
Notes, provided, however, that Notes having a principal amount equal to at
least 66 2/3% of the original aggregate principal amount of the Notes remain
outstanding after such redemption. Such redemption must occur on a
Redemption Date within 90 days of such sale and upon not less than 30 or
more than 60 days' notice mailed to each Holder of Notes to be redeemed at
such Holder's address appearing in the Note Register, in amounts of $1,000
or an integral multiple of $1,000, at a redemption price of 108.875% of the
principal amount of the Notes plus accrued and unpaid interest, if any, to
but excluding the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the
particular Notes to be redeemed or any portion thereof that is an integral
multiple of $1,000.
The Notes will not have the benefit of any sinking fund.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Notes at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Notes, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee in writing of such Redemption Date and of the principal
amount of Notes to be redeemed.
SECTION 1104. Selection by Trustee of Notes to Be
Redeemed.
-----------------------------------
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the
principal amount of Notes of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Note
Registrar in writing of the Notes selected for redemption and, in the case
of any Notes selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate,
in the case of any Notes redeemed or to be redeemed only in part, to the
portion of the principal amount of such Notes which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed, at his address
appearing in the Note Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price plus accrued interest, if any,
(3) if less than all the Outstanding Notes are to be redeemed,
the identification (and, in the case of partial redemption, the
principal amounts) of the particular Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Note to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Notes are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and (except if
the Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Notes which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
--------------------------------
Notice of redemption having been given as aforesaid, the Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless
the Company shall default in the payment of the Redemption Price plus
accrued interest) such Notes shall cease to bear interest. Upon surrender
of any such Note for redemption in accordance with said notice, such Note
shall be paid by the Company at the Redemption Price together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Notes, or one or more Predecessor Notes,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate
provided by the Note.
SECTION 1108. Notes Redeemed in Part.
----------------------
Any Note which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that
purpose pursuant to Section 1002 (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of
such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in aggregate principal amount
equal to and in exchange for the unredeemed portion of the principal of the
Note so surrendered.
ARTICLE TWELVE
Subordination of Notes
SECTION 1201. Notes Subordinate to Senior Debt.
--------------------------------
The Company covenants and agrees, and each Holder of a Note, by
his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article (subject to the
provisions of Article Four and Article Thirteen), the payment of the
principal of (and premium, if any) and interest on each and all of the
Notes are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Debt of the Company.
The Notes will rank pari passu with the guarantee by the Company
of the 10 7/8% Senior Subordinated Notes due 2004 of Plitt Theatres, Inc.
SECTION 1202. Payment Over of Proceeds Upon Dissolution,
Etc.
------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company
or to its creditors, as such, or to its assets, or (b) any liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c)
any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Company, then and in any such event specified
in (a), (b) or (c) above (each such event, if any, herein sometimes
referred to as a "Proceeding") the holders of Senior Debt shall be entitled
to receive or retain payment in full of all amounts due or to become due on
or in respect of all Senior Debt, or provision shall be made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, before the Holders of the Notes are entitled
to receive any payment or distribution of any kind or character, whether in
cash, property or securities, on account of principal of (or premium, if
any) or interest on or other obligations in respect of the Notes or on
account of any purchase or other acquisition of Notes by the Company or any
Subsidiary of the Company (all such payments, distributions, purchases and
acquisitions herein referred to, individually and collectively, as a "Notes
Payment"), and to that end the holders of Senior Debt shall be entitled to
receive, for application to the payment thereof, any Notes Payment which
may be payable or deliverable in respect of the Notes in any such
Proceeding.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Note shall have received any
Notes Payment before all Senior Debt of the Company is paid in full or
payment thereof provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of such Debt, and if such fact shall, at
or prior to the time of such Notes Payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
Notes Payment shall be paid over or delivered forthwith to the trustee in
bankruptcy or other person making payment or distribution of assets of the
Company for the application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay the Senior Debt in full in cash or
Cash Equivalents or otherwise in a manner satisfactory to the holders of
such Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or
securities" shall not be deemed to include a payment or distribution of
stock or securities of the Company provided for by a plan of reorganization
or readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy
law or of any other corporation provided for by such plan of reorganization
or readjustment which stock or securities are subordinated in right of
payment to all then outstanding Senior Debt to substantially the same
extent as the Notes are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of all or substantially all of its properties
and assets as an entirety to another Person upon the terms and conditions
set forth in Article Eight shall not be deemed a Proceeding for the
purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1203. No Payment When Senior Debt in
Default.
------------------------------
In the event that any Senior Payment Default (as defined below)
shall have occurred and be continuing, then no Notes Payment shall be made
unless and until such Senior Payment Default shall have been cured or
waived or shall have ceased to exist or all amounts then due and payable in
respect of Senior Debt shall have been paid in full, or provision shall
have been made for such payment in cash or cash equivalents or otherwise in
a manner satisfactory to the holders of Senior Debt. "Senior Payment
Default" means any default in the payment of principal of (or premium, if
any) or interest on Designated Senior Debt when due, whether at the due
date of any such payment or by declaration of acceleration, call for
redemption or otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt
of written notice by the Company and the Trustee of the occurrence of such
Senior Nonmonetary Default from any holder of Designated Senior Debt, (or
any trustee, agent or other representative for such holder) which is the
subject of such Senior Nonmonetary Default, no payments on account of
principal of, premium, if any, or interest on, or in respect of the
purchase or other acquisition of, the Notes, and no defeasance of the
Notes, may be made for a period (the "Payment Blockage Period") commencing
on the date of the receipt of such notice and ending the earlier of (i) the
date on which such Senior Nonmonetary Default shall have been cured or
waived or ceased to exist or all Designated Senior Debt the subject of such
Senior Nonmonetary Default shall have been discharged and (ii) the 179th
day after the date of the receipt of such notice. No Senior Nonmonetary
Default that existed or was continuing on the date of the commencement of a
Payment Blockage Period may be made the basis of the commencement of a
subsequent Payment Blockage Period whether or not within a period of 360
consecutive days, unless such Senior Nonmonetary Default shall have been
cured for a period of not less than 90 consecutive days; provided, however,
any breach of any financial covenant for a period commencing after the
expiration of a Payment Blockage Period that would give rise to a new event
of default, even though such breach is a breach of a provision under which
a prior event of default previously existed, shall constitute a new event
of default for this purpose. In any event, notwithstanding the foregoing,
no more than one Payment Blockage Period may be commenced during any
360-day period and there shall be a period of at least 181 days during each
360-day period when no Company Payment Blockage Period is in effect.
"Senior Nonmonetary Default" means the occurrence or existence and
continuance of an event of default with respect to Senior Debt, other than
a Senior Payment Default, permitting the holders of the Designated Senior
Debt (or a trustee or other agent on behalf of the holders thereof) then to
declare such Designated Senior Debt due and payable prior to the date on
which it would otherwise become due and payable.
The failure to make any payment on the Notes by reason of the
provisions of this Article Twelve will not be construed as preventing the
occurrence of an Event of Default with respect to the Notes arising from
any such failure to make payment. Upon termination of any period of Payment
Blockage Period the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
In the event that, notwithstanding the foregoing, the Company
shall make any Notes Payment to the Trustee or any Holder prohibited by the
foregoing of this Section, and if such fact shall, at or prior to the time
of such Notes Payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such Notes Payment shall be
paid over and delivered forthwith to the holders of the Senior Debt of the
Company.
By reason of such subordination, in the event of insolvency by
the Company, creditors of the Company who are not holders of Senior Debt or
of the Notes may recover less, ratably, than holders of Senior Debt and
more, ratably, than Holders of the Notes.
The subordination provisions described in this Article will not
be applicable to payments in respect of the Notes from a defeasance trust
established in connection with any defeasance or covenant defeasance of the
Notes as described under Article Thirteen.
The provisions of this Section shall not apply to any Notes
Payment with respect to which Section 1202 would be applicable.
SECTION 1204. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture
or in any of the Notes shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 1202 or under
the conditions described in Section 1203, from making Notes Payments, or
(b) the application by the Trustee of any money deposited with it hereunder
to Notes Payments or the retention of such Notes Payment by the Holders,
if, at the time of such application by the Trustee, it did not have
knowledge that such Notes Payment would have been prohibited by the
provisions of this Article.
SECTION 1205. Subrogation to Rights of Holders of Senior
Debt.
------------------------------------------
Subject to the payment in full of all amounts due or to become
due on or in respect of Senior Debt of the Company or the provision for
such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, the Holders of the Notes shall
be subrogated to the rights of the holders of such Debt to receive payments
and distributions of cash, property and securities applicable to such Debt
until the principal of (and premium, if any) and interest on the Notes
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of the Company of any cash,
property or securities to which the Holders of the Notes or the Trustee
would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Notes or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of
the Notes, be deemed to be a payment or distribution by the Company to or
on account of the Senior Debt of the Company.
SECTION 1206. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders on the one hand
and the holders of Senior Debt on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Notes, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under
this Article of the holders of Senior Debt, is intended to rank equally
with all other general obligations of the Company), to pay to the Holders
of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Notes and creditors of the Company other than the holders of
Senior Debt; or (c) prevent the Trustee or the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of
the holders of Senior Debt to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1207. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1208. No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Notes to the holders of
Senior Debt, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior
Debt or any instrument evidencing the same or any agreement under which
Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any Person liable in any manner for the collection of Senior
Debt; and (iv) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 1209. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Notes. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt or from
any trustee therefor; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 601, shall be entitled in
all respects to assume that no such facts exist.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee therefor)
to establish that such notice has been given by a holder of Senior Debt (or
a trustee therefor). In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any Person
as a holder of Senior Debt to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the satisfaction of the Trustee as to the amount of Senior Debt
held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent
to the rights of such Person under this Article, and if such evidence is
not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
SECTION 1210. Reliance on Judicial Order or Certificate of
Liquidating Agent.
--------------------------------------------
Upon any payment or distribution of assets or securities of the
Company referred to in this Article, the Trustee, subject to the provisions
of Section 601, and the Holders of the Notes shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which
such Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this
Article.
SECTION 1211. Trustee Not Fiduciary for Holders of Senior
Debt.
-------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes
or to the Company or to any other Person cash, property or securities to
which any holders of Senior Debt shall be entitled by virtue of this
Article or otherwise.
SECTION 1212. Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's Rights.
--------------------------------------
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Debt which
may at any time be held by it, to the same extent as any other holder of
Senior Debt, and nothing in this Indenture shall deprive the Trustee of any
of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.
SECTION 1213. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1212 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 1214. Defeasance of This Article Twelve.
---------------------------------
The subordination of the Notes provided by this Article Twelve is
expressly made subject to the provisions for defeasance or covenant
defeasance in Article Thirteen hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such defeasance or covenant
defeasance, the Notes then outstanding shall thereupon cease to be
subordinated pursuant to this Article Twelve.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
----------------------------------------
The Company may at its option by Board Resolution, at any time,
in accordance with the Exchange and Registration Rights Agreement, elect to
have either Section 1302 or Section 1303 applied to the Outstanding Notes
upon compliance with the conditions set forth below in this Article
Thirteen.
SECTION 1302. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Notes, and
the provisions of Article Eleven and Twelve hereof shall cease to be
effective, on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Notes and to have satisfied all
its other obligations under such Notes and this Indenture insofar as such
Notes are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Notes to receive, solely from
the trust fund described in Section 1304 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any)
and interest on such Notes when such payments are due, (B) the Company's
obligations with respect to such Notes under Sections 304, 305, 306, 1002
and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Thirteen. Subject to compliance with
this Article Thirteen, the Company may exercise its option under this
Section 1302 notwithstanding the prior exercise of its option under Section
1303.
SECTION 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, (i) the Company shall be released from its
obligations under Sections 1005 through 1018, inclusive, and Clauses (3),
(4) and (5) of Section 801, (ii) the occurrence of an event specified in
Sections 501(3), 501(4) (with respect to Clauses (1), (3), (4) or (5) of
Section 801), 501(5) (with respect to any of Sections 1005 through 1018,
inclusive), 501(6) and 501(7) shall not be deemed to be an Event of Default
and (iii) the provisions of Article Twelve hereof shall cease to be
effective on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such
covenant defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such Section, Clause or Article, whether directly or
indirectly by reason of any reference elsewhere herein to any such Section,
Clause or Article or by reason of any reference in any such Section, Clause
or Article to any other provision herein or in any other document, but the
remainder of this Indenture and such Notes shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance.
---------------------------
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the then Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Notes, (A) money in an amount, or (B)
U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of (premium, if any), and each installment of interest on
the Notes on the Stated Maturity of such principal or installment of
interest in accordance with the terms of this Indenture and of such
Notes. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged
or (y) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt.
(2) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Notes will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred.
(3) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the Outstanding Notes will not recognize
gain or loss for Federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to Federal income
tax on the same amount, in the same manner and at the same times as
would have been the case if such deposit and covenant defeasance had
not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Notes, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and
for purposes of the Trust Indenture Act with respect to any securities
of the Company.
(6) At the time of such deposit: (A) no default in the payment of
all or a portion of principal of (or premium, if any) or interest on
or other obligations in respect of any Senior Debt shall have occurred
and be continuing, and no event of default with respect to any Senior
Debt shall have occurred and be continuing and shall have resulted in
such Senior Debt becoming or being declared due and payable prior to
the date on which it would otherwise have become due and payable and
(B) no other event of default with respect to any Senior Debt shall
have occurred and be continuing permitting (after notice or the lapse
of time, or both) the holders of such Senior Debt (or a trustee on
behalf of the holders thereof) to declare such Senior Debt due and
payable prior to the date on which it would otherwise have become due
and payable, or, in the case of either Clause (A) or Clause (B) above,
each such default or event of default shall have been cured or waived
or shall have ceased to exist.
(7) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and
be continuing.
(8) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (which Opinion of Counsel may
rely, as to factual matters, on such Officer's Certificate), each
stating that all conditions precedent provided for relating to either
the defeasance under Section 1302 or the covenant defeasance under
Section 1303 (as the case may be) have been complied with.
(10) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
as defined in the Investment Company Act of 1940, as amended, or such
trust shall be qualified under such act or exempt from regulation
thereunder.
SECTION 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
-----------------------------------
Subject to the provisions of the last paragraph of Section 1003,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Notes, of all sums due and to become due thereon in respect
of principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law. Money so
held in trust shall not be subject to the provisions of Article Twelve.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Notes.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time
to time upon Company Request any money or U.S. Government Obligations held
by it as provided in Section 1304 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance.
SECTION 1306. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money
in accordance with Section 1302 or 1303 by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Thirteen until such time as
the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 1302 or 1303; provided, however, that if the
Company makes any payment of principal of (and premium, if any) or interest
on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Note to receive
such payment from the money held by the Trustee or the Paying Agent.
--------------------
<PAGE>
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By /s/ John C. McBride, Jr.
-------------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President
and General Counsel
Attest:
- --------------------------
BANKERS TRUST COMPANY
By /s/ Susan Johnson
-------------------------------
Name: Susan Johnson
Title: Assistant Vice President
Attest:
- ---------------------------
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On the _____ day of __________, 1998, before me personally came
___________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that [he -- she] signed [his -- her] name thereto by like
authority.
------------------------------
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On the _____ day of __________, 1998, before me personally came
___________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that [he -- she] signed [his -- her] name thereto by like
authority.
------------------------------
<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to ' 306(b)(i) of the Indenture)
Bankers Trust Company
Four Albany Street
4th Floor
New York, New York 10006
Re: 8 7/8% Senior Subordinated Notes
due 2008 of Loews Cineplex
Entertainment Corporation (the
"Securities")
------------------------------
Reference is made to the Indenture, dated as of August 5, 1998
(the "Indenture"), from Loews Cineplex Entertainment Corporation (the
"Company") to Bankers Trust Company, as Trustee. Terms used herein and
defined in the Indenture or in Regulation S or Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to U.S. $____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). 540423AA8
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by
them to do so. Such beneficial owner or owners are referred to herein
collectively as the "Owner". If the Specified Securities are represented by
a Global Security, they are held through the Depositary or an Agent Member
in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Security, they are
registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the
form of a Regulation S Security. In connection with such transfer, the
Owner hereby certifies that, unless such transfer is being effected
pursuant to an effective registration statement under the Securities Act,
it is being effected in accordance with Rule 904 or Rule 144 under the
Securities Act and with all applicable securities laws of the states of the
United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person
acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and
any person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated
by the Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United
States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other renumeration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(b)(1) have
been satisfied; and
(F) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule
144) has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and is being effected in accordance with the
applicable amount, manner of sale and notice requirements of Rule
144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were
last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
----------------------------------------
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:
-------------------------------------
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ' 306(b)(ii) of the Indenture)
Bankers Trust Company
Four Albany Street
4th Floor
New York, New York 10006
Re: 8-7/8% Senior Notes due 2008 of
Loews Cineplex Entertainment
Corporation (the "Securities")
-------------------------------
Reference is made to the Indenture, dated as of August 5, 1998
(the "Indenture"), from Loews Cineplex Entertainment Corporation (the
"Company")and Bankers Trust Company, as Trustee. Terms used herein and
defined in the Indenture or in Rule 144A or Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to U.S. $_____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). 540423AA8
ISIN No(s), If any. 454098AA3
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by
them to do so. Such beneficial owner or owners are referred to herein
collectively as the "Owner". If the Specified Securities are represented by
a Global Security, they are held through the Depositary or an Agent Member
in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Security, they are
registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the
form of a Restricted Security. In connection with such transfer, the Owner
hereby certifies that, unless such transfer is being effected pursuant to
an effective registration statement under the Securities Act, (i) the Owner
is not a U.S. Person (as defined in the Indenture) and (ii) such transfer
is being effected in accordance with Rule 144A or Rule 144 under the
Securities Act and all applicable securities laws of the states of the
United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as:
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the
Owner may be relying on Rule 144A in connection with the
transfer; and
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule
144) has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and is being effected in accordance with the
applicable amount, manner of sale and notice requirements of Rule
144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were
last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
----------------------------------------
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:
-------------------------------------
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to ' 306(c))
Bankers Trust Company
Four Albany Street
4th Floor
New York, New York 10006
Re: 8-7/8% Senior Subordinated Notes
due 2008 of Loews Cineplex
Entertainment Corporation (the
"Securities")
--------------------------------
Reference is made to the Indenture, dated as of August 5, 1998
(the "Indenture"), from Loews Cineplex Entertainment Corporation (the
"Company"), and Bankers Trust Company, as Trustee. Terms used herein and
defined in the Indenture or in Rule 144 under the U.S. Securities Act of
1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). 540423AA8
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by
them to do so. Such beneficial owner or owners are referred to herein
collectively as the "Owner". If the Specified Securities are represented by
a Global Security, they are held through the Depositary or an Agent Member
in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Security, they are
registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to
Section 306(c) of the Indenture. In connection with such exchange, the
Owner hereby certifies that the exchange is occurring after a holding
period of at least two years (computed in accordance with paragraph (d) of
Rule 144) has elapsed since the Specified Securities were last acquired
from the Company or from an affiliate of the Company, whichever is later,
and the Owner is not, and during the preceding three months has not been,
an affiliate of the Company. The Owner also acknowledges that any future
transfers of the Specified Securities must comply with all applicable
securities laws of the states of the United States and other jurisdictions.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
----------------------------------------
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:
-------------------------------------
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
<PAGE>
<TABLE>
<CAPTION>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
INDENTURE
SECTION 1008(IV) SCHEDULE I
AS OF MAY 31, 1998:
MORTGAGES:
Amount Maturity Rate Theatre
--------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Plitt Theatres:
Birchter Properties $ 129,752 1-Jun-07 8.50% Town & Country
Sylvan Shulman 198,973 01-Dec-08 11% Kirkland
Texas Commerce Bank 168,636 1-Jun-00 9.25% Presidio
Arthur Fastenberg 809,442 1-Jul-00 11.50% Baronet/Coronet
National Western Life 3,824,828 1-Sep-07 10% El Dorado
National Western Life 2,883,089 1-Sep-07 10% Catalina
Howard Milstein 228,572 1-Mar-02 0% Milstein
Connecticut Mutual Life 3,750,000 1-May-00 10.5% Olympia
Royal Maccabees Life 6,831,000 1-Apr-04 8.25% Lincoln Village
Swiss Bank Corp. 3,000,000 15-Jan-99 8% Court & State
Metro Fulton Assoc. 946,175 13-Nov-98 5.61% Metro Fulton
-------------
$22,770,467
-------------
Cineplex Canada:
London Life $ 6,412,146 01-Feb-02 9.63% 1303 Yonge St.
Sutter Hill 36,458 08-Oct-98 7.50% South Common
-------------
$ 6,448,604
-------------
Loews:
Copley Place Assoc. $ 250,000 28-Feb-99 8.50% Sack Theatres
$ 29,469,071
=============
<CAPTION>
CAPITAL LEASES:
Amount Maturity Rate Theatre
--------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Loews:
Jinep Co. $ 255,000 1-Aug-02 16% Loews Showboat
66 Third Ave. 10,687,000 1-May-11 8% Loews East Vill.
-------------
$ 10,942,000
Plitt:
JMB Properties $ 555,330 31-Aug-17 8.50% River Oaks 9-10
Hawthorn Theatre LLC 522,565 30-Nov-02 8.50% Hawthorn
Orland C.P. 634,249 30-Jun-02 8.50% Orland Square
Fox Valley LLC 545,594 20-Nov-02 8.50% Fox Valley
120 E 87th St. 331,398 31-Mar-02 8.50% 86th St.
IMAX Corp. 501,672 01-Jun-10 11% IMAX Equip.
Charter Financial Corp. 13,339,000 Various 12 CPX Locations
-------------
$ 16,429,808
$ 27,371,808
=============
</TABLE>
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
INDENTURE
SECTION 1013 SCHEDULE II
1) Master Agreement, dated May 14, 1998, among Loews Cineplex
Entertainment Corporation, as Borrower, the Lenders listed therein, as
Lenders, Bankers Trust Company, as Administrative Agent and as a
Co-Syndication Agent, Bank of America NT&SA, as a Co-Syndication
Agent, The Bank of New York, as a Co-Syndication Agent, and Credit
Suisse First Boston, as a Co-Syndication Agent
2) Capital Leases and Mortgages as listed on Schedule I as provided for
under Section 1008 (iv) of the Indenture
Exhibit 4.6
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of August 5,
1998, by and among Loews Cineplex Entertainment Corporation (the "Company")
and Goldman, Sachs & Co., BT Alex. Brown Incorporated, Credit Suisse First
Boston Corporation and Salomon Brothers Inc (collectively, the
"Purchasers") as the purchasers of the 8.875% Senior Subordinated Notes due
2008 of the Company.
1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
(c) "Effective Time", in the case of an Exchange Offer, shall mean the
date on which the Commission declares the Exchange Offer registration
statement effective or on which such registration statement otherwise
becomes effective and, in the case of a Shelf Registration, shall mean the
date on which the Commission declares the Shelf Registration effective or
on which the Shelf Registration otherwise becomes effective.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(e) "Exchange Offer" shall have the meaning assigned thereto in
Section 2.
(f) "Exchange Securities" shall have the meaning assigned thereto in
Section 2.
(g) The term "holder" shall mean the Purchasers for so long as they
own any Registrable Securities and any person who is a holder or beneficial
owner of any Registrable Securities, for so long as such person owns any
Registrable Securities.
(h) "Indenture" shall mean the Indenture, dated as of August 5, 1998,
between the Company and Bankers Trust Company, as Trustee.
(i) The term "person" shall mean a corporation, limited liability
company, association, partnership, organization, business, individual,
trust, government or political subdivision thereof or governmental agency.
(j) "Registrable Securities" shall mean the Securities; provided,
however, that such Securities shall cease to be Registrable Securities when
(i) in the circumstances contemplated by Section 2(a), such Securities have
been exchanged for Exchange Securities in an Exchange Offer as contemplated
in Section 2(a) provided, however, that any such Securities that, pursuant
to the last two sentences of Section 2(a), are included in a prospectus for
use in connection with resales by broker-dealers shall be deemed to be
Registrable Securities with respect to Sections 5, 6 and 9 until resale of
such Exchange Securities has been effected within the 180-day period
referred to in Section 2(a); (ii) in the circumstances contemplated by
Section 2(b), a registration statement registering such Securities under
the Securities Act has been declared or becomes effective, and such
Securities have been sold or otherwise transferred by the holder thereof
pursuant to such effective registration statement; (iii) such Securities
are sold pursuant to Rule 144 under circumstances in which any legend borne
by such Securities relating to restrictions on transferability thereof,
under the Securities Act or otherwise, is removed by the Company or
pursuant to the Indenture, or such Securities are eligible to be sold
pursuant to paragraph (k) of Rule 144; or (iv) such Securities shall cease
to be outstanding.
(k) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
(l) "Restricted Holder" shall mean (i) a holder that is an affiliate
of the Company within the meaning of Rule 405 under the Securities Act,
(ii) a holder who acquires Exchange Securities outside the ordinary course
of such holder's business or (iii) a holder who has arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing Exchange Securities.
(m) "Rule 144", "Rule 405" and "Rule 415" shall mean, in each case,
such rule promulgated under the Securities Act.
(n) "Securities" shall mean, collectively, the 8.875% Senior
Subordinated Notes due 2008 of the Company to be issued and sold to the
Purchasers and any securities issued in exchange therefor or in lieu
thereof pursuant to the Indenture.
(o) "Securities Act" shall mean the Securities Act of 1933.
(p) "Shelf Registration" shall have the meaning assigned thereto in
Section 2 hereof.
(q) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
or any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of
this Agreement, and the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision. Unless the context otherwise
requires, any reference to a statute, rule or regulation refers to the same
(including any successor statute, rule or regulation thereto) as it may be
amended from time to time.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to
use its reasonable best efforts to file under the Securities Act, as soon
as practicable, but no later than 90 days after the Closing Date, a
registration statement relating to an offer to exchange (the "Exchange
Offer") any and all of the Securities for a like aggregate principal amount
of debt securities of the Company which are identical in all material
respects to the Securities (and which are entitled to the benefits of a
trust indenture which is identical in all material respects to the
Indenture or is the Indenture and which has been qualified under the Trust
Indenture Act) except that they have been registered pursuant to an
effective registration statement under the Securities Act and will not
contain provisions for the additional interest contemplated by Section 2(c)
hereof or provisions restricting transfer (such new debt securities
hereinafter called "Exchange Securities"). The Company will require each
holder of Registrable Securities who wishes to exchange such Registrable
Securities for Exchange Securities in the Exchange Offer to represent that
any Exchange Securities to be received by it will be acquired in the
ordinary course of its business, that at the time of the commencement of
the Exchange Offer it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Securities and that it is not an affiliate of the Company within the
meaning of Rule 405 under the Securities Act. The Company agrees to use its
reasonable best efforts to cause such registration statement to become
effective under the Securities Act as soon as practicable thereafter. The
Exchange Offer will be registered under the Securities Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its
reasonable best efforts to commence the Exchange Offer promptly after such
registration statement has become effective, hold the Exchange Offer open
for at least 30 days and exchange the Exchange Securities for all
Registrable Securities that have been validly tendered and not withdrawn on
or prior to the expiration of the Exchange Offer. The Exchange Offer will
be deemed to have been completed only if the Exchange Securities received
by holders (other than Restricted Holders) in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and without material
restrictions under the Blue Sky or securities laws of a substantial
majority of the States of the United States of America, it being understood
that broker-dealers receiving Exchange Securities will be subject to
certain prospectus delivery requirements with respect to resale of the
Exchange Securities. The Exchange Offer shall be deemed to have been
completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Securities for all outstanding Registrable Securities pursuant to
the Exchange Offer and (ii) the Company having exchanged, pursuant to the
Exchange Offer, Exchangeable Securities for all Registrable Securities that
have been properly tendered and not withdrawn before the expiration of the
Exchange Offer, which shall be on a date that is at least 30 days following
the commencement of the Exchange Offer. The Company agrees (i) to include
in the registration statement a prospectus for use in any resales by any
holder of Securities that is a broker-dealer and (ii) to keep such
registration statement effective for a period ending on the earlier of the
180th day after the Exchange Offer has been completed or such time as such
broker-dealers no longer own any Registrable Securities. With respect to
such registration statement, such holders shall have the benefit of the
rights of indemnification and contribution set forth in Section 6 hereof.
(b) In the event that (i) on or prior to the consummation of the
Exchange Offer existing Commission interpretations are changed such that
the Exchange Securities received by holders (other than Restricted Holders)
in the Exchange Offer for Registrable Securities are not or would not be,
upon receipt, transferable by each such holder without restriction under
the Securities Act, (ii) the Exchange Offer has not been consummated on or
before the 240th day after the Closing Date or (iii) the Exchange Offer is
not available to any holder of Registrable Securities, the Company shall,
in lieu of (or, in the case of clause (iii), in addition to) conducting the
Exchange Offer contemplated by Section 2(a), file under the Securities Act
as soon as practicable a "shelf" registration statement providing for the
registration of, and the resale on a continuous or delayed basis by the
holders of, all of the Registrable Securities (or, in the case of clause
(iii), of the holders referred to in such clause (iii)), pursuant to Rule
415 under the Securities Act and/or any similar rule that may be adopted by
the Commission (the "Shelf Registration"). The Company agrees to use its
reasonable best efforts to cause the Shelf Registration to become or be
declared effective as soon as practicable after the Closing Date and to
keep such Shelf Registration continuously effective for a period ending on
the earlier of the second anniversary of the initial effective date of
registration statement relating to the Shelf Registration or such time as
all of the Registrable Securities registered on such Shelf Registration
have been sold pursuant to thereto. The Company further agrees to
supplement or make amendments to the Shelf Registration, as and when
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration or by the
Securities Act or rules and regulations thereunder for shelf registration,
and the Company agrees to furnish to the holders of the Registrable
Securities copies of any such supplement or amendment prior to its being
used and/or filed with the Commission.
(c) In the event that (i) the Company has not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 90th day after the Closing Date, or (ii)
such registration statement (or, if applicable, the Shelf Registration) has
not become effective or been declared effective by the Commission on or
before the 210th day after the Closing Date, or (iii) the Exchange Offer
has not been completed within 30 business days after the initial effective
date of the registration statement (if the Exchange Offer is then required
to be made) or (iv) any registration statement required by Section 2(a) or
2(b) is filed and declared effective but shall thereafter cease to be
effective (except as specifically permitted herein) without being succeeded
immediately by an additional registration statement filed and declared
effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the per annum interest rate of the Securities
as set forth in the Securities shall increase by 0.5% during the first
90-day period following the occurrence of the Registration Default, and the
per annum interest rate on the Securities will increase by an additional
0.5% for each subsequent 90-day period during which any Registration
Default remains in effect up to a maximum additional interest rate of 1%,
for the period from and including the date of occurrence of the
Registration Default to but excluding such date as no Registration Default
is in effect (at which time the interest rate will be restored to its
initial rate). In the event that the interest rate of the Securities is so
increased, the Company shall promptly notify the Trustee of such increase,
including any subsequent increase, and the beginning and ending dates
therefor.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a)
or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment
of a new trustee under the Indenture, the Company shall appoint a new
trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
Shelf Registration, if applicable, the Company shall use its reasonable
best efforts to effect or cause the Shelf Registration to permit the sale
of the Registrable Securities by the holders thereof in accordance with the
intended method or methods of distribution thereof described in the Shelf
Registration. In connection therewith, the Company shall:
(i) as soon as reasonably possible, prepare and file with the
Commission a registration statement with respect to the Shelf
Registration on any form which may be utilized by the Company and
which shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods thereof, as specified
in writing by the holders of the Registrable Securities, and use its
reasonable best efforts to cause such registration statement to become
effective as soon as reasonably possible thereafter;
(ii) as soon as reasonably possible, prepare and file with the
Commission such amendments and supplements to such registration
statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such registration statement
for the period specified in Section 2(b) hereof and as may be required
by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such registration statement,
and furnish to the holders of the Registrable Securities copies of any
such supplement or amendment prior to its being used and/or filed with
the Commission;
(iii) as soon as reasonably possible, comply with the provisions
of the Securities Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the holders
thereof set forth in such registration statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which
term, for purposes of this Agreement, shall include a person deemed to
be an underwriter within the meaning of Section 2(11) of the
Securities Act) if any, thereof, (C) the sales or placement agent, if
any, therefor, (D) counsel for such underwriters or agent, and (E) not
more than one counsel for all the holders of such Registrable
Securities the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with
the Commission, and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such
registration statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal
place of business or such other reasonable place for inspection by the
parties referred to in Section 3(c)(iv) who shall certify to the
Company that they have a current intention to sell the Registrable
Securities pursuant to the Shelf Registration such financial and other
information and books and records of the Company, and cause the
officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the reasonable judgment of the respective
counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain
in confidence and not to disclose to any other person any information
or records designated by the Company in writing as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such registration
statement or otherwise), or (B) such person shall be required, or
shall deem it advisable, so to disclose such information pursuant to
the subpoena or order of any court or other governmental agency or
body having jurisdiction over the matter (subject to the requirements
of such order, and only after such person shall have given the Company
prompt prior written notice thereof), or (C) such information is
required to be set forth in such registration statement or the
prospectus included therein or in an amendment to such registration
statement or an amendment or supplement to such prospectus in order
that such registration statement, prospectus, amendment or supplement,
as the case may be, does not contain an untrue statement of a material
fact or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(vi) promptly notify the selling holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (A) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same
has become effective, (B) of any comments by the Commission, the Blue
Sky or securities commissioner or regulator of any state with respect
thereto or any request by the Commission for amendments or supplements
to such registration statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company
contemplated by Section 3(c)(xv) or Section 5 cease to be true and
correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (F)
at any time when a prospectus is required to be delivered under the
Securities Act, if such registration statement, prospectus, prospectus
amendment or supplement or post-effective amendment, or any document
incorporated by reference in any of the foregoing, contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(vii) use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of such registration statement
or any post-effective amendment thereto at the earliest practicable
date;
(viii) if requested by any managing underwriter or underwriters,
any placement or sales agent or any holder of Registrable Securities,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such holder specifies should be included
therein relating to the terms of the sale of such Registrable
Securities, including, without limitation, information with respect to
the principal amount of Registrable Securities being sold by such
holder or agent or to any underwriters, the name and description of
such holder, agent or underwriter, the offering price of such
Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of
the offering of the Registrable Securities to be sold by such holder
or agent or to such underwriters; and make all required filings of
such prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each
placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in Section 3(c)(iv) an
executed copy of such registration statement, each such amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein) and such number of copies
of such registration statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by such holder, agent or underwriter, as the case may be)
and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as such holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and disposition
of the Registrable Securities owned by such holder, offered or sold by
such agent or underwritten by such underwriter and to permit such
holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to
the use of such prospectus (including such preliminary and summary
prospectus) and any amendment or supplement thereto by each such
holder and by any such agent and underwriter, in each case in the form
most recently provided to such party by the Company, in connection
with the offering and sale of the Registrable Securities covered by
the prospectus (including such preliminary and summary prospectus) or
any supplement or amendment thereto;
(x) use its reasonable best efforts to (A) register or qualify
the Registrable Securities to be included in such registration
statement under such securities laws or Blue Sky laws of such
jurisdictions as any holder of such Registrable Securities and each
placement or sales agent, if any, therefor and underwriter, if any,
thereof shall reasonably request, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter to complete
its distribution of Securities pursuant to such registration statement
and (C) take any and all other actions as may be reasonably necessary
or advisable to enable each such holder, agent, if any, and
underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (1) qualify
as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Section 3(c)(x), (2) consent to general service of process or taxation
in any such jurisdiction or (3) make any changes to its articles of
incorporation or by-laws or any agreement between it and its
stockholders;
(xi) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal,
state, provincial or local, which may be required to effect the Shelf
Registration or the offering or sale in connection therewith or to
enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any
restrictive legends; and, in the case of an underwritten offering,
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of the Registrable
Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Shelf Registration;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and
take such other actions in connection therewith as any holders of
Registrable Securities aggregating at least 25% in aggregate principal
amount of the Registrable Securities at the time outstanding shall
request in order to expedite or facilitate the disposition of such
Registrable Securities; provided, that the Company shall not be
required to enter into any such agreement more than twice with respect
to all of the Registrable Securities and may delay entering into such
agreement until the consummation of any underwritten public offering
which the Company shall have then engaged;
(xv) whether or not an agreement of the type referred to in
Section (3)(c)(xiv) hereof is entered into and whether or not any
portion of the offering contemplated by such registration statement is
an underwritten offering or is made through a placement or sales agent
or any other entity, (A) make such representations and warranties to
the holders of such Registrable Securities and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof
substantially the same as those set forth in Section 1 of the Purchase
Agreement dated the date hereof and such other representations and
warranties in form, substance and scope as are customarily made in
connection with an offering of debt securities pursuant to any
appropriate agreement and/or to a registration statement filed on the
form applicable to the Shelf Registration; (B) obtain an opinion or
opinions of counsel to the Company in customary form and covering such
other matters of the type customarily covered by such an opinion, as
the managing underwriters, if any, and as any holders of at least 25%
in aggregate principal amount of the Registrable Securities at the
time outstanding may reasonably request, addressed to such holder or
holders and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof and dated the effective date of such
registration statement (and if such registration statement
contemplates an underwritten offering of a part or all of the
Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the
matters to be covered by such opinion shall include, without
limitation, the due incorporation and good standing of the Company and
its subsidiaries; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section (3)(c)(xiv)
hereof; the due authorization, execution, authentication and issuance,
and the validity and enforceability, of the Securities; the absence of
material legal or governmental proceedings involving the Company; the
absence of a breach by the Company or any of its subsidiaries of, or a
default under, material agreements binding upon the Company or any
subsidiary of the Company; the absence of governmental approvals
required to be obtained in connection with the Shelf Registration, the
offering and sale of the Registrable Securities, this Agreement or any
agreement of the type referred to in Section (3)(c)(xiv) hereof,
except such approvals as may be required under state securities or
Blue Sky laws; the compliance as to form of such registration
statement and any documents incorporated by reference therein and of
the Indenture with the requirements of the Securities Act and the
Trust Indenture Act, respectively; and, as of the date of the opinion
and of the registration statement or most recent post-effective
amendment thereto, as the case may be, the absence from such
registration statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by
reference therein (in each case other than the financial statements
and other financial information contained therein) of an untrue
statement of a material fact or the omission to state therein a
material fact necessary to make the statements therein not misleading
(in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the
Commission under the Exchange Act)); (C) obtain a "cold comfort"
letter or letters from the independent certified public accountants of
the Company addressed to the selling holders of Registrable Securities
and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof, dated (i) the effective date of such
registration statement and (ii) the date of any prospectus supplement
to the prospectus included in such registration statement or the
effective date of any post-effective amendment to such registration
statement which includes unaudited or audited financial statements as
of a date or for a period subsequent to that of the latest such
statements included in such prospectus (and, if such registration
statement contemplates an underwritten offering pursuant to any
prospectus supplement to the prospectus included in such registration
statement or post-effective amendment to such registration statement
which includes unaudited or audited financial statements as of a date
or for a period subsequent to that of the latest such statements
included in such prospectus, dated the date of the closing under the
underwriting agreement relating thereto), such letter or letters to be
in customary form and covering such matters of the type customarily
covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably
requested by any holders of at least 25% in aggregate principal amount
of the Registrable Securities at the time outstanding and the
placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above or
those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of
any proposal by the Company to amend or waive any provision of this
Agreement pursuant to Section 9(h) hereof and of any amendment or
waiver effected pursuant thereto, each of which notices shall contain
the text of the amendment or waiver proposed or effected, as the case
may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling group
or "assist in the distribution" (within the meaning of the Rules of
Conduct (the "Rules of Conduct") of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a holder of
such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise,
reasonably assist such broker-dealer in complying with the
requirements of such Rules of Conduct, including, without limitation,
by (A) if such Rules of Conduct shall so require, engaging a
"qualified independent underwriter" (as defined in such Rules of
Conduct) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of
the offering contemplated by such registration statement is an
underwritten offering or is made through a placement or sales agent,
to recommend the yield of such Registrable Securities, (B)
indemnifying any such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 6 hereof,
and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the
requirements of the Rules of Conduct; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as
soon as practicable but in any event not later than 18 months after
the effective date of such registration statement, an earning
statement of the Company and its consolidated subsidiaries complying
with Section 11(a) of the Securities Act (including, at the option of
the Company, Rule 158 thereunder).
(d) In the event that the Company would be required, pursuant to
Section 3(c)(vi)(F) above, to notify the selling holders of Registrable
Securities, the placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof, the Company shall without delay prepare and
furnish to each such holder, to each placement or sales agent, if any, and
to each underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. Each holder of
Registrable Securities agrees that upon receipt of any notice from the
Company pursuant to Section 3(c)(vi)(F) hereof, such holder shall forthwith
discontinue the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until such
holder shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such holder shall deliver to
the Company (at the Company's expense) all copies, other than permanent
file copies, then in such holder's possession of the prospectus covering
such Registrable Securities at the time of receipt of such notice.
(e) The Company may require each holder of Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Company may from time to
time request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such holder
agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such holder to the Company
or of the occurrence of any event in either case as a result of which any
prospectus relating to such registration contains or would contain an
untrue statement of a material fact regarding such holder or such holder's
intended method of distribution of such Registrable Securities or omits to
state any material fact regarding such holder or such holder's intended
method of distribution of such Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and promptly to furnish to the Company
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not
contain, with respect to such holder or the distribution of such
Registrable Securities, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all Commission and any NASD registration
and filing fees and expenses, (b) all fees and expenses in connection with
the qualification of the Securities or Exchange Securities for offering and
sale under the State securities and Blue Sky laws referred to in Section
3(c)(x) hereof, including reasonable fees and disbursements of counsel for
the placement or sales agent or underwriters in connection with such
qualifications, (c) all expenses relating to the preparation, printing,
distribution and reproduction of each registration statement required to be
filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Securities and Exchange
Securities and all other documents relating hereto, (d) messenger and
delivery expenses, (e) fees and expenses of the Trustee under the Indenture
and of any escrow agent or custodian, (f) internal expenses (including,
without limitation, all salaries and expenses of the Company's officers and
employees performing legal or accounting duties), (g) fees, disbursements
and expenses of counsel and independent certified public accountants of the
Company (including the expenses of any opinions or "cold comfort" letters
required by or incident to such performance and compliance), (h) fees,
disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 3(c)(xvii) hereof, (i) fees, disbursements and
expenses of one counsel for the holders of Registrable Securities retained
in connection with a Shelf Registration, as selected by the holders of at
least a majority in aggregate principal amount of the Registrable
Securities being registered, and fees, expenses and disbursements of any
other persons, including special experts, retained by the Company in
connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred,
assumed or paid by any holder of Registrable Securities or any placement or
sales agent therefor or underwriter thereof, the Company shall reimburse
such person for the full amount of the Registration Expenses so incurred,
assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities
being registered shall pay all agency fees, brokerage fees and commissions
and underwriting discounts and commissions and transfer taxes, if any,
attributable to the sale of such Registered Securities and the fees and
disbursements of any counsel or other advisors or experts retained by such
holders (severally or jointly), and any other out-of-pocket expenses of
such holders, other than the counsel and experts specifically referred to
above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, the
Purchasers and each of the holders from time to time of Registrable
Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may
be, and, in the case of an underwritten offering of Registrable Securities,
at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and any such registration
statement and any amendment thereto will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and any
such prospectus or any amendment or supplement thereto will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and at all
times subsequent to the Effective Time when a prospectus would be required
to be delivered under the Securities Act, other than from (i) such time as
a notice has been given to holders of Registrable Securities pursuant to
Section 3(c)(vi)(F) hereof until (ii) such time as the Company furnishes an
amended or supplemented prospectus pursuant to Section 3(d) hereof, each
such registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(c)(ix)
hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture
Act and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by a holder
of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which the Company or any
subsidiary of the Company is bound or to which any of the property or
assets of the Company or any subsidiary of the Company is subject, other
than a breach or default which is not material to the business, property,
condition (financial or otherwise), or results of operations of the Company
and its subsidiaries taken as a whole, nor will such action result in any
violation of the provisions of the articles of incorporation or by-laws of
the Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
subsidiary of the Company or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Securities Act of the
Registrable Securities, qualification of the Indenture under the Trust
Indenture Act and such consents, approvals, authorizations, registrations
or qualifications as may be required under State securities or Blue Sky
laws in connection with the offering and distribution of the Registrable
Securities.
(d) This Agreement has been duly authorized, executed and delivered by
the Company.
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, and in consideration
of the agreements of the Purchasers contained herein, and as an inducement
to the Purchasers to purchase the Securities, the Company shall, and it
hereby agrees to, indemnify and hold harmless each of the holders of
Registrable Securities to be included in such registration, and each person
who participates as a placement or sales agent or as an underwriter in any
offering or sale of such Registrable Securities against any losses, claims,
damages or liabilities, joint or several, to which such holder, agent or
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company shall reimburse such holder, such
agent and such underwriter for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable to any such person in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final
or summary prospectus, or amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by
holders of Registrable Securities expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters.
The Company may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to Section 2 hereof
and to entering into any underwriting agreement with respect thereto, that
the Company shall have received an undertaking reasonably satisfactory to
it from each holder of such Registrable Securities and from each
underwriter named in any such underwriting agreement, severally and not
jointly, to (i) indemnify and hold harmless the Company and all other
holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained
therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such holder or underwriter
expressly for use therein, and (ii) reimburse the Company for any legal and
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as expenses are
incurred; provided, however, that no such holder shall be required to
undertake liability to any person under this Section 6(b) for any amounts
in excess of the dollar amount of the proceeds to be received by such
holder from the sale of such holder's Registrable Securities pursuant to
such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, notify
such indemnifying party in writing of the commencement of such action; but
the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party, other than under
the indemnification provisions of or contemplated by Section 6(a) or 6(b)
hereof. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement
thereof, such indemnifying party shall be entitled to participate therein
and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party (which consent shall not be
unreasonably withheld), be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
No indemnifying party shall be liable for the cost of any settlement
effected by an indemnified party without the written consent of such
indemnifying party, which consent shall not be unreasonably withheld.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified
party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were determined by pro rata
allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in this Section 6(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 6(d),
no holder shall be required to contribute any amount in excess of the
amount by which the dollar amount of the proceeds received by such holder
from the sale of any Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) exceeds the amount of any
damages which such holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission,
and no underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The holders' and any underwriters'
obligations in this Section 6(d) to contribute shall be several in
proportion to the principal amount of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the
Securities Act; and the obligations of the holders and any underwriters
contemplated by this Section 6 shall be in addition to any liability which
the respective holder or underwriter may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his consent, is named in any
registration statement as about to become a director of the Company) and to
each person, if any, who controls the Company within the meaning of the
Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof
shall be designated by the holders of at least a majority in aggregate
principal amount of the Registrable Securities to be included in such
offering, provided that such designated managing underwriter or
underwriters is or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (1)
agrees to sell such holder's Registrable Securities on the basis provided
in any underwriting arrangements approved by the persons entitled hereunder
to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to
the extent it shall be required to do so under the Exchange Act, it shall
timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including, but not limited to, the reports under
Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1)
of Rule 144) and the rules and regulations adopted by the Commission
thereunder, and shall take such further action as any holder of Registrable
Securities who is unable to sell Registrable Securities pursuant to an
effective registration statement may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 or any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities in connection with that holder's sale
pursuant to Rule 144, the Company shall deliver to such holder a written
statement as to whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any
such failure, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of
this Agreement, in any court of the United States or any State thereof
having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, if delivered personally or by
courier, or three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If
to the Company, to it at 711 5th Avenue, New York, New York 10022,
Attention: President, Senior Vice President - Finance and General Counsel
and if to a holder, to the address of such holder set forth in the security
register or other records of the Company, or to such other address as any
party may have furnished to the others in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
(d) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the parties hereto.
In the event that any transferee of any holder of Registrable Securities
shall validly acquire Registrable Securities, in any manner, whether by
gift, bequest, purchase, operation of law or otherwise, such transferee
shall, without any further writing or action of any kind, be deemed a party
hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by validly taking and
holding such Registrable Securities such transferee shall be entitled to
receive the benefits of and be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made
pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf
of any holder of Registrable Securities, any director, officer or partner
of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and
shall survive delivery of and payment for the Registrable Securities
pursuant to the Purchase Agreement and the transfer and registration of
Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein (including the Indenture and the form of
Securities) or delivered pursuant hereto which form a part hereof contain
the entire understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior agreements and understandings between
the parties with respect to its subject matter. This Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company
and the holders of at least 66-2/3 percent in aggregate principal amount of
the Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound
by any amendment or waiver effected pursuant to this Section 9(h), whether
or not any notice, writing or marking indicating such amendment or waiver
appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders
of Registrable Securities shall be made available upon reasonable notice to
the Company for inspection and copying on any business day by any holder of
Registrable Securities at the offices of the Company at the address thereof
set forth in Section 9(c) above and at the office of the Trustee under the
Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same
instrument.
Agreed to and accepted as of the date referred to above.
LOEWS CINEPLEX
ENTERTAINMENT CORPORATION
By: /s/ John C. McBride, Jr.
-----------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President
and General Counsel
GOLDMAN, SACHS & CO.
BT ALEX. BROWN INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
SALOMON BROTHERS INC
By: GOLDMAN, SACHS & CO.
/s/ Goldman, Sachs & Co.
-----------------------------
(Goldman, Sachs & Co.)
Exhibit 5.1
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
(212) 859-8000
September 30, 1998 (FAX: 212-859-4000)
Loews Cineplex Entertainment Corporation
711 Fifth Avenue
11th Floor
New York, New York 10022
Ladies and Gentlemen:
We are acting as special counsel for Loews Cineplex Entertainment
Corporation, a Delaware corporation (the "Company"), in connection with the
preparation of a registration statement on Form S-4 (the "Registration
Statement") filed with the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the proposed exchange of up to U.S. $ 300,000,000 aggregate
principal amount of 8 7/8 Senior Subordinated Notes due 2008 of the Company
(the "New Notes") for a like principal amount of the Company's issued and
outstanding 8 7/8 Senior Subordinated Notes due 2008 (the "Old Notes"). All
capitalized terms used herein that are defined in, or by reference in, the
Registration Statement have the meanings assigned to such terms therein or
by reference therein, unless otherwise defined herein. With your
permission, all assumptions and statements of reliance herein have been
made without any independent investigation or verification on our part
except to the extent otherwise expressly stated, and we express no opinion
with respect to the subject matter or accuracy of such assumptions or items
relied upon.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such agreements, instruments (including the Letter
of Transmittal), documents and records of the Company and its subsidiaries,
such certificates of public officials and such other documents
(collectively, the "Documents"), and (iii) received such information from
officers and representatives of the Company and its subsidiaries and others
as we have deemed necessary or appropriate for the purposes of this
opinion.
In all such examinations, we have assumed the legal capacity of
all natural persons, the genuineness of all signatures on original or
certified copies, and the conformity to original or certified documents of
all copies submitted to us as conformed or reproduction copies. As to
various questions of fact relevant to the opinions expressed herein, we
have relied upon the representations and warranties contained in the
Documents and certificates and oral or written statements and other
information of or from public officials and officers and representatives of
the Company, its subsidiaries and others, and assume compliance on the part
of all parties to the Documents with their covenants and agreements
contained therein.
To the extent it may be relevant to the opinion expressed herein,
we have assumed that the parties to the Documents other than the Company
have the power and authority to enter into and perform under such documents
and to consummate the transactions contemplated hereby, that the Documents
have been duly authorized, executed and delivered by, and constitute a
valid and binding obligation of, enforceable against such parties in
accordance with its terms and that such parties shall comply with all of
their obligations under the Documents and all laws applicable thereto.
Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion
that, when the Registration Statement has become effective under the
Securities Act, the New Notes have been duly authorized and executed by the
Company and duly authenticated by the Trustee in accordance with the terms
of the Indenture and delivered in exchange for the Old Notes in accordance
with the terms of the Indenture, the New Notes will constitute valid and
binding obligations of the Company.
Our opinion above is subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
now or hereafter in effect affecting creditors' rights and remedies
generally and (ii) general principles of equity including, without
limitation, standards of materiality, good faith, fair dealing and
reasonableness, equitable defenses and limits as to the availability of
equitable remedies, whether such principles are considered in a proceeding
at law or in equity.
The opinion expressed herein is limited to the federal laws of
the United States of America and the laws of the State of New York and, to
the extent relevant hereto, the DGCL, as currently in effect. The opinion
expressed herein is given as of the date hereof, and we undertake no
obligation to supplement this letter if any applicable laws change after
the date hereof or if we become aware of any facts that might change the
opinion expressed herein after the date hereof or for any other reason.
We hereby consent to the filing of this opinion as an Exhibit to
the Registration Statement and to the reference to this firm under the
caption "Validity of the New Notes" in the Prospectus that is included in
the Registration Statement. In giving these consents, we do not hereby
admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
The opinion expressed herein is solely for your benefit in
connection with the Registration Statement and may not be relied on in any
manner or for any purpose by any other person or entity without our prior
written consent.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ David C. Golay
-------------------------
David C. Golay
Exhibit 10.21
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
8 7/8% SENIOR SUBORDINATED
NOTES DUE 2008
----------------
PURCHASE AGREEMENT
July 31, 1998
Goldman, Sachs & Co.,
BT Alex. Brown Incorporated,
Credit Suisse First Boston Corporation,
Salomon Brothers Inc,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Loews Cineplex Entertainment Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Initial Purchasers named in Schedule I hereto (the
"Initial Purchasers") an aggregate of $300,000,000 principal amount of the
Senior Subordinated Notes of the Company specified above (the
"Securities").
1. The Company represents and warrants to, and agrees with, each of
the Initial Purchasers that:
(a) A preliminary offering circular, dated June 17, 1998 (the
"Preliminary Offering Circular") and an offering circular, dated July
31, 1998 (the "Offering Circular"), in each case including the
international supplement thereto, have been prepared in connection
with the offering of the Securities. Any reference to the Preliminary
Offering Circular or the Offering Circular, as the case may be, as
amended or supplemented, as of any specified date shall be deemed to
include any Additional Issuer Information (as defined in Section 5(f))
furnished by the Company prior to the completion of the distribution
of the Securities. The Company's most recent Annual Report on Form
10-K and all subsequent documents filed with the United States
Securities and Exchange Commission (the "Commission") pursuant to
Section 13(a), 13(c) or 15(d) of the United States Securities Exchange
Act of 1934, as amended (the "Exchange Act") on or prior to the date
of the Preliminary Offering Circular or the Offering Circular, as the
case may be; any documents filed with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act after the date of
the Preliminary Offering Circular or the Offering Circular, as the
case may be, as amended or supplemented, as of any specified date, and
prior to such specified date; and any Additional Issuer Information
(as defined in Section 5(f)) furnished by the Company prior to the
completion of the distribution of the Securities, are hereinafter
called the "Exchange Act Reports". The Exchange Act Reports, when they
were or are filed with the Commission, conformed or will conform in
all material respects to the applicable requirements of the Exchange
Act and the applicable rules and regulations of the Commission
thereunder. The Preliminary Offering Circular or the Offering Circular
and any amendments or supplements thereto did not and will not, as of
their respective dates, contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Initial Purchaser through Goldman, Sachs & Co.
expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in
the Offering Circular any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular; and, since the respective dates
as of which information is given in the Offering Circular, there has
not been any change in the capital stock, stockholders' equity, total
assets or long-term debt of the Company or any of its subsidiaries or
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Offering Circular;
(c) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Offering Circular or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to
be made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering
Circular, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation;
(e) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares and except as otherwise set
forth in the Offering Circular) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
(f) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the indenture to be dated as of August 5, 1998 (the
"Indenture") between the Company and Bankers Trust Company, as Trustee
(the "Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Indenture
has been duly authorized and, when executed and delivered by the
Company and the Trustee, the Indenture will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Securities
and the Indenture will conform to the descriptions thereof in the
Offering Circular and will be in substantially the form previously
delivered to you;
(g) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale
of the Securities) will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations G, T, U, and X of the Board
of Governors of the Federal Reserve System;
(h) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the
Company in connection with the offering of the Securities;
(i) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the
Indenture, and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions
contemplated by this Agreement or, the Indenture, except for the
filing of a registration statement by the Company with the Commission
pursuant to the United States Securities Act of 1933, as amended (the
"Act") pursuant to Section 5(k) hereof, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(j) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(k) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute
a summary of the terms of the Securities, under the caption "Certain
United States Federal Tax Consequences to Non-United States Holders",
and under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(l) Other than as set forth in the Offering Circular, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which are reasonably
likely individually or in the aggregate to have a material adverse
effect on the financial position, stockholders' equity or results of
operations of the Company and its subsidiaries (a "Material Adverse
Effect"); and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(m) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Act) as securities which are listed on
a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation
system;
(n) The Company is subject to Section 13 or 15(d) of the Exchange
Act;
(o) The Company is not, and after giving effect to the offering
and sale of the Securities, will not be an "investment company", as
such term is defined in the United States Investment Company Act of
1940, as amended (the "Investment Company Act");
(p) Neither the Company, nor any person acting on its or their
behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Act or, with respect to Securities sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Act), by
means of any directed selling efforts within the meaning of Rule 902
under the Securities Act and the Company, any affiliate of the Company
and any person acting on its or their behalf has complied with and
will implement the "offering restriction" within the meaning of such
Rule 902;
(q) Within the preceding six months, neither the Company nor any
other person acting on behalf of the Company has offered or sold to
any person any Securities, or any securities of the same or a similar
class as the Securities, other than Securities offered or sold to the
Initial Purchasers hereunder. The Company will take reasonable
precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Act) of any Securities or any substantially similar
security issued by the Company, within six months subsequent to the
date on which the distribution of the Securities has been completed
(as notified to the Company by Goldman, Sachs & Co.), is made under
restrictions and other circumstances reasonably designed not to affect
the status of the offer and sale of the Securities in the United
States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Securities
Act;
(r) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(s) PricewaterhouseCoopers LLP, who have certified certain
financial statements of the Company and its subsidiaries, and KPMG,
who have certified certain financial statements of Cineplex Odeon
Corporation, are each independent public accountants with respect to
the Company and Cineplex Odeon Corporation ("Cineplex Odeon"),
respectively, as required by the Act and the rules and regulations of
the Commission thereunder.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Initial Purchasers, and each of the
Initial Purchasers agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 96.685% of the principal amount thereof,
plus accrued interest, if any, from July 31, 1998 to the Time of Delivery
hereunder, the principal amount of Securities set forth opposite the name
of such Initial Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Initial Purchasers propose to offer the Securities for sale upon
the terms and conditions set forth in this Agreement and the Offering
Circular and each Initial Purchaser hereby represents and warrants to, and
agrees with the Company that:
(a) It will offer and sell the Securities only to (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within
the meaning of Rule 144A under the Act in transactions meeting the
requirements of Rule 144A or (ii) upon the terms and conditions set forth
in Annex I to this Agreement;
(b) It is an "accredited investor" within the meaning of Rule 501
under the Act; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the
methods described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Initial Purchaser
hereunder will be represented by one or more definitive global Securities
in book-entry form which will be deposited by or on behalf of the Company
with The Depository Trust Company ("DTC") or its designated custodian. The
Company will deliver the Securities to Goldman, Sachs & Co., for the
account of each Initial Purchaser, against payment by or on behalf of such
Initial Purchaser of the purchase price therefor by certified or official
bank check or checks, payable to the order of the Company in Federal (same
DAY) funds, by causing DTC to credit the Securities to the account of
Goldman, Sachs & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to Goldman, Sachs & Co.
for checking at least twenty-four hours prior to the Time of Delivery (as
defined below) at the office of DTC or its designated custodian (the
"Designated Office"). The time and date of such delivery and payment shall
be 9:30 a.m., New York City time, on August 5, 1998 or such other time and
date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by
the Initial Purchasers pursuant to Section 7(k) hereof, will be delivered
at such time and date at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, NY 10004 (the "Closing Location"), and the Securities
will be delivered at the Designated Office, all at the Time of Delivery. A
meeting will be held at the Closing Location at 2:00 p.m., New York City
time, on the New York Business Day next preceding the Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to
the preceding sentence will be available for review by the parties hereto.
For the purposes of this Section 4, "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by
law or executive order to close.
5. The Company agrees with each of the Initial Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish
you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish the Initial Purchasers with two (2) copies of the
Offering Circular and each amendment or supplement thereto signed by an
authorized officer of the Company, with the independent accountants'
report(s) in the Offering Circular, and any amendment or supplement
containing amendments to the financial statements covered by such
report(s), signed by the accountants, and additional copies thereof in such
quantities as you may from time to time reasonably request, and if, at any
time prior to the expiration of nine months after the date of the Offering
Circular, any event shall have occurred as a result of which the Offering
Circular as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such
same period to amend or supplement the Offering Circular, to notify you and
upon your request to prepare and furnish without charge to each Initial
Purchaser and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell
contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company that are substantially similar to the Securities
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face- amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, for the benefit of holders from time to time of
Securities, to furnish at its expense, upon request, to holders of
Securities and prospective Initial Purchasers of securities information
(the "Additional Issuer Information") satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Act;
(g) If requested by you, to use its best efforts to cause the
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
securities exchange on which the Securities, or any class of securities of
the Company is listed; and (ii) such additional publicly available
information concerning the business and financial condition of the Company
as you may from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the Company and
its subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(i) During the period of two years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined
in Rule 144 under the Securities Act) to, resell any of the Securities
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them;
(j) The Company shall file and use its best efforts to cause to be
declared or become effective under the Securities Act, on or prior to 90
days after the Time of Delivery, a registration statement on Form S-4
providing for (i) the registration of another series of debt securities of
the Company, with terms identical to the Securities (the "Exchange
Securities"), and (ii) the exchange of the Securities for the Exchange
Securities, all in a manner which will permit persons who acquire the
Exchange Securities and who are not affiliates of the Company to resell the
Exchange Securities pursuant to Section 4(1) of the Securities Act; and
(k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Offering Circular under the caption "Use of Proceeds".
6. The Company covenants and agrees with the several Initial
Purchasers that the Company will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the issue of the Securities and all other
expenses in connection with the preparation, printing and filing of the
Preliminary Offering Circular and the Offering Circular and any amendments
and supplements thereto and the mailing and delivering of copies thereof to
the Initial Purchasers and dealers; (ii) the cost of printing or producing
any Agreement among Initial Purchasers, this Agreement, the Indenture, the
Blue Sky and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities, for offering and
sale under state securities laws as provided in Section 5(b) hereof,
including the reasonable fees and disbursements of counsel for the Initial
Purchasers in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) any fees charged by securities
rating services for rating the Securities; (v) the cost of preparing the
Securities; (vi) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities; (vii) any cost incurred
in connection with the designation of the Securities for trading in PORTAL
and (viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Initial Purchasers will pay all
of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Initial Purchasers hereunder shall be
subject, in their discretion, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of the
Time of Delivery, true and correct, the condition that the Company shall
have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) Sullivan & Cromwell, counsel for the Initial Purchasers, shall
have furnished to you such opinion or opinions, dated the Time of Delivery,
in form and substance satisfactory to you, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon the matters covered therein;
(b) Fried, Frank, Harris, Shriver & Jacobson, counsel for the Company,
shall have furnished to you their written opinion, dated the Time of
Delivery, in the form attached as Annex II hereto;
(c) John C. McBride, Jr., General Counsel of the Company, shall have
furnished to you his written opinion, dated the Time of Delivery, in the
form attached as Annex III hereto;
(d) Davies, Ward & Beck, Canadian counsel for the Company, shall have
furnished to you their written opinion, dated the Time of Delivery, in the
form attached as Annex IV hereto;
(e) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, PricewaterhouseCoopers LLP
shall have furnished to you a letter or letters, dated the respective dates
of delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex V hereto;
(f) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, KPMG shall have furnished
to you a letter or letters, dated the respective dates of delivery thereof,
in form and substance satisfactory to you, to the effect set forth in Annex
VI hereto;
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Offering Circular any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Offering Circular, and (ii) since the respective dates as of which
information is given in the Offering Circular there shall not have been any
change in the capital stock, stockholders' equity, total assets or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Offering Circular, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the Initial
Purchasers so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities on the terms and in the manner contemplated in this Agreement
and in the Offering Circular;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the Toronto Stock
Exchange; (ii) a suspension or material limitation in trading in the
Company's securities on the New York Stock Exchange or the Toronto Stock
Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; (iv) the outbreak
or escalation of hostilities involving the United States or the declaration
by the United States of a national emergency or war, if the effect of any
such event specified in this Clause (iv) in the judgment of the Initial
Purchasers makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Offering Circular; or (v) the occurrence of any
material adverse change in the existing financial, political or economic
conditions in the United States or elsewhere which, in the judgment of the
Initial Purchasers, would materially and adversely affect the financial
markets or the markets for the Securities and other debt securities;
(j) The Securities have been designated for trading on PORTAL;
(k) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsection (g) of this Section and as to such other matters as you may
reasonably request; and
(l) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery a Certificate of its Senior Vice President -
Finance in form and substance satisfactory to you certifying that the
issuance of the Securities by the Company will not cause the Company to be
in breach of or default under any financial covenant contained in (i) any
of those agreements filed as exhibits to the Company's registration
statement on Form S-1 in respect of the concurrent equity offering (the
"S-1 Agreements"), or (ii) any other agreement to which the Company is a
party, except, in the case of this clause (ii) only, where such breach or
default could not reasonably be expected to have a Material Adverse Effect.
8. (a) The Company will indemnify and hold harmless each Initial
Purchaser against any losses, claims, damages or liabilities, joint or
several, to which such Initial Purchaser may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, and will reimburse each Initial
Purchaser for any legal or other expenses reasonably incurred by such
Initial Purchaser in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in any Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser through
Goldman, Sachs & Co. expressly for use therein.
(b) Each Initial Purchaser will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular
or the Offering Circular, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in any Preliminary Offering Circular or the Offering Circular or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Initial Purchaser
through Goldman, Sachs & Co. expressly for use therein; and will reimburse
the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party (which consent shall not be
unreasonably withheld), be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement
or compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising
out of such action or claim and (ii) does not include a statement as to, or
an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Initial Purchasers on the other from the offering of the
Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Initial Purchasers on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Initial Purchasers, in each case
as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the Initial Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (d), no Initial
Purchaser shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it
and distributed to investors were offered to investors exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. The Initial Purchasers' obligations in this subsection
(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Initial Purchaser within the meaning of the Act; and the
obligations of the Initial Purchasers under this Section 8 shall be in
addition to any liability which the respective Initial Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Initial Purchaser shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder, you may
in your discretion arrange for you or another party or other parties to
purchase such Securities on the terms contained herein. If within
thirty-six hours after such default by any Initial Purchaser you do not
arrange for the purchase of such Securities, then the Company shall be
entitled to a further period of thirty-six hours within which to procure
another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for
the purchase of such Securities, or the Company notifies you that it has so
arranged for the purchase of such Securities, you or the Company shall have
the right to postpone the Time of Delivery for a period of not more than
seven days, in order to effect whatever changes may thereby be made
necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments to
the Offering Circular which in your opinion may thereby be made necessary.
The term "Initial Purchaser" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person
had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Initial Purchaser or Initial Purchasers by
you and the Company as provided in subsection (a) above, the aggregate
principal amount of such Securities which remains unpurchased does not
exceed one-eleventh of the aggregate principal amount of all the
Securities, then the Company shall have the right to require each
non-defaulting Initial Purchaser to purchase the principal amount of
Securities which such Initial Purchaser agreed to purchase hereunder and,
in addition, to require each non-defaulting Initial Purchaser to purchase
its pro rata share (based on the principal amount of Securities which such
Initial Purchaser agreed to purchase hereunder) of the Securities of such
defaulting Initial Purchaser or Initial Purchasers for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Initial Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Initial Purchaser or Initial Purchasers by
you and the Company as provided in subsection (a) above, the aggregate
principal amount of Securities which remains unpurchased exceeds
one-eleventh of the aggregate principal amount of all the Securities, or if
the Company shall not exercise the right described in subsection (b) above
to require non-defaulting Initial Purchasers to purchase Securities of a
defaulting Initial Purchaser or Initial Purchasers, then this Agreement
shall thereupon terminate, without liability on the part of any
non-defaulting Initial Purchaser or the Company, except for the expenses to
be borne by the Company and the Initial Purchasers as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof;
but nothing herein shall relieve a defaulting Initial Purchaser from
liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Initial
Purchasers, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Initial Purchaser or any controlling
person of any Initial Purchaser, or the Company, or any officer or director
or controlling person of the Company, and shall survive delivery of and
payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Initial
Purchaser except as provided in Sections 6 and 8 hereof; but, if for any
other reason, the Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Initial
Purchasers through you for all out-of-pocket expenses approved in writing
by you, including fees and disbursements of counsel, reasonably incurred by
the Initial Purchasers in making preparations for the purchase, sale and
delivery of the Securities, but the Company shall then be under no further
liability to any Initial Purchaser except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Initial Purchasers, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Initial Purchaser made or given by you jointly or by Goldman, Sachs & Co.
on behalf of you as the Initial Purchasers(1).
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Initial Purchasers shall be delivered or sent by
mail, telex or facsimile transmission to you as the Initial Purchasers in
care of Goldman, Sachs & Co., 32 Old Slip, 9th Floor, New York, New York
10004, Attention: Registration Department; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address
of the Company set forth in the Offering Circular, Attention: President,
Senior Vice President - Finance and General Counsel; provided, however,
that any notice to a Initial Purchaser pursuant to Section 8(c) hereof
shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth in its Initial Purchasers'
Questionnaire, or telex constituting such Questionnaire, which address will
be supplied to the Company by you upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Initial Purchasers, the Company and, to the extent provided
in Sections 8 and 10 hereof, the officers and directors of the Company and
each person who controls the Company or any Initial Purchaser, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No Initial Purchaser of any of the Securities from any Initial
Purchaser shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be
an original, but all such respective counterparts shall together constitute
one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Initial Purchasers
plus one for each counsel counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Initial Purchasers, this letter and
such acceptance hereof shall constitute a binding agreement between each of
the Initial Purchasers and the Company. It is understood that your
acceptance of this letter on behalf of each of the Initial Purchasers is
pursuant to the authority set forth in a form of Agreement among Initial
Purchasers, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
LOEWS CINEPLEX
ENTERTAINMENT CORPORATION
By: /s/ John C. McBride, Jr.
------------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President
and General Counsel
Accepted as of the date hereof:
Goldman, Sachs & Co.,
BT Alex. Brown Incorporated,
Credit Suisse First Boston Corporation,
Salomon Brothers Inc
By: /s/ Goldman, Sachs & Co.
-------------------------------
(Goldman, Sachs & Co.)
<PAGE>
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
INITIAL PURCHASER PURCHASED
----------------- ---------
Goldman, Sachs & Co.................................. $175,000,000.00
BT Alex. Brown Incorporated.......................... 41,667,000.00
Credit Suisse First Boston Corporation............... 41,667,000.00
Salomon Brothers Inc................................. 41,666,000.00
Total....................... $300,000,000.00
===============
<PAGE>
ANNEX I
(1) The Securities have not been and will not be registered under the
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with
Regulation S under the Act or pursuant to an exemption from the
registration requirements of the Act. Each Initial Purchaser represents
that it has offered and sold the Securities, and will offer and sell the
Securities (i) as part of their distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Time of Delivery, only in accordance with Rule 903 of Regulation S, Rule
144A or pursuant to Paragraph 2 of this Annex I under the Act. Accordingly,
each Initial Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Securities, and it and they
have complied and will comply with the offering restrictions requirement of
Regulation S. Each Initial Purchaser agrees that, at or prior to
confirmation of sale of Securities (other than a sale pursuant to Rule
144A) or pursuant to Paragraph 2 of this Annex I, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period
a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation
S.
Each Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution
or delivery of the Securities, except with its affiliates or with the prior
written consent of the Company.
(2) Notwithstanding the foregoing, Securities in registered form may
be offered, sold and delivered by the Initial Purchasers in the United
States and to U.S. persons pursuant to Section 3(a)(i) of this Agreement
without delivery of the written statement required by paragraph (1) above.
(3) Each Initial Purchaser further represents and agrees that (i) it
has not offered or sold and prior to the date six months after the date of
issue of the Securities will not offer or sell any Securities to persons in
the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal
or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (b) it has complied, and will comply, with all
applicable provisions of the Financial Services Act of 1986 of Great
Britain with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issuance of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 of Great Britain or is a person to whom the document may otherwise
lawfully be issued or passed on.
(4) Each Initial Purchaser agrees that it will not offer, sell or
deliver any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Securities in
such jurisdictions. Each Initial Purchaser understands that no action has
been taken to permit a public offering in any jurisdiction outside the
United States where action would be required for such purpose. Each Initial
Purchaser agrees not to cause any advertisement of the Securities to be
published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such
case with Goldman, Sachs & Co.'s express written consent and then only at
its own risk and expense.
<PAGE>
ANNEX II
Pursuant to Section 7(b) of the Purchase Agreement, Fried, Frank,
Harris, Shriver & Jacobson shall furnish to the Initial Purchasers their
written opinion in the following form:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Offering Circular;
(ii) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock
of the Company have been duly authorized and validly issued and are
fully paid and non-assessable;
(iii) Except as set forth on a schedule to such opinion, each of
LTM New York, Inc., Loews Theatre Management Corp. and Plitt Theatres,
Inc. (each a "Material U.S. Subsidiary") is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation;
(iv) This Agreement has been duly authorized, executed and
delivered by the Company;
(v) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company entitled to the benefits provided
by the Indenture; and the Securities and the Indenture conform in all
material respects to the descriptions thereof in the Offering
Circular; the Securities have been duly authorized by the Company; the
global Security has been duly executed, authenticated, issued and
delivered and constitutes a valid and legally binding obligation of
the Company entitled to the benefits provided by the Indenture; the
Securities in certificated form, when executed, authenticated issued
and delivered in exchange for the global Security in accordance with
the Indenture, shall have been duly executed, authenticated,, issued
and delivered and shall constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indenture;
the global Security and the Indenture conform, and the Certificated
Securities if and when issued in the form specified in the Indenture
will conform, to the descriptions thereof in the Offering Circular;
(vi) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms;
(vii) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the
Indenture and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject (this opinion being limited (x) to such counsel's review of
only the S- 1 Agreements and (y) in that such counsel need express no
opinion with respect to any such conflict, breach or violation not
readily ascertainable from the face of any such agreement, or arising
under or based upon any cross-default provision insofar as it relates
to a default under an agreement, not so filed or arising under or
based upon any covenant of a financial or numerical nature or
requiring computations), nor will such actions result in any violation
of the provisions of (i) the Certificate of Incorporation or By-laws
of the Company, (ii) any statute, rule or regulation of any
governmental agency or authority of the United States or of the State
of New York or under the Delaware General Corporation Law (the
"DGCL"), and (iii) any order of any court binding upon the Company or
any of its subsidiaries (the opinion in this clause (iii) being
limited to (x) such counsel's review of only those court orders that
are specifically identified in an officer's certificate of the Company
and (y) in that such counsel need express no opinion with respect to
any such violation not readily ascertainable from the face of any such
court order);
(viii) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or
authority of the United States or of the State of New York or under
the DGCL is required for the issue and sale of the Securities or the
consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the obligation of the Company to use its
best efforts to cause to be declared or become effective under the
Securities Act, on or prior to 90 days after the Time of Delivery, a
registration statement on Form S-4 as set forth in section 5(j) of
this agreement, (ii) qualification of the Indenture in respect of the
Exchange Securities under the Trust Indenture Act of 1939 and (iii)
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities by the Initial Purchasers;
(ix) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute
a summary of the terms of the Securities, under the caption "Certain
United States Federal Tax Consequences to Non-United States Holders",
insofar as they purport to describe the provisions of the laws
referred to therein, and under the caption "Underwriting", insofar as
they purport to describe the provisions of the Purchase Agreement
referred to therein, fairly summarize in all material respects the
matters referred to therein;
(x) No registration of the Securities under the Act, and no
qualification of an indenture under the United States Trust Indenture
Act of 1939 with respect thereto, is required for the offer, sale and
initial resale of the Securities by the Initial Purchasers in the
manner contemplated by this Agreement (excluding any exchange of the
Securities for Exchange Securities);
(xi) Such counsel shall state that in the course of the
preparation by the Company of the Offering Circular, such counsel
participated in conferences with certain of the officers and
representatives of, and the independent public accountants for, the
Company, at which the contents of the Offering Circular were
discussed. Such counsel shall further state that between the date of
the Offering Circular and the time of delivery of such opinion, such
counsel participated in additional conferences with certain of the
officers and representatives of, and independent public accountants
for the Company, at which the contents of the Offering Circular were
discussed to a limited extent. Such counsel may state that, given the
limitations inherent in the independent verification of factual
matters and the character of determinations involved in the process,
such counsel is not passing upon or assuming any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Offering Circular, except to the extent provided in paragraph (ix)
above. Subject to the foregoing and on the basis of the information
gained in the performance of the services referred to above, including
information obtained from officers and other representatives of, and
the independent public accountants for, the Company, such counsel
shall state that no facts have come to their attention that have
caused them to believe that the Offering Circular, as of its date,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Also, subject to the foregoing, such
counsel shall state that no facts have come to their attention in the
course of the proceedings described in the second sentence of this
paragraph that cause them to believe that the Offering Circular, as of
the date and time of delivery of this letter, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Such counsel shall state that they express
no view or belief, however, with respect to financial statements, the
notes or schedules thereto or other financial information included in
or omitted from the Offering Circular; and
(xii) The Company is not, and after giving effect to the offering
and sale of the Securities, will not be an "investment company", as
such term is defined in the Investment Company Act.
<PAGE>
ANNEX III
Pursuant to Section 7(c) of the Purchase Agreement, John C. McBride,
Jr. shall furnish to the Initial Purchasers his written opinion in the
following form:
(i) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except
where the failure to be so qualified in any such jurisdiction could
not reasonably be expected to have a Material Adverse Effect.
(ii) Except as disclosed in the Offering Circular, all of the
issued shares of capital stock of each Material U.S. Subsidiary have
been duly and validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares and
except as otherwise set forth in the Offering Circular) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except to the extent that such
liens, encumbrances, equities or claims could not reasonably be
expected to have a Material Adverse Effect;
(iii) To such counsel's knowledge and other than as set forth in
the Offering Circular, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would be reasonably likely to, individually or in the
aggregate, have a Material Adverse Effect; and, to such counsel's
knowledge, no such proceedings are threatened by governmental
authorities or others;
(iv) Neither the Company nor any of its subsidiaries is (i) in
violation of its Certificate of Incorporation or By-laws or (ii) in
default in the performance or observance of any material obligation,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound,
except, with respect to this subsection (ii), where such default could
not reasonably be expected to have a Material Adverse Effect; and
(v) Such counsel shall state that in the course of the
preparation by the Company of the Offering Circular, such counsel
participated in conferences with certain of the officers and
representatives of, and the independent public accountants for the
Company, at which the contents of the Offering Circular were
discussed. Such counsel shall further state that between the date of
the Offering Circular and the time of delivery of such opinion, such
counsel participated in additional conferences with certain of the
officers and representatives of, and independent public accountants
for the Company, at which the contents of the Offering Circular were
discussed to a limited extent. Such counsel may state that, given the
limitations inherent in the independent verification of factual
matters and the character of determinations involved in the process,
such counsel is not passing upon or assuming any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Offering Circular. Subject to the foregoing and on the basis of
the information gained in the performance of the services referred to
above, including information obtained from officers and other
representatives of, and the independent public accountants for the
Company, such counsel shall state that no facts have come to his
attention that have caused him to believe that the Offering Circular,
as of its date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Also,
subject to the foregoing, such counsel shall state that no facts have
come to his attention in the course of the proceedings described in
the second sentence of this paragraph that cause him to believe that
the Offering Circular, as of the date and time of delivery of this
letter, contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such counsel
shall state that he expresses no view or belief, however, with respect
to financial statements, the notes or schedules thereto or other
financial information included in or omitted from the Offering
Circular.
<PAGE>
ANNEX IV
Pursuant to Section 7(d) of the Purchase Agreement, Davies, Ward &
Beck shall furnish to the Initial Purchasers their written opinion in the
following manner:
(i) Cineplex Odeon is validly existing under the laws of the
Province of Ontario, Canada, with corporate power to own its
properties and conduct its business as described in the Offering
Circular; and
(ii) The authorized capital of Cineplex Odeon consists of an
unlimited number of Common Shares ("Common Shares") and an unlimited
number of First Preference Shares, issuable in series ("First
Preference Shares"), of which 95,415,303 Common Shares and no First
Preference Shares are issued and outstanding and are fully paid and
non-assessable.
(iii) The sole registered holder of the Common Shares is Loews
Cineplex Entertainment Corporation.
(iv) Cineplex Odeon has the right pursuant to the Order and
Section 185 of the OBCA, and upon offering to purchase the Common
Shares held by Dissenters and complying with the provisions of Section
185 of the OBCA to extinguish the rights of Dissenters to be paid the
fair value of their common shares acquired by the Company pursuant to
the Plan of Arrangement.
(v) Cineplex Odeon is qualified to carry on business as an
extraprovincial corporation in the Provinces of New Brunswick, Quebec,
Manitoba, Saskatchewan, Alberta and British Columbia. (1)
- ---------------------
1 Subject to receiving local agents' opinions confirming same.
<PAGE>
ANNEX V
Pursuant to Section 7(e) of the Purchase Agreement,
PriceWaterhouseCoopers LLP shall furnish letters to the Initial Purchasers
to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") and the
applicable published rules and regulations thereunder;
(ii) The consolidated financial statements and financial
statement schedules audited by us and included in the Offering
Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
the Company for the five most recent fiscal years included in the
Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for the most recent four fiscal years and in the accounting
records of the Company with respect to the fiscal year ended February
28, 1994;
(iv) On the basis of limited procedures not constituting an audit
in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Offering Circular are not in conformity
with generally accepted accounting principles applied on the
basis substantially consistent with the basis for the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
in the Offering Circular;
(C) any unaudited income statement data and balance sheet
items included in the Offering Circular and referred to in Clause
(B) were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Offering Circular do not comply as to
form in all material respects with the applicable accounting
requirements or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Initial Purchasers, or any increases in
any items specified by the Initial Purchasers, in each case as
compared with amounts shown in the latest balance sheet included
in the Offering Circular except in each case for changes,
increases or decreases which the Offering Circular discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified
by the Initial Purchasers, or any increases in any items
specified by the Initial Purchasers, in each case as compared
with the comparable period of the preceding year and with any
other period of corresponding length specified by the Initial
Purchasers, except in each case for decreases or increases which
the Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Initial Purchasers, which are derived from the general accounting
records of the Company and its subsidiaries, which appear in the
Offering Circular, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
<PAGE>
ANNEX VI
Pursuant to Section 7(f) of the Purchase Agreement, KPMG shall furnish
letters to the Initial Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to Cineplex Odeon and its subsidiaries within the meaning of
the Securities Exchange Act of 1934 (the "Exchange Act") and the
applicable published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
Cineplex Odeon for the five most recent fiscal years included in the
Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting an audit
in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of Cineplex Odeon and its subsidiaries,
inspection of the minute books of Cineplex Odeon and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of Cineplex Odeon and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe
that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Offering Circular are not in conformity
with generally accepted accounting principles applied on the
basis substantially consistent with the basis for the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Offering Circular and referred to in Clause
(B) were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Offering Circular do not comply as to
form in all material respects with the applicable accounting
requirements or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular or any increase in the consolidated long-term
debt of Cineplex Odeon and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Initial Purchasers, or any increases in
any items specified by the Initial Purchasers, in each case as
compared with amounts shown in the latest balance sheet included
in the Offering Circular except in each case for changes,
increases or decreases which the Offering Circular discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified
by the Initial Purchasers, or any increases in any items
specified by the Initial Purchasers, in each case as compared
with the comparable period of the preceding year and with any
other period of corresponding length specified by the Initial
Purchasers, except in each case for decreases or increases which
the Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Initial Purchasers, which are derived from the general accounting
records of Cineplex Odeon and its subsidiaries, which appear in the
Offering Circular, and have compared certain of such amounts,
percentages and financial information with the accounting records of
Cineplex Odeon and its subsidiaries and have found them to be in
agreement.
Exhibit 10.22
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
8 7/8% SENIOR SUBORDINATED
NOTES DUE 2008
----------------
AMENDMENT TO
PURCHASE AGREEMENT
August 4, 1998
Goldman, Sachs & Co.,
BT Alex. Brown Incorporated,
Credit Suisse First Boston Corporation,
Salomon Brothers Inc,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Loews Cineplex Entertainment Corporation, a Delaware corporation (the
"Company"), and the Initial Purchasers named in Schedule I hereto (the
"Initial Purchasers") have entered into that certain Purchase Agreement,
dated as of July 31, 1998 (the "Purchase Agreement"), pursuant to which the
Company proposes, subject to the terms and conditions stated therein, to
issue and sell to the Initial Purchasers an aggregate of $300,000,000
principal amount of the Senior Subordinated Notes of the Company specified
above (the "Securities"). The Company and the Initial Purchasers hereby
agree to amend the Purchase Agreement as provided below.
1. Schedule I to the Purchase Agreement is hereby amended and restated
in its entirety as set forth in Schedule I hereto. The Purchase Agreement
shall otherwise remain unchanged.
2. This Amendment to Purchase Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Initial Purchasers
plus one for each counsel counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Initial Purchasers, this letter and
such acceptance hereof shall constitute a binding agreement between each of
the Initial Purchasers and the Company. It is understood that your
acceptance of this Amendment to Purchase Agreement on behalf of each of the
Initial Purchasers is pursuant to the authority set forth in a form of
Agreement among Initial Purchasers, the form of which shall be submitted to
the Company for examination upon request, but without warranty on your part
as to the authority of the signers thereof.
Very truly yours,
LOEWS CINEPLEX
ENTERTAINMENT CORPORATION
By: /s/ John C. McBride, Jr.
------------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President
and General Counsel
Accepted as of the date hereof:
Goldman, Sachs & Co.,
BT Alex. Brown Incorporated,
Credit Suisse First Boston Corporation,
Salomon Brothers Inc
By: /s/ Goldman, Sachs & Co.
-------------------------------
(Goldman, Sachs & Co.)
<PAGE>
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
INITIAL PURCHASER PURCHASED
----------------- ---------
Goldman, Sachs & Co.................................. $150,000,000.00
BT Alex. Brown Incorporated.......................... 50,000,000.00
Credit Suisse First Boston Corporation............... 50,000,000.00
Salomon Brothers Inc................................. 50,000,000.00
Total....................... $300,000,000.00
===============
EXHIBIT 12.1
<TABLE>
<CAPTION>
LOEWS CINEPLEX ENTERTAINMENT
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands of dollars)
Actual Pro Forma Actual
Three months Three months Three months Pro Forma
ended ended ended Year ended Year ended Year ended Year ended Year ended Year ended
May 31, May 31, May 31, Feb. 28, Feb. 28, Feb. 28, Feb. 28, Feb. 28, Feb. 28,
1998 1998 1997 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-tax
income (loss
from
continuing
operations ($862) ($13,679) ($35) ($21,515) $2,612 $2,115 ($2,459) ($6,259) $1,168
Fixed
charges:
Interest
expense and
amortization
of debt
discount and
premium on
all
indebtedness 6,003 12,638 3,452 47,932 13,578 14,190 15,237 8,510 9,551
Rentals:
Buildings 224 443 235 1,840 928 971 1,018 1,074 1,129
--------- ---------- --------- --------- -------- -------- -------- -------- --------
Total fixed
charges 6,227 13,081 3,687 49,772 14,506 15,161 16,255 9,584 10,680
--------- ---------- --------- --------- -------- -------- -------- -------- --------
Earnings
before
income
taxes,
minority
interest
and fixed
charges $5,365 ($598) $3,652 $28,257 $17,118 $17,276 $13,796 $3,325 $11,848
========= ========== ========= ========== ======== ======== ========= ======== ========
Ratio of
earnings to
fixed
charges 0.86(1) (0.05)(1) 0.99(1) 0.57(1) 1.18 1.14 0.85(1) 0.35(1) 1.11
========= ========== ========= ========== ======== ======== ========= ======== ========
- --------------------------
<FN>
(1) Earnings did not cover fixed charges by $862, $13,679, $35, $21,515, $2,459 and $6,259 for the three months ended May 31,
1998, on a pro forma basis for the three months ended May 31, 1998, for the three months ended May 31, 1997, on a pro forma
basis for the year ended February 28, 1998 and for the years ended February 28, 1996 and 1995, respectively.
</FN>
</TABLE>
Exhibit 23.1
[LETTERHEAD OF KPMG]
The Board of Directors
Cineplex Odeon Corporation
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG
- ----------------------------
Toronto, Canada
September 28, 1998
Exhibit 23.2
[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
registration statement on Form S-4 of our report dated May 21, 1998 on the
financial statements of Loews Cineplex Entertainment Corporation and our
report dated April 15, 1998 on the financial statements of Loeks-Star
Partners, which appear in such Prospectus. We also consent to the
application of our report on the financial statements of Loews Cineplex
Entertainment Corporation to the Financial Statement Schedules for the three
years ended February 28, 1998 listed under Item 21 of this registration
statement when such schedules are read in conjunction with such report. The
audits referred to in our report on the financial statements of Loews
Cineplex Entertainment Corporation also included these schedules. We also
consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
New York, New York
September 29, 1998
Exhibit 25.1
- ---------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone
number of agent for service)
---------------------------------
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3386485
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
711 FIFTH AVENUE
11TH FLOOR
NEW YORK, NY 10022
(212) 833-6200
(Address, including zip code of principal executive offices)
8-7/8% SENIOR SUBORDINATED NOTES DUE 2008
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority
to which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3.- 15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-65171, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement, Registration
No. 333-25843 and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
June 19, 1997, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended
on November 18, 1997. Copy attached.
<PAGE>
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust Company
dated as of June 30, 1998. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New
York, on the 21th day of September, 1998.
BANKERS TRUST COMPANY
By: /s/ Susan Johnson
-----------------------------
Susan Johnson
Assistant Vice President
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER
SECTION 8005 OF THE BANKING LAW," dated June 19, 1997, providing for an
increase in authorized capital stock from $1,601,666,670 consisting of
100,166,667 shares with a par value of $10 each designated as Common Stock
and 600 shares with a par value of $1,000,000 each designated as Series
Preferred Stock to $2,001,666,670 consisting of 100,166,667 shares with a
par value of $10 each designated as Common Stock and 1,000 shares with a
par value of $1,000,000 each designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of
New York,
this 27TH day of June in the Year of our Lord one
thousand nine hundred and NINETY-SEVEN.
/s/ Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a
Managing Director and an Assistant Secretary of Bankers Trust Company, do
hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby
amended to increase the aggregate number of shares which the corporation
shall have authority to issue and to increase the amount of its authorized
capital stock in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is One Billion, Six Hundred and One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,601,666,670),
divided into One Hundred Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Two Billion One Million, Six Hundred Sixty-Six Thousand,
Six Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all
outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
/s/ James T. Byrne, Jr.
----------------------------
James T. Byrne, Jr.
Managing Director
/s/ Lea Lahtinen
----------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in
the foregoing certificate; that she has read the foregoing certificate and
knows the contents thereof, and that the statements herein contained are
true.
/s/ Lea Lahtinen
----------------------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
/s/ Sandra L. West
--------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
NOVEMBER 18, 1997
BANKERS TRUST COMPANY
NEW YORK
<PAGE>
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be
held at the office of the Company in the Borough of Manhattan, City of New
York, on the third Tuesday in January of each year, for the election of
directors and such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall
be the duty of the Chairman of the Board, the Chief Executive Officer or
the President to call such meetings whenever requested in writing to do so
by stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either
in person or by proxy, stockholders owning a majority of the capital stock
of the Company, in order to constitute a quorum, except at special
elections of directors, as provided by law, but less than a quorum shall
have power to adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief
Executive Officer or, in his absence, the President or, in their absence,
the senior officer present, shall preside at meetings of the stockholders
and shall direct the proceedings and the order of business. The Secretary
shall act as secretary of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate
powers exercised by a Board of Directors consisting of such number of
directors, but not less than ten nor more than twenty-five, as may from
time to time be fixed by resolution adopted by a majority of the directors
then in office, or by the stockholders. In the event of any increase in the
number of directors, additional directors may be elected within the
limitations so fixed, either by the stockholders or within the limitations
imposed by law, by a majority of directors then in office. One-third of the
number of directors, as fixed from time to time, shall constitute a quorum.
Any one or more members of the Board of Directors or any Committee thereof
may participate in a meeting of the Board of Directors or Committee thereof
by means of a conference telephone or similar communications equipment
which allows all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute presence in
person at such a meeting.
All directors hereafter elected shall hold office until the next annual
meeting of the stockholders and until their successors are elected and have
qualified. No person who shall have attained age 72 shall be eligible to be
elected or re-elected a director. Such director may, however, remain a
director of the Company until the next annual meeting of the stockholders
of Bankers Trust New York Corporation (the Company's parent) so that such
director's retirement will coincide with the retirement date from Bankers
Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes
his responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the
Board of Directors may be filled by the affirmative vote of a majority of
the directors then in office, and the directors so elected shall hold
office for the balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board
of Directors. In his absence, the Chief Executive Officer or, in his
absence, such other director as the Board of Directors from time to time
may designate shall preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for
the conduct of its meetings and the management of the affairs of the
Company as it may deem proper, not inconsistent with the laws of the State
of New York, or these By-Laws, and all officers and employees shall
strictly adhere to, and be bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from
time to time on the third Tuesday of the month. If the day appointed for
holding such regular meetings shall be a legal holiday, the regular meeting
to be held on such day shall be held on the next business day thereafter.
Special meetings of the Board of Directors may be called upon at least two
day's notice whenever it may be deemed proper by the Chairman of the Board
or, the Chief Executive Officer or, in their absence, by such other
director as the Board of Directors may have designated pursuant to Section
3 of this Article, and shall be called upon like notice whenever any three
of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of
committees shall be fixed from time to time by resolution of the Board of
Directors.
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of
not less than five directors who shall be appointed annually by the Board
of Directors. The Chairman of the Board shall preside at meetings of the
Executive Committee. In his absence, the Chief Executive Officer or, in his
absence, such other member of the Committee as the Committee from time to
time may designate shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted
by law all of the powers of the Board of Directors, except when the latter
is in session, and shall keep minutes of its proceedings, which shall be
presented to the Board of Directors at its next subsequent meeting. All
acts done and powers and authority conferred by the Executive Committee
from time to time shall be and be deemed to be, and may be certified as
being, the act and under the authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee
may act only by the concurrent vote of not less than one-third of its
members, at least one of whom must be a director other than an officer. Any
one or more directors, even though not members of the Executive Committee,
may attend any meeting of the Committee, and the member or members of the
Committee present, even though less than a quorum, may designate any one or
more of such directors as a substitute or substitutes for any absent member
or members of the Committee, and each such substitute or substitutes shall
be counted for quorum, voting, and all other purposes as a member or
members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by
resolution adopted by a majority of the entire Board of Directors which
shall consist of such number of directors, who are not also officers of the
Company, as may from time to time be fixed by resolution adopted by the
Board of Directors. The Chairman shall be designated by the Board of
Directors, who shall also from time to time fix a quorum for meetings of
the Committee. Such Committee shall conduct the annual directors'
examinations of the Company as required by the New York State Banking Law;
shall review the reports of all examinations made of the Company by public
authorities and report thereon to the Board of Directors; and shall report
to the Board of Directors such other matters as it deems advisable with
respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain,
from time to time, expert assistants, independent of the officers or
personnel of the Company, to make studies of the Company's assets and
liabilities as the Committee may request and to make an examination of the
accounting and auditing methods of the Company and its system of internal
protective controls to the extent considered necessary or advisable in
order to determine that the operations of the Company, including its
fiduciary departments, are being audited by the General Auditor in such a
manner as to provide prudent and adequate protection. The Committee also
may direct the General Auditor to make such investigation as it deems
necessary or advisable with respect to the Company, its various departments
and the conduct of its operations. The Committee shall hold regular
quarterly meetings and during the intervals thereof shall meet at other
times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or
continue the powers and duties of such Committees. Each Committee appointed
pursuant to this Article shall serve at the pleasure of the Board of
Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice
Chairmen, one or more Executive Vice Presidents, one or more Senior
Managing Directors, one or more Managing Directors, one or more Senior Vice
Presidents, one or more Principals, one or more Vice Presidents, one or
more General Managers, a Secretary, a Controller, a Treasurer, a General
Counsel, one or more Associate General Counsels, a General Auditor, a
General Credit Auditor, and one or more Deputy Auditors, who need not be
directors. The officers of the corporation may also include such other
officers or assistant officers as shall from time to time be elected or
appointed by the Board. The Chairman of the Board or the Chief Executive
Officer or, in their absence, the President, the Senior Vice Chairman or
any Vice Chairman, may from time to time appoint assistant officers. All
officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence,
the President, the Senior Vice Chairman or any Vice Chairman. The Board of
Directors may require any and all officers and employees to give security
for the faithful performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive
Officer of the Company who may also hold the additional title of Chairman
of the Board, President, Senior Vice Chairman or Vice Chairman and such
person shall have, subject to the supervision and direction of the Board of
Directors or the Executive Committee, all of the powers vested in such
Chief Executive Officer by law or by these By-Laws, or which usually attach
or pertain to such office. The other officers shall have, subject to the
supervision and direction of the Board of Directors or the Executive
Committee or the Chairman of the Board or, the Chief Executive Officer, the
powers vested by law or by these By-Laws in them as holders of their
respective offices and, in addition, shall perform such other duties as
shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to
the Board of Directors for the determination of the program of the internal
audit function and the evaluation of the adequacy of the system of internal
controls. Subject to the Board of Directors, the General Auditor shall have
and may exercise all the powers and shall perform all the duties usual to
such office and shall have such other powers as may be prescribed or
assigned to him from time to time by the Board of Directors or vested in
him by law or by these By-Laws. He shall perform such other duties and
shall make such investigations, examinations and reports as may be
prescribed or required by the Audit Committee. The General Auditor shall
have unrestricted access to all records and premises of the Company and
shall delegate such authority to his subordinates. He shall have the duty
to report to the Audit Committee on all matters concerning the internal
audit program and the adequacy of the system of internal controls of the
Company which he deems advisable or which the Audit Committee may request.
Additionally, the General Auditor shall have the duty of reporting
independently of all officers of the Company to the Audit Committee at
least quarterly on any matters concerning the internal audit program and
the adequacy of the system of internal controls of the Company that should
be brought to the attention of the directors except those matters
responsibility for which has been vested in the General Credit Auditor.
Should the General Auditor deem any matter to be of special immediate
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive
Officer and, through the Audit Committee, to the Board of Directors for the
systems of internal credit audit, shall perform such other duties as the
Chief Executive Officer may prescribe, and shall make such examinations and
reports as may be required by the Audit Committee. The General Credit
Auditor shall have unrestricted access to all records and may delegate such
authority to subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan
or plans of position evaluation and salary administration as shall be
approved from time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of
the Board, the Chief Executive Officer or any person authorized for this
purpose by the Chief Executive Officer, shall appoint or engage all other
employees and agents and fix their compensation. The employment of all such
employees and agents shall continue during the pleasure of the Board of
Directors or the Executive Committee or the Chairman of the Board or the
Chief Executive Officer or any such authorized person; and the Board of
Directors, the Executive Committee, the Chairman of the Board, the Chief
Executive Officer or any such authorized person may discharge any such
employees and agents at will.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section
7018 of the New York Banking Law, indemnify any person who is or was made,
or threatened to be made, a party to an action or proceeding, whether civil
or criminal, whether involving any actual or alleged breach of duty,
neglect or error, any accountability, or any actual or alleged
misstatement, misleading statement or other act or omission and whether
brought or threatened in any court or administrative or legislative body or
agency, including an action by or in the right of the Company to procure a
judgment in its favor and an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise, which any
director or officer of the Company is servicing or served in any capacity
at the request of the Company by reason of the fact that he, his testator
or intestate, is or was a director or officer of the Company, or is serving
or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement, and costs, charges and
expenses, including attorneys' fees, or any appeal therein; provided,
however, that no indemnification shall be provided to any such person if a
judgment or other final adjudication adverse to the director or officer
establishes that (i) his acts were committed in bad faith or were the
result of active and deliberate dishonesty and, in either case, were
material to the cause of action so adjudicated, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company
is permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided
by, the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement
providing for such indemnification, it being expressly intended that these
By-Laws authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to
any person referred to in Section 1 the funds necessary for payment of
expenses, including attorneys' fees, incurred in connection with any action
or proceeding referred to in Section 1, upon receipt of a written
undertaking by or on behalf of such person to repay such amount(s) if a
judgment or other final adjudication adverse to the director or officer
establishes that (i) his acts were committed in bad faith or were the
result of active and deliberate dishonesty and, in either case, were
material to the cause of action so adjudicated, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the
election of its directors is held by the Company, or (ii) any employee
benefit plan of the Company or any corporation referred to in clause (i) in
any capacity shall be deemed to be doing so at the request of the Company.
In all other cases, the provisions of this Article V will apply (i) only if
the person serving another corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise so served at the specific
request of the Company, evidenced by a written communication signed by the
Chairman of the Board, the Chief Executive Officer or the President, and
(ii) only if and to the extent that, after making such efforts as the
Chairman of the Board, the Chief Executive Officer or the President shall
deem adequate in the circumstances, such person shall be unable to obtain
indemnification from such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding,
to the extent permitted by law, or on the basis of the applicable law in
effect at the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or
advancement of expense pursuant to this Article V (i) is a contract right
pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
Company and the director or officer, (ii) is intended to be retroactive and
shall be available with respect to events occurring prior to the adoption
hereof, and (iii) shall continue to exist after the rescission or
restrictive modification hereof with respect to events occurring prior
thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company,
the claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled also to be paid the expenses of
prosecuting such claim. Neither the failure of the Company (including its
Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of or reimbursement or advancement of expenses to the
claimant is proper in the circumstance, nor an actual determination by the
Company (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant is not entitled to indemnification or
to the reimbursement or advancement of expenses, shall be a defense to the
action or create a presumption that the claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 1 shall be entitled to indemnification only as
provided in Sections 1 and 3, notwithstanding any provision of the New York
Banking Law to the contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the
Company and such officers as the Chairman of the Board, the Chief Executive
Officer or the Secretary may from time to time direct in writing, to be
affixed to certificates of stock and other documents in accordance with the
directions of the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a
specified occasion and for a specified transaction or transactions, for the
use of a printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the
books of the Company by the registered holder in person, or by power of
attorney, duly executed, witnessed and filed with the Secretary or other
proper officer of the Company, on the surrender of the certificate or
certificates of such shares properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board
of Directors at any meeting, or by the stockholders at any annual or
special meeting, provided notice thereof has been given.
<PAGE>
I, Susan Johnson, Assistant Vice President of Bankers Trust Company, New
York, New York, hereby certify that the foregoing is a complete, true and
correct copy of the By-Laws of Bankers Trust Company, and that the same are
in full force and effect at this date.
/s/ Susan Johnson
------------------------
ASSISTANT VICE PRESIDENT
DATED: September 21, 1998
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of
the quarter.
<TABLE>
<CAPTION>
SCHEDULE RC--BALANCE SHEET
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions
(from Schedule RC-A):
a. Noninterest-bearing balances and currency and
coin (FN1).................................................. 0081 1,868,000 1.a.
b. Interest-bearing balances (FN2)............................. 0071 2,041,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B,
column A) .................................................. 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B,
column D)................................................... 1773 7,419,000 2.b.
3. Federal funds sold and securities purchased under
agreements to resell........................................... 1350 41,837,000 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)........................................ RCFD 2122 20,707,000 4.a.
b. LESS: Allowance for loan and lease losses................... RCFD 3123 629,000 4.b.
c. LESS: Allocated transfer risk reserve ...................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)......... 2125 20,078,000 4.d.
5. Trading Assets (from schedule RC-D)............................ 3545 49,665,000 5.
6. Premises and fixed assets (including capitalized leases)....... 2145 848,000 6.
7. Other real estate owned (from Schedule RC-M)................... 2150 180,000 7.
8. Investments in unconsolidated subsidiaries
and associated companies (from Schedule RC-M).................. 2130 92,000 8.
9. Customers' liability to this bank on acceptances
outstanding.................................................... 2155 512,000 9.
10. Intangible assets (from Schedule RC-M)......................... 2143 270,000 10.
11. Other assets (from Schedule RC-F).............................. 2160 6,442,000 11.
12. Total assets (sum of items 1 through 11)....................... 2170 131,252,000 12.
- --------------------------
<FN>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</FN>
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns
A and C from Schedule RC-E, part I)........................ RCON 2200 26,791,000 13.a.
(1) Noninterest-bearing(FN1) .............................. RCON 6631 3,362,000 13.a.(FN1)
(2) Interest-bearing....................................... RCON 6636 23,429,000 13.a.(FN2)
b. In foreign offices, Edge and Agreement subsidiaries,
and IBFs (from Schedule RC-E part II)...................... RCFN 2200 22,089,000 13.b.
(1) Noninterest-bearing.................................... RCFN 6631 1,810,000 13.b.(FN1)
(2) Interest-bearing....................................... RCFN 6636 20,279,000 13.b.(FN2)
14. Federal funds purchased and securities sold under
agreements to repurchase...................................... RCFD 2800 19,274,000 14.
15. a. Demand notes issued to the U.S. Treasury .................. RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D)................... RCFD 3548 30,729,000 15.b.
16. Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
a. With a remaining maturity of one year or less.............. RCFD 2332 7,891,000 16.a.
b. With a remaining maturity of more than one year
through three years........................................ A547 3,576,000 16.b.
c. With a remaining maturity of more than three years......... A548 2,872,000 16.c.
17. Not Applicable 17.
18. Bank's liability on acceptances executed and outstanding...... RCFD 2920 512,000 18.
19. Subordinated notes and debentures (FN2)....................... RCFD 3200 1,534,000 19.
20. Other liabilities (from Schedule RC-G)........................ RCFD 2930 9,202,000 20.
21. Total liabilities (sum of items 13 through 20)................ RCFD 2948 124,470,000 21.
22. Not Applicable 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................. RCFD 3838 1,000,000 23.
24. Common stock.................................................. RCFD 3230 2,001,000 24.
25. Surplus (exclude all surplus related to preferred stock)...... RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves..................... RCFD 3632 3,693,000 26.a.
b. Net unrealized holding gains (losses) on available-
for-sale securities........................................ RCFD 8434 ( 71,000) 26.b.
27. Cumulative foreign currency translation adjustments........... RCFD 3284 ( 381,000) 27.
28. Total equity capital (sum of items 23 through 27)............. RCFD 3210 6,782,000 28.
29. Total liabilities and equity capital (sum of items 21
and 28)....................................................... RCFD 3300 131,252,000 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most Number
comprehensive level of auditing work performed for ------
the bank by independent external auditors as of
any date during 1997............................... RCFD 6724 N/A M.1
1= Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2= Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3= Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4= Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5= Review of the bank's financial statements by external auditors
6= Compilation of the bank's financial statements by external auditors
7= Other audit procedures (excluding tax preparation work)
8= No external audit work
- ----------------------
<FN>
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</FN>
</TABLE>
Exhibit 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______________, 1998 (THE "EXPIRATION DATE"), UNLESS
EXTENDED BY LOEWS CINEPLEX ENTERTAINMENT CORPORATION
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON ______________, 1998, UNLESS EXTENDED.
AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER
ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER
EXCHANGE AGENT:
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
By Hand: By Overnight Delivery: By Mail: Facsimile Transmission:
(for eligible institutions only)
<S> <C> <C> <C>
Bankers Trust Company BT Services Tennessee, Inc. BT Services Tennessee, Inc. (615) 835-3572
Receipt and Delivery Windows Reorganization Unit Reorganization Unit Confirm Receipt of Facsimile
123 Washington Street, 1st Floor 648 Grassmer Park Road P.O. Box 292737 by Telephone
New York, New York 10006 Nashville, Tennessee 37211 Nashville, Tennessee 37229-2737 (615) 835-3701
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE
TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated
__________, 1998 (the "Prospectus"), of Loews Cineplex Entertainment
Corporation (the "Company") which, together with this Letter of Transmittal
(the "Letter of Transmittal"), constitute the Company's offer (the
"Exchange Offer) to exchange U.S. $1,000 principal amount of a new series
of 8 7/8% Senior Subordinated Notes Due 2008 (the "New Notes") of the
Company for each U.S. $1,000 principal amount of outstanding 8 7/8% Senior
Subordinated Notes Due 2008 (the "Old Notes") of the Company. The terms of
the New Notes are identical in all material respects (including principal
amount, interest rate and maturity) to the terms of the Old Notes for which
they may be exchanged pursuant to the Exchange Offer, except that (i) the
New Notes will have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and, therefore, will not bear legends
restricting the transfer thereof and (ii) holders of the New Notes will not
be entitled to certain rights of holders of the Old Notes under an exchange
and registration rights agreement which will terminate upon consummation of
the Exchange Offer. Following the consummation of the Exchange Offer,
neither the Old Notes nor the New Notes will be entitled to the contingent
increase in interest rate provided pursuant to the indenture governing the
Old Notes and the New Notes (the "Indenture"), and the Old Notes. Following
the consummation of the Exchange Offer, holders of Old Notes and New Notes
will not have any further registration rights, and the Old Notes will
continue to be subject to certain restrictions on transfer.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED, QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT.
HOLDERS (AS DEFINED BELOW) WHO WISH TO BE ELIGIBLE TO RECEIVE NEW
NOTES FOR THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY
TENDER (AND NOT WITHDRAW) THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO
THE EXPIRATION DATE.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule affixed
hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBER(S) BY OLD NOTES TENDERED*
---------------- ----------- -------------------- ----------------
TOTAL
-----
* Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by the Old Notes. See
Instruction 2.
This Letter of Transmittal is to be used by Holders if certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders. If tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at the Depository Trust Company
("DTC") through the DTC Automated Tender Offer Program ("ATOP"), such
tender may be made by transmission of an Agent's Message pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer -
Procedures for Tendering Old Notes" by any financial institution that is a
participant in DTC and whose name appears on a security position listing as
the owner of Old Notes (such participants, acting on behalf of Holders are
referred to herein, together with such Holders, as "Acting Holders"). See
Instruction 1. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
Unless the context requires otherwise, the term "Holder" for purposes
of this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond
power from the registered holder.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the
Exchange Agent on or prior to 5:00 p.m. on the Expiration Date may tender
their Old Notes according to the guaranteed delivery procedure set forth in
the Prospectus under the caption "The Exchange Offer--Terms of the Exchange
Offer--Guaranteed Delivery Procedures."
[] CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED
HEREWITH.
[] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):___________________________________
Name of Eligible Institution that Guaranteed Delivery:__________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:_________________________________________________
Transaction Code Number:________________________________________
[] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:___________________________________________________________
Address:________________________________________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the above-described principal
amount of Old Notes. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge
that said Exchange Agent acts as the agent of the Company and as Trustee
under the Indenture) with respect to such Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates representing
such Old Notes, and to deliver all accompanying evidence of transfer and
authenticity to or upon the order of the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to which the
undersigned is entitled upon the acceptance by the Company of such Old
Notes for exchange pursuant to the Exchange Offer, (b) receive all benefits
and otherwise to exercise all rights of beneficial ownership of such Old
Notes, all in accordance with the terms of the Exchange Offer, and (c)
present such Old Notes for transfer on the register for such Old Notes. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire New
Notes issuable upon the exchange of such tendered Old Notes, and that, when
the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Old Notes or to transfer ownership of such Old
Notes on the account books maintained by DTC.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than broker-dealers, as set
forth below, and any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act provided that such New Notes are acquired in the ordinary course of
such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
New Notes.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer--Conditions of the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company) as
more particularly set forth in the Prospectus, the Company may not be
required to exchange any of the Old Notes tendered hereby and, in such
event, the Old Notes not exchanged will be returned to the undersigned at
the address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to the Company that
(i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is such Holder, (ii) neither the
Holder of Old Notes nor any such other person is participating in, intends
to participate in or has an arrangement or understanding with any person to
participate in, the distribution of such New Notes, (iii) if the Holder is
not a broker-dealer or is a broker-dealer but will not receive New Notes
for its own account in exchange for Old Notes, neither the Holder nor any
such other person is engaged in or intends to participate in a distribution
of the New Notes and (iv) neither the Holder nor any such other person is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act. If the tendering Holder tenders Old Notes with the
intention of participating, or for the purpose of participating, in the
distribution of the New Notes, it acknowledges that it may not rely upon
certain interpretations by the staff of the SEC described in the Exchange
Offer, and that, in the absence of an exemption therefrom, it must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction, and any
such secondary resale transaction must be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act. If the
tendering Holder is a broker-dealer (whether or not it is also an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) that will receive New Notes for its own account in exchange
for Old Notes, it represents that the Old Notes to be exchanged for the New
Notes were acquired by it as a result of market-making activities or other
trading activities, and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, the undersigned is not deemed
to admit that it is an "underwriter" within the meaning of the Securities
Act.
The undersigned acknowledges that prior to this Exchange Offer, there
has been no public market for the Old Notes or the New Notes. If a market
for the New Notes should develop, the New Notes could trade at a discount
from their principal amount. The undersigned is aware that the Company does
not intend to list the New Notes on a national securities exchange and that
there can be no assurance that an active market for the New Notes will
develop.
The undersigned understands and acknowledges that the Company reserves
the right, in its sole discretion, to purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or to
terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers will
differ from the terms of the Exchange Offer.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned and every obligation
of the undersigned hereunder shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees
in bankruptcy and other legal representatives of the undersigned. Tendered
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time on __________, 1998 or on such later date or time to which the Company
may extend the Exchange Offer (the "Expiration Date").
The undersigned understands that tenders of the Old Notes pursuant to
any one of the procedures described in the Prospectus under the caption
"The Exchange Offer - Procedures for Tendering Old Notes" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company in accordance with the terms and subject to the
conditions of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to
one of the procedures described in the Prospectus and the instructions
thereto, the tendering holder will be deemed to have waived the right to
receive any payment in respect of interest on the Old Notes accrued up to
the date of issuance of the New Notes.
The undersigned recognizes that, under certain circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange
any of the Old Notes tendered. Old Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth
below unless otherwise indicated under "Special Delivery Instructions"
below.
Unless otherwise indicated herein under the box entitled "Special
Issuance Instructions" below, New Notes, and Old Notes not validly tendered
or accepted for exchange, will be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, New Notes, and Old Notes not validly tendered
or accepted for exchange, will be delivered to the undersigned at the
address shown below the signature of the undersigned. The undersigned
recognizes that the Company has no obligation pursuant to the "Special
Issuance Instructions" to transfer any Old Notes from the name of the
registered holder thereof if the Company does not accept for exchange any
of the principal amount of such Old Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be resolved by the
Company, whose determination will be final and binding. The Company
reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which may, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the absolute right to
waive any condition to the Exchange Offer and any irregularities or
conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding.
Unless waived, any irregularities in connection with tenders must be cured
within such time as the Company shall determine. The Company and the
Exchange Agent shall not be under any duty to give notification of defects
in such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made
until such irregularities have been cured or waived.
<PAGE>
TENDERING HOLDER(S) SIGN HERE
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _______________, 1998
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith. If
signature by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth the full title of
such person.) See Instruction 3.
Name (s):__________________________________________________________________
(PLEASE PRINT)
Capacity (full title): ____________________________________________________
Address:___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.:_______________________________________________
TAX IDENTIFICATION NO.
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTION 3)
Authorized Signature: _____________________________________________________
Name:______________________________________________________________________
Title:_____________________________________________________________________
Address:___________________________________________________________________
Name of Firm:______________________________________________________________
Area Code and Telephone No.:_______________________________________________
Dated: _____________, 1998
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes in a principal amount for Old Notes in a principal amount
not tendered, or New Notes are to be not tendered, or New Notes, are to be
issued in the name of someone other delivered to someone other than the
than the person whose signature person whose signature appears in Box
appears in Box 2. 2 or to an address other than that
shown in Box 1.
Issue and deliver: Deliver:
(check appropriate boxes) (check appropriate boxes)
[] Old Notes not tendered [] Old Notes not tendered
[] New Notes, to: [] New Notes, to:
Name________________________________ Name_________________________________
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
Please complete the Substitute form Address______________________________
W-9 at Box 3
_____________________________________
Tax I.D. or Social Security Number:__
- ------------------------------------- -------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Old Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at any of its addresses set forth
herein on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY
MAIL IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ASSUME DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. THIS
LETTER OF TRANSMITTAL AND THE OLD NOTES SHOULD NOT BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes
pursuant to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer -- Terms of the Exchange Offer --
Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution (as defined in
the Prospectus); (ii) on or prior to the Expiration Date, the Exchange
Agent must have received from such Eligible Institution a letter, telex,
telegram, Agent's Message or facsimile transmission setting forth the name
and address of the tendering Holder, the name(s) in which such Old Notes
are registered, and the certificate numbers of the Old Notes to be
tendered; and (iii) all tendered Old Notes as well as this Letter of
Transmittal and all other documents required by this Letter of Transmittal
must be received by the Exchange Agent within three business days after the
date of execution of such letter, telex, telegram, Agent's Message or
facsimile transmissions, all as provided in the Prospectus under the
caption "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
2.PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted
in denominations of U.S. $1,000 and integral multiples in excess thereof.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the box entitled "Principal Amount Tendered."
A newly issued certificate for the principal amount of Old Notes submitted
but not tendered will be sent to such Holder as soon as practicable after
the Expiration Date. All Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. To be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Any such notice of withdrawal must specify the person named in the
Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers and designation of the Old Notes to be withdrawn, the
principal amount of Old Notes delivered for exchange, a statement that such
a Holder is withdrawing its election to have such Old Notes exchanged, and
the name of the registered Holder of such Old Notes, and must be signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Company that the person withdrawing the
tender has succeeded to the beneficial ownership of the Old Notes being
withdrawn. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility. All questions as
to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. The Exchange Agent will return the
properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. Properly withdrawn Old Notes may be retendered by following one
of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering Old Notes" at any time prior to
the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of
certificates without alteration, enlargement or change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies
of this Letter of Transmittal as there are different registrations of Old
Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must
be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered Holder or Holders, in either case signed exactly as the name or
names of the registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons
should so indicate when signing, and, unless waived by the Company, proper
evidence satisfactory to the Company of their authority so to act must be
submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a
registered Holder of such Old Notes; or (ii) for the account of any
Eligible Institution.
4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for principal
amounts not tendered or accepted for exchange, are to be delivered to, or
are to be issued in the name of, any person other than the registered
Holder of the Old Notes tendered hereby, or if a transfer tax is imposed
for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Holder or any other person) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer
taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
7. SUBSTITUTE FORM W-9. Each tendering Holder (or other payee) is
required to provide the Company with a correct taxpayer identification
number ("TIN"), generally the Holder's Social Security or federal employer
identification number, and with certain other information, on Substitute
Form W-9, which is provided under "Important Tax Information" below, and to
certify that the Holder (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9
may subject the tendering Holder (or other payee) to a $50 penalty imposed
by the Internal Revenue Service and 31% federal income tax backup
withholding on any payment. The box in Part 3 of the Substitute Form W-9
may be checked if the tendering Holder (or other payee) has not been issued
a TIN and has applied for a TIN or intends to apply for a TIN in the near
future. If the box in Part 3 is checked and the Company is not provided
with a TIN by the time of payment, if any, the Company will withhold 31% on
all such payments, if any, until a TIN is provided to the Company.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of
the Prospectus and this Letter of Transmittal, may be directed to the
Exchange Agent at the address and telephone number set forth above. In
addition, all questions relating to the Exchange Offer, as well as requests
for assistance or additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Exchange Agent at the address specified
in the Prospectus.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO 5:00 P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Federal income tax law of the United States requires that a holder of
Old Notes whose Old Notes are accepted for exchange provide the Company
with the holder's correct taxpayer identification number, which, in the
case of a holder who is an individual, is his or her social security
number, or otherwise establish an exemption from backup withholding. If the
Company is not provided with the correct taxpayer identification number,
the exchange holder of Old Notes may be subject to a $50 penalty imposed by
the Internal Revenue Service (the "IRS"). In addition, interest on the New
Notes acquired pursuant to the Exchange Offer may be subject to backup
withholding in an amount equal to 31% of any interest payment. If
withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, an exchanging holder of Old Notes must
provide his correct TIN by completing the Substitute Form W-9 provided in
this Letter of Transmittal, certifying that the TIN provided is correct (or
that the exchanging holder of Old Notes is awaiting a TIN) and that either
(a) the exchanging holder has not yet been notified by the IRS that such
holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder
that such holder is no longer subject to backup withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt
holders other than foreign individuals (e.g., corporations) should certify
to such exempt status on the Substitute Form W-9 provided in this Letter of
Transmittal. Foreign individuals should complete and provide Form W-8 to
indicate their foreign status.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any payment made to a Holder or other
payee with respect to the Old Notes, the Holder is required to notify the
Company of the Holder's current TIN (or the TIN of any other payee) by
completing the form below, certifying that the TIN provided on Substitute
Form W-9 is correct (or that such Holder is awaiting a TIN), and that (i)
the Holder has not been notified by the IRS that the Holder is subject to
backup withholding as a result of failure to report all interest or
dividends or (ii) the IRS has notified the Holder that the Holder is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Holder is required to give the Company the TIN (e.g., Social
Security number or Employer Identification Number) of the registered owner
of the Old Notes. If the Old Notes are registered in more than one name or
are not registered in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
<PAGE>
PAYER'S NAME: LOEWS CINEPLEX ENTERTAINMENT CORPORATION
------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN _______________
SUBSTITUTE THE BOX AT RIGHT AND CERTIFY BY Social Security
FORM W-9 SIGNING AND DATING BELOW. Number(s)
OR_____________
Employer
Identification
Number(s)
DEPARTMENT OF PART 2-- PART 3--
THE TREASURY CERTIFICATION -- Under Penalties of Check if
INTERNAL REVENUE Perjury, I certify that: awaiting TIN
SERVICE (1) The number shown on this [] form
is my correct taxpayer identification [_]
number (or I am waiting for a number
to be issued for me), and
(2) I am not subject to backup
withholding because: (a) I am exempt
from backup withholding, or (b) I
have not been notified by the
Internal Revenue Service (IRS) that I
am subject to backup withholding as a
result of a failure to report all
interest or dividends, or (c) the IRS
has notified me that I am no longer
subject to backup withholding.
PAYER'S REQUEST CERTIFICATION INSTRUCTIONS -- You must cross out item
FOR TAXPAYER (2) above if you have been notified by the IRS that you
IDENTIFICATION are currently subject to backup withholding because of
NUMBER ("TIN") underreporting interest or dividends on your tax return.
AND
CERTIFICATIONS Name_________________________________
Address______________________________
(include zip code)
SIGNATURE ___________________________ DATE_______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50
PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable cash
payments made to me thereafter will be withheld until I provide a taxpayer
identification number to the payer and that, if I do not provide my
taxpayer identification number within sixty days, such retained amounts
shall be remitted to the IRS as backup withholding.
SIGNATURE _________________________________ DATE ______________________
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer Identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer.
<TABLE>
<CAPTION>
For this type of account: Give the For this type of account: Give the EMPLOYER
SOCIAL SECURITY IDENTIFICATION
number of-- number of--
- --------------------------- ------------------------------- ------------------------------- ------------------------------
<S> <C> <C> <C>
1. Individual The individual 8. Sole proprietorship account The owner(4)
2. Two or more individuals The actual owner of the 9. A valid trust, estate, or Legal entity (Do not
(joint account) account or, if combined funds, pension trust furnish the identifying
the first individual on the number of the personal
account(1) representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
3. Husband and wife (joint The actual owner of the 10. Corporate The corporation
account) account or, if joint funds,
the first individual on the
account(FN1)
4. Custodian account of a The minor(FN2) 11. Religious, charitable, or The organization
minor (Uniform Gift to educational organization
Minors Act)
5. Adult and minor (joint The adult or, if the minor is 12. Partnership held in the The partnership
account) the only contributor, the name of the business
minor(FN1)
6. Account in the name of The ward, minor, or 13. Association, club or other The organization
guardian or committee incompetent person(FN3) tax-exempt organization
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(FN1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also
trustee)
b. So-called trust The actual owner(FN1) 15. Account with the The public entity
account that is not a Department of Agriculture
legal or valid trust in the name of a public
under State law entity (such as a State or
local government, school
district or prison) that
receives agricultural
program payments.
- -------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
If only one person on a joint account has a social security number,
that person's social security number must be furnished.
(2) Circle the minor's name and furnish the minor's social security
number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) You must show your individual name, but you may also enter your
business or "doing business as" name. You may use either your social
security number or your employer identification number (if you have
one).
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
</FN>
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue
Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
. A corporation
. A financial institution
. An organization exempt from tax under section 501(a),* an individual
retirement plan or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, The District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
. An international organization or any agency or instrumentality
thereof.
. A registered dealer in securities or commodities registered in the
U.S., the District of Columbia or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section
1441.
. Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
. Payments of patronage dividends where the amount renewed is not paid
in money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
. Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $6.00 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Note: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or
business and you have not provided your correct taxpayer
identification number to the payer.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and their regulations.
PRIVACY ACT NOTICE-Section 6109 requires most recipients of dividend,
interest, or other payments to give their correct taxpayer identification
numbers to payers who must report the payments to IRS. The IRS uses the
numbers for identification purposes and to help verify the accuracy of tax
returns. The IRS may also provide this information to the Department of
Justice for civil and criminal litigation and to cities, states and the
District of Columbia to carry out their tax laws. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
(4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS.--If the requester discloses
or uses taxpayer identification numbers in violation of federal law, the
requester may be subject to civil and criminal penalties.
- -------------------
* Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended.
Exhibit 99.2
LOEWS CINEPLEX ENTERTAINMENT
CORPORATION
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER FOR ALL OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 1998, UNLESS EXTENDED.
AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER
ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER
Registered holders of outstanding 8 7/8% Senior Subordinated Notes Due
2008 (the "Old Notes") of Loews Cineplex Entertainment Corporation (the
"Company") who wish to tender their Old Notes in exchange (the "Exchange
Offer") for a like principal amount of 8 7/8% Senior Subordinated Notes Due
2008 (the "New Notes") of the Company and whose Old Notes are not
immediately available or who cannot deliver their Old Notes and Letter of
Transmittal (the "Letter of Transmittal") (and any other documents required
by the Letter of Transmittal) to The Bank of New York (the "Exchange
Agent"), on or prior to 5:00 p.m., New York City time on the Expiration
Date (the "Expiration Date"), may use this Notice of Guaranteed Delivery or
one substantially equivalent hereto. This Notice of Guaranteed Delivery may
be delivered by hand or sent by facsimile transmission (receipt confirmed
by telephone and an original delivered by guaranteed overnight delivery) or
mail to the Exchange Agent. See "The Exchange Offer -- Terms of the
Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus (the
"Prospectus").
The Exchange Agent for the Exchange Offer is:
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
By Hand: By Overnight Delivery: By Mail: Facsimile Transmission:
(for eligible institutions only)
<S> <C> <C> <C>
Bankers Trust Company BT Services Tennessee, Inc. BT Services Tennessee, Inc. (615) 835-3572
Receipt and Delivery Windows Reorganization Unit Reorganization Unit Confirm Receipt of
123 Washington Street, 1st Floor 648 Grassmer Park Road P.O. Box 292737 Facsimile by Telephone
New York, New York 10006 Nashville, Tennessee 37211 Nashville, Tennessee 37229-2737 (615) 835-3701
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute
a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear
in the applicable space provided on the Letter of Transmittal for Guarantee
of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer - Terms of the Exchange Offer - Guaranteed Delivery
Procedures."
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to U.S. $1,000 or integral multiples
thereof. The undersigned understands that tenders of Old Notes pursuant to
the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time
on the Expiration Date. Tenders of Old Notes may also be withdrawn if the
Exchange Offer is terminated without any such Old Notes being purchased
thereunder or as otherwise provided in the Prospectus under the caption
"The Exchange Offer - Terms of the Exchange Offer - Withdrawal of Tenders
of Old Notes."
Subject to and effective upon acceptance for exchange of the Old Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to,
and any and all claims in respect of or arising or having arisen as a
result of the undersigned's status as a holder of, all Old Notes tendered
hereby. In the event of a termination of the Exchange Offer, the Old Notes
tendered pursuant thereto will be returned promptly to the tendering Old
Note holder.
The undersigned hereby represents and warrants that the undersigned
accepts the terms and conditions of the Prospectus and the Letter of
Transmittal, has full power and conditions of the Prospectus and the Letter
of Transmittal, has full power and authority to tender, sell, assign and
transfer the Old Notes tendered hereby and that the Company will acquire
good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
Old Notes tendered.
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees
in bankruptcy and other legal representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Name(s) of Registered Holder(s):
Owner(s) or Authorized Signatory:
_________________________________ ____________________________________
_________________________________ ____________________________________
_________________________________ ____________________________________
Principal Amount of Old Notes Address:____________________________
Tendered:________________________ ____________________________________
Certificate No.(s) of Old Notes Area Code and Telephone No.:________
(if available):__________________
_________________________________ Date:_______________________________
If Old Notes will be delivered by
book-entry transfer at the Depository
Trust Company, insert Depository
Account No.:________________________
<PAGE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on
certificates for Old Notes or on a security position listing as the owner
of Old Notes, or by person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed
Delivery. If a signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary
or such representative capacity, such person must provide the following
information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _________________________________________________________________
_________________________________________________________________
Capacity: _________________________________________________________________
Address(es):_______________________________________________________________
_______________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States or an "eligible guarantor institution" as defined by Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby (a) represents that each holder of Old Notes on
whose behalf this tender is being made "own(s)" the Old Notes covered
hereby within the meaning of Rule 14e-4 under the Exchange Act, (b)
represents that such tender of Old Notes complies with such Rule 14e-4, and
(c) guarantees that, within three business days from the date of this
Notice of Guaranteed Delivery, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), together with certificates
representing the Old Notes covered hereby in proper form for transfer and
required documents, will be deposited by the undersigned with the Exchange
Agent.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE
TIME SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL
LOSS TO THE UNDERSIGNED.
Name of Firm:_____________________ Authorized Signature:_______________
Address:__________________________
__________________________________ Name:_______________________________
Area Code and Telephone No.:______ Title:______________________________
__________________________________ Date:_______________________________
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL.
