<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-------------
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 1998
Commission file number 001-14099
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(formerly LTM Holdings, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 13-3386485
- --------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
711 Fifth Avenue
New York, New York 10022
- ---------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 833-6200
Securities registered pursuant
to Section 12 (b) of the Act: Common Stock, par value $.01 per share
Securities registered pursuant
to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X ]
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant was $107,985,863 as of May 15, 1998.
The number of shares of common stock, $.01 par value per share, outstanding on
May 15, 1998 was 44,079,296.
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 4
Strategy 5
Synergies 5
Theatre Reconfiguration Program 5
North American Expansion Plans 6
International Expansion 7
Theatre Upgrades 7
Customer Service Program 7
Information Systems Technology 8
Acquisitions/Mergers 8
Environmental Matters 8
Theatre Operations 8
Competition 9
Film Licensing 9
Industry Overview 10
Seasonality 11
International 11
Government Regulations 11
Employees 12
Cautionary Notice Regarding Forward Looking Statements 12
Factors That May Affect Future Performance 12
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 16
Item 6. Selected Historical Financial Data
Key Operating Statistics 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements 24
PART III
Item 10. Directors and Executive Officers of the Registrant 44
Item 11. Executive Compensation 47
Item 12. Security Ownership of Certain Beneficial
Owners and Management 52
Item 13. Certain Relationships and Related Transactions 62
2
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 65
SIGNATURES 67
INDEX TO EXHIBITS
3
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
PART I
ITEM 1. BUSINESS
Loews Cineplex Entertainment Corporation ("Loews Cineplex", "LCP" or the
"Company"), formerly LTM Holdings, Inc., is one of the world's largest theatre
exhibition companies in terms of revenue and operating cash flows. On May 14,
1998, pursuant to a statutory arrangement (the "Combination"), the Company
completed the combination of the theatre exhibition businesses of the Loews
Theatres division of Sony Pictures Entertainment Inc. ("SPE"), and Cineplex
Odeon Corporation ("Cineplex Odeon"), another major motion picture exhibitor
with operations in the U.S. and Canada. As a result of the Combinaton as of May
15, 1998, the Company owned and operated or had interests in 2,787 screens at
451 locations in 22 states and the District of Columbia and 6 Canadian provinces
representing approximately 9.3% of the total North American exhibition screens.
The Company's theatres are currently concentrated in large 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. The Company holds a 50% partnership interest in
each of Loeks-Star Theatres ("LST") and Magic Johnson Theatres ("MJT"). LST and
MJT hold interests in and operate 12 locations, comprising a total of 144
screens, as of May 15, 1998. Screens and locations for the partnerships are
included in the Company amounts referred to above. LST's theatres are located in
the metropolitan Detroit, Michigan area. MJT's theatres are located in large
urban areas with predominantly minority populations. Pursuant to a settlement
agreement with the Department of Justice (the "DOJ") and the States of New York
and Illinois, the Company is currently in the process of selling approximately
85 screens at 25 locations in New York City and Chicago.
The Company is the descendant of 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. The Company's theatre circuit has grown over the years
through internal development and acquisitions of other motion picture
exhibitors. Today, the Company operates theatres under the Loews, Sony and
Cineplex Odeon theatre names, in addition to its partnerships that operate
theatres under the Loeks-Star and Magic Johnson names. The Company's principal
shareholders include SPE, a wholly owned indirect subsidiary of Sony Corporation
of America ("SCA"), Universal Studios, Inc. ("Universal"), the Charles Rosner
Bronfman Family Trust and certain related shareholders (the "Claridge Group")
and others, who own 51.1% (49.9% of the voting common stock), 26.0% (26.6% of
the voting common stock), 9.6% and 13.3% of the Company's common stock,
respectively.
The Company is incorporated under the laws of the State of Delaware with its
principal offices located at 711 Fifth Avenue, New York, New York 10022, and
its telephone number is (212) 833-6200.
Prior to the Combination with Cineplex Odeon, the Company was originally
organized as a wholly owned indirect subsidiary of SPE ("Loews Theatres"). On
May 14, 1998, Loews Theatres combined with Cineplex Odeon and changed its name
from LTM Holdings, Inc. to Loews Cineplex Entertainment Corporation.
Except where expressly noted information is given as of February 28, 1998 and
does not include information on or with respect to Cineplex Odeon Corporation.
Additionally, except where expressly noted amounts are reported in U.S. dollars.
4
<PAGE>
Strategy
The Company's goal is to continue to be the theatrical exhibition leader in
highly populated metropolitan areas and the preferred exhibitor for
distributors and the theatre-going patrons in such areas. To achieve these
goals, the Company has actively participated in the industry trend toward the
development of multi-screen and megaplex theatres. The Company believes these
larger theatre facilities provide significant competitive advantages in
capturing moviegoers seeking more attractive surroundings, a wider variety of
films and better customer service. Loews Theatre's business strategy consists
of: (i) capitalizing on synergies from the Combination that are expected to
result in cost savings/operational improvements and enhanced operating cash
flows, as well as other expected efficiencies, (ii) building new theatres in
strategically important areas, (iii) reconfiguring existing theatres to include
more screens and (iv) disposing of obsolete, unprofitable and/or marginal
theatres. The Company's business strategy also contemplates international
expansion to capitalize on opportunities outside North America and growth
through acquisitions and new strategic alliances. The Company's strategic plan
is premised on customer value and is market driven. Key elements of the plan
include:
Synergies
The Company believes it will be able to capitalize on significant synergies
resulting from the combination of the Loews Theatres and Cineplex Odeon theatre
circuits. These synergies are expected to result in operational improvements
and enhanced operating cash flows as well as other efficiencies. The Company
believes it can improve operating margins by realizing revenue enhancing
operating efficiencies and cost savings from reduced overhead costs as well as
through efficient allocation of resources to service the areas of expected
growth. The Company also anticipates that it will realize additional benefits
caused by economies of scale such as volume purchase discounts and other similar
savings.
Theatre Reconfiguration Program
Loews Theatres has, in the last several years, embarked on a major theatre
reconfiguration program. This program has consisted of (i) building modern,
state-of-the-art multi-screen theatres including stadium seating and digital
sound systems in selective locations in key metropolitan areas, (ii) either
renovating or upgrading existing theatres or, (iii) disposing of theatres that
are deemed to be obsolete and/or marginally profitable.
Loews Theatres has adopted a prototype design for new theatre construction. This
prototype, which can have from 12 to more than 20 screens depending on the
location, has 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, size and efficiency of concession
stands and incorporates state-of-the-art point-of-sale technology in the food
and beverage service area.
The Company believes that the larger multi-screen 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. These multi-screen
facilities also enable the Company to present a variety of films, with more
frequent showtimes, to the movie-going public.
In 1994, the Company opened its flagship Sony Lincoln Square Theatre in New York
City, consisting of 12 screens and the first commercial 3-D IMAX(R) theatre in
the United States. This theatre quickly became the box office leader in Loews
Theatres' circuit and, according to A.C. Nielsen/EDI, the top grossing theatre
in the U.S. since it opened in 1994.
5
<PAGE>
During the five years ended February 28, 1998, the Company constructed and
placed into service 25 new multiplex and megaplex theatres consisting of 286
screens. These new facilities are state-of-the-art entertainment complexes,
several with stadium seating, emphasizing customer convenience, comfort, better
presentation, improved sight lines and advanced sound systems. These new theatre
complexes have proven to be very successful in terms of revenues and operating
cash flows and are the type of facilities planned for development in the future.
The following table indicates the number of theatre locations, screens and
changes to the Company's circuit configuration as a result of the theatre
reconfiguration program (including screens and locations relating to LST and
MJT) during the fiscal years ending in 1994 through 1998 (excludes Cineplex
Odeon's theatres):
<TABLE>
<CAPTION>
FIVE
FEBRUARY 28, OR 29, YEAR
1998 1997 1996 1995 1994 TOTAL
------ ------ ------ ------ ----- ------
LOCATIONS
<S> <C> <C> <C> <C> <C> <C>
Beginning of year......................... 143 154 180 182 188 188
New construction................ 6 4 3 5 7 25
Dispositions.................... (10) (15) (29) (7) (13) (74)
----- ---- ----- ----- ---- -----
Year end.................................. 139 143 154 180 182 139
SCREENS
Beginning of year......................... 959 950 1,030 981 944 944
New construction................ 92 44 36 54 60 286
Expansions...................... 12 22 3 15 - 52
Dispositions.................... (28) (57) (119) (20) (23) (247)
----- ---- ----- ----- ---- -----
Year end.................................. 1,035 959 950 1,030 981 1,035
Average screens per location.............. 7.4 6.7 6.2 5.7 5.4
</TABLE>
With the addition of the Cineplex Odeon theatre circuit as a result of the
Combination, at May 15, 1998, the Company operated theatres at 451 locations
with 2,787 screens or an average of 6.2 screens per location. These include 25
theatres comprising 85 screens in New York City and Chicago, which the Company
is obligated to sell under an agreement reached with the DOJ and the States of
New York and Illinois in connection with the approval of the Combination. The
theatres held for disposition represented approximately 3% of total screens and
generated approximately $43 million of box office revenue and approximately $9
million of cash flow on an annual basis. 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 a significant number of these theatres for closing.
North American Expansion Plans
The Company believes that the combined Loews Theatres and Cineplex Odeon
portfolio of theatre locations and screen configurations are complementary,
especially in key metropolitan areas with excellent opportunities for growth.
The Company intends to take advantage of Loews Theatres' and Cineplex Odeon's
complementary historical strategies of selective and focused expansion in terms
of adding locations and/or screens to their respective portfolios of theatres.
This strategy is designed to serve the Company's customers better and strengthen
it's competitive position, particularly in core metropolitan areas.
In addition to expanding its presence in metropolitan areas where it already
operates, the Company is evaluating and considering entering new metropolitan
areas. The Company currently is targeting to open approximately 30 locations
comprising 500 to 550 screens over the next two years.
6
<PAGE>
International Expansion
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. The Company
believes that a large portion of the world is underscreened with poor quality
theatres. Initial multiplexing in international markets has already resulted in
significant increases in admissions and box office revenue. As an integral part
of its strategic plan, the Company is currently considering expansion
opportunities in select areas throughout the world and is pursuing several
opportunities in Europe and expects to announce agreements in the near future.
The Company's current negotiations involve the formation of joint ventures with
local partners. In addition, the Company intends to continue to identify local
partners with a significant presence in targeted international markets with whom
management can pursue joint venture opportunities. This will allow the Company
to capitalize on significant development and operating expertise and access to
capital, and take advantage of the local partners' established presence and
significant local expertise.
Theatre Upgrades
Loews Theatres has an ongoing program of upgrading its existing theatres,
including new seating, advanced sound systems and point-of-sale systems. The
Company intends to upgrade its current portfolio of theatres in major urban
areas by expanding and remodeling its existing theatres. These upgraded theatres
will include new innovations such as stadium seating, which offers patrons
improved sight lines, and state-of-the-art digital sound, which will further
enhance the movie-going experience. The point-of-sale system upgrades include
state-of-the-art box office and concession selling stations, as well as the
addition of automated ticket vending machines (ATM). Management believes that
modernizing the theatre portfolio will lead to significant increases in total
revenue and profitability levels. The Company expects to incorporate the
Cineplex Odeon circuit into these plans and initiatives.
Customer Service Program
As part of its customer service program, the Company has developed training and
incentive programs for its theatre staff. It has placed the theatre manager's
office in its newly constructed theatres, in a central kiosk, which is designed
to make the manager more visible to customers and responsive to their needs.
To encourage increased patronage, the Company has established new concession
programs, providing a wider selection of concession items with enhanced
promotions and merchandising activities. The Company has also established a
series of box office admission discount programs, including reduced price
matinees, as incentives for patronage by select groups of customers including
senior citizens and children.
The Company has further sought to optimize the scheduling of motion picture
showing times to lessen congestion at its theatres, improve service and
concession sales and increase customer satisfaction with the overall theatre-
going experience.
The Company has continually sought to improve the concession per capita of its
theatres by enhancing concession merchandising programs and by improving its
concession staff productivity. The Company has made sizable investments in
computer technology, including touch screen selling stations providing quicker
service at its concession stands, resulting in higher customer turnover and
productivity improvements. The Company has also invested in intensive management
training to continuously improve service and sales techniques to increase
concession sales. By serving customers more quickly, the Company believes it can
increase its concession per capita. In addition, through better use of
technology, theatre management has more timely access to information resulting
in the Company becoming more responsive to changing conditions within each
of its theatres.
7
<PAGE>
Information Systems Technology
In the last three years, Loews Theatres has streamlined its point-of-sales
system at the theatre box office and in concession areas by implementing a
state-of-the-art information technology system. This system has shortened
transaction processing times while providing timely information concerning
concession sales and employee productivity at each location. In addition to
providing a standardized revenue collection system with timely and reliable
delivery of information to the home office. The concession area has also
incorporated new technology in its retail customer service systems. This has
resulted in significant improvements in customer turnover and employee
productivity, as well as leading to better inventory management and control.
Loews Theatres has also made significant investments in technology to streamline
and enhance features within its major reporting systems. This investment has
included (a) replacement of (i) the point of sale system in approximately 125
theatres, (ii) an obsolete general mainframe, (iii) obsolete file servers and
(iv) obsolete desktop computers and (b) the upgrade and replacement of major
corporate office applications, including general ledger, accounts payable and
other accounting systems. Through May 15, 1998, Loews Theatres has spent
approximately $13.0 million in this effort. The Company expects to integrate the
Cineplex Odeon circuit into many of these systems.
Acquisitions/Mergers
The Company is continually seeking acquisition opportunities to improve
operating margins through cost savings realized through economies of scale.
Acquisitions can also provide the critical mass for expanding the circuit into
new markets and enhancing competitiveness in existing markets. In this regard,
the Combination with Cineplex Odeon represents a key element of the Company's
strategic plan.
Please see Item 6 "Selected Historical Financial Data" for information
illustrating the effectiveness of the Company's business strategy over the past
five years.
Environmental Matters
The Company owns, manages and/or operates theatres and other properties that are
subject to certain U.S. and Canadian federal, provincial, 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.
One of the Company's drive-in motion picture theatres located in the State of
Illinois is currently the subject of 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.
The Company does not believe that its liabilities, if any, in connection with
this site will be material.
Theatre Operations
Nearly all of the Company's screens are located in multi-screen theatres. The
Company's average screens per theatre, which is an important measure of
operating efficiency, is 7.4 as of February 28, 1998 (6.2 as of May 15, 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 at the same time while serving patrons from common support
facilities, including 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.
8
<PAGE>
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.
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. The following table presents the ten largest exhibition companies in
North America by number of screens according to the 1997-1998 NATO Encyclopedia
of Exhibition:
<TABLE>
<CAPTION>
TEN LARGEST EXHIBITION COMPANIES (UNITED STATES AND CANADA)
Theatre Company Total Screens TOTAL LOCATIONS BOX OFFICE REVENUE*
--------------- ------------- --------------- -------------------
<S> <C> <C> <C>
(IN MILLIONS)
Carmike Cinemas 2,590 515 $312.9
United Artists Theatres 2,237 366 $473.3
AMC Entertainment Inc. 1,930 225 $512.7
CINEPLEX ODEON 1,550 312 $379.1
Cinemark USA Inc. 1,459 165 $243.7
Regal Cinemas Inc. **** 1,335 160 $211.2
General Cinema Theatres 1,202 202 $299.3
LOEWS THEATRES** 1,082 153 $307.7
National Amusements 898 102 N/A
Hoyts Cinemas Corp. 817 112 N/A
LOEWS CINEPLEX*** 2,632 465 $686.8
</TABLE>
* Source: Public records and individual company reports. Box office
results are stated for the twelve months ended June 30,1997, except
that for Loews Theatres box office results are stated for the twelve
months ended February 28, 1997 and for General Cinemas box office
results are stated for the twelve months ended July 31, 1997.
** Includes LST and MJT.
*** Includes LST and MJT and merely aggregates individual data in this
chart for Loews Theatres and Cineplex Odeon. This data is not intended
to represent the anticipated total screens, locations or box office
revenue of Loews Cineplex on a pro forma basis at any time.
**** It has been publicly announced that Regal Cinemas Inc. and Act III have
agreed to merge. The above does not include Act III information.
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 subject movies 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.
9
<PAGE>
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 such that exhibitor
and the distributor will negotiate film rental terms 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.
Industry Overview
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 1997-98 NATO Encyclopedia of Exhibition, as of May 1, 1997,
the ten largest exhibitors (in terms of number of screens) operated
approximately 51% of the total screens, with no one exhibitor operating more
than 10% of the total of 29,731 screens.
In 1997, U.S. motion picture attendance was approximately 1.4 billion, the
highest attendance level recorded by NATO during the past thirty-eight years,
and in the same year, box office revenues exceeded $6.4 billion, an 8% increase
over 1996. Additionally, 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 the 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.
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 the 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 SPE),
Universal Studios, Inc. (approximately 84% of which is owned by Seagram Co.
Ltd.), The Walt Disney Company, Warner Bros. (which is owned by Time-Warner
Inc.), Paramount Pictures Inc. (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 U.S., based on box office receipts.
10
<PAGE>
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, there has
recently been an industry trend towards greater 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.
International
International exhibition is an increasingly important source of revenue for film
distributors and growth opportunities for exhibitors. According to the
Baskerville Communications Corporation, the international (i.e., non-North
American) share of total worldwide box office receipts in 1996 was 62%, up from
43% in 1983, and since 1983, international box office receipts have increased at
approximately a 9% compounded annual growth rate. Management of the Company
believes that many international markets for theatrical exhibition, which have
historically been underscreened and underserved, will continue to experience
rapid growth as additional multiplex theatres are introduced.
Government Regulations
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, the Company 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.
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 the theatre and its facilities and reasonable access to
work stations. The Company has established a program to review and evaluate
their respective U.S. theatres and to make changes that may be required by law.
See item 3. "Legal Proceedings" concerning certain matters pending under the
Americans With Disabilities Act (the "ADA") involving the Company.
Motion picture theatres are also subject to certain U.S. and Canadian federal,
provincial, state and local laws governing such matters as construction,
renovation and operation of its theatres, employee wages and working conditions,
health and sanitation regulations. The Company believes all of its theatres are
in substantial compliance with such requirements.
On April 16, 1998, Loews Theatres and Cineplex Odeon reached an agreement with
the DOJ and the Attorneys General of the States of New York and Illinois
allowing the merger of Loews Theatres and Cineplex Odeon to proceed to form the
Company. Under the terms of the agreement, which is subject to court approval
and public comment, the Company will divest itself of 25 theatres comprising 85
screens in New York City and Chicago.
11
<PAGE>
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 good.
Certain Loews Cineplex 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 Loews Cineplex 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 recertifies.
Cautionary Notice Regarding Forward Looking Statements
This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-K, including, without
limitation, certain statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" may constitute
forward looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in the following section ("Factors That May Affect
Future Performance"). All forward-looking statements are expressly qualified in
their entirety by the Cautionary Statements.
Factors That May Affect Future Performance
In addition to other factors and matters discussed elsewhere herein, factors
that, in the view of the Company, could cause actual results to differ
materially from those discussed in forward-looking statements include: (i) the
effect of economic conditions on a national, regional or international basis;
(ii) the ability of the Company to integrate the operations of Cineplex Odeon,
the compatibility of the operating systems of the combined companies, 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, competition;
(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 and Cineplex Odeon; and opportunities that may be presented to and
pursued by the Company.
12
<PAGE>
ITEM 2. PROPERTIES
At May 15, 1998, the Company, including LST and MJT, operated or had interests
in 2,787 screens in 451 theatres, of which 47 theatres were owned by the
Company, 399 theatres were leased and 5 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 on a
state-by-state basis at May 15, 1998.
<TABLE>
<CAPTION>
UNITED STATES CANADA
------------- ------
STATE SCREENS LOCATIONS* PROVINCE SCREENS LOCATIONS*
- ----- ------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
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 Total 802 135
=== ===
Illinois**............... 366 64
Indiana.................. 54 6 INTERNATIONAL
-------------
Kentucky................. 9 2 COUNTRY SCREENS LOCATIONS*
------- ------- ----------
Maryland................. 169 27 Hungary 6 1
= =
Massachusetts............ 82 12
Michigan................. 108 9
Minnesota................ 25 5
New Hampshire............ 12 2
New Jersey............... 196 23
New York**............... 299 59
Ohio..................... 26 4
Pennsylvania............. 7 1
Texas.................... 180 20
Utah..................... 65 12
Virginia................. 57 9
Washington............... 112 19
----- ---
Total............. 1,979 315
===== ===
</TABLE>
* Includes theatres owned, leased or managed by the Company, as well as
partnerships in interests. which the Company has interests.
** The above properties include theatres scheduled to be divested as a result
of the Department of Justice settlement. See Item 3 "Legal Proceedings" for
additional discussion.
At February 28, 1998, Loews Theatres, including LST and MJT, operated or had
interests in 1,035 screens in 139 theatres, of which 9 theatres were owned by
Loews Theatres, 126 theatres were leased and 4 theatres were subject to
management arrangements.
Pursuant to the agreements governing the LST 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 interests
between the partners and to unaffiliated third parties.
The Company's executive offices at 711 Fifth Avenue, New York, New York are
leased pursuant to a lease agreement that expires on December 31, 2007.
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in routine litigation and legal
proceedings 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.
Chicago Litigation
- -------------------
On or about October 14, 1997, a purported class action was commenced in the U.S.
District Court for the Northern District of Illinois against Cineplex Odeon, SCA
and SRE by Jerrold I. Rosenthal, on his own behalf and on the behalf of persons
allegedly similarly situated. On November 21, 1997, the complaint was amended to
change the defendants to Cineplex Odeon, Loews Theatres and Sony Pictures
Entertainment, Inc. The complaint alleges that if the merger agreement is
consummated, Loews Cineplex will own 60% or more of all movie theaters in the
metropolitan Chicago area, and, as a consequence (i) the merger agreement would
violate the federal and Illinois antitrust statutes because the consummation of
the merger agreement would allegedly tend to substantially lessen competition
among and/or tend to create a monopoly over movie theaters in the metropolitan
Chicago area and other, unspecified geographical areas and (ii) consummation of
the merger agreement would allegedly injure Rosenthal and the members of the
purported class by resulting in higher prices for movie tickets and limitations
on the variety of movies exhibited. Rosenthal is seeking injunctive relief
regarding the merger agreement under federal and Illinois antitrust statutes
preventing consummation of the merger agreement or, if the merger agreement is
consummated, requiring divestiture, and also seeks attorney fees and costs.
Rosenthal has not claimed monetary damages. Rosenthal is seeking to represent a
purported class of "all patrons of movie theaters in Chicago, Illinois and
outlying areas" and other, unspecified "similar" geographical areas elsewhere
where the Company will own 60% or more of all movie theaters upon consummation
of the merger agreement. No motion for certification of the purported class has
yet been made. The Company believes that Rosenthal's claims are without merit,
and is opposing Rosenthal's claims vigorously.
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 Corporation and Seagram Co. Ltd., alleging federal, antitrust violations
in New York and Illinois stemming out of the proposed business 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.
14
<PAGE>
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. The Company believes that SWRA's claims are
without merit, and the Company intends to oppose SWRA's claims vigorously. All
of the defendants moved to dismiss the amended complaint by motion dated January
8, 1998.
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 its wholly owned subsidiary
Plitt Theatres, Inc ("Plitt"). The complaint alleges that certain Cineplex Odeon
theatres in Washington D.C. and its metropolitan area, 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 Americans With Disabilities Act ("ADA")
and, where applicable, the District of Columbia Human Rights Act. The plaintiffs
are seeking a judgment for injunctive relief ordering Cineplex Odeon and Plitt
to cease violating such statutes 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 the State of New York. On
May 8, 1998, the DOJ informed Cineplex Odeon that it intended to accelerate the
scheduling of site visits in light of the impending sale of these theatres.
Furthermore, the DOJ alleges that its investigation to date has identified
numerous violations of the ADA. The pending investigation and related
allegations may adversely affect the price received by the Company in connection
with the sale of these theatres.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
No matters were submitted to a vote of the shareholder during the year ended
February 28, 1998.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Dividend Policy
The Company does not anticipate paying any dividends on its Common Stock in the
foreseeable future and is prohibited under the terms of the Company's credit
facility from paying such dividends.
Price Range of Common Stock
The Company's Common Stock commenced trading on The New York Stock Exchange and
The Toronto Stock Exchange on May 15, 1998 as LCP and LCX, respectively. Prior
to such date, all of the outstanding Common Stock was held by a wholly owned
subsidiary of SPE. Accordingly, no trading market existed for the Common Stock
during the two year period ended February 28, 1998. As of May 15, 1998, there
were approximately 1,790 record holders of the Common Stock.
Unregistered Securities: Use of Proceeds from Registered Securities
On May 14, 1998, the Company issued (i) 291,086.591 shares of Common Stock to a
wholly owned subsidiary of SPE in connection with the exchange of such shares
for all of the issued and outstanding shares of S&J Theatres, Inc., which holds
the Company's 50% interest in MJT and (ii) 2,373,217.409 shares of Common Stock
to a wholly owned subsidiary of SPE in connection with the merger of Star
Theatres, Inc., which holds the Company's 50% interest in LST, into a wholly
owned subsidiary of the Company. Such issuances were not registered under the
Securities Act of 1933, as amended, in reliance on the exemption provided by
Section 4(2) thereof.
In connection with the Combination, the Company registered 26,632,709 shares of
Common Stock and 84,000 shares of Class B Non-Voting Common Stock, par value
$.01 per share (the "Non-Voting Stock") pursuant to a Registration Statement on
Form S-4 (file No. 333-46313), which was declared effective on February 13,
1998. The offering of such securities commenced on February 13, 1998 in
connection with the solicitation of shareholder approval of the Combination by
shareholders of Cineplex Odeon and terminated other than in respect of shares of
Common Stock issuable (i) pursuant to certain anti-dilution provisions in the
Subscription Agreement, dated September 30, 1997 (the "Subscription Agreement")
between the Company and Universal and (ii) upon conversion of the Non-Voting
Stock on May 14, 1998 upon consummation of the Combination. All of the
registered securities were issued either (i) pursuant to the Combination
in exchange for all of the outstanding shares of Cineplex Odeon Corporation and
Plitt Theatres, Inc., or (ii) to Universal for a cash payment of $84.5 million
pursuant to the Subscription Agreement. All of the cash proceeds, together with
funds from borrowings under the Company's credit facility, were used on May 14,
1998 to (A) repay indebtedness of $149.3 million under the then existing
Cineplex Odeon credit facility, (B) make payments to SPE and its affiliates
aggregating $394.8 million, (C) reimburse $300,000 in expenses of the Claridge
Group, and (D) reimburse $700,000 in expenses of Universal, in each case as
contemplated by the Registration Statement.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
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 selected historical financial data should be read in conjunction
with the separate consolidated financial statements and notes thereto of the
Company and "Loews Cineplex Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are included elsewhere in this Form
10-K. Further, the Selected Historical Financial Data excludes data for Cineplex
Odeon Corporation which became a subsidiary of this Company on May 14, 1998.
16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, OR 29,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Admissions revenues ................... $ 296,933 $ 273,498 $ 264,585 $ 255,392 $ 244,864
Concessions revenues .................. 104,009 90,643 84,358 79,287 75,355
Other revenues ........................ 12,568 11,204 10,153 8,656 8,800
----------- ----------- ----------- ----------- -----------
413,510 375,345 359,096 343,335 329,019
----------- ----------- ----------- ----------- -----------
Theatre operations and other expenses
(including concession costs) ......... 307,568 282,480 277,375 268,236 259,173
General and administrative ............. 28,917 21,447 20,282 18,753 17,449
Depreciation and amortization .......... 52,307 44,576 41,273 38,572 37,873
Loss on sale/disposals of theatres ..... 7,787 9,951 7,249 13,420 3,491
Interest expense ....................... 14,319 14,776 15,376 10,613 9,865
Income tax expense/(benefit) ........... 2,751 2,295 309 (1,337) 4,662
----------- ----------- ----------- ----------- -----------
Net income (loss) ...................... $ (139) $ (180) $ (2,768) $ (4,922) $ (3,494)
=========== =========== =========== =========== ===========
Earning (loss) per common share:
basic ............................. $(.01) $(.01) $(.14) $(.24) $(.17)
diluted ........................... $(.01) $(.01) $(.14) $(.24) $(.17)
Weighted average shares and
equivalent outstanding(A):
basic ............................. 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807
diluted ........................... 20,924,890 20,472,807 20,472,807 20,472,807 20,472,807
BALANCE SHEET DATA (AT PERIOD END):
Property, equipment and leaseholds ... $ 609,152 $ 613,692 $ 602,435 $ 605,982 $ 566,043
Total assets ......................... $ 728,551 $ 721,372 $ 715,810 $ 723,108 $ 675,667
Total long-term obligations (including
debt) ............................. $ 336,526 $ 339,206 $ 333,268 $ 347,783 $ 297,474
Total liabilities .................... $ 404,040 $ 396,722 $ 390,980 $ 395,510 $ 343,147
Stockholder's equity ................. $ 324,511 $ 324,650 $ 324,830 $ 327,598 $ 332,520
CASH FLOW STATEMENT DATA:
Cash flow provided by operating
activities ........................ $ 64,185 $ 47,976 $ 46,326 $ 36,188 $ 55,150
</TABLE>
(A) Restated in all periods presented to reflect impact of a stock dividend
declared on February 5, 1998.
Key Operating Statistics
The table below sets forth key operating statistics, based on continuing
operations, for the Company 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 one measure is more meaningful than another, and the
Company's management uses these measures collectively to assess operating
performance. In order to arrive at a more meaningful presentation of financial
operating data related to the productivity and performance of the Company, and,
except as otherwise noted, all amounts below include 100% of the operating
results of the LST and MJT partnerships in which the Company has a 50%
interest. Further, the Key Operating Statistics excludes data for Cineplex Odeon
Corporation which became a subsidiary of the Company on May 14, 1998.
17
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, OR 29,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT LOCATIONS, SCREENS, AND PER PATRON DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Locations operated at period end................. 139 143 154 180 182
Screens operated at period end................... 1,035 959 950 1,030 981
Attendance....................................... 58,387 53,133 53,544 52,656 52,113
Total revenues................................... $ 480,437 $ 421,613 $ 400,412 $ 377,171 $ 360,828
Revenues per screen(1)........................... $ 464.19 $ 439.64 $ 421.49 $ 366.19 $ 367.82
Revenues per location(1)......................... $3,456.38 $2,948.34 $2,600.08 $2,095.39 $1,982.57
EBITDA(2)........................................ $ 69,238 $ 61,467 $ 54,190 $ 42,926 $ 48,906
Total EBITDA(3).................................. $ 86,643 $ 78,273 $ 68,177 $ 62,540 $ 57,982
Partners' share of Total EBITDA.................. $ 6,339 $ 4,853 $ 4,800 $ 4,287 $ 3,677
Attributable EBITDA(4)........................... $ 80,304 $ 73,420 $ 63,377 $ 58,253 $ 54,305
Total EBITDA per screen(1)....................... $ 83.71 $ 81.62 $ 71.77 $ 60.72 $ 59.10
Total EBITDA per location(1)..................... $ 623.33 $ 547.36 $ 442.71 $ 347.44 $ 318.58
Total EBITDA per patron(1)....................... $ 1.48 $ 1.47 $ 1.27 $ 1.19 $ 1.11
Concessions revenue per patron................... $ 2.14 $ 1.98 $ 1.82 $ 1.70 $ 1.63
Admissions revenue per patron.................... $ 5.91 $ 5.79 $ 5.52 $ 5.34 $ 5.16
CASH FLOW STATEMENT DATA(5):
Net cash provided by operating activities........ $ 64,185 $ 47,976 $ 46,326 $ 36,188 $ 55,150
Net cash used in investing activities............ $ (51,439) $ (53,254) $ (34,690) $ (82,486) $ (32,098)
Net cash (used)/provided by finance
activities..................................... $ (5,842) $ 5,048 $ (14,005) $ 46,359 $ (23,022)
</TABLE>
(1) All per screen, location and patron ratios are calculated based upon
screens and locations as of period end and include the LST and MJT
partnerships.
(2) EBITDA consists of earnings before interest, income taxes, depreciation and
amortization including equity earnings from investments in the LST and MJT
partnerships. EBITDA should not be construed as an alternative to operating
income (as determined in accordance with U.S. GAAP).
(3) Total EBITDA consists of EBITDA plus loss on sale/disposals of theatres
and 100% of the operating results of the LST and MJT 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 and EBITDA, in viewing its overall liquidity and borrowing
capacity.
18
<PAGE>
A reconciliation of EBITDA to Total EBITDA follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, OR 29,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA (as defined above)........ $69,238 $61,467 $54,190 $42,926 $48,906
ADD: Loss on sale/disposals of
theatres........................ 7,787 9,951 7,249 13,420 3,491
------- ------- ------- ------- -------
Modified EBITDA, including
equity earnings................ 77,025 71,418 61,439 56,346 52,397
ADD: EBITDA from partnerships,
net of equity earnings already
included in EBITDA............. 9,618 6,855 6,738 6,194 5,585
------- -------- ------- ------- -------
Total EBITDA..................... $86,643 $78,273 $68,177 $62,540 $57,982
======= ======= ======= ======= =======
</TABLE>
(4) Attributable EBITDA consists of Total EBITDA less Partners' share of Total
EBITDA.
(5) Cash flow statement data include cash flows from long-term investments in
the LST and MJT partnerships to the extent of the Company's equity
interests.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
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.
The information presented below does not include information with respect to
Cineplex Odeon, which became a subsidiary of the Company on May 14, 1998.
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
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/expansions 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.
19
<PAGE>
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 Loews
Theatres/Cineplex Odeon merger related costs 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, the Company 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. Modified EBITDA
(earnings before interest, taxes, depreciation and amortization, and
gains/losses on asset disposals or sales) is a measure of financial performance
commonly used in the motion picture exhibition industry. 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, 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.
20
<PAGE>
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, the Company 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, primarily due
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 the Combination)
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. The Company derives substantially all of its revenues
from cash collected at the box office and through concession sales. Generally,
this provides the Company with 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, the Company 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 the Company's intercompany payable account with its affiliates. Since
the Company does not carry any significant amounts of inventory or accounts
receivable and any excess cash historically was "swept" by an affiliate of the
Company's 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, the
Company had an arrangement whereby SCA and/or its affiliates would make
additional funds available to the Company through a short-term credit facility
at interest rates, commensurate with market, established at the time of the
loan. The Company 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").
At February 28, 1998, the Company's 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, the Company is included in
the consolidated federal income tax returns of SCA. For financial reporting
purposes, the Company 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).
21
<PAGE>
The Company has experienced, and expects to continue to realize, improved
operating results as a consequence of investments in 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, the Company has added 338 screens and 25 locations. At May
14, 1998, the Company had capital spending commitments for the future
development and construction of 14 theatre properties comprising 258 screens
aggregating approximately $177.8 million for the Loews Theatre circuit.
Additionally, at May 15, 1998, the Company had capital spending commitments for
the future development and construction of 210 screens aggregating approximately
$71.0 million for the Cineplex Odeon circuit.
Liquidity and Capital Resources - (Post-Combination)
Subsequent to the May 14, 1998 Combination, the Company has performed all cash
management functions on a "stand-alone" basis.
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, together with funds provided by Universal under the
Subscription Agreement, replaced the Sony Credit Facility and Cineplex Odeon's
existing credit facility, funded cash paid to SPE and/or its affiliates upon
closing of the Combination and will provide ongoing financing to the Company to
fund the Company's further expansion in North America and internationally. 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 (as defined therein)rate plus an
applicable margin based on the Company's Leverage Ratio (as defined therein).
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. Future cash needs, in excess of amounts provided by
operations, will be funded by the Company's $1 billion credit facility. 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 is currently evaluating an equity offering in the foreseeable
future. Any proceeds of this equity offering are expected to fund the Company's
domestic and international expansion or repayment of existing debt.
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. 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 these notes on a senior subordinated basis
and Cineplex Odeon was released from its guarantee of Plitt Theatres under such
notes.
Effect of Inflation
Inflation has not had a material effect on the Company's operations.
22
<PAGE>
Year 2000 Issue
The Year 2000 issue affects virtually all companies and organizations. The
Company 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. The Company does not anticipate
incurring significant additional costs to address the Year 2000 issue, although
the effectiveness of the Company'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 which the Company conducts business will
successfully address the Year 2000 issue with respect to their own computer
software. If the Company's present efforts to address the Year 2000 issue are
not successful, or if vendors and other third parties with which the Company
conducts business do not successfully address the Year 2000 issue, the Company's
business and financial condition could be adversely affected.
New Accounting Pronouncements
The Company has determined that two new pronouncements that have been issued but
are not yet effective are applicable to the Company, 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
the Company's fiscal year ending February 28, 1999, 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.
Additionally, 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 these standards when required and does not believe
they will have a significant impact on its financial statements.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
Page
-----
<S> <C>
Report of Independent Accountants 25
Consolidated Balance Sheet at February 28, 1998 and 1997 26
Consolidated Statement of Operations for the years ended
February 28, 1998 and 1997 and February 29, 1996 27
Consolidated Statement of Changes in Stockholder's Equity
for the years ended February 28, 1998 and 1997 and February 29, 1996 28
Consolidated Statement of Cash Flows for the years ended
February 28, 1998 and 1997 and February 29, 1996 29
Notes to Consolidated Financial Statements 30-43
</TABLE>
Financial Statement Schedules:
For the three years ended February 28, 1998
II--Valuation and Qualifying Accounts are included in Item 14
on page 79.
The financial statements for Loeks-Star Theatres, Inc. are included in Item
14 on pages 69 to 78.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Loews Cineplex Entertainment Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 8 on page 24 present fairly, in all material respects, the
financial position of Loews Cineplex Entertainment Corporation and its
subsidiaries at February 28, 1998 and February 28, 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
25
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
FEBRUARY 28,
1998 1997
---------- ---------
<S> <C> <C>
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
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
26
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
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)
====== ====== =====
</TABLE>
(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.
27
<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.
28
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
29
<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.
30
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
31
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
32
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 share 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.
33
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
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
======== ========
</TABLE>
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.
34
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 28, FEBRUARY 28, FEBRUARY 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.
35
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
FEBRUARY 28, FEBRUARY 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:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
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
========= ===== =======
36
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 POSTRETIREMENT 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.
37
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
38
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The debt due to (from) SCA affiliates at February 28, 1998 and February 28,
1997, consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------- ------------
<S> <C> <C>
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
======== ========
</TABLE>
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.
39
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 28, FEBRUARY 28, FEBRUARY 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:
<TABLE>
<CAPTION>
FEB. 28, FEB. 28, FEB. 29,
1998 % 1997 % 1996 %
-------- ------ -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
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)%
====== ===== ====== ===== ===== =====
</TABLE>
40
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred tax assets and liabilities are comprised of the following:
FEBRUARY 28, FEBRUARY 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.
41
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about stock options outstanding at
February 28, 1998:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ ---------------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
FEBRUARY 28,
1998
------------
<S> <C> <C>
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)
=======
</TABLE>
42
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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.
NAME AGE POSITION
----- --- --------
George A. Cohon 61 Director
Marinus N. Henny 46 Director
Ernest Leo Kolber 69 Director
Ken 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 Wynne 55 Director
Mortimer Zuckerman 60 Director
Lawrence J. Ruisi 49 President and Chief Executive
Officer and Director
Allen Karp 57 Chairman and Chief Executive
Officer of Cineplex Odeon Canada
and Director
Travis Reid 43 President, U.S Operations
John C. McBride, Jr. 42 Senior Vice President and General
Counsel
John J. Walker 45 Senior Vice President and Chief
Financial Officer
Seymour Smith 78 Senior Vice President and Deputy
General Counsel
Mindy Tucker 38 Corporate Vice President
Strategic Planning and Secretary
Joseph Sparacio 38 Vice President and Controller
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.
Marinus N. Henny - Since April 1997, Mr. Henny has been Executive Vice
President and Chief Financial Officer of Sony Corporation of America ("SCA").
From December 1993 to April 1997 Mr. Henny was Executive Vice President of SCA.
44
<PAGE>
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. and The Toronto-Dominion Bank. Senator Kolber has been
a director of Loews Cineplex since May 1998.
Ken Lemberger - Since January 1997, Mr. Lemberger has been President of
Columbia TriStar Motion Picture Group. Prior 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 earlier in 1995 he served as Vice President,
Finance and Controller of Universal from 1991 to 1995. From 1987 to 1990, Mr.
Mulligan was a Senior Manager in the Entertainment Specialty Practice Unit of
Price Waterhouse.
Yuki Nozoe - Since October 1996, Mr. Nozoe has been Executive Vice
President of SPE and, since February 1996, Executive Vice President of SCA.
Prior to then, 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 Studios, Inc. Prior to February
1996, Ms. Randall was Managing Partner of the Los Angeles office of Katten
Munchin & 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 Sony Retail Entertainment ("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 of Walt Disney Imagineering.
Howard Stringer - Since May 1998, Mr. Stringer has served as Chairman of
SPE. From May 1997 to May 1998, Mr. Stringer served as President of SCA and
served as a member of the Boards of Directors of SCA, SPE, Sony Electronics,
Inc. and Sony Music Entertainment, Inc. 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.
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 had
been Co-President 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.
Mortimer B. Zuckerman - Currently serves as Chairman of Boston Properties,
Inc., Chairman and Editor-in-chief of U.S. News & World Report, Chairman of The
Atlantic Monthly, Chairman and Co-Publisher of New York's Daily News, Chairman
of Fast Company and Chairman of Applied Graphics Technologies.
45
<PAGE>
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 SRE and from 1990
through May 1998 served as Executive Vice President of SPE. In such capacities,
Mr. Ruisi was responsible for oversight of SPE's theatrical exhibition group,
including Loews Cineplex, 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. In 1986, Mr. Karp joined Cineplex Odeon as Senior
Executive Vice-President and became President, North American Theatres Division
of Cineplex Odeon in August 1988. Mr. Karp practiced corporate law with the
Toronto law firm of Goodman and Carr from 1966 until 1986 where he first became
involved with the motion picture exhibition business as a legal and strategic
advisor to Canadian Odeon Theatre Inc. and 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 Cineplex and, for the preceding year, served as Executive
Vice President-Film Buying of Loews Cineplex. As Executive Vice President of
Loews Cineplex, 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
Cineplex in 1991, Mr. Reid served as Vice President of Film for General Cinema's
Midwestern, Southwestern and Western regions.
John C. McBride, Jr. - 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. From 1982 to
1990, Mr. McBride was an associate with the law firm of Simpson Thacher &
Bartlett.
John J. Walker - Since 1990, Mr. Walker has served as Senior Vice President
and Chief Financial Officer of Loews Cineplex. From 1988 to 1990, Mr. Walker
has served as Vice President-Controller of Loews Cineplex. 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.
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 Cineplex
and, until 1997, 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 and from 1990 to 1992, as Vice President
with the International Distribution Group of SPE.
Joseph Sparacio - Since 1990, Mr. Sparacio has served as Vice President and
Controller of Loews Cineplex. Prior to joining Loews Cineplex, 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.
46
<PAGE>
ITEM 11. 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 last three fiscal years ended February 28, 1998, February 28,
1997 and February 29, 1996, respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
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(a) 500,000(a) 1,796,933(a) 900,000 56,313(e)
Chief Executive Officer 1997 $683,974(a) 608,802(a) 655,200(a)
Barrie Lawson-Loeks(b).... 1998 $534,070 $250,000 819,360(c),(d) 11,291(e)
Co-Chairman 1997 $522,492 $275,000 50,000(c)
Jim Loeks(b).............. 1998 $534,070 $250,000 812,160(c),(d) 11,152(e)
Co-Chairman 1997 $522,492 $275,000 50,000(c)
Travis E. Reid............ 1998 $378,927 $225,000 250,000 5,256(e)
President 1997 $363,903 $175,000
Seymour Smith............. 1998 $380,499 $ 60,000 50,000 2,400(e)
Executive Vice President, 1997 $376,739 $ 60,000
General Counsel and
Secretary
</TABLE>
- -----------
(a) Represents amounts paid to Mr. Ruisi as President of SRE. In this capacity,
Mr. Ruisi has other responsibilities in addition to the oversight and
direction of the Sony theatrical exhibition group.
(b) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
(c) Includes amounts attributable to forgiveness by an affiliate of SPE of a
portion of relocation indebtedness owed to such affiliate of SPE incurred
by Jim Loeks and Barrie Lawson-Loeks in 1992.
(d) Includes amounts attributable to separation payments and car allowances.
(e) Represents [$56,313], [$10,400], [$10,400], [$4,750] and [$2,400]
contributed by the Company to the Savings Plan for Messrs. Ruisi, Lawson-
Loeks, Loeks, Reid and Smith respectively (and any premiums paid by the
Company for term-life insurance or above market rates credited on deferred
compensation amounts).
47
<PAGE>
STOCK OPTIONS
GRANT OF OPTIONS. The table below sets forth information with respect to grants
of options to purchase Company common stock during the year ended February 28,
1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------------------------- ----------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
GRANTED(#) FISCAL YEAR(b) ($/SH) DATE PRESENT VALUE(c)
- ----------------------------------- --------------------- ------------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C>
Lawrence J. Ruisi...... 900,000 41.5% $13.125 12/16/07 $3,924,000
Barrie Lawson-Loeks.... - - - - -
Jim Loeks.............. - - - - -
Travis Reid............ 250,000 11.5% $13.125 12/16/07 $1,090,000
Seymour Smith.......... 50,000 2.3% $13.125 12/16/07 $ 218,000
</TABLE>
(a) All options, other than those held by Mr. Ruisi, become exercisable with
respect to twenty percent of the aggregate number of Loews Cineplex common
stock 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. With respect to the options held by Mr. Ruisi, options to purchase
500,000 shares of Loews Cineplex 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
Combination. Upon a Change of Control of the Company all Options outstanding
on the date of such Change in Control shall become immediately and fully
exercisable.
(b) Percentages shown are based on a total of 2,170,000 options granted to
employees of the Company during the fiscal year ended February 28, 1998.
(c) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange 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.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE. The following table sets forth
as of February 28, 1998, for each of the Named Executive Officers (i) the total
number of options for Loews Cineplex common stock (exercisable and
unexercisable) held and (ii) the value of such options which were in-the-money
at February 28, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED STOCK OPTIONS AT IN-THE-MONEY STOCK OPTIONS AT
FISCAL YEAR-END (#)(a) FISCAL YEAR-END ()$)(b)
------------------------------- ------------------------------
SHARES
ACQUIRED VALUE
NAME EXERCISE(#) REALIZED($) 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.... -- -- -- -- -- --
Jim Loeks.............. -- -- -- -- -- --
Travis Reid............ -- -- -- 250,000 -- 781,250
Seymour Smith.......... -- -- -- 50,000 -- 156,250
</TABLE>
48
<PAGE>
- -------------
(a) Reflects the number of shares of Loews Cineplex common stock underlying
options granted.
(b) Based on the difference between (i) ten times the per share closing price of
the Common Shares of Cineplex Odeon as reported on the NYSE Composite
Tape on February 28, 1998, and (ii) the exercise price of the option on
such date.
Employment Agreements
The Company 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 the Company and will 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 the Company which are applicable generally
to the Company'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 not be 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 the Company's common stock pursuant to the Company's stock option plan at an
exercise price of $13.125 per share (the "Initial Options"), Mr. Ruisi will be
granted not less than an additional 100,000 options on the 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 by the Company or by Mr.
Ruisi other than by reason of Loews Cineplex's material breach of the Agreement,
the Company 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 the Company terminates Mr. Ruisi's employment without cause prior to the
expiration of the Agreement, which it will be deemed to do if it 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 benefit) 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 the Company's 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 the Company 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. 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 of the Combination. The agreement, as
amended, provides for (i) an annual employment term ending on the third
anniversary of the Combination, (ii) an annual base salary, (iii) certain
employee benefits, (iv) a guaranteed minimum annual bonus of $155,000, (v) a
special one-time cash bonus of $1,000,000 (half of which has been paid and the
other half to be paid within 90 days after the Combination, 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 and his guaranteed minimum annual
bonus (the "Termination Payment"), less the base salary 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.
49
<PAGE>
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 immediately, he is entitled to a
termination payment upon the expiration of the agreement in an amount equal to
his then annual base salary, 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 the Termination Payment, 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 termination payment equal to the
greater of (i) his guaranteed minimum annual bonus and 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
annual base salary then being paid plus his guaranteed minimum annual bonus.
In addition, Mr. Karp will be entitled to any compensation previously deferred
and not yet paid by Cineplex Odeon. If, however, any compensation previously
deferred and not yet paid plus 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 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, at his option, either the amount he would have
been entitled to receive under his employment contract prior to its amendment if
he had terminated as a result of a material breach of Cineplex, or the amount
which he would have been entitled to receive under his employment contract prior
to its amendment if he had terminated following a material change of Cineplex.
In addition, Cineplex Odeon may terminate Mr. Karp's employment on not less than
six months' 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 his guaranteed minimum
annual bonus (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.
As well, subject to any required regulatory approvals, if Cineplex Odeon
terminates the employment of Mr. Karp for any reason, all stock options
previously granted to him, other than his performance-based options, shall
immediately vest and he shall remain entitled to exercise any vested and
unexercised stock options, including his performance-based 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 employment contract with Loews Cineplex on October
21, 1995, which will expire on October 20, 1999. Mr. Reid's employment agreement
provides for an annual base salary of $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.
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.
50
<PAGE>
John J. Walker entered into an employment agreement with Loews Cineplex on June
1, 1993, which will expire on May 31, 1998. Mr. Walker's employment agreement
provides for an annual base salary of $219,570 and an annual bonus in an amount
determined by Loews Cineplex, subject to a minimum annual bonus amount of
$25,000 per fiscal year. Mr. Walker was also granted a non-qualified stock
option with respect to 150,000 shares of Loews Cineplex Common Shares.
Mindy Tucker entered into an employment agreement with the Company on December
15, 1997 to serve as Corporate Vice President 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 which 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 an option to
purchase 75,000 shares of the Company's common stock at an exercise price of
$13.125 per share.
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 entered into an employment agreement with Loews Cineplex on
August 20, 1994, which will expire on August 19, 1999. Mr. Sparacio's employment
agreement provides for an annual base salary of $170,000, which will be
increased to $180,000 as of August 20, 1998, and an annual bonus in an amount
determined by Loews Cineplex. Mr. Sparacio was also granted a non-qualified
stock option with respect to 75,000 shares of Loews Cineplex Common Shares.
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
and Ms. Tucker 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.
51
<PAGE>
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 Loews Cineplex Common
Shares.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- ------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Stock, $.01 par value Sony Pictures Entertainment Inc. 21,934,625 shares(a)(b) 49.9%
550 Madison Avenue
New York, New York
Universal Studios, Inc. 11,691,249(a)(b) 26.6%
100 Universal City Plaza
Universal City, CA 91608
The Claridge Group 4,324,003(a)(b)(c) 9.8%
c/o Claridge Inc.
1170 Peel Street, 8th Floor
Montreal, Quebec H3B 4P2
George Cohon -
Marinus N. Henny - (d) *
Hon. E. Leo Kolber 350,309(c) *
Ken Lemberger - (d) *
Ron Meyer - (f) *
Brian C. Mulligan - (d) *
Yuki Nozoe - (d) *
Karen Randall - (f) *
Stanley Steinberg - (d) *
Howard Stringer - (d) *
Robert Wynne - (d) *
Mortimer Zuckerman - *
Lawrence J. Ruisi 500,100(g) 1.1%
Allen Karp 500,114(h) 1.1%
Barrie Lawson-Loeks -
Jim Loeks -
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Travis Reid -
Seymour Smith -
All directors and officers
as a group (22 persons) 1,357,923 3.0%
Class A Non-Voting Common Sony Pictures 1,202,486 (a) 100%
Stock, $.01 par value Entertainment Inc.
550 Madison Avenue
New York, New York
Class B Non-Voting Common Universal Studios, Inc. 80,000 (a) 95.2
Stock, $.01 par value 100 Universal City Plaza
Universal City, CA 91608
</TABLE>
- -------------------
* Indicates beneficial ownership or control of less than 1.0% of the
outstanding shares of LCE Common Stock
(a) All of such shares are subject to the terms of the Stockholders Agreement
described below.
(b) Excludes shares of Common Stock issuable upon conversion of the Non-Voting
Common Stock.
(c) Members of The Claridge Group and their shareholdings 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; Louis Ludwick-23,377 shares; and
(vii) Senator Kolber, who has voting control of the shares held by Bojil
Equities Inc., as to which he disclaims any pecuniary interests. 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.
(d) Does not include 21,934,625 shares of Loews Cineplex Common Stock and
1,202,486 shares of Class A Non-Voting 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.
(e) 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. Also
includes 7,500 shares of Loews Cineplex Common Stock beneficially owned by
Senator Kolber's wife, as to which he disclaims beneficial ownership.
(f) Does not include 11,691,246 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.
(g) This number relates solely to options exercisable within 60 days of May 19,
1998.
(h) 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 within 60 days of May 19, 1998.
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. 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 119,923,229 of the then outstanding
Seagram Shares, constituting approximately 34.6% of the then outstanding Seagram
Shares, which amount includes the approximately 14.9% of the 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 33.5% of the
outstanding Seagram Shares and a voting trustee for approximately 0.7% of the
then outstanding Seagram Shares, which shares are beneficially owned by the
Bronfman Trusts and certain other entities.
53
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Loews
Cineplex's directors and executive officers, and persons who beneficially own
more than 10% of a registered class of Loews Cineplex's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Loews Cineplex Common Stock and other
equity securities of Loews Cineplex. To Loews Cineplex's knowledge, based
solely on review of the copies of such reports furnished to Loews Cineplex (and
written representations that no other reports were required), all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners have been complied with.
THE STOCKHOLDERS AGREEMENT
The Company, SPE, Universal and the members of the Claridge Group (for purposes
of this section, the "Stockholders") have entered into an Amended and Restated
Stockholders Agreement dated as of September 30, 1997 (the "Stockholders
Agreement"), which provides for certain board, voting, consent, standstill,
purchase, transfer and other rights and obligations for the parties thereto.
The Loews Cineplex Board
Pursuant to the Stockholders Agreement, effective as of the Closing, the Loews
Cineplex Board is to be comprised of 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 the
parties prior to the Closing. Two of the Independent Directors were designated
by mutual agreement of LCE, SPE, Universal and a majority of the members of the
Independent Committee prior to the Closing. 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. 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 LCE
or an Affiliate. The initial Management Directors are Lawrence J. Ruisi, who is
President and Chief Executive officer of Loews Cineplex, and Allen Karp, who is
Chairman and Chief Executive Officer of Cineplex Odeon.
The Stockholders Agreement provides that SPE, Universal and the Claridge Group
will, subject to the exceptions and limitations described below, be entitled to
designate for nomination for election to the Loews Cineplex Board, the number of
directors of Loews Cineplex ("Loews Cineplex Directors") that generally
corresponds to such Stockholder's "Applicable Percentage" set forth on the
following chart (the "Directors Chart");
NUMBER OF DIRECTORS APPLICABLE PERCENTAGE
- ------------------- ---------------------
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
54
<PAGE>
provided, however, that:
(i) (x) until the five-year anniversary of the Closing, 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);
(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 designated 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%.
55
<PAGE>
If the Stockholders collectively have the right to designate at least 13 members
of the Loews Cineplex Board 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 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 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 Loews Cineplex Board, 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 Loews Cineplex Board, as provided in the Stockholders Agreement.
In connection with each election of members of the Loews Cineplex Board, the
Management Directors and the Independent Directors will be designated by a
nominating committee of the Loews Cineplex Board (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 Loews
Cineplex Board 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 Loews
Cineplex Board multiplied by the total number of members comprising such
committee. The Stockholders Agreement contains other provisions relating to
committees of the Loews Cineplex Board and various provisions relating to the
procedures, including meetings and agendas, and the powers of the Loews Cineplex
Board.
Each Stockholder has agreed that it will not without the prior written consent
of SPE and Universal (i) seek the election of any Loews Cineplex Director,
except in accordance with the terms of the Stockholders Agreement; (ii) deposit
any Loews Cineplex Common Shares in a voting trust or subject any Loews Cineplex
Common Shares 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-1 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 Loews Cineplex Common Shares, other than a Group
consisting exclusively of Stockholders, any of their Affiliates or Permitted
Transferees.
56
<PAGE>
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 transactions 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 Loews Cineplex Board; (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 Loews Cineplex By-Laws by action
of the Loews Cineplex Board.
Under the Stockholders Agreement, SPE and Universal are entitled to certain
additional consents 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 Loews Cineplex board related to any (a) Merger,
(b) voluntary liquidation, dissolution or winding up of Loews Cineplex (a
"Dissolution"), (c) amendment or restatement of the Loews Cineplex Charter or
(d) amendment or repeal of any provision of, or addition of any provision to,
the Loews Cineplex By-laws (a "By-law Amendment"), each Stockholder has agreed
to use its best efforts to cause the Loews Cineplex Directors designed 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 owed
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.
57
<PAGE>
So long as the Applicable Percentage or SPE or Universal equals or exceeds the
Minimum percentage, (i) Loews Cineplex has agreed that the Loews Cineplex
Charter will provide that effecting a Merger or Dissolution or adopting an
amendment or restatement of the Loews Cineplex 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 holder of at least 80% of the
outstanding Loews Cineplex Common Shares; 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 Loews Cineplex Board shall have proved such matter;
provided, further, that in the case of any Merger that is approved by 14 members
of the Loews Cineplex Board, such Merger shall require the affirmative vote or
written consent of the holders of at least 66 2/3% of the outstanding Loews
Cineplex Common Shares and (ii) no Stockholder shall vote in favor or, consent
in writing to, or take any other action to effect an amendment or repeal of such
provisions of the Loews Cineplex Charter.
Approval of Certain Transactions 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 Shares by the Stockholders
The Stockholders Agreement includes the following restrictions on Transfers by
SPE and Universal:
Restrictions on Transfer by SPE and Universal during the Six Months following
Closing. 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 Interest for a period of six months
following the Closing. 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 Shares 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 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.
58
<PAGE>
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
Standstill Among Loews Cineplex and the Stockholders. 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 Loews Cineplex Common
Shares upon the conversion of Loews Cineplex Non-Voting Common Shares.
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 Loews Cineplex Board 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 Loews Cineplex Charter, a majority of the Loews Cineplex Common Shares
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) the six-year anniversary of the Closing and (y) any time after
the four-year anniversary of the Closing 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:
59
<PAGE>
(a) 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);
(b) 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 1/4% at any time Universal and its Affiliates
beneficially own more Voting Shares than any holder of Loews Cineplex
Common Shares;
(c) 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);
(d) any Person (other than a Stockholder or Permitted Transferee)
beneficially owning more than 20% of the Voting Shares, excluding from the
Voting Shares beneficially owned by such Person Voting Shares acquired from
a Stockholder, a Permitted Transferee or Loews Cineplex; or
(e) the Public Stockholders beneficially owning more than 66 2/3%
of the Voting Shares.
Standstill Among the Stockholders. 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 the 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 Loews Cineplex Common Shares upon the conversion of
Loews Cineplex Non-Voting Common Shares.
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 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%.
60
<PAGE>
Registration Rights
The Stockholders Agreement grants to the Stockholders customary demand and
piggyback rights with respect to the registration of Loews Cineplex Common
Shares (including any Loews Cineplex Common Shares issuable upon conversion of
Loews Cineplex Non-Voting Commercial Shares) owned by them as of the Closing or
thereafter acquired by them. Loews Cineplex has agreed to pay all expenses of
the initial registration demanded by each of SPE, Universal and the Claridge
Group.
Equity Purchase Rights
The Stockholders Agreement provides that if Loews Cineplex proposes to issue or
sell any Voting Shares pursuant to 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 Loews Cineplex
Common Shares 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 board members and may also be
entitled to registration rights. Third Party Transferees will not receive 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 are not assignable 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 Loews Cineplex Board" (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 Loews Cineplex 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 Loews Cineplex
Common Shares held by them. Such new class would be identical in all respect to
the Loews Cineplex Common Shares, except that such class would entitle the
holders thereof to proportionate representation on the Loews Cineplex Board on
the same basis that Universal is entitled to representation thereon pursuant to
the Stockholders Agreement and 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
61
<PAGE>
shares, if issued, would be convertible into shares of Loews Cineplex 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 the five-year anniversary of the Closing 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.
ITEM 13. 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 provides
certain video distribution services to Universal for which Universal paid
Cineplex Odeon approximately $1.0 million during its fiscal year ended December
31, 1997.
At May 14, 1998, Loews Cineplex's total debt due to SCA and its affiliates was
approximately $299.5 million. As a result of the Combination, all intercompany
debt from Loews Cineplex to SCA and its affiliates was repaid at the Closing
with funds drawn under the new credit facility. Further, SCA's affiliates
provide certain administrative support services to Loews Cineplex in the areas
of payroll processing, employee benefits coverage, risk management including
excess liability, workman's compensation, officers and directors coverage and
legal and tax services. During fiscal year 1998, SCA's affiliates charged Loews
Cineplex approximately $600,000 for these services. Additionally, SCA and its
affiliates provide certain employee benefits under a multiple employer-type plan
to substantially all Loews Cineplex's employees. Based on certain criteria,
including actuarially determined amounts, SCA and its affiliates allocate costs
of these programs to Loews Cineplex. These allocated costs were approximately
20% to 23% of payroll during 1998.
During the year ended February 28, 1998, Loews Cineplex was charged by a SCA
affiliate approximately $1.8 million for certain administrative related
services. Periodically, Loews Cineplex reviews the reasonableness of these
charges in light of market conditions to ensure such charges are competitive
with the market.
LCP and SCA or its affiliates have entered into (a) a trademark agreement
governing the ongoing and future use of the Sony Corporation "Sony" trademark
in connection with the operation of certain LCP theatres, (b) a tax sharing and
indemnity agreement regarding certain tax, ERISA and other matters and (c) a
transition services agreement pursuant to which SPE will provide LCP with
certain administrative services currently performed by SPE or its affiliates on
behalf of Loews Cineplex to the extent such services are required by LCP to
conduct its operations in the ordinary course of business following the merger.
Such services will be provided at such prices and rates, and subject to
termination, as may be agreed upon by SPE and LCP but pursuant to terms no less
favorable to than would be obtainable from unaffiliated third parties.
62
<PAGE>
An affiliate of SCA is developing an entertainment/retail complex in San
Francisco, California ("Yerba Buena"). Loews Cineplex has negotiated 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 LST 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 Mr. Kolber who is a
director of Loews Cineplex and/or associates of Mr. Kolber, has a minority
interest, contributed Cdn$3,250,000 of the total financing required to complete
the project and are 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 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 Loews Cineplex Common Shares issued to Universal pursuant to the
Subscription Agreement at the closing of the Combination is subject to
adjustment pursuant to anti-dilution provisions contained in the Subscription
Agreement. In accordance with these provisions, Loews Cineplex will be required
to issue, subject to applicable stock exchange requirements, additional Loews
Cineplex Common Shares to Universal for no additional consideration if Loews
Cineplex issues or sells any Loews Cineplex Common Shares (other than in
connection with the Combination, employee stock options or the conversion of
Loews Cineplex Non-Voting Common Shares) in certain types of transactions to any
person other than Universal or any of its affiliates (a "Sale"), including
issuances upon conversion, exchange of 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, the number of additional shares to be issued to Universal would be
equal (a) the quotient of $84,500,000 divided by the Subsequent Sale Price,
minus (b) 4,426,606 Loews Cineplex Common Shares. Upon the completion of each
subsequent Sale, the number of additional shares would equal (w) the quotient of
$84,500,000 divided by the weighted average Subsequent Sale Price (determined in
accordance with the Subscription Agreement) of all Sales, minus (x) the number
of additional Loews Cineplex Common Shares previously issued to Universal
pursuant to the adjustment provisions of the Subscription Agreement, minus (y)
the 4,426,606 Loews Cineplex Common Shares issued to Universal on the Closing,
plus (z) any Loews Cineplex Common Shares that Universal may be required to
deliver as described in the following sentence. In certain circumstances, if
there is more than one Sale, Universal may be required to deliver Loews Cineplex
Common Shares Cineplex to the extent that the Subsequent Sale Price is greater
than the weighted average Subsequent Sale Price of all Sales. The anti-dilution
provisions terminate once the aggregate proceeds of all Sales equals or exceed
$100 million.
63
<PAGE>
From and after the later of (i) 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 twelve-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 University 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 (the "Base Price") 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 (the "Engineering Firm")
selected by Universal and reasonably acceptable to Loews Cineplex (the
"Deficiency Amount"). 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 fails to provide such notice, the Start Date is
tolled until the fifth day following delivery of such notice.
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. Financial Statements
Financial Statements of Loews Cineplex Entertainment Corporation are
included in Part II, Item 8.
Loeks-Star Theatres, Inc. Financial Statements
2. Financial Statement Schedules
Valuation and Qualifying Accounts
3. 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 Amending Agreement dated May 14, 1998
2.3 (1) Subscription Agreement by and between Registrant and
Universal Studios, Inc. dated as of September 30, 1997.
3.1 Amended and Restated Certificate of Incorporation of
Registrant
3.2 (1) Form of Amended and Restated By-laws of Registrant
4.1 (2) Indenture dated as of June 23, 1994, by and among Plitt
Theatres, Inc. and Cineplex Odeon Corporation and The Bank of
New York as Trustee
4.2 Supplemental Indenture dated as of May 14, 1998 among
Registrant and The Bank of New York, as Trustee
10.1 (1) 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 Tax Sharing and Indemnity Agreement dated May 14, 1998 by and
among Registrant and Sony Corporation of America.
10.3 Sony Trademark Agreement dated May 14, 1998 by and among
Registrant and Sony Corporation of America.
10.4 Transition Services Agreement dated May 14, 1998 among
Registrant, Sony Corporation of America and Sony Pictures
Entertainment, Inc.
10.5 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 have been 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 Sony YBG Entertainment Center Tenant Work Agreement
10.7 (1) Form of Director Indemnification Agreement
10.8 (1) Loews Cineplex Entertainment Corporation 1997 Stock Incentive
Plan
10.9 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 Employment Agreement between Registrant and Lawrence J.
Ruisi
10.11(3) Employment Agreement between Cineplex Odeon Corporation and
Allen Karp
10.12 Assumption dated May 14, 1998 of Allen Karp Employment
Agreement by Registrant
10.13(1) 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
10.14(1) Agreement between Registrant and Travis Reid, dated October
21, 1995
65
<PAGE>
10.15(1) Agreement between Registrant and Joseph Sparacio, dated
August 20, 1994, including Term Extension Letter dated
March 5, 1997
10.16(1) Agreement between Registrant and John J. Walker, dated
June 1, 1993, including Term Extension Letter dated
March 5, 1997
10.17(1) Letter Agreement between Registrant and John C.
McBride, Jr., dated November 17,1997
10.18 Letter Agreement between Registrant and Mindy Tucker,
dated December 15, 1997
21 Subsidiaries of the Registrant
23 Consent of Price Waterhouse LLP
27 Financial Data Schedule (for SEC use only)
4. Form 8-K:
No reports on form 8-K were filed by Registrant during the quarter
ended February 28, 1998.
(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 from the fiscal
year ended December 31, 1996 of Cineplex Odeon Corporation, Commission file
number 1-9454.
66
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
Dated: May 26, 1998
/s/ John C. McBride
----------------------------------------------------
John C. McBride
Senior Vice President and General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- -----
/s/ Lawrence J. Ruisi
- ------------------------
Lawrence J. Ruisi President, Chief Executive Officer May 26, 1998
and Director (Principal Executive
Officer)
/s/ John J. Walker
- ------------------------
John J. Walker Senior Vice President and Chief May 26, 1998
Financial Officer (Principal
Financial Officer)
/s/ Joseph Sparacio
- ------------------------
Joseph Sparacio Vice President and Controller May 26, 1998
(Principal Accounting Officer)
/s/ George A. Cohon
- ------------------------
George A. Cohon Director May 26, 1998
/s/ Marinus N. Henny
- ------------------------
Marinus N. Henny Director May 26, 1998
/s/ Allen Karp
- ------------------------
Allen Karp Director May 26, 1998
67
<PAGE>
/s/ Ernest Leo Kolber
- ---------------------
Ernest Leo Kolber Director May 26, 1998
- ---------------------
Ken Lemberger Director May 26, 1998
/s/ Ron Meyer
- ---------------------
Ron Meyer Director May 26, 1998
- ---------------------
Brian C. Mulligan Director May 26, 1998
- ---------------------
Yuki Nozoe Director May 26, 1998
/s/ Karen Randall
- ---------------------
Karen Randall Director May 26, 1998
/s/ Stanley Steinberg
- ---------------------
Stanley Steinberg Director May 26, 1998
/s/ Howard Stringer
- ---------------------
Howard Stringer Director May 26, 1998
- ---------------------
Robert Wynne Director May 26, 1998
- ---------------------
Mortimer Zuckerman Director May 26, 1998
68
<PAGE>
REPORT OF INDEPENDENT ACCOUNTS
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 operations and cash flows for the fifty-two
weeks ended February 26, 1998, the fifty-two weeks ended February 27, 1998 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 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
69
<PAGE>
LOEKS-STAR PARTNERS
BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
1998 1997
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
LOEKS-STAR PARTNERS
STATEMENTS OF INCOME
(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>
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
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
LOEKS-STAR PARTNERS
STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
LOEKS STAR
PARTNER PARTNER TOTAL
--------- --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
<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.
73
<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.
74
<PAGE>
LOEKS-STAR PARTNERS
NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)
- -------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (continued)
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 26, FEBRUARY 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
=========== =========
75
<PAGE>
LOEKS-STAR PARTNERS
NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)
- -------------------------------------------------------------------------------
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:
FEB 26, FEB 27, FEB 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 26, FEBRUARY 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
========== ===========
76
<PAGE>
LOEKS-STAR PARTNERS
NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)
- -------------------------------------------------------------------------------
5. NOTES PAYABLE TO PARTNER (CONTINUED)
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.
77
<PAGE>
LOEKS-STAR PARTNERS
NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)
- -------------------------------------------------------------------------------
7. INVESTMENT IN STAR SOUTHFIELD CENTER, L.L.C. (CONTINUED)
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:
<TABLE>
<CAPTION>
Unaudited Audited
--------- -------
November 1, 1997 Fiscal Year
Total through through Ended
February 28, 1998 February 28, 1998 October 31, 1997
---------------------- ----------------------- ---------------------
<S> <C> <C> <C>
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)
-----------------------------------------------------------------------
</TABLE>
78
<PAGE>
SCHEDULE II
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS (CHARGED TO DEDUCTIONS
BEGINNING OF COSTS AND AND OTHER BALANCE AT
PERIOD EXPENSES) CHARGES END OF PERIOD
------ --------- ------- -------------
YEAR ENDED FEBRUARY 28, 1998
- ----------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
79
<PAGE>
EXHIBIT 2.2
AMENDING AGREEMENT
------------------
AGREEMENT, dated as of May 14, 1998 among Cineplex Odeon Corporation
("Cineplex"), Sony Pictures Entertainment Inc. ("SPE"), LTM Holdings, Inc.
-------- ---
("LTM"), Universal Studios, Inc. ("Universal"), and the Charles Rosner Bronfman
--- ---------
Family Trust (the "Trust") (on behalf of itself and the other members of the
Claridge Group being Charles R. Bronfman, E. Leo Kolber, Arnold M. Ludwick,
Phyllis Lambert Foundation and 3096475 Canada Inc.).
WHEREAS, SPE, LTM and Cineplex have entered into an Amended and Restated
Master Agreement dated as of September 30, 1997 (the "Master Agreement");
----------------
WHEREAS, LTM and Universal have entered into an Amended and Restated
Subscription Agreement dated as of September 30, 1997 (the "Subscription
------------
Agreement"); and
- ---------
WHEREAS, the parties desire to amend the Master Agreement and the
Subscription Agreement as set forth below and confirm their understanding of
certain matters under the related Stockholders Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
agreements contained herein, the parties agree as follows:
SECTION 1 AMENDMENTS TO THE MASTER AGREEMENT
--------- ----------------------------------
1.1 The last sentence of Section 7.3 (a) of the Master Agreement is hereby
amended by and restated in its entirety as set forth below:
"In addition, LTM shall have received a certificate of the
Chief Financial Officer of Cineplex Odeon certifying that,
as of the Closing Date, except for (a) amounts owed to
Universal and its Affiliates for film booking and home video
arrangements or under the management agreement in respect of
the Universal City Cinema, (b) obligations and liabilities
included in clauses (ii) (x) and (y) of the definition of
Net Working Capital and Debt reflected in each case in
Cineplex Odeon's Closing Statement or arising under the
Documents or as disclosed in the Cineplex Odeon Reports or
in Section 2.19 of the Cineplex Disclosure Schedule, (c) the
exclusions set forth in the final sentence of paragraph 9 of
the Letter Agreement and (d) obligations and liabilities of
Cineplex Odeon Films, a division of Cineplex Odeon, pursuant
to an agreement made by it with October Films, Inc. pursuant
to which Cineplex Odeon Films acts as a distributor of
October
<PAGE>
Films, Inc. films in Canada, Cineplex Odeon has no outstanding
obligations or liabilities, contingent or otherwise, owed to Universal
or the Claridge Group, or their respective Affiliates."
SECTION 2 AMENDMENTS TO THE CINEPLEX ODEON DISCLOSURE STATEMENT
--------- -----------------------------------------------------
2.1 Section 2.19 of the Cineplex Odeon Disclosure Statement is hereby
amended by deeming the contents of Schedule "A" attached hereto to be
incorporated into and to form part of the said Section 2.19.
SECTION 3 AMENDMENTS TO THE SUBSCRIPTION AGREEMENT
--------- ----------------------------------------
3.1 Section 7.15 of the Subscription Agreement is hereby amended and
restated in its entirety as set forth below:
"Section 7.15. Release. Subject to the consummation of the
-------
Purchase, and excluding (a) amounts owed to Universal and
its Affiliates for film booking and home video arrangements
or under the management agreement in respect of the
Universal City Cinema, (b) obligations and liabilities
included in clauses (ii)(x) and (y) of the definition of Net
Working Capital and Debt reflected in each case in Cineplex
Odeon's Closing Statement or arising under the Documents and
(c) obligations and liabilities of Cineplex Odeon Films, a
division of Cineplex Odeon, pursuant to an agreement made by
it with October Films, Inc. pursuant to which Cineplex Odeon
Films acts as a distributor of October Films, Inc. films in
Canada, Universal, on behalf of itself and its Affiliates,
hereby acknowledges, releases and discharges, and
indemnifies and saves harmless, Cineplex Odeon and the
Cineplex Odeon Subsidiaries and their successors and assigns
from all actions, causes of action, suits, debts, dues, sums
of money, accounts, claims and demands owed by Cineplex
Odeon and the Cineplex Odeon Subsidiaries to Universal and
its Affiliates by reason of any matter, cause, contract
(whether written or oral), course of dealing or thing
whatsoever arising during, or in respect of, the period on
or before the Closing Date."
-2-
<PAGE>
SECTION 4 AMENDMENTS TO THE FORM OF TAX SHARING AND INDEMNITY AGREEMENT
--------- -------------------------------------------------------------
4.1 The form of Tax Sharing and Indemnity Agreement attached as Exhibit E
to the Master Agreement is hereby amended and restated in its entirety in
substantially the same form as set forth in Schedule "B" attached hereto.
SECTION 5 LTM CONSENT TO SALE OF CINEPLEX'S FILM DISTRIBUTION BUSINESS
--------- ------------------------------------------------------------
5.1 Pursuant to section 5.1(b) of the Master Agreement, LTM hereby
consents to the disposition by Cineplex of all of Cineplex's film distribution
business at or prior to the Closing of the Transactions on terms previously
disclosed to LTM.
SECTION 6 APPOINTMENT OF INDEPENDENT DIRECTORS
--------- ------------------------------------
6.1 (a) The parties acknowledge and confirm that, notwithstanding the
provisions of Section 6.18 of the Master Agreement and Section 2.1 of the
Stockholders Agreement, two Independent Directors as opposed to four Independent
Directors will be appointed effective as of the Closing. LTM shall use its best
efforts to cause an additional two Independent Directors to be appointed as soon
as possible following the Closing, such two additional Independent Directors to
be designated by mutual agreement of LTM, Universal, SPE and the two Independent
Directors appointed on Closing. Until such two additional Independent Directors
shall have been duly elected to the Board, LTM shall not take any action
requiring Board authorization unless such action is approved by (i) such vote as
may be required by the Stockholders Agreement and LTM's Amended and Restated
Certificate of Incorporation and Bylaws and the Delaware General Corporation Law
and (ii) a "Weighted Majority of the Board." For purposes of this agreement,
"Weighted Majority of the Board" means a majority of the votes cast by directors
at any meeting at which a quorum is present, in which the vote of each
Independent Director is multiplied by the quotient of (i) 4 divided by (ii) the
number of Independent Directors then in office.
(b) This will confirm (i) the covenant and agreement of each of
Universal and SPE that each of Universal and SPE will use its best efforts to
cause the Company to fulfill the Company's obligations under the third sentence
of paragraph (a) of this Section 6.1 and (ii) the covenant and agreement of the
Company, Universal and SPE that if either Universal or SPE shall fail to use its
best efforts to cause the Company to fulfill in any material respect any of the
Company's obligations under paragraph (a) of this Section 6.1:
-3-
<PAGE>
(A) Such failure shall have the consequences specified in Section
8.3 of the Stockholders Agreement and
(B) Each of Universal and SPE shall have the rights and remedies
specified in Section 8.11 of the Stockholders Agreement,
in each case to the same extent as if the covenants of each of Universal
and SPE set forth in clause (i) above were a covenant of Universal and SPE under
the Stockholders Agreement and such covenant were among the obligations
enumerated in the second sentence of Section 8.3 and in Section 8.11(c) thereof.
SECTION 7 TRANSACTION EXPENSES
--------- --------------------
7.1 The parties hereto acknowledge that LTM has not approved of any plan
pursuant to which severance costs or "stay" bonuses will be incurred by LTM or
Cineplex Odeon as a result of the Transactions in excess of those previously
proposed by LTM and without the written approval of SPE, Universal, Claridge
Inc. and a majority of the Independent Directors, any such excess shall not be
included as "Transaction Expenses" as defined in Section 2.7 of the Master
Agreement for purposes of determining the Final Closing Statement.
SECTION 8 CLOSING ADJUSTMENT
--------- ------------------
8.1 The parties hereto acknowledge that, notwithstanding anything
contained in the Master Agreement to the contrary, the Closing shall in no way
be construed as a waiver of any party's right to object that the Preliminary
Closing Statements were not prepared in accordance with the terms of Sections
2.7, 3.7 and 6.9 of the Master Agreement and the parties agree that any such
objections may be raised subsequent to the Closing in connection with the
determination of the Final Closing Statement.
SECTION 9 APPOINTMENT OF ARBITRATOR
--------- -------------------------
9.1 The parties acknowledge and confirm that, notwithstanding the
provisions of Section 3.3(d) of the Stockholders Agreement, an Arbitrator has
not been selected as required thereby. Following the Closing, the parties hereto
agree that they will use their reasonable best efforts to appoint promptly an
Arbitrator meeting the requirements of Section 3.3(d) of the Stockholder
Agreement.
SECTION 10 NO OTHER AGREEMENTS
---------- -------------------
10.1 Except as expressly set forth herein, this Agreement will not amend or
modify any provision of the Master Agreement, the Subscription Agreement or the
Stockholders Agreement.
-4-
<PAGE>
SECTION 11 COUNTERPARTS
---------- ------------
11.1 This agreement may be executed in several counterparts, each of which
so executed shall be deemed to be an original and such counterparts together
shall be but one and the same instrument.
SECTION 12 INTERPRETATION
---------- --------------
12.1 Capitalized terms used but not defined herein shall have the meanings
set forth in the Master Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
LTM HOLDINGS, INC.
By: /s/ John Walker
---------------------------------
Name: John Walker
Title: Senior Vice President and Chief
Financial Officer
SONY PICTURES ENTERTAINMENT INC.
By: /s/ Ronald N. Jacobi
---------------------------------
Name: Ronald N. Jacobi
Title: Executive Vice President and General
Counsel
UNIVERSAL STUDIOS, INC.
By: /s/ Brian Mulligan
---------------------------------
Name: Brian Mulligan
Title: Vice President, Corporate Development
CINEPLEX ODEON CORPORATION
By: /s/ Michael Herman
---------------------------------
Name: Michael Herman
Title: Executive Vice President, Corporate
Affairs and Secretary
CHARLES ROSNER BRONFMAN FAMILY TRUST
By: /s/ Robert Rabinovitch
---------------------------------
Name: Robert Rabinovitch
Title:
By: /s/ Michael Vineberg
---------------------------------
Name: Michael Vineberg
Title:
-6-
<PAGE>
Schedule "A"
5. Limited Partnership Agreement made as of July 31, 1985 between 619918 Ontario
Inc. and 130876 Canada Inc. (the "Partnership").
6. Lease made as of June 1, 1985 between Cineplex Odeon Corporation and the
Yonge-Eglinton Cinema Partnership.
7. Guarantee of Cineplex Odeon Corporation dated December 11, 1985 (with respect
to the obligations of the general partner of the Partnership and the
Partnership).
8. Agency Agreement made as of July 31, 1985 between the Yonge-Eglinton Cinema
Partnership and Cineplex Odeon Corporation.
9. Net Lease made as of June 1, 1985 between Yonge-Eglinton Building Limited,
Transtortium Realty Limited and Transplex Building Corporation Limited, and
Cineplex Odeon Corporation.
-7-
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LTM HOLDINGS, INC.
LTM Holdings, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is LTM Holdings, Inc. (the
"Corporation"). The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware
on October 31, 1986.
SECOND: This Restated Certificate of Incorporation, which both
restates and amends the original Certificate of Incorporation of the
Corporation as heretofore amended, has been duly adopted pursuant to
Sections 242 and 245 of the General Corporation Law of the State of
Delaware (the "GCL") and by written consent of the sole stockholder of
the Corporation in accordance with Section 228 of the GCL.
THIRD: The text of the Corporation's Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended
to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Loews Cineplex Entertainment Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington (19805), County of New Castle.
The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the GCL.
ARTICLE IV
1. Authorized Capital. The total number of shares of all classes of capital
stock which the Corporation has authority to issue is 330,000,000 shares,
divided into classes as follows: (i) 300,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), (ii) 10,000,000 shares of Class A
non-voting common stock, par value $.01 per share (the "Class A Non-Voting
Common Stock"), (iii) 10,000,000 shares of Class B non-voting common stock, par
value $.01 per share (the "Class B Non-Voting Common Stock," and together with
the Class A Non-Voting Common Stock, the "Non-Voting Common Stock;" the Non-
Voting Common Stock and the Common Stock, together, the "Common Shares") and
(iv) 10,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"). Shares of Preferred Stock may be issued from time to time in
one or more series in accordance with Section 3 of this Article IV. Except as
provided to the contrary in the terms of any series of Preferred Stock,
<PAGE>
the amount of the authorized stock of this Corporation or of any class or series
may be increased or decreased by the affirmative vote of the holders of a
majority in voting power of the stock in this Corporation entitled to vote
irrespective of the provisions of Section 242(b)(2) of the GCL or any successor
provision thereto.
2. Common Shares. (a) Voting Rights. (i) Every holder of Common Stock
shall be entitled to cast, in person or by proxy, one vote for each share of
Common Stock held of record by such holder on all matters to be voted on by
stockholders.
(ii) the holders of Non-Voting Common Stock shall not be entitled to
any voting rights, except as otherwise required by law.
(b) Dividends. Subject to the provisions of the GCL and the terms of any
series of Preferred Stock, dividends may be declared and paid on Common Shares
at such time and in such amounts as the Board of Directors of the Corporation
(the "Board") may deem advisable. The holders of each class of Common Shares
shall be entitled to receive dividends as and when declared by the Board out of
any funds legally available for payment of such dividends. Each Common Share, of
any class, shall rank equally with all other Common Shares, of any class, as to
the payment of dividends and other distributions upon liquidation or otherwise.
No dividends shall be paid on any class of then outstanding Common Shares unless
dividends are paid on a pro rata basis on all other then outstanding shares of
all other classes of Common Shares. No class of outstanding Common Shares shall
be split-up or otherwise divided by reclassification, stock split, stock
dividend, subdivision, combination or otherwise unless all other then
outstanding shares of all other classes of Common Shares are split-up or divided
in the same manner. In the event of the making of any dividend or distribution
payable in Common Shares or in the event of any split-up or other division by
reclassification, stock split, stock dividend, subdivision, combination or
otherwise of the Common Shares, the holders of Common Stock shall be entitled to
receive only shares of Common Stock, the holders of Class A Non-Voting Common
Stock shall be entitled to receive only shares of Class A Non-Voting Common
Stock, and the holders of Class B Non-Voting Common Stock shall be entitled to
receive only shares of Class B Non-Voting Common Stock, in each case on a pro
rata basis.
(c) Liquidation Rights. In the event of the dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and other liabilities of the Corporation
and the preferential and other amounts required to be paid to the holders of
Preferred Stock, each Common Share shall be entitled to share ratably with all
other Common Shares in the remaining net assets of the Corporation.
3. Preferred Stock. The Board is hereby expressly authorized at any time
and from time to time to provide for the issuance of all or any shares of
Preferred Stock in one or more series, and to fix for each such series of
Preferred Stock the number of shares comprising such series and such voting
powers, full or limited, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board providing for
the issuance of such series and to the fullest extent as may now or hereafter be
permitted by the GCL.
4. Conversion Rights. (a) Common Stock. Shares of Common Stock are not
convertible.
(b) Non-Voting Common Stock. (i) Each share of Class A Non-Voting Common
Stock shall convert into one fully paid and non-assessable share of Common Stock
in accordance with this clause (i) of this Section 4(b):
(A) upon the Transfer of any share of Class A Non-Voting Common Stock
to any Person other than SPE and its Affiliates in compliance with the
Stockholders Agreement, each such share shall be converted into one share
of Common Stock immediately, and without any action by the holder thereof;
-2-
<PAGE>
(B) if at any time SPE and its Affiliates shall beneficially own in
the aggregate less than 49.9% of the outstanding shares of Common Stock
(before giving effect to the conversion of any such shares), immediately,
and without any action by the holder thereof, such number of shares of
Class A Non-Voting Common Stock shall be converted into Common Stock on a
one-for-one basis, to the extent that after giving effect to such
conversion, SPE and its Affiliates would not beneficially own in excess of
49.9% of the outstanding shares of Common Stock and such conversion shall
occur pro rata among SPE and its Affiliates based on the number of shares
of Class A Non-Voting Common Stock held by each such holder; and
(C) upon the third anniversary of the Closing Date, each share of
Class A Non-Voting Common Stock shall be converted into one share of Common
Stock immediately, and without any action by the holder thereof.
(ii) Each share of Class B Non-Voting Common Stock shall convert into
one fully paid and non-assessable share of Common Stock immediately, and
without any action by the holder thereof, upon the later to occur of both
of (A) the Transfer of such share of Class B Non-Voting Common Stock to any
Person (other than the Person to whom such shares were issued pursuant to
the plan of arrangement contemplated by the Master Agreement or any
Affiliate of such Person) and (B) the fifth anniversary of the closing of
the transactions contemplated by the Master Agreement.
(c) Effectiveness of Conversion. A conversion of shares of Non-Voting
Common Stock into shares of Common Stock shall be deemed to have been effected
as of the close of business on the business day on which an event described in
clauses (i), (ii) or (iii) of Section 4(b) occurs, and at such time the rights
of the holder of the converted shares of Non-Voting Common Stock shall cease and
such holder will be deemed to have become the holder of record of the shares of
Common Stock issuable upon such conversion.
(d) Issuance of New Certificates. Promptly after a conversion of shares of
Non-Voting Common Stock pursuant to Section 4(b) and the receipt by the
Corporation of the certificate or certificates representing the shares of Non-
Voting Common Stock so converted, the Corporation shall issue and deliver to the
holder, in accordance with its instructions, each of the following:
(i) the certificate or certificates representing the shares of Common
Stock issuable upon such conversion; and
(ii) a certificate representing any shares of Non-Voting Common Stock
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted
into shares of Common Stock.
(e) Issuance Tax. The issuance of certificates representing shares of
Common Stock received upon conversion of shares of Non-Voting Common Stock shall
be made without charge to the holders of such shares for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of Common Stock.
5. Except as otherwise provided in this Article IV, Common Stock and Non-
Voting Common Stock shall be identical in all respects.
ARTICLE V
1. At any time when SPE or USI has an Article III Consent Right, except
as provided in Section 3 of this Article V, in addition to any affirmative vote
required by the GCL, by this Restated Certificate of Incorporation or by the
terms of any series of Preferred Stock, none of the matters specified in Section
2 of this Article V (any such matter, a "Significant Event") shall be
consummated without the affirmative vote or written consent of the holders
-3-
<PAGE>
of at least 80% of the outstanding shares of Common Stock. Such affirmative vote
or consent shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by the GCL, by this
Restated Certificate of Incorporation or by the terms of any series of Preferred
Stock.
2. The following are Significant Events for purposes of this Article V:
(a) any merger or consolidation in which the Corporation is a
constituent corporation (other than a merger of the Corporation into
another corporation that owns at least 90% of the outstanding stock of each
class and series of stock of the Corporation pursuant to Section 253 of the
GCL) or any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Corporation and its subsidiaries taken as a whole, provided
that a merger which satisfies all of the following criteria shall not be a
Significant Event and shall not be subject to this Article V: (i) the
Corporation is the surviving corporation, (ii) all shares of Common Stock
outstanding immediately prior to the consummation thereof remain
outstanding immediately after the consummation thereof and the only change
in the capital stock of the Corporation resulting from such merger is the
issuance of shares of capital stock pursuant thereto, and (iii) no consent
of the stockholders of the Corporation would be required in connection
therewith under the GCL; and
(b) the adoption of any plan or proposal for the liquidation,
dissolution or winding up of the Corporation.
3. The provisions of Section 1 of this Article V shall not be applicable to
any particular Significant Event if such Significant Event shall be approved by
at least 14 members of the Board and, in such circumstances (i) in the case of
any Significant Event described in Section 2(a) of this Article V, such
Significant Event shall require the affirmative vote or written consent of
holders of at least 66 2/3% of the outstanding shares of Common Stock in
addition to any requirements of the GCL or the terms of any series of Preferred
Stock then outstanding and (ii) in the case of any Significant Event described
in Section 2(b) of this Article V, such Significant Event shall require only
such affirmative vote or written consent as is required by the GCL or by the
terms of any series of Preferred Stock then outstanding.
ARTICLE VI
1. At any time when SPE and its wholly-owned subsidiaries, USI and its
wholly-owned subsidiaries and the members of the Claridge Group beneficially own
in the aggregate more than 50% of the outstanding shares of Common Stock, any
action required or permitted to be taken at any special meeting of the
stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The foregoing provision shall not apply to annual
meetings of the stockholders of the Corporation. At any time when SPE and its
wholly-owned subsidiaries, USI and its wholly-owned subsidiaries and the members
of the Claridge Group do not beneficially own in the aggregate more than 50% of
the outstanding shares of Common Stock, any action required or permitted to be
taken by the stockholders of the Corporation may only be taken at a duly called
annual or a special meeting of the stockholders of the Corporation and may not
be taken by written consent of stockholders.
2. Except as otherwise required by the GCL and subject to the rights of the
holders of any series of Preferred Stock then outstanding, special meetings of
stockholders of the Corporation may be called only by the Board pursuant to a
resolution approved by at least 14 members of the Board.
ARTICLE VII
-4-
<PAGE>
1. The business and affairs of the Corporation shall be managed by or under
the direction of the Board. The Board shall consist of sixteen directors.
Election of directors need not be by written ballot.
2. Directors may be removed with or without cause, provided, however,
directors may be removed without cause (i) at a time when SPE and its wholly
owned subsidiaries, USI and its wholly owned subsidiaries and members of the
Claridge Group beneficially own in the aggregate more than 50% of the
outstanding shares of Common Stock, by the affirmative vote or written consent
of the holders of at least 50% of the outstanding shares of Common Stock and
(ii) at any time when SPE and its wholly-owned subsidiaries, USI and its wholly-
owned subsidiaries and the members of the Claridge Group do not beneficially own
in the aggregate more than 50% of the outstanding shares of Common Stock, by the
affirmative vote or written consent of the holders of at least 80% of the
outstanding shares of Common Stock. For purposes of this Section 2, "cause"
shall mean the wilful and continuous failure of a director to substantially
perform such director's duties to the Corporation or the wilful engaging by a
director in gross misconduct materially and demonstrably injurious to the
Corporation.
ARTICLE VIII
1. Indemnification of Directors and Officers. The Corporation shall
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 the Corporation) by reason of the fact that he or she is or was a
director or officer of the Corporation, or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation 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 the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she 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 reasonable cause to believe that his or
her conduct was unlawful.
2. Derivative Actions. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director
or officer of the Corporation, or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection with the defense or
settlement of such action or suit 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 the Corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
3. Indemnification in Certain Cases. To the extent that a director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article VIII, or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
-5-
<PAGE>
4. Procedure. Any indemnification under Sections 1 and 2 of this Article
VIII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in such Sections 1 and 2. Such
determination shall be made as required or permitted by applicable law.
5. Advances for Expenses. Expenses (including attorney's fees) incurred by
a director or officer in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer, to repay such
amount if it shall be ultimately determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
6. Rights Not-Exclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this Article VIII
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any law, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office.
7. Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this Article
VIII or under applicable law.
8. Definition of Corporation. For the purposes of this Article VIII,
references to "the Corporation" include all constituent corporations absorbed
in a consolidation or merger as well as the resulting or surviving corporation
so that any person who is or was a director or officer of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article VIII with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the same
capacity.
9. Survival of Rights. The indemnification and advancement of expenses
provided by, or granted pursuant to this Article VIII shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person. No subsequent
amendment of this Article VIII shall diminish the rights hereunder of any
director or officer with respect to any action taken or claim made prior to such
amendment.
10. Claims. If a claim of indemnification or advancement of expenses
under this Article VIII is not paid in full within sixty days after a written
claim therefor by the director or officer has been received by the Corporation,
the director or officer may file suit to recover the unpaid amount of such claim
and, if successful in whole or in part, shall be entitled to be paid the expense
of prosecuting such claim. In any such action the Corporation shall have the
burden of proving the director or officer is not entitled to the requested
indemnification or advancement of expenses under applicable law.
ARTICLE IX
To the fullest extent permitted by the GCL, as the same exists or may be
hereafter amended, no director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director. Each person who serves as a director of the
Corporation while this Article IX is in
-6-
<PAGE>
effect shall be deemed to be doing so in reliance on the provisions of this
Article IX, and neither the amendment or repeal of this Article IX, nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article IX, shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for, arising
out of, based upon, or in connection with any acts or omissions of such director
occurring prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE X
In furtherance and not in limitation of the powers conferred upon it by
law, the Board is expressly authorized to adopt, repeal or amend the bylaws of
the Corporation pursuant to a resolution approved (i) at any time when the
Applicable Percentage of SPE or USI equals or exceeds the Minimum Percentage, by
at least 14 members of the Board and (ii) at any time when the Applicable
Percentage of each of SPE and USI is less than the Minimum Percentage, by a
majority of the members of the Board. In addition to any requirements of the
GCL, any other provision of this Restated Certificate of Incorporation or the
terms of any series of Preferred Stock then outstanding, at any time when the
Applicable Percentage of SPE or USI equals or exceeds the Minimum Percentage,
the affirmative vote or written consent of the holders of at least 80% of the
outstanding shares of Common Stock shall be required in order for the
stockholders to adopt, repeal or amend any provision of the bylaws of the
Corporation, notwithstanding the fact that a lesser percentage may be specified
by the GCL, this Restated Certificate of Incorporation or by the terms of any
Preferred Stock then outstanding.
ARTICLE XI
In addition to any requirements of the GCL and any other provision of this
Restated Certificate of Incorporation or the terms of any series of Preferred
Stock (and notwithstanding the fact that a lesser percentage may be specified by
the GCL, this Restated Certificate of Incorporation or any such terms), the
affirmative vote or written consent of the holders of at least 80% of the
outstanding shares of Common Stock shall be required to adopt, repeal or amend
any provision of this Restated Certificate of Incorporation. Notwithstanding the
foregoing, such 80% approval requirement shall not be applicable, and any such
adoption, repeal or amendment shall require only such affirmative vote as is
required by the GCL or by the terms of any Preferred Stock then outstanding (i)
if, at any time when the Applicable Percentage of SPE or USI equals or exceeds
the Minimum Percentage, such adoption, repeal or amendment shall be approved by
at least 14 members of the Board and (ii) if, at any time when the Applicable
Percentage of each of SPE and USI is less than the Minimum Percentage such
adoption, repeal or amendment shall be approved by a majority of the members of
the Board. Subject to the foregoing provisions of this Article XI, the
Corporation reserves the right to amend or repeal any provision contained in
this Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by the GCL, and all rights conferred upon stockholders herein are
granted subject to this reservation.
ARTICLE XII
Capitalized terms used in this Amended and Restated Certificate of
Incorporation but not defined herein shall have the meanings ascribed thereto in
the Amended and Restated Stockholders Agreement, dated as of September 30, 1997,
among the Corporation, Sony Pictures Entertainment Inc., a Delaware corporation,
Universal Studios, Inc., a Delaware corporation, Charles Rosner Bronfman Family
Trust, a trust created under the laws of the province of Quebec, and the other
persons listed on Exhibit A thereto as the same may be amended, modified,
supplemented or restated from time to time.
-7-
<PAGE>
IN WITNESS WHEREOF, LTM Holdings, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by its duly authorized officer, this
14th day of May , 1998.
LTM Holdings, Inc.
By: /s/ John C. McBride, Jr.
----------------------------------
John C. McBride, Jr.
Senior Vice President, General Counsel
and Assistant Secretary
-8-
<PAGE>
EXHIBIT 4.2
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of May 14, 1998, among Plitt Theatres,
Inc., as Issuer (the "Issuer"), Loews Cineplex Entertainment Corporation, as
Guarantor ("Loews Cineplex") and The Bank of New York, as Trustee (the
"Trustee").
WHEREAS, the Issuer and Cineplex Odeon Corporation, as Guarantor ("Cineplex
Odeon"), have executed and delivered to the Trustee an Indenture, dated as of
June 23, 1994 (the "Indenture"), providing for the issuance by the Issuer of
$200 million in aggregate principal amount of 10 7/8% Senior Subordinated
Securities (the "Notes") (capitalized terms used but not otherwise defined
herein shall have the meanings assigned to them in the Indenture);
WHEREAS, pursuant to Section 5.01 of the Indenture, Loews Cineplex will
assume the obligations of Cineplex Odeon as Guarantor of the Notes pursuant to
the terms of the Indenture and the Notes, and Cineplex Odeon will be released
from such obligations;
NOW, THEREFORE, in consideration of the premises, Loews Cineplex hereby
covenants and agrees with the Trustee and its successor or successors in said
trust under the Indenture as follows:
Section 1. Assumption of Obligations. Loews Cineplex hereby agrees to
-------------------------
assume the obligations of Cineplex Odeon as Guarantor under the Parent Guarantee
set forth on Article Twelve of the Indenture for the equal and ratable benefit
of the holders of the Notes, subject to the provisions of Article Thirteen of
the Indenture.
Section 2. Notice. Notices to Loews Cineplex under the Indenture should
------
be sent to Loews Cineplex Entertainment Corporation, 711 Fifth Avenue, 11th
Floor, New York, New York 10022, Attention: John C. McBride, Jr., General
Counsel, with a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, New York 10004, Attention: David C. Golay.
Section 3. Release. The Trustee, on behalf of any and all holders of the
-------
Notes, hereby acknowledges, releases and discharges Cineplex Odeon and its
successors and assigns (other than Loews Cineplex), from all obligations owed by
Cineplex Odeon to any and all holders of the Notes arising with respect to the
Parent Guarantee or the Indenture.
Section 4. Miscellaneous.
-------------
<PAGE>
a) The Indenture as amended and supplemented by this Supplemental
Indenture is in all respects preserved and confirmed.
b) This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every holder of the Notes heretofore or hereafter authenticated
and delivered shall be bound hereby.
c) For all purposes of this Supplemental Indenture, except as otherwise
defined or unless the context otherwise requires, capitalized terms used in this
Supplemental Indenture and defined in the Indenture shall have the meanings
specified in the Indenture.
d) This Supplemental Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
e) The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to
be duly executed as of the date first written above.
PLITT THEATRES, INC.,
as Issuer
By: /s/ Michael Herman
---------------------------------
Name: Michael Herman
Title: Executive Vice President,
Corporate Affairs and
Secretary
LOEWS CINEPLEX
ENTERTAINMENT CORPORATION,
as Guarantor
By: /s/ Joseph Sparacio
----------------------------------
Name: Joseph Sparacio
Title: Vice President and
Controller
THE BANK OF NEW YORK,
as Trustee
By: /s/ Marie E. Trimboli
---------------------------------
Name: Marie E. Trimboli
Title: Assistant Treasurer
-3-
<PAGE>
EXHIBIT 10.2
Tax Sharing and Indemnity Agreement
THIS AGREEMENT, dated as of May 14, 1998, is by and between Sony
Corporation of America, a New York corporation ("SCA"), and LTM Holdings, Inc.,
a Delaware corporation ("LTM").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, SCA is the common parent of the Affiliated Group (as defined
below) that included the LTM Group (as defined below) for Taxable Years (as
defined below) ending prior to the Closing Date ("Prior Years") and SCA filed a
consolidated federal income tax return on behalf of the Affiliated Group for
such years; and
WHEREAS, SCA is the common parent of the Affiliated Group that
included the LTM Group for the portion of the consolidated federal income tax
return year that ended on the Closing Date (the "Current Year") and SCA intends
to file a consolidated federal income tax return on behalf of the Affiliated
Group for the Taxable Year that includes the Current Year; and
WHEREAS, as of the Closing Date, the LTM Group will no longer be
affiliated with SCA for U.S. federal income tax purposes, but may remain
affiliated with SCA for purposes of filing consolidated, combined or unitary
state income, franchise or capital tax returns; and
WHEREAS, SCA and LTM wish to provide for procedures to be followed and
for the allocation and payment of consolidated U.S. federal income tax
liabilities of the SCA Group for Prior Years and the Current Year, and with
respect to consolidated, combined or unitary state income, franchise or capital
tax liabilities, for Prior Years, the Current Year and for Future Years, and to
provide for certain other tax-related matters.
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements and covenants herein contained, SCA and LTM agree as follows:
The parties hereto agree as follows:
1. Definitions. For the purposes of this Agreement, the following
-----------
terms shall be defined as follows:
(a) "Affiliated Group" shall mean a group of corporations
described in Section 1504(a) of the Code which files a consolidated
U.S. federal income tax return.
<PAGE>
(b) "AMT" shall mean the alternative minimum tax imposed by
Section 55(a) of the Code.
(c) "Closing Date" shall have the meaning set forth in the Master
Agreement dated September 30, 1997 among Sony Pictures Entertainment,
Inc., Cineplex Odeon Corp. and LTM.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Final Determination" shall mean the final resolution of
liability for any tax governed by this Agreement for a Taxable Year,
including any related interest or penalties, (i) by IRS Form 870 or
870-AD (or any successor forms thereto), on the date of acceptance by
or on behalf of the IRS, or by a comparable form under the laws of
other jurisdictions, except that a Form 870 or 870-AD or comparable
form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of
the taxing authority to assert a further deficiency shall not
constitute a Final Determination, (ii) by a decision, judgment, decree
or other order by a court of competent jurisdiction, which has become
final and unappealable, (iii) by a closing agreement or accepted offer
in compromise under Section 7121 or 7122 of the Code, or comparable
agreements under the laws of other jurisdictions, (iv) by any
allowance of a refund or credit in respect of any overpayment of any
tax governed by this Agreement, but only after the expiration of all
periods during which such refund may be recovered (including by way of
offset) by the tax imposing jurisdiction, or (v) by any other final
disposition, including by reason of the expiration of the applicable
statute of limitations.
(f) "Future Years" shall mean Taxable Years or portions thereof
beginning after the Closing Date.
(g) "IRS" shall mean the Internal Revenue Service.
(h) "LTM Group" shall mean LTM and all of its U.S. subsidiaries
which are members of the SCA Group and shall also include Star
Theatres of Michigan, Inc., a Michigan corporation and S&J Theatres,
Inc., a California corporation.
(i) "LTM Group Separate Tax Liability" for a Taxable Year shall
mean the liability for U.S. federal income tax (including AMT and
Environmental Tax, if any) (as determined under Section 6 below), and
interest, penalties and additions to tax with respect thereto, of the
LTM
-2-
<PAGE>
Group computed as though the LTM Group filed a consolidated U.S.
federal income tax return separate from the SCA Group for such taxable
period and all prior taxable periods, which amount shall not be less
than zero.
(j) "SCA Group" shall mean the Affiliated Group for U.S. federal
income tax purposes of which SCA is the common parent.
(k) "SCA Group Tax Liability" for a Taxable Year shall mean the
actual liability of the SCA Group for U.S. federal income tax
(including AMT and Environmental Tax, if any), and interest, penalties
and additions to tax with respect thereto, for such Taxable Year.
(l) "SCA Separate Group" shall mean the SCA Group, excluding all
members of the LTM Group.
(m) "Taxable Year" shall mean the period for which a U.S. federal
income tax return or state income, franchise or capital tax return is
made.
2. Tax Sharing and Indemnity Agreement. This is the Tax Sharing and
-----------------------------------
Indemnity Agreement contemplated by the Master Agreement dated September 30,
1997 by and among Sony Pictures Entertainment Inc. ("SPE"), Cineplex Odeon
Corporation and LTM (the "Master Agreement").
3. Payment, Indemnity and Consent. SCA shall pay to the IRS the
------------------------------
entire SCA Group Tax Liability and shall indemnify and hold harmless each member
of the LTM Group with respect to any SCA Group Tax Liability imposed on such
member (including, without limitation, by reason of Section 1.1502-6 of the
Treasury Regulations), subject (a) to clause (i) of Sections 4 and 5, (b)
Section 7, and (c) in the case of members of the LTM Group to offset by (and
reimbursement of) any amount due to SCA from LTM pursuant to this Agreement. On
behalf of itself and each other member of the LTM Group, LTM hereby consents to
be included in the consolidated federal income tax return filed by SCA as the
common parent of the SCA Group for the Taxable Year that includes the Current
Year.
4. Prior Years. If as a result of an audit by a taxing authority or
-----------
as a result of a court proceeding, the SCA Group Tax Liability (or any component
thereof or of the SCA Group's taxable income or loss) for a Prior Year is
adjusted, then notwithstanding paragraph 3 hereof (i) if there are adjustments
which increase the LTM Group Separate Tax Liability for a Prior Year, the amount
of any such increase shall be paid by LTM to SCA and (ii) if there are
adjustments which decrease the LTM Group Separate Tax Liability for a Prior
Year, the amount of any such decrease shall be paid to LTM by SCA to the extent
such amounts have previously been paid by LTM to SCA. SCA and LTM shall
cooperate in determining the amounts which have previously been
-3-
<PAGE>
paid by LTM to SCA. Payments by or to LTM required as the result of adjustments
shall be made promptly after the Final Determination of such adjustments.
5. Current Year. The portion of the LTM Group Separate Tax Liability
------------
for the Current Year not previously accrued prior to the Closing Date shall be
estimated by SCA and LTM and the amount of such estimate shall be accrued as a
liability of LTM, provided that the LTM Group Separate Tax Liability shall be
computed without taking into account the triggering as a result of the
transactions contemplated by the Master Agreement of any excess loss account
within the meaning of Treasury Regulation Section 1.1502-19 or deferred gain or
loss arising out of any intercompany transaction within the meaning of Treasury
Regulation Section 1.1502-13 (or arising out of any deferred intercompany
transaction within the meaning of Treasury Regulation Section 1.1502-13 as in
effect with respect to transactions occurring in years beginning before July 12,
1995) between a member of the SCA Separate Group and a member of the LTM Group
or between members of the LTM Group, and provided further, that any other taxes
imposed as a result of the transactions contemplated by the Master Agreement
shall be borne by the parties on whom imposed by law, except to the extent
expressly provided in this Agreement or in Section 9.3 of the Master Agreement.
If as the result of an audit by a taxing authority or as a result of a
court proceeding, the SCA Group Tax Liability (or any component thereof or of
the SCA Group's taxable income or loss) for the Current Year is adjusted, then
notwithstanding paragraph 3 hereof (i) if there are adjustments which increase
the LTM Group Separate Tax Liability for the Current Year, the amount of any
such increase shall be paid by LTM to SCA and (ii) if there are adjustments
which decrease the LTM Group Separate Tax Liability for the Current Year, the
amount of any such decrease shall be paid to LTM by SCA to the extent such
amounts have previously been paid by LTM to SCA. SCA and LTM shall cooperate in
determining the amounts which have previously been paid by LTM to SCA. Payments
by or to LTM required as the result of adjustments shall be made promptly after
the Final Determination of such adjustments.
6. Applicable Principles. The LTM Group Separate Tax Liability shall
---------------------
be computed as if the members of the LTM Group filed a separate consolidated tax
return for such members, except that such computation shall (1) be consistent
with the elections made, and the tax positions taken (or as adjusted pursuant to
a Final Determination) in determining the SCA Group Tax Liability, and (2) be in
accordance with Sections 4, 5 and 10.
7. State Tax Returns, Liability. If any member of the SCA Separate
----------------------------
Group filed with respect to any Prior Year or will file with respect to the
Current Year a combined or consolidated state, local or foreign income or
franchise tax return with any member of the LTM Group or any return for a tax
based on capital that included the capital of any member of the LTM Group, the
provisions of Sections 1 through 6 shall
-4-
<PAGE>
apply mutatis mutandis to any such taxes as if such returns were consolidated
----------------
U.S. federal income tax returns.
In the case of Future Years, if members of the SCA Group own, in the
aggregate, 50% or less of the voting stock of LTM, members of the SCA Separate
Group and the LTM Group shall file a combined or consolidated state, local or
foreign income or franchise tax return or return for a tax based on capital (a
"Combined Return") only to the extent that and in jurisdictions where they
mutually agree to file on such basis. If members of the SCA Group own, in the
aggregate, more than 50% of the voting stock of LTM, members of the SCA Separate
Group and the LTM Group shall file a Combined Return only to the extent that and
in jurisdictions where (i) (A) they file on such basis with respect to the
Current Year and (B) the party requesting the filing of a Combined Return
provides to the other party an opinion of independent tax accountants or
counsel, reasonably satisfactory to the other party, to the effect that members
of the SCA Separate Group and the LTM Group meet the ownership requirement
threshold necessary to be eligible to file a Combined Return with respect to
such jurisdiction, or (ii) they mutually agree to file on such basis. In the
event that, in accordance with the preceding sentence, any member of the SCA
Separate Group files a Combined Return with any member of the LTM Group for a
Future Year, then on each due date for the payment of any taxes relating to any
such return (or any portion thereof, including installments of estimated taxes)
by SCA or a member of the SCA Separate Group, LTM shall pay or cause to be paid
to SCA or such member of the SCA Separate Group an amount equal to LTM's
estimate of the tax liability of such member of the LTM Group. A final
computation of the liability of such member of the LTM Group shall be made
jointly by SCA and LTM no later than 90 days after the filing of such tax
return, and any difference between the estimated liability and actual liability
of such member of the LTM Group shall be paid by LTM to SCA or by SCA to LTM, as
the case may be, within 30 days of such final computation. Further, the
provisions of Sections 1 through 4 and Section 6 shall apply mutatis mutandis to
----------------
any such taxes as if such returns were consolidated U.S. federal income tax
returns; provided, however, that (x) to the extent necessary to implement clause
-------- -------
(i) of this Section 7, the consent contained in Section 3 shall be considered a
consent as to Future Years as well as the Current Year, and (y) for Future
Years, the definitions of SCA Group and LTM Group shall be deemed to include any
subsidiary of LTM with which any member of the SCA Group is consolidated or
combined, whether or not such subsidiary was ever a member of the Affiliated
Group of which SCA is the common parent. Any amount borne by LTM (or any other
member of the LTM Group) pursuant to this Section 7 shall be considered an item
attributable to it in determining the LTM Group Separate Tax Liability for the
Taxable Year in which such payment is made or received.
8. Tax Returns. SCA shall prepare (or cause to be prepared) and file
-----------
(or cause to be filed) on a timely basis all U.S. consolidated federal income
tax returns and consolidated, combined or unitary state income, franchise or
capital tax returns required to
-5-
<PAGE>
be filed after the Closing Date in respect of or which include members of both
the SCA Separate Group and the LTM Group for any Taxable Year that ends prior to
or includes the Closing Date. SCA shall cause to be timely paid all taxes shown
on such tax returns. Each such tax return shall be prepared on a basis
consistent with the prior practice of the SCA Group, except as otherwise
required by changes in applicable law. With respect to items for which there is
no such prior practice, (i) SCA shall determine the reporting on such tax
returns of items relating to the transactions contemplated by the Master
Agreement, after consultation with LTM and (ii) SCA shall consult with LTM
regarding the reporting on such tax returns of other items for which there is no
such prior practice. SCA shall provide LTM with copies of the portions of such
tax returns relating to the LTM Group as soon as practicable but in any event no
later than 15 days prior to the due date of such returns (including extensions)
and LTM shall notify SCA of any objections to such tax returns within 10 days
prior to such due date. If SCA and LTM are unable to agree on the method of
preparation of any such tax return, SCA shall file such tax return as prepared,
except that SCA shall treat those items described in clause (ii) of this Section
8 in the manner determined by LTM provided that LTM shall have provided to SCA
an opinion of independent nationally recognized tax accountants or counsel to
the effect that such treatment will not result in the imposition of penalties on
SCA.
9. Contests. SCA and LTM shall promptly notify each other of any
--------
assessments, audits or proceedings which could result in an adjustment to the
LTM Group Separate Tax Liability for a Prior Year or the Current Year. SCA
shall consult with LTM regarding the conduct of any such audit or proceeding and
shall not settle or compromise any such audit or proceeding except in good faith
and based on the merits of the defense to such adjustment. In the event that
LTM requests that SCA accept a settlement of such adjustment offered by the
relevant taxing authority, SCA shall either accept such settlement as it relates
to LTM, assuming that the relevant taxing authority would accept such
settlement, or agree with LTM that LTM's liability hereunder with respect to
such adjustment shall be limited to an amount calculated on the basis of such
settlement offer and that LTM shall have no liability in excess of such amount
with respect to such adjustment following the date of such request.
10. Carrybacks. LTM shall make, and shall cause each member of the
----------
LTM Group to make, all available elections under federal, state or local law to
relinquish the entire carryback period with respect to losses, credits and other
tax attributes attributable to members of the LTM Group arising in any Future
Year that could be carried back to a tax return with respect to the Current Year
or Prior Years which included any member of the SCA Separate Group. In the case
of any tax attributes of members of the LTM Group arising in a Future Year for
which no such election is available and which must be carried back, which carry
back would have the effect of reducing the amount of the LTM Group Separate Tax
Liability for the Current Year or Prior Years, SCA shall apply for a refund
relating to the carry back of any such tax attribute and upon receipt of
-6-
<PAGE>
any such refund shall promptly pay to LTM the amount of the resulting reduction
in the LTM Group Separate Tax Liability for the relevant Taxable Year, less any
expenses described in the following sentence. LTM shall indemnify SCA for any
reasonable out-of-pocket expenses incurred in an attempt to obtain such refund
provided that SCA provides to LTM evidence, reasonably satisfactory to LTM, as
to the amount of such expenses incurred by SCA.
11. ERISA Indemnity. SCA shall indemnify and hold harmless LTM and
---------------
its Subsidiaries (including the Transferred SPE Subsidiaries) and their
respective officers, directors, successors and assigns from and against any and
all obligations, liabilities or expenses (i) arising out of or relating to any
Benefit Plan (other than a LTM Benefit Plan) with respect to LTM Employees
maintained, sponsored, contributed to, or required to be contributed to, by SCA
or any of its Subsidiaries (other than LTM, LTM's Subsidiaries and the
Transferred SPE Subsidiaries), including liabilities arising under Title IV of
ERISA or (ii) with respect to any liability attributable to the LTM Excluded
Employees, including, without limitation, any liabilities arising under Section
6.12(d) of the Master Agreement. Capitalized terms used in this Section 11 that
are not defined herein shall have the meanings ascribed to them in the Master
Agreement.
12. IMAX Assignment and Assumption Indemnity. Following the Closing,
----------------------------------------
LTM shall indemnify and hold harmless SCA and SPE, and their respective
successors and assigns, from all actions, causes of action, suits, debts, dues,
sums of money, accounts, claims and demands arising under (i) that certain Lease
Agreement (the "Ground Lease") dated as of May 21, 1992 between SPE and Lincoln
Metrocenter Partners, L.P., (ii) that certain Letter Agreement (the "Letter
Agreement") dated as of March 3, 1995 between SCA and IMAX Corporation ("IMAX")
(solely to the extent that it relates to the lease of IMAX equipment in San
Francisco, California and specifically not with respect to the lease of IMAX
equipment in Berlin, Germany), (iii) that certain System Lease Agreement (the
"IMAX Lease" and, together with the Ground Lease and the Letter Agreement, the
"Assigned Agreements") dated as of May 28, 1992 between SPE and IMAX,
respectively, by reason of any matter, cause, contract (whether written or
oral), course of dealing or thing whatsoever arising during, or in respect of
the period after the effective date of the assignment of the Assigned
Agreements, in each case to the extent provided in the letter agreement dated
May 14, 1998 attached hereto as Exhibit A.
13. Guaranties and Related Indemnity. LTM shall use its reasonable
--------------------------------
best efforts to be substituted in all respects for SCA and its affiliates,
effective as of the Closing, in respect of all guaranties and similar
obligations in favor of, or for the benefit of, LTM or its subsidiaries, and to
cause SCA and its affiliates to be released from such guaranties or obligations.
Following the Closing, with respect to any such guaranty or
-7-
<PAGE>
obligation for which no such substitution and release is effected, LTM shall
indemnify SCA against any costs or expenses in respect of any such guaranty or
obligation.
14. Cooperation. SCA and LTM shall, and shall cause their respective
-----------
affiliates to, reasonably cooperate in the preparation and filing of tax
returns, and the preparation and defense of audits and proceedings relating to
tax returns.
15. Exclusive Agreement. This Agreement and any agreements executed
-------------------
in connection herewith (including the Master Agreement and any agreements
executed in connection therewith) constitute the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersede all prior
and contemporaneous agreements and understandings of the parties in connection
therewith.
16. Successors, Governing Law. This Agreement and all of the
-------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
17. Confidentiality. Each party shall hold and cause its consultants
---------------
and advisors to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other party
hereto furnished it by such other party or its representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the party to which it was furnished, (b) in the public
domain through no fault of such party, or (c) later lawfully acquired from other
sources by the party to which it was furnished), and each party shall not
release or disclose such information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
shall be advised of the provisions of this Section 16. Each party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Tax Sharing and Indemnity Agreement as of the date first above written.
SONY CORPORATION OF AMERICA
By /s/ Marinus N. Henny
---------------------------------
Name: Marinus N. Henny
Title: Executive Vice President
LTM HOLDINGS, INC.
By /s/ Joseph Sparacio
----------------------------------
Name: Joseph Sparacio
Title: Vice President and Controller
Solely for purposes of Section 12 hereof:
SONY PICTURES ENTERTAINMENT INC.
By /s/ Ronald N. Jacobi
--------------------------------
Name: Ronald N. Jacobi
Title: Executive Vice President
and General Counsel
-9-
<PAGE>
Exhibit A
LTM Holdings, Inc.
711 Fifth Avenue
New York, New York 10022
May 14, 1998
SONY PICTURES ENTERTAINMENT INC.
10202 West Washington Boulevard
Culver City, California 90232-3195
RE: LEASE between LINCOLN METROCENTER PARTNERS, as landlord, and SONY
PICTURES ENTERTAINMENT INC., as tenant dated May 21, 1992 (the
"Lincoln Lease") and SYSTEM LEASE AGREEMENT dated May 28, 1992
between IMAX CORPORATION AND SONY PICTURES ENTERTAINMENT INC., as
amended, (THE "IMAX LEASE").
Gentlemen/Gentlewomen:
In order to induce (a) Sony Pictures Entertainment Inc. ("SPE") to assign
to Loews Lincoln Theatre Holding Corp. ("Loews Lincoln") SPE's interest in, and
all the rights, duties and obligations of SPE under (a) the lease between
Lincoln Metrocenter Partners, as landlord, and Sony Pictures Entertainment Inc.,
as tenant dated May 21, 1992 (the "Lincoln Lease") and System Lease Agreement
dated May 28, 1992 between IMAX Corporation and Sony Pictures Entertainment
Inc., as amended (the "IMAX Lease"), and (b) Sony Corporation of America ("SCA")
to assign to Loews California Theatres, Inc., SCA's interest in, and all the
rights, duties and obligations of SCA under, the Letter Agreement with IMAX
Corporation dated March 3, 1995 (the "Letter Agreement") solely to the extent
that it relates to the lease of IMAX equipment in San Francisco, California, LTM
Holdings, Inc. which will be renamed Loews Cineplex Entertainment Corporation,
("LCE"), the holder of all the issued and outstanding stock of Loews Lincoln,
hereby covenants and agrees to, and shall, indemnify, defend, and hold harmless
SPE, SCA, their respective affiliates, and their respective officers, directors
and employees (individually and collectively the "Indemnitee") from and against
any and all losses, liabilities, damages, claims, demands, obligations, actions,
settlements, costs and expenses (including, without limitation, court costs and
attorneys' fees) which the Indemnitee (or any of them) may suffer, sustain,
incur, pay, expend or lay out by virtue, as a result of or in respect of, in
connection with and/or based upon or arising out of, directly or indirectly, any
and/or all of the covenants, agreements, representations, duties and/or
obligations of (i) SPE as the Tenant under the Lincoln Lease and for each and
every breach by LCE or its subsidiaries of any and/or all such covenants,
agreements, representations, warranties, duties and/or obligations by LCE or its
subsidiaries, (ii) SPE under the IMAX Lease and for each and every breach by LCE
or its subsidiaries of any and/or all such covenants, agreements,
representations, warranties, duties and/or obligations by LCE or its
subsidiaries, and (iii) SCA under the Letter Agreement and for each and every
breach by LCE or its subsidiaries of any and/or all such covenants, agreements,
representations, warranties, duties and/or obligations by LCE or its
subsidiaries; excluding any indemnification obligation owing to IMAX under the
IMAX Lease arising out of or in connection with the anti-cartel or other
litigation instituted in Germany by Big Screen Cinema Projektgesellschaft mbH
against IMAX pertaining to the construction and installation of IMAX equipment
at the Sony Center in Berlin.
<PAGE>
The Indemnitee shall promptly notify LCE of any claim or other matter with
respect to which indemnification will be sought hereunder; provided, however,
-------- -------
that the failure so to notify LCE of such claim shall not relieve LCE of its
obligations hereunder.
LCE shall control the defense and settlement of any such claim or other
matter in reasonable cooperation with the Indemnitee by counsel of its own
choice, which counsel shall be reasonably satisfactory to Indemnitee except that
(i) other than by the payment of monetary damages, LCE shall not enter into any
settlement or other agreement binding upon the Indemnitee without its consent,
(ii) the Indemnitee may participate in any action, suit, or other legal
proceeding as to which indemnification is provided hereunder, at its own expense
by counsel of its own choice, and (iii) if the Indemnitee shall have reasonably
concluded and notified LCE that a conflict may exist between the positions of
LCE and the Indemnitee, that there may be specific defenses available to the
Indemnitee different from or additional to those available to LCE or that such
claim involves or could affect matters beyond the scope of the obligation
herein, in which event LCE shall not have the right to direct the defense of
such aspects of the claim or other matter as are specified in the notice and the
Indemnitee shall at LCE's cost and expense conduct the defense of said aspects
of such claim or other matter.
Very truly yours,
LTM HOLDINGS, INC.
by /s/ John C. McBride, Jr.
----------------------------------------
its Senior Vice President, General Counsel
----------------------------------------
and Assistant Secretary
----------------------------------------
Accepted and Agreed to
SONY PICTURES ENTERTAINMENT INC.
by /s/ Ronald N. Jacobi
----------------------------------
its Executive Vice President and
----------------------------------
General Counsel
----------------------------------
SONY CORPORATION OF AMERICA
by /s/ Marinus N. Henny
----------------------------------
its Executive Vice President
----------------------------------
2
<PAGE>
EXHIBIT 10.3
TRADEMARK AGREEMENT
THIS TRADEMARK AGREEMENT (this "Agreement") is made this 14th day of May,
1998 by and between Sony Corporation, a Japanese corporation ("Sony"), and LTM
Holdings, Inc., a Delaware corporation ("LTM").
WHEREAS, Sony is the owner of the trademark "SONY" and all goodwill
associated therewith (the "Trademark");
WHEREAS, LTM desires to have its direct or indirect wholly-owned
subsidiaries (the "Subsidiaries") use the Trademark in connection with all such
services pertaining to the ownership, leasing or operation of theaters for the
exhibition, display, marketing, promotion and advertisement of motion pictures
as are currently conducted by the Subsidiaries (the "Movie Theater Services") at
the Theaters (as hereinafter defined); and
WHEREAS, Sony desires the Subsidiaries to have the right to use the
Trademark in connection with the Movie Theater Services at the Theaters.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein the parties hereto agree as follows:
Section 1. Use and License of Trademark.
----------------------------
(a) LTM shall cause the Subsidiaries, and Sony grants the Subsidiaries the
right at no cost, to use the Trademark in connection with providing all the
Movie Theater Services (i) at the facility currently known as "Sony Lincoln
Square Theaters" ("Lincoln Square") for a period of five (5) years commencing on
the date hereof, and (ii) at the Yerba Buena entertainment and retail facility
under development at San Francisco, California ("Yerba Buena"), for a term of
five (5) years from the date hereof or the date when operation of a movie
theater first starts at Yerba Buena, whichever is later (Lincoln Square and
Yerba Buena are collectively referred to herein as the "New Theaters," and
together with the Existing Theaters (as hereinafter defined), the "Theaters") in
the manner currently used for Lincoln Square and otherwise as provided in this
Agreement, including without limitation, using the Trademark in the name of the
New Theaters for all purposes; and
(b) Sony hereby grants to LTM a royalty-free non-transferable, non-
exclusive license solely for the purpose of sublicensing to the Subsidiaries the
right to use the Trademark in connection with the Movie Theater Services at the
facilities listed on Schedule A to this Agreement (the "Existing Theaters") for
a term of six (6) months from the date hereof.
<PAGE>
Section 2. Covenants of LTM.
----------------
(a) LTM shall cause the Subsidiaries not to use the Trademark in any way
which impairs or dilutes the Trademark or Sony's reputation. Without limiting
the generality of the foregoing, LTM shall cause the Subsidiaries to use the
Trademark only in accordance with the standards, specifications and qualities
consistent with (i) current practices established by or on behalf of Sony at
Lincoln Square for the New Theaters and (ii) current practices established by or
on behalf of Sony at the Existing Theaters for the Existing Theaters.
(b) Except with the prior written consent of Sony, during the term of this
Agreement, LTM shall cause the Subsidiaries to use the Trademark only in
connection with providing the Movie Theater Services at the Theaters. With
respect to each of the Theaters, LTM agrees to cause each of the Subsidiaries to
provide the Movie Theater Services consistent with current practices and at the
quality and levels with which the Movie Theater Services are currently provided
(i) at Lincoln Square for the New Theaters and (ii) for the Existing Theaters at
each such Theater, so long as the Trademark is used at each such Theater.
(c) Notwithstanding the provisions of this Section 2, LTM may not permit
the Subsidiaries to use the Trademark in any new manner with respect to the
Existing Theaters, without prior written consent by Sony.
(d) LTM shall permit, and LTM shall cause the Subsidiaries to permit, duly
authorized representatives of Sony to inspect, upon reasonable notice and
intervals and at Sony's sole expense, the use or intended use of the Trademark
by the Subsidiaries in connection with the Movie Theater Services at the
Theaters.
Section 3. Prosecution Rights. Sony shall have the sole right to commence
------------------
and conduct all proceedings relating to the Trademark, and without restricting
the generality of the foregoing, Sony shall at its own expense and its own sole
discretion, prosecute, defend or settle all suits or proceedings arising out of
any claim of unfair competition, passing-off or infringement of the copyright or
trademark rights in the Trademark or any other claims made by any third parties
in connection with the Trademark; provided, however, that Sony shall prosecute
any such claim or proceeding which involves infringement of the Trademark by a
third party where such infringement consists of unauthorized use of the
Trademark in connection with a movie theater or theaters, unless Sony in its
reasonable judgment determines not to do so, and that LTM shall give Sony prompt
written notice of suits or threats of suits concerning these matters against
LTM, the Subsidiaries or Sony. LTM agrees to cooperate, and LTM agrees to have
the Subsidiaries cooperate, at Sony's cost, in any reasonable manner deemed
necessary by Sony, in the prosecution, defense or settlement of any suits or
proceedings as referred to herein. Nothing contained herein shall be construed
as obligating Sony to bring or defend any proceedings in respect of the
Trademark.
2
<PAGE>
Section 4. Non-attack. LTM shall not, and LTM shall cause the
----------
Subsidiaries not to, seek to challenge, in any manner whatsoever either directly
or indirectly, in any court, tribunal or other forum, the validity of the
Trademark and/or trademark registrations thereof, and Sony's ownership thereof.
Section 5. Disclaimer and Infringement. Sony shall have no liability
---------------------------
whatsoever to LTM or any of the Subsidiaries for any claim or proceedings of any
kind by a third party against LTM or any of the Subsidiaries for its use of the
Trademark at the Existing Theaters due to alleged infringement of rights of
other parties or for any other reason. Without restricting the generality of
the foregoing, Sony shall not be responsible for legal fees or costs incurred by
LTM or any of the Subsidiaries or for any award of damages made against LTM or
any of the Subsidiaries with respect to use of the Trademark at the Existing
Theaters. Sony shall, however, subject to the provisions of Section 3,
indemnify LTM and the Subsidiaries and hold them harmless from and in respect of
any loss, liability, damage, cost or expense, including reasonable attorney's
fees, arising out of any claims or suits which may be brought or made against
LTM and/or the Subsidiaries by a third party to the extent that the use by the
Subsidiaries of the Trademark at the New Theaters in accordance with the
provisions of this Agreement infringes any trademark of such third party.
Section 6. Indemnification. LTM hereby indemnifies and agrees to hold
---------------
Sony and its subsidiaries harmless from and in respect of any loss, liability,
damage, cost or expense including reasonable attorney's fees arising out of any
claims or suits which may be brought or made against Sony or its subsidiaries by
reason (i) any breach of the Trademark License Agreement or (ii) LTM's
unauthorized use of the Trademark.
Section 7. Assignment. The rights granted to or obligations assumed by
----------
LTM in this Agreement shall not be transferable or assignable to any entity
without the prior written consent of Sony. Further, LTM shall cause the
Subsidiaries not to transfer or assign to any entity the rights granted to or
obligations assumed by the Subsidiaries pursuant to Section 1.
Section 8. Term/Termination.
----------------
(a) This Agreement shall become effective as of the date first above
written and shall terminate on the six-month anniversary date thereof as to
Existing Theaters and on the fifth (5th) anniversary date thereof as to the New
Theaters, except that Sony may terminate at any time the obligations for LTM to
use the Trademark as described in Section 1(a) by giving LTM at least ninety
(90) days prior written notice.
(b) Notwithstanding the foregoing provision, Sony shall have the right to
terminate this Agreement upon giving at least thirty (30) days prior written
notice, in the event that LTM breaches any of the terms and conditions herein
set forth; provided, however, that if LTM has cured such breach giving rise to
LTM's right to terminate this Agreement prior to the end of such thirty (30) day
period, this Agreement shall continue in full force and effect as if such breach
had not occurred.
3
<PAGE>
(c) All costs and expenses to be incurred by LTM or the Subsidiaries in
connection with the cessation of the use of the Trademark, including but not
limited to, the removal of the Trademark shall be borne by LTM or the
Subsidiaries; provided, however, that to the extent the use of the Trademark as
described in Section 1 (a) is terminated by Sony pursuant to Sony's notice under
Section 8 (a), all costs and expenses to be incurred by LTM or the Subsidiaries
in connection with the cessation of such use of the Trademark shall be borne by
Sony.
Section 9. Notice. All notices required to be given hereunder shall be
------
sent to the other in writing and shall be valid and sufficient only if sent by
facsimile and confirmed by registered or certified mail, postage prepaid,
addressed as follows:
Sony LTM
---- ---
Sony Corporation LTM Holdings Inc.
6-7-35 Kitashinagawa 711 Fifth Avenue
Shinagawa-ku, Tokyo 141 New York, New York 10022
Japan U.S.A.
Attention: General Manager, Attention: President and General Counsel
Trademark & Licensing Department Facsimile: (212) 833-6222
Facsimile: 81-3-5448-5707
Section 10. Automatic Termination. Sony or LTM have each the option to
---------------------
terminate this Agreement if the other party hereto becomes insolvent or declares
bankruptcy.
Section 11. Ownership. LTM acknowledges that Sony is the exclusive owner
---------
of the Trademark and agrees to that any goodwill generated from LTM's use of the
Trademark shall belong to Sony. LTM acknowledges that all use of the Trademark
by it or any of the Subsidiaries, and all goodwill associated therewith, inure
to the benefit of Sony. LTM agrees to take whatever steps and execute whatever
documents are necessary in order to convey to Sony any and all rights that it
may have acquired in the Trademark. Sony agrees that it will use reasonable
commercial efforts to protect and maintain the validity of, and Sony's rights
in, the Trademark and any registrations therefor.
Section 12. Governing Law. All matters relating to the validity,
-------------
performance, construction or breach of this Agreement shall be governed by laws
of the State of New York, except that any matters relating to trademark rights
shall be governed by laws of the United States of America.
Section 13. Miscellaneous. This Agreement constitutes the entire
-------------
agreement between the parties concerning its subject matter and supersedes all
prior negotiations, understandings, representations and agreements, oral or
written. There are no other contemporaneous agreements between the parties
relating to the subject matter hereof. If any provision of this Agreement shall
be invalid, such invalidity shall not affect any of other provisions. A waiver
by either party of any term or condition in this Agreement in
4
<PAGE>
one instance shall not be deemed or construed to be a waiver of such term or
condition in the future, or of any subsequent breach hereof, whether of the same
or of a different nature. Any rights and obligations created by this Agreement
and that by necessary implication continue after its expiration or termination
shall survive such expiration or termination. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto.
Section 14. Equitable Relief. LTM acknowledges that irreparable harm
----------------
might result from, monetary damages might not be an adequate remedy for, any
breach or threatened breach by LTM of its agreements contained in Section 2 and
that Sony, notwithstanding any cure period provided under Section 8(b), shall
be entitled to equitable relief, including a temporary restraining order, a
preliminary or permanent injunction or specific performance, as a remedy for any
such breach or threatened breach. LTM agrees that in the event such equitable
relief is sought it will consent to the entry of an order granting the requested
relief without the necessity of Sony posting a bond in connection therewith.
The parties further agree that the remedies of temporary restraining order,
preliminary or permanent injunction or specific performance shall not be deemed
to be the exclusive remedies for a breach of Section 2 but shall be in addition
to all other remedies available to Sony at law or equity.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Trademark License
Agreement to be executed by their duly authorized officers or representatives as
of the date set forth above.
SONY CORPORATION
By /s/ Tamotsu Iba
-----------------------------------
Name: Tamotsu Iba
Title: Executive Deputy President
LTM HOLDINGS, INC.
By /s/ John C. McBride, Jr.
-----------------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President,
General Counsel and
Assistant Secretary
6
<PAGE>
LETTER AGREEMENT
----------------
Reference is made to the Amended and Restated Master Agreement among
Sony Pictures Entertainment Inc., LTM Holdings, Inc. and Cineplex Odeon
Corporation, dated as of September 30, 1997 (the "Master Agreement") and the
Trademark Agreement by and between Sony Corporation and LTM Holdings, Inc.
contemplated by Section 6.22 of the Master Agreement.
The parties hereto acknowledge and agree that, notwithstanding
anything to the contrary required by the Master Agreement, Exhibit A to the
above-referenced Trademark Agreement is dated as of April 6, 1998.
SONY PICTURES
ENTERTAINMENT INC.
By: /s/ Ronald N. Jacobi
----------------------------------
Name: Ronald N. Jacobi
Title: Executive Vice President and
General Counsel
LTM HOLDINGS, INC.
By: /s/ John C. McBride, Jr.
----------------------------------
Name: John C. McBride, Jr.
Title: Senior Vice President,
General Counsel and
Assistant Secretary
CINEPLEX ODEON CORPORATION
By: /s/ Michael Herman
----------------------------------
Name: Michael Herman
Title: Executive Vice President,
Corporate Affairs and
Secretary
7
<PAGE>
EXHIBIT 10.4
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT is made as of May 14, 1998 by and
between Sony Pictures Entertainment Inc. ("SPE"), Sony Corporation of America
("SCA") and Loews Cineplex Entertainment Corporation ("Loews Cineplex").
WHEREAS, SPE, LTM Holdings, Inc. and Cineplex Odeon Corporation
("Cineplex Odeon"), have entered into an Amended and Restated Master Agreement
dated as of September 30, 1997 (the "Master Agreement"), pursuant to which LTM
Holdings, Inc. and Cineplex Odeon engaged in a series of transactions (the
"Transactions") that resulted in the combination of the businesses of LTM
Holdings, Inc. and Cineplex Odeon and the name of LTM Holdings, Inc. was changed
to "Loews Cineplex Entertainment Corporation"; and
WHEREAS, the Master Agreement contemplates that SCA and SPE will
provide Loews Cineplex with certain services that are currently performed by SCA
or affiliates of SCA on behalf of Loews Cineplex for a limited period following
the closing date of the Transactions (the "Closing Date"), and SCA and SPE are
willing to provide such services subject to the terms and conditions set forth
in this Transition Services Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, SCA, SPE and Loews Cineplex agree as follows:
Section 1. Definitions. Unless otherwise specified herein, terms
-----------
used in this Transition Services Agreement and defined in the Master Agreement
shall have the same meanings as set out in the Master Agreement.
Section 2. Services. Commencing on the Closing Date and until
--------
terminated as described in Section 3 hereof, SCA and its Affiliates shall make
available to Loews Cineplex the services (the "Services") described on Schedule
I hereto. Notwithstanding the foregoing, and for an abundance of caution, SPE
and SCA shall only be responsible for providing the services set forth opposite
their respective names on Schedule I hereto.
Section 3. Term and Termination. (a) Except as provided in Section
--------------------
3(b) hereof, this Transition Services Agreement shall take effect as of the
Closing Date and shall terminate, with respect to each Service, on the earlier
of (i) July 1, 1999 or (ii) 90 days from receipt of a written notice of
termination of such Service from any party to the other parties.
<PAGE>
(b) In the event Loews Cineplex is in default or fails to perform any
obligation under this Transition Services Agreement, and such default is not
cured within 30 business days after receipt of written notice of such default,
or if any proceeding is commenced by or against Loews Cineplex for the purpose
of subjecting the assets of Loews Cineplex to any law relating to bankruptcy or
insolvency or for the appointment of a receiver for the business, property,
affairs or revenues of the party, or if either party makes a general assignment
of its assets for the benefit of creditors, then and in any such event, SCA and
SPE may, at their option without further notice to or demand of, in addition to
all other rights and remedies provided at law or in equity, terminate this
Transition Services Agreement and all rights, privileges and licenses granted or
created hereunder.
Section 4. Prices; Invoices. Loews Cineplex shall pay to SPE and SCA
----------------
the rates set forth on Schedule I hereto for those Services requested and
received by Loews Cineplex. SPE and SCA shall send Loews Cineplex a monthly
statement accounting for any Services received by Loews Cineplex during such
month. SCA and SPE shall provide Loews Cineplex with such documents and records
as Loews Cineplex may reasonably request to confirm the invoiced Services and
amounts therefor. Invoices shall be due and payable 30 days from the date of
receipt.
Section 5. Confidentiality. Except as otherwise required under
---------------
applicable law, SCA, SPE and Loews Cineplex agree to maintain as confidential
and not to disclose to any third party any information provided by one party to
the other or otherwise obtained by one party from the other in the performance
of this Transition Services Agreement.
Section 6. Force Majeure. SCA and SPE, and their respective
-------------
Affiliates, shall be excused from failure to provide any Services to the extent
that such failure is directly or indirectly caused by any occurrence beyond its
control and commonly known as force majeure, including, without limitation,
----- -------
delays arising out of acts of God, acts or orders of a government, agency or
instrumentality thereof, acts of public enemy, riots, embargoes, strikes
(whether of SCA, SPE or other persons) or any other causes, circumstances or
contingencies which are beyond the control of SCA and SPE, and their respective
Affiliates. Notwithstanding any events operating to excuse the performance by
SCA and SPE, and their respective Affiliates, this Transition Services Agreement
shall continue in full force until its termination as provided in Section 3
above.
Section 7. Indemnity. With respect to all Services provided
---------
hereunder, Loews Cineplex shall indemnify and hold SCA, SPE and their Affiliates
(including the employees, agents, officers, and directors of all such
-2-
<PAGE>
companies) harmless from any damages from third parties that SCA and SPE, and
their respective Affiliates, may incur as a result the provision of any such
Services.
Section 8. Disclaimer of Warranty; Limitation of Remedies. (a) ALL
----------------------------------------------
WARRANTIES, EXPRESS OR IMPLIED, ARE DISCLAIMED AND EXCLUDED BY SCA AND SPE,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(b) SCA's and SPE's entire liability and Loews Cineplex' exclusive
remedies for SCA's and SPE's liability of any kind (including liability for
negligence) for the services covered by this Transition Services Agreement and
all other performance, nonperformance or delays in performance by SCA and/or SPE
under or related to this Transition Services Agreement shall not exceed the
total amount billed or billable to Loews Cineplex for the particular service or
part thereof which gave rise to the loss or damage. This limitation of SCA's
and SPE's liability does not apply to claims for personal injury and damage to
tangible personal property caused solely by SCA's or SPE's negligence.
(c) IN NO EVENT SHALL SCA OR SPE BE LIABLE TO LOEWS CINEPLEX, ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR AFFILIATES FOR INDIRECT, SPECIAL
CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF
PROFITS OR DAMAGE TO OR LOSS OF USE OF ANY PROPERTY.
Section 9. Miscellaneous. All "Miscellaneous" provisions contained
-------------
in Article IX of the Master Agreement are, to the extent relevant, fully
applicable hereto and are incorporated by reference as though fully set forth
herein.
-3-
<PAGE>
IN WITNESS WHEREOF, this Transition Services Agreement has been
executed on behalf of each of the parties hereto as of the day and year first
above written.
Sony Pictures Entertainment Inc.
By: /s/ Leah Weil
-----------------------------
Its: Assistant Secretary
-----------------------------
Sony Corporation of America
By: /s/ Marinus N. Henny
-----------------------------
Its: Executive Vice President
-----------------------------
Loews Cineplex Entertainment
Corporation
By: /s/ John C. McBride, Jr.
-----------------------------
Its: Senior Vice President,
-----------------------------
General Counsel and
-----------------------------
Assistant Secretary
-----------------------------
-4-
<PAGE>
LOEWS-CINEPLEX MERGER
SUMMARY OF TRANSITION SERVICES BETWEEN SPE, SCA AND LOEWS CINEPLEX
<TABLE>
<CAPTION>
===============================================================================================================
PARTY PROVIDING SERVICE SERVICE PROVIDED ANNUAL COST (INCOME) OF SERVICE PAYMENT FREQUENCY
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sony Pictures Entertainment Payroll Processing $ 275,000 Monthly
- ---------------------------------------------------------------------------------------------------------------
Sony Pictures Entertainment Fringe Benefits 23% Home Office Base Salary Monthly
20% Field Operations Base Salary
- ---------------------------------------------------------------------------------------------------------------
Sony Pictures Entertainment Benefits Administration $ 75,000 Monthly
- ---------------------------------------------------------------------------------------------------------------
Sony Pictures Entertainment Legal Retainer/1/ $ 100,000/2/ Monthly
- ---------------------------------------------------------------------------------------------------------------
Sony Corporation of America Tax Return Preparation and $ 500,000 Monthly
Compliance
- ---------------------------------------------------------------------------------------------------------------
Sony Corporation of America Check Stock and Printing $ 61,000 Monthly
of Payroll Checks
- ---------------------------------------------------------------------------------------------------------------
Sony Corporation of America Telecommunications/3/ $ 275,000 Monthly
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
</TABLE>
Notes:
1. The legal retainer covers only consultation with SPE lawyers and general
supervision of day-to-day matters and does not include any out-of-pocket
expenses or outside legal fees.
2. Additional Services may be retained for specific projects if necessary. Any
additional requirements for legal services will be negotiated separately
and are not covered as part of the legal retainer.
3. Reflects costs associated with usage of telephone system including system
maintenance and equipment rental. Local, long distance and teleconferencing
phone usage charges are paid to Sony Corporation of America based on actual
vendor billings. Reflects costs associated with WAN and Web support, as
well.
<PAGE>
SONY YBG ENTERTAINMENT CENTER
TENANT WORK AGREEMENT
<PAGE>
SONY YBG ENTERTAINMENT CENTER
TENANT WORK AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. INTRODUCTION............................................................. 1
II. CREATIVE CONCEPT STATEMENT............................................... 1
III. PROJECT DESCRIPTION...................................................... 1
THE SITE............................................................ 1
THE BUILDING........................................................ 1
IV. DEFINITIONS.............................................................. 1
I. ITEMS PROVIDED BY LANDLORD............................................... 2
A. BUILDING............................................................ 2
B. COMMON INTERIOR AREAS............................................... 2
C. PUBLIC TOILET FACILITIES............................................ 2
D. EXTERIOR STOREFRONTS................................................ 2
E. NON-COMMON DEMISING PARTITIONS...................................... 2
F. FLOOR SLAB.......................................................... 2
G. COLUMNS............................................................. 2
H. ELECTRICAL SERVICE.................................................. 2
I. FIRE ALARM AND LIFE SAFETY.......................................... 3
J. TELEPHONE........................................................... 3
K. PLUMBING............................................................ 3
1. Retail Tenants................................................. 3
2. Restaurant Tenants............................................. 3
L. FIRE PROTECTION SPRINKLER SYSTEM.................................... 3
M. HVAC................................................................ 3
N. GAS (RESTAURANT TENANTS ONLY)....................................... 3
O. CATV SERVICE........................................................ 3
P. BUILDING WIDE PUBLIC ADDRESS SYSTEM................................. 3
II. CODE AND GENERAL BUILDING INFORMATION.................................... 3
A. SAN FRANCISCO CITY DEPARTMENTS...................................... 3
B. APPLICABLE CODES.................................................... 4
C. CONSTRUCTION:....................................................... 4
D. OCCUPANCY:.......................................................... 4
III. DESIGN CRITERIA.......................................................... 5
A. EXISTING CONDITIONS................................................. 5
B. VISUAL MERCHANDISING................................................ 5
C. TENANT FRONTAGE DESIGN CRITERIA..................................... 5
1. GENERAL TENANT FRONTAGE CRITERIA............................... 5
2. EXTERIOR TENANT FRONTAGES...................................... 7
D. GENERAL GRAPHIC DESIGN CRITERIA..................................... 7
1. SUGGESTED SIGN TYPES........................................... 7
2. GUIDELINES..................................................... 7
3. EXTERIOR TENANT FRONTAGE SIGN CRITERIA......................... 8
E. DEMISING PARTITIONS................................................. 8
F. INTERIOR PARTITIONS................................................. 9
G. CEILINGS............................................................ 9
H. FLOORING............................................................ 9
I. STRUCTURAL DESIGN GUIDELINES........................................ 9
J. MECHANICAL DESIGN GUIDELINES........................................ 9
1. Documentation.................................................. 10
2. HVAC Calculations.............................................. 10
3. Outdoor Design Conditions...................................... 10
4. Indoor Design Conditions....................................... 10
5. Landlord System Design......................................... 10
6. Exhaust Requirements........................................... 11
7. General Provisions............................................. 11
8. Access Requirements............................................ 11
9. Roof or Grade-Mounted Equipment................................ 12
10. Insulation..................................................... 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
K. PLUMBING.............................................................. 12
1. Domestic Water................................................... 12
2. Sanitary Waste................................................... 12
3. Sanitary Vent.................................................... 13
4. Grease Waste..................................................... 13
5. Natural Gas...................................................... 13
6. Testing.......................................................... 13
L. FIRE PROTECTION....................................................... 13
M. HVAC EQUIPMENT........................................................ 13
1. VAV Boxes........................................................ 13
2. Supplemental HVAC................................................ 14
N. AIR DISTRIBUTION...................................................... 14
1. Primary Air Ductwork............................................. 14
2. Secondary Air Ductwork........................................... 14
3. Return Air....................................................... 15
4. Kitchen Exhaust.................................................. 15
O. TEMPERATURE CONTROL................................................... 15
1. Supplemental HVAC................................................ 15
P. ELECTRICAL DESIGN GUIDELINES.......................................... 16
1. Documentation.................................................... 16
2. Service Entrance and Metering.................................... 16
3. Maximum Service Sizes............................................ 16
4. Balance.......................................................... 16
5. Short Circuit Current............................................ 16
6. Grounding........................................................ 16
7. General Provisions............................................... 16
8. Existing Installations........................................... 17
Q. LIGHTING AND POWER.................................................... 17
1. Wires, Cables and Conduit........................................ 17
2. Circuit and Motor Disconnects.................................... 17
3. Transformers..................................................... 17
4. Distribution..................................................... 17
5. Lighting and Receptacle Panels................................... 17
6. Illumination..................................................... 18
R. LIFE SAFETY SYSTEMS................................................... 18
S. TELECOMMUNICATIONS.................................................... 18
T. SECURITY SYSTEM....................................................... 18
U. ACOUSTICAL CRITERIA................................................... 18
IV. TENANT DESIGN SUBMITTAL AND REVIEW......................................... 18
A. SELECTION OF TENANT'S ARCHITECT....................................... 18
B. DOCUMENTATION PHASES.................................................. 19
1. Concept Development.............................................. 19
2. Schematic Design................................................. 19
3. Design Development............................................... 19
4. Construction Documents........................................... 19
C. DESIGN REVIEWS........................................................ 19
1. Concept Development Review-...................................... 20
2. Schematic Design Review-......................................... 20
3. Design Development and Construction Documents Review............. 20
D. DESIGN DELIVERABLES................................................... 20
1. Deliverables-Concept Development................................. 21
2. Deliverables-Schematic Design.................................... 21
3. Deliverables - Design Development (30% Construction Documents)... 23
4. Deliverables - 100% Construction Documents....................... 25
5. Final Review..................................................... 26
E. CHECKING.............................................................. 26
F. DESIGN DOCUMENT CONTROL AND MANAGEMENT TERMINOLOGY.................... 26
1. Original Release................................................. 26
2. Bulletin......................................................... 26
3. Conforming Bulletin.............................................. 26
4. Addendum......................................................... 27
G. RELEASE PROCEDURES.................................................... 27
1. Original Release................................................. 27
2. Bulletin Releases................................................ 27
3. Conforming Bulletins............................................. 27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
V. TENANT IMPROVEMENT CONSTRUCTION............................................ 28
A. TENANT'S RESPONSIBILITIES............................................. 28
B. SELECTION OF TENANT'S GENERAL CONTRACTOR.............................. 28
C. PERMITS............................................................... 28
D. PREREQUISITES TO TENANT'S CONSTRUCTION................................ 29
E. TENANT'S PROJECT MANAGEMENT........................................... 29
F. SAFETY................................................................ 30
G. COORDINATION AND COOPERATION.......................................... 31
H. PROTECTION OF WORK AND PROPERTY; RESPONSIBILITY FOR LOSS.............. 31
I. TEMPORARY FACILITIES/CLEANUP.......................................... 31
J. BARRICADES/SITE PROTECTION............................................ 32
K. ACCESS TO ROOF........................................................ 33
L. ELEVATORS/ESCALATORS.................................................. 33
M. FIRE PREVENTION....................................................... 33
N. UTILITIES............................................................. 33
O. DAMAGE TO WORK/DISPUTES............................................... 34
P. LIENS................................................................. 34
Q. WALK-THROUGH.......................................................... 34
R. INSPECTION AND ACCEPTANCE............................................. 34
S. LANDLORD'S PRIOR RIGHTS............................................... 34
T. CERTIFICATE OF OCCUPANCY.............................................. 35
U. VIOLATIONS............................................................ 35
V. WARRANTIES............................................................ 35
W. BOND.................................................................. 35
X. LANDLORD'S RIGHT TO PERFORM WORK...................................... 35
Y. LANDLORD'S SCOPE OF WORK.............................................. 35
</TABLE>
iii
<PAGE>
I. INTRODUCTION
This Criteria is offered to assist Tenants in the design, construction and
operation of their space within the Sony Yerba Buena Gardens Entertainment
Center. It means to encourage freedom of individual expression and set forth a
common point of departure for all Tenants.
Each Tenant is expected to become familiar with the intent, scope,
requirements and details of this Tenant Work Agreement and develop their design
to ensure compatibility and compliance with these criteria, as well as with the
established style and character of The Center.
Tenants and their architects and engineers are encouraged to discuss
specific design concepts or questions regarding this document with Landlord
prior to beginning design work.
Unless specifically stated otherwise herein, all design and construction
activities for Tenant Improvements shall be provided at Tenant's sole expense.
II. CREATIVE CONCEPT STATEMENT
YBG Entertainment Center in San Francisco is an urban complex featuring the
best of Sony creativity and technology brought together to provide visitors with
a variety of exciting interactive, live and multi-media events. YBG
Entertainment Center is designed to be an integral part of the city of San
Francisco, a good neighbor in one of the most distinctive and "neighborly"
cities in the world. This is a one-of-a-kind entertainment venue, featuring
innovative retail opportunities and the finest in dining experiences, fifteen
state of the art motion picture theatres and a Sony 3-D Imax Theatre.
III. PROJECT DESCRIPTION
THE SITE
--------
The Yerba Buena Center is located in San Francisco's South of Market
neighborhood adjacent to the Moscone Convention Center, the San Francisco Museum
of Modern Art, and the Yerba Buena Center for the Arts. It is situated on the
west side of Yerba Buena Gardens, and fronts Mission Street to the north, Fourth
Street to the west and Howard Street to the south. The Center opens up to the
Yerba Buena Gardens Esplanade on the east.
The Center includes a 15-screen Sony Theatres motion picture theatre
complex, a 3-D IMAX theatre, attractions utilizing high technology, venues for
live performances, family entertainment, restaurants and retail outlets.
THE BUILDING
------------
The Sony Entertainment Center Building is a 350,000 square foot complex
within a mixed use development in Yerba Buena Gardens. The building is a 4-
story, steel-framed structure with glass and metal cladding. The approximately
20' floor-to-floor height provide room for running building systems piping and
equipment in the ceiling space, while allowing space for creative displays,
merchandising and elements on the floor.
The Building's interior is envisioned to remain open, allowing the spaces
to be seamless, connected and interactive.
IV. DEFINITIONS
. All words herein shall be afforded their common industry usage unless
defined in the Lease Agreement or this Tenant Work Agreement Exhibit. The Lease
Agreement and this Tenant Work Agreement Exhibit are meant to be read and
applied in harmony; provided however, in the event of a conflict, the Lease
Agreement shall prevail.
. "Landlord's Representative" shall refer to the Landlord's Project
Manager or his designated representative unless expressly specified otherwise.
. "Base Building" shall mean the Yerba Buena Center in which the
Premises is located.
. "Landlord's Construction Documents" are Landlord provided Base
Building construction drawings, specifications, documents, etc, collectively.
. "Tenant Improvements" are collectively the Tenant's design,
construction, finishes and all other work by the Tenant in the Premises, as well
as any other work required to complete the Tenant's work in the Premises.
. "Tenant Design Documents" are collectively Tenant's drawings,
specifications and other design documents.
<PAGE>
. Wherever a requirement or affirmative duty is expressed herein with
the use of the word "shall" or "must", or regarding a responsibility or item of
work or expense, said duty, responsibility, item of work or expense is the
Tenant's responsibility unless clearly expressed to the contrary.
. "Project" as used in the Exhibit shall refer to the Tenant's entire
effort of designing, managing and constructing the Tenant Improvements.
. "Tenant's Project Team" shall refer to all persons, consultants, etc.,
employed by or engaged by the Tenant to complete the Project.
. "Tenant's Contractor" shall refer to each and every contractor engaged
by the Tenant to complete the Tenant Improvements and the Tenant work for the
Project. Any duty imposed on the Tenant and/or the Tenant's Contractor
regarding work in or for the Base Building shall apply in equal force to each of
their consultants and subcontractors.
. Landlord's "approval" or "consent" as used herein shall mean written
approval or consent from Landlord's Project Manager or his designated
representative; provided, however, Landlord's approval of any document required
herein to be submitted by the Tenant for the Landlord's approval shall signify
only that the Tenant's submittal meets the limited purpose of satisfying the
Tenant's obligation hereunder, relative to that submission only. In no way does
Landlord's approval indicate compliance with applicable laws, codes, standards
or regulations.
. "Notice" when used herein shall mean written notice pursuant to terms
of the Lease Agreement executed by the Landlord and Tenant.
. "Lease Line" and "Gross Leasable Area", as used herein, shall derive
their meaning from the Lease Agreement and the Landlord's Construction
Documents.
I. ITEMS PROVIDED BY LANDLORD
The following is either existing (as is) within the Base Building, or will
be provided by the Landlord at the Landlord's expense in accordance with the
Landlord's Construction Documents, and constitutes the Landlord's complete
responsibility with regard to the construction of the Premises and the Center.
A. BUILDING
A steel framed building including service areas and corridors.
B. COMMON INTERIOR AREAS
Common interior areas complete with finished floors and ceilings,
stairs, escalators and elevators, lighting, heating and air conditioning,
skylights, landscaping, furnishings, sprinkler system, public entrances and
exits.
C. PUBLIC TOILET FACILITIES
Public toilet facilities, accessible to the handicapped.
D. EXTERIOR STOREFRONTS
All exterior storefronts and window walls.
E. NON-COMMON DEMISING PARTITIONS
Where a demising partition of the Tenant's Premises is adjacent to a
service corridor or other Landlord-related facility, and is not an exterior
wall, the Landlord will provide a demising partition from floor slab to
underside of structure above with 6"x 18 gauge ( or heavier gauge as required)
steel stud construction at 16" on center, complete with drywall on the corridor
side of the wall only.
F. FLOOR SLAB
The Base Building structural floor deck within the Tenant's Premises
as shown on the Base Building plans.
G. COLUMNS
Spray on fireproofed structural steel columns occurring within the
Tenant's Premises, as shown on the Tenant Lease Plan.
H. ELECTRICAL SERVICE
Single and three phase services are available from points of
connections within designated electrical equipment rooms (EER's) on each floor.
2
<PAGE>
I. FIRE ALARM AND LIFE SAFETY
Fire and life safety system points of connection for each Tenant at a
designated Satellite Electronic Equipment Room (SEER).
J. TELEPHONE
Telephone system point of connection for each Tenant at a designated
Satellite Electronic Equipment Room.
K. PLUMBING
1. Retail Tenants
Domestic water and sanitary sewer rough-in are not provided for
typical retail spaces.
2. Restaurant Tenants
Restaurant Tenants shall be provided with gas service (for
cooking only).
Domestic water line with gate valve and capped sanitary sewer
line shall be provided for Tenant's connection. The domestic water line will be
located overhead within the Tenant Lease Area and the sanitary sewer line will
be located below the Tenant Lease Area floor.
L. FIRE PROTECTION SPRINKLER SYSTEM
A wet automatic fire sprinkler system with drops on swing-arms
distributed at code minimum throughout the unfinished space.
M. HVAC
Packaged air handlers for use by Tenant spaces with provision for a
non-ducted, combination exhaust and return air system balanced to maintain zero
pressure differential. All outside supply and return exhausted air connections
are made by the Base Building.
Based on Landlord's approval and availability, CHW and HHW supply and
return lines (valved and capped) on each level of the Building, may be used by
Tenant for supplemental heating and cooling units (provided and installed by the
Tenant).
N. GAS (RESTAURANT TENANTS ONLY)
Gas service (for cooking only) will be in predetermined Food Service
areas only.
O. CATV SERVICE
Cable Television service is not presently available.
P. BUILDING WIDE PUBLIC ADDRESS SYSTEM
Landlord will furnish and install, in the Tenant's space, a building
wide public address interface box.
END OF ITEMS PROVIDED BY LANDLORD
II. CODE AND GENERAL BUILDING INFORMATION
A. SAN FRANCISCO CITY DEPARTMENTS
Building Department:
--------------------
San Francisco City & County Public Works Department
Department of Building Inspection
1660 Mission Street
San Francisco, CA 94103
558-6096
Central Permits Bureau
(415) 558-6070
Commercial Tenant Improvements
(415) 558-6086
3
<PAGE>
Health Department:
------------------
San Francisco City & County Health Department
101 Grove Street
San Francisco, CA 94102
(415) 554-2500
Fire Department:
----------------
San Francisco City & County Fire Department
Fire Prevention Bureau
260 Golden Gate Avenue
San Francisco, CA 94102
(415) 861-8000
Plumbing Department:
--------------------
San Francisco City & County Public Works Department
Department of Building Inspection
Plumbing Division
1660 Mission Street
San Francisco, CA 94103
(415) 558-6054
Electrical Inspection:
----------------------
City & County of San Francisco Public Works Department
Department of Building Inspection
Electrical Division
1660 Mission Street
San Francisco, CA 94103
(415) 558-6030
The following is provided as a general guide only and does not release
the Tenant from its obligation to comply with all applicable codes and
regulations as interpreted by the regulating authorities. Landlord is not
responsible for reviewing or interpreting code-related questions affecting the
design of individual tenant spaces. The Tenant is responsible for ascertaining
and complying with the applicable codes and regulations governing its space.
B. APPLICABLE CODES
The 1995 or Latest Edition of:
San Francisco Building Code (SFBC)
San Francisco Fire Code
San Francisco Mechanical Code
San Francisco Plumbing Code
San Francisco Electrical Code
San Francisco City and County Health Department Code
California Title 24 Energy Conservation Code - California Statute
California Accessibility Statutes and Regulations
Americans with Disabilities Act (ADA)
C. CONSTRUCTION:
Type I - Fire Resistive, Non-Combustible, Sprinklered
D. OCCUPANCY:
Occupancy Groups for each venue are noted below and are based on
assumed uses. Tenant's proposal for different uses to that listed must have
approval by the Landlord.
<TABLE>
<CAPTION>
Venue Occupancy Group
----- ---------------
<S> <C>
Gateway
North Entry/Passage Group A-2.1
Main Gateway Space Group A-2.1
Minna Street Passage Group A-2.1
Sony Theatres Ticketing Group A-2.1
Gateway Retail Group M
Environmental Retail Group M
Sony On-line Studio Group B/M
Sony The Entertainment Store Group M
Taste of San Francisco Group A-2.1
South of Market Live Group A-2.1
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Back of House Group B
The Music Club Group A-2
Bar Area Group A-3
Premiere Cafe and Kitchen Group A-2.1
South Howard Street Lobby (Ground and 2nd Floor) Group A-2.1
Film and TV Retail Group M
The Microsoft Store (Media Retail) Group M
Mammoth Institute of Technology (North Attraction) Group A-2.1
Open Reality Lab (Sony Playstation Lab) Group M
Sony's Mission Street Theatres Group A-2.1/A-2
Where The Wild Things Are (Sendak)
Lobby Group M
Creative Kids Store (Sendak Retail) Group M
In the Night Kitchen (Restaurant) Group A-2.1
Wild Things Playspace Group A-2.1
</TABLE>
III. DESIGN CRITERIA
A. EXISTING CONDITIONS
Before preparing Tenant Construction Documents, the Tenant's
Project Team will be given 30 days to review and comment on the Landlord's
Construction Document and to identify any inconsistencies, errors or omissions
(collectively "inconsistencies"), and to confirm that the Landlord's
Construction Documents are adequate for the intended purpose. The Tenant's
failure to formally provide the Landlord notice of any such inconsistencies or
inadequacies within said 30 day period results in the Tenant waiving its right
to any such claim, and thereafter the Tenant agrees to indemnify and hold
Landlord harmless against any claim whatsoever based on any inconsistency,
defect or inadequacy in the Landlord's Construction Documents. Unless otherwise
noted, Tenant shall integrate and coordinate all existing conditions in the Base
Building Construction Drawings.
Tenant's Project Team shall likewise inspect its space in the
Base Building prior to the start of construction of its Tenant Improvements. Any
adjustments or coordination to Tenant Improvement Documents arising from field
conditions being different than Landlord's Construction Documents, or other
building documents, shall be made by Tenant.
Utility points of connection will be provided within designated
electrical rooms (ERs) and satellite electronic equipment rooms (SEERs).
Locations of these rooms, their sizes and utility systems are shown on the
Landlord's Construction Drawings provided to the Tenant. It is the Tenant's
responsibility to extend these utilities as required to and within its space.
No curtains, blinds, shades, screens or other similar objects
shall be attached to or used in connection with any window or door of the Leased
Premises without the prior written consent of Landlord. Doors, windows, glass
lights and any lights or skylights that reflect or admit light into the Common
Area or other places of the Center shall not be covered or obstructed and there
shall be no objects in the immediate vicinity of the windows. Tenant shall not
place anything against or near glass partitions or doors or windows which may
appear unsightly from outside the Leased Premises. Tenant shall not, without the
Landlord's prior written approval place anything or hang anything in or about
the Leased Premises which would adversely affect the appearance of the Center.
B. VISUAL MERCHANDISING
Visual merchandising is a theatrical and informational
presentation of product, not only in storefront display but throughout the
store. Visually exciting displays with professionally executed graphics shall be
considered an integral part of the store planning process and an ongoing
management function.
All sales fixtures and counters used in the Premises must be new
and must be constructed using first quality workmanship. All fixtures and
counters must be compatible with the decor of the store. Tenant shall submit all
merchandising plans with colored and detailed renderings of all proposed
displays for approval by the Landlord.
C. TENANT FRONTAGE DESIGN CRITERIA
This criteria is to establish standards of quality and design to
ensure the compatibility of Tenant Frontages with the entire Center as well as
with adjacent venues. It is the desire of the Landlord that, while maintaining
a high level of design quality, there be a continued diversity and individual
expression for each Tenant's Frontage.
1. GENERAL TENANT FRONTAGE CRITERIA
All Tenant Frontages shall be designed by Tenant to conform
to these criteria and Landlord's review and approval. The Landlord reserves the
right to reject any Tenant Improvement or portion thereof, visible from the
common area if, in the sole opinion of the Landlord, the design does not conform
to the design standards of The Center.
5
<PAGE>
a. General Requirements
--------------------
All Tenant Frontage treatment must be full height and full
width, abutting Base Building elements as may occur, finished floor, and
Landlord's adjacent improvements as may occur, or to the underside of existing
structure as may be required.
b. Design Control Area
-------------------
The Design Control Area includes all display windows and
retail graphics, display fixtures, signs, materials, finishes, colors, and
lighting in front of the design control line, a line 4'0" inside the Lease Line
along the adjacent area. Glass enclosed fixed display pedestals or fixtures in
front of the store closure must be designed with materials and finishes
compatible with the Tenant Frontage. If a Tenant chooses to recess the store
closure behind the designated design control line, the Design Control Area will
be considered enlarged accordingly. The Tenant's Frontage may not project beyond
the Lease Line under any circumstances.
c. Store Closure
-------------
All Store Closures shall be sized according to Tenant's
Frontage Elevation(s). Due to smoke evacuation requirements, the closures are to
be integrally designed with reference to the Base Building smoke evacuation
system.
Closures are an integral part of the architectural design of
the Tenant space in both their open and closed positions and may be featured or
minimized according to the tenant's overall design statement.
d. Tenant Frontage and Entrances
-----------------------------
The level of the finished floor within the store entrance
area must correspond to the level of the Common Area finished floor at the Lease
Line to create a smooth transition.
At recessed tenant frontages, Landlord's floor finish from
the Lease Line shall be extended by the Tenant to the tenant frontage
construction line, threshold, or the center line of Tenant's closure.
Soffits, if any, shall be an integral part of the frontage
design.
Maximum Tenant Frontage transparency from the public area to
the lease space is required. Large areas of solid walls or visual obstructions
will not be permitted. A minimum of 60% of the Tenant's front shall be visually
-------
transparent, i.e., a combination of open entryway and glass. Greater
transparency is encouraged. The open entryway can be the entire width of the
leased Premises.
A controlled transition between Landlord's and Tenant's
finishes shall be detailed and maintained in all regards.
e. Prohibited Tenant Frontage Materials
------------------------------------
The use of the following materials on the Tenant Frontage is
strictly prohibited:
. Pegboard, in any form
. Vinyl or suede wall covering or wallpaper
. Soft wood Tenant Frontages (i.e. rough sawn cedar)
. Cork or cork tiles
. Carpet or fabric
f. Planting Material
-----------------
Tenants may use living plants in their store and Tenant
Frontage areas, with approval from the Landlord, if in character with the Tenant
Improvement. Depressed or slab-level planting is not allowed. All plants
installed by the Tenant shall be properly maintained.
g. Lighting
--------
There shall be no direct glare from the store to the
adjacent area as a result of the Tenant's lighting in the Design Control Area.
Tenants shall provide a high level of illumination above the display areas and
store entrances. All showcases and display cases must be adequately lighted and
ventilated.
All lighting and illuminated signage in the Design Control
Area must be illuminated during the Center's normal operating hours and must be
controlled by a time clock connected to the Tenant's power supply.
6
<PAGE>
h. Tenant should use the sign criteria in this manual in
the development of its graphic design. Landlord reserves the right to design
Tenant's graphics if Tenant's design is judged unacceptable.
2. EXTERIOR TENANT FRONTAGES
All existing Exterior tenant frontages and entrances will be
maintained by the Landlord as may be required. No changes or additions can be
made to exterior tenant frontages by Tenant.
D. GENERAL GRAPHIC DESIGN CRITERIA
Creative, unique and high-quality graphics fully integrated into
the tenant frontage design are a minimum requirement for identity signing. The
entire tenant frontage shall be considered the sign field, and signing may occur
anywhere within the limits of the tenant frontage. Graphic designs and signage
shall be included as part of all design submittals, and the Landlord's review
shall be based on the cohesive integration and compatibility with the Tenant
Improvement in terms of composition, balance, color and graphic impact.
Tenants are encouraged to use bold, daring and unique signing.
Combined with exposed neon and effective task lighting, such signing promotes
the Center's festive atmosphere. Signing and graphics must be designed to be
easily read--up close and at a distance. The use of brand name vendor-supplied
standard signs should be avoided; all graphics and signage shall be custom
fabricated.
The Tenant is encouraged to attach graphic elements to the Tenant
Frontage extending beyond the Lease Line into the Common Area subject to the
following restrictions:
. The graphic design should not focus on verbal identity,
but rather images or icons which express the essence of the Tenant. In addition,
because each Tenant's graphic will be viewed together with elements from the
adjacent tenants, the Landlord will carefully control the design of each
Tenant's graphic to ensure that the overall composition of the building is
appropriate and balanced.
. Design data for all graphic elements must include
structural information and clearly show methods of support and attachments.
. All graphic designs shall be reviewed by the Landlord's
structural engineer and Tenants must comply with the engineer's recommendations
accordingly.
. All graphics shall be placed to ensure necessary and
appropriate pedestrian clearances.
<TABLE>
<CAPTION>
1. SUGGESTED SIGN TYPES
<S> <C>
Unusual cabinet-type signs with tenant Edge-lit letters or forms
frontage
Gold or silver leaf on tenant frontage Sandblasted or etched glass
glass
Open channel letters with exposed neon Fiber optic
Sandblasted back-lit mirror Pin-mounted halo-lit letters
Internally illuminated reverse channel Exposed neon
letters
Routed sign bank with push-through Sandblasted wood
letters
Built-up acrylic (minimum Decorative paint on glass
1-1/2" thick)
</TABLE>
2. GUIDELINES
a. Tenant frontage identification signs shall be limited
to the Tenant's trade name as approved in the Lease or as otherwise approved in
writing by the Landlord. The Tenant may use a customary signature, hallmark,
crest, shield, logo or other established corporate insignia, and these shall be
included within the allowable sign area.
b. Dimensional signs or artistically sculpted objects are
encouraged. Cut-metal, acrylic, fabric and other materials will be reviewed on
an individual basis.
c. Multiple signs or graphic treatments will be allowed
for Tenants with multiple exposures to the Common Area.
d. Secondary signs, advertisements, notices or decals
shall not be exhibited within or affixed to any part of the tenant frontage
unless previously approved in writing.
7
<PAGE>
e. All signs with a visible back shall be factory
finished. All fasteners shall be concealed. Supports and hanging devices shall
be of a quality material and finish.
f. All electrical connections and equipment, such as
ballasts and transformers, must be concealed, with access from within the
Premises. No exposed neon crossovers, raceways, ballast boxes or transformers
will be permitted.
g. Sign company names or decals shall be concealed.
h. Maximum brightness allowed for tenant frontage
identification signs will be 100 foot-lamberts taken at the letter face.
i. Sign illumination shall be automatically controlled.
3. EXTERIOR TENANT FRONTAGE SIGN CRITERIA
Given the requirements of the Redevelopment Agency for
exterior tenant frontages, the Tenant is not guaranteed exterior tenant signage.
The Landlord will carefully review the design of all proposed signing - size,
materials, colors, etc. Any materials or signage temporary in nature, or deemed
inappropriate by the Landlord, will not be permitted. The location of exterior
signage shall be determined by the Landlord.
a. All exterior signage shall be designed, fabricated,
installed and maintained at the Tenant's expense.
b. Placement of exterior graphics and signage shall be
confined to the transom panels over ground level store fronts as approved by the
San Francisco Redevelopment Agency.
c. Signs on the transom panels must be of individual
letters and may be any one of the following:
. Pin mounted metal letters
. Reverse channel metal letters, back-lit
. Surface mounted dimensional metal letters, non-
illuminated
. Routed out letters, back-lit
. Etched, sandblasted, or engraved letters
. Applied gold and silver leaf
d. Exterior letters and logos may project a maximum of 6"
beyond the building wall, when installed on the transom panel. No sign
manufacturers' or installers' decals may be visible to the public.
e. Exterior window walls may be used for primary or
secondary graphics. The following restrictions shall apply to show window
graphics:
. All show window signage must be a minimum of 6"
from any edge.
. Show window signage may not cover more than 1
square foot per lineal foot of lease width, if
transom lettering is not used; and no more than
1/2 square foot per foot of lease width if transom
lettering is used.
. All graphics must be applied on the inside face of
the glass.
. All neon or cold cathode signage must occur behind
glass, out of the public's reach.
. All show window graphics will be subject to
Landlord's approval.
f. Only the Tenant's approved store or business name (as
stated in the Lease) and logo may be used for exterior graphics and signage. No
advertising slogans, brand names, or product names may be added. Only
established logos will be permitted.
g. Sign illumination shall be internal and self contained.
No animated, flashing, or intermittent lights, black lights, or strobe lights
will be permitted.
h. All illuminated signs and display window lighting must
be automatically controlled.
E. DEMISING PARTITIONS
Demising partitions between Tenant space shall consist in all
cases of 6"x 18 gauge (or heavier gauge as required) metal studs at 24" on
center.
a. Provide and install metal studs for all demising walls
relative to the Lease Line.
8
<PAGE>
b. Provide the required gypsum wallboard on its side of the
demising wall all as required by Code for the designated fire rating of this
assembly.
c. Any and all penetrations in the demising wall must be
constructed so as to maintain the integrity of the required fire rating, if any.
F. INTERIOR PARTITIONS
All framing shall be of non-combustible construction. The use of
approved combustible trim and feature finish materials may require additional
fire sprinkler intensity. Combustible trim and feature material is not allowed
above the area of protection provided by the sprinkler heads.
G. CEILINGS
The Tenant may use any ceiling conforming to code except that
standard 2'x 2' and 2'x 4' lay-in acoustical ceiling tiles may not be used in
any areas visible to the public. Examples of acceptable ceilings are: metal
linear, 2'x 2' tegular, concealed grid, drywall, and patterned 2'x 4' tiles.
The Tenant shall provide access to all ductwork heaters, piping,
controls, or valves located within the Premises by means of an accessible
ceiling tile or flush access panels.
H. FLOORING
The choice of flooring materials may be restricted due to
superimposed dead load constraints given in the structural guidelines which
follow.
The top of structural deck at all areas of Level I is established
at minus 2" below final finished floor elevation. Floor assemblies at Level 1
locations which make up this difference shall be provided as part of the
Tenant's work.
The top of structural deck at all upper levels cannot be recessed
to receive finish floor assemblies. All flooring at upper levels shall be
installed directly upon the structural deck. A smooth transition between
material and level changes shall be detailed and maintained as required.
I. STRUCTURAL DESIGN GUIDELINES
Modifications to the Base Building structure shall not be
allowed.
Accumulated gravity loads of the Base Building and its Tenant Improvements must
be understood and controlled due to the unique relationship of this facility to
the existing structure on which it is placed. Load criteria is generally
established as follows:
a. Typical floor assemblies
Construction dead load of base bldg 70 psf
Superimposed dead load of TI 20 psf
Live load as given by occupancy classification
b. Ground floor
Superimposed dead load for 2" flooring 25 psf
c. Suspended Floors and roofs
Superimposed dead load for hung props 5 psf
The values listed above are additive depending upon the Tenant's
location within the Base Building. As the Tenant's design proceeds, it shall be
reviewed with the Landlord's structural engineer for conformance and possible
deviations within these guidelines.
J. MECHANICAL DESIGN GUIDELINES
The Tenant shall be required to complete mechanical systems from
points of connection identified by the Landlord.
The design, materials and installation shall conform to the best
current practice in the respective trades and shall be consistent with good
engineering practice, manufacturer's recommendations, industry technical
references and standards, and shall conform to all Title 24 energy conservation
requirements.
The Tenant shall submit a written request to Landlord for
upgrades and/or deviations from specified utility capacities or minimum criteria
requirements. Upgrades shall be subject to availability. The cost for revising
any existing installation, shall be borne by the Tenant initiating the changes.
9
<PAGE>
Modifications to existing systems that are required to accommodate
Tenant Improvements shall be clearly defined in both the construction documents
and a written request for deviation. Modifications to existing Landlord systems
shall be performed by a contractor approved by the Landlord.
1. Documentation
Calculations and documentation are required to validate design
requirements. Information shall be sufficient to allow thorough analysis of the
design for all plumbing, fire protection and HVAC systems.
2. HVAC Calculations
HVAC calculations shall utilize methods recommended by the ASHRAE
Fundamental Tenant Work Agreement (latest edition) and other ASHRAE
publications.
3. Outdoor Design Conditions
Outdoor design shall be based on the ASHRAE data below and as
required by code:
Summer: Dry Bulb 2-1/2% design
Wet Bulb 2-1/2% design
Winter: Dry Bulb 99% design
4. Indoor Design Conditions
Tenant space indoor design shall be for temperatures indicated
below or required by code:
Summer: 75 FDB occupied
50 relative humidity
Winter 68 FDB occupied
55 FDB unoccupied
Heat gain calculations shall be based on the time of peak gain (month,
day & hour), considering coincident solar, thermal, and internal environmental
gains, full internal heat (all lights on) and full outside air requirements at
design conditions. A block load shall be provided to determine the concurrent
peak requirement if the zone peak loads do not occur at the same time. Heat
gains for all miscellaneous and process loads shall include an itemized
equipment list with a description of the item, quantity, connected load and
diversity factors used to determine peak load.
Calculations shall be provided for peak airflow based on the space
sensible load. Outside air plenum, portions of lighting and roof loads should
not be included in the space sensible load utilized to determine the peak CFM.
The effect of heat removal exhaust systems shall be shown in the heat
gain calculations. Heat loss calculations shall be provided for both occupied
and unoccupied periods based on full heat loss and full outside air requirements
at design conditions.
5. Landlord System Design
Packaged air handling units have been provided to meet the heating and
cooling needs of tenant spaces. Typically, all zoning is to be done with VAV
boxes. Food Service Tenants shall utilize thermal exhaust for the primary source
of cooling with chilled air available for supplemental cooling. Individual
package rooftop or split systems shall not be utilized.
If the Tenant has heating and cooling requirements beyond those provided by the
Base Building, the Tenant shall furnish and install a supplemental system that
is compatible with the design of the Base Building HVAC system. Additional
capacity in the chilled water loops may be available with Landlord's approval,
based on Tenant's requirements.
System Design Parameters
------------------------
Refer to Mechanical Schedules included in the Landlord's
Construction Documents.
Minimum outdoor supply air requirements for retail occupancies
are provided through the Landlord packaged air handler units.
The Landlord will operate the building HVAC system only during
normal published business hours. No provisions are made for 24-hour cooling or
heating operation.
10
<PAGE>
6. Exhaust Requirements
All general exhaust requirements have been provided via the Base
Building exhaust system. The ceiling or open space is utilized as a plenum,
wherein 100% of the supply air is exhausted or re-circulated to maintain zero
pressure differential. The minimum exhaust air requirements shall comply with
code and shall meet or exceed the following:
Toilet rooms, locker rooms, etc., shall have a minimum of 20 air
changes per hour. Spaces with internally generated odors and other contaminants
(for example, hair and nail salons, fabric shops, leather and pet shops, photo
processors, food preparation areas) shall have the greater of:
a) 4 FPM exhaust velocity through b) Sufficient exhaust volume to
the cross section of the space (or) prevent the migration of odors
open to the Common Area to adjacent areas.
Such rooms must have an exhaust and filtration system installed which
removes odors and/or contaminants prior to introducing them into the return
air/exhaust system or they must be exhausted to the exterior of the building.
Location and routing of exhaust duct shall be coordinated with the Landlord.
Kitchen hoods shall be exhausted per the equipment manufacturer's
recommendations. Exhausts shall be sized to remove the average internal heat
gain.
As applicable, Tenant shall furnish and install a toilet room exhaust
fan(s) with back draft damper(s). The fan(s) shall be connected to the
Landlord's master toilet exhaust system at ceiling level, and operate whenever
the switch light is turned on in the toilet room(s).
Balance Requirements
--------------------
Balance requirements for Tenant systems necessitate that the air
pressure differential between adjacent spaces shall be neutral. A negative
pressure relative to the adjacent spaces shall be maintained in the areas
requiring exhaust systems as previously described.
The Tenant shall employ a contractor approved by the Landlord to
balance systems to design specifications. All balancing work shall be scheduled
through the Landlord's Project Manager.
7. General Provisions
Design all piping and ductwork to present a neat and orderly
appearance, running lines parallel with building structural grid or walls. Keep
piping and ductwork free from contact with adjacent surfaces to prevent noise
transmission. Systems should be designed to accommodate thermal expansion.
Locate all above floor piping, ductwork, equipment, etc., in the
joist space or adjacent to the bottom of joists and beams. Clear heights must be
held at a maximum so that mezzanines or other architectural features, electrical
or mechanical systems and stacked storage can be accommodated.
Piping and ductwork shall be concealed in walls, above ceilings,
or, if left exposed, it shall be located out of public reach finished to blend
with surrounding surfaces. Pressure piping shall be above grade and accessible.
All penetrations shall be sleeved and fire stopped as required. NOTE: The
Contractor shall avoid penetrating the acoustical envelope that surrounds the
Theatres on Level 3 and 3M.
All mechanical systems shall be designed and installed so that
access through other Tenant spaces or Common Area is not required. Routing to
remote system components that require access through other Tenant spaces or the
Common Area shall be coordinated with the Landlord's Project Manager prior to
the start of construction. Labels, no farther than twenty feet apart, shall be
provided to identify component, Tenant name, and space number.
8. Access Requirements
All components and equipment shall be provided with adequate
access for periodic inspection, service and replacement. This requirement
applies to both Tenant and Landlord systems within the space and may require
access through a Tenant space.
Technical Guidelines
--------------------
A 24"x 24" minimum size wall or ceiling access door or panel
shall be provided for all valves, clean outs, dampers, controls, devices, etc.
Panels shall be hinged and latched. Nailed or screwed attachment is not
acceptable. Knockout panels, removable ceilings or wall sections shall be
provided for removal or service of equipment larger than allowed by a 24"x 24"
access size.
All access panels shall be provided with engraved, adhesive or
stenciled labels identifying the equipment, valves, etc., requiring access.
Label acoustical ceiling grid to indicate where tiles should be removed for
access to equipment. All valves, dampers, controls, etc. shall be marked by
tying a piece of "caution tape" to the valve or damper, in order to facilitate
locating the valves or dampers.
11
<PAGE>
Provide the minimum clearance recommended by the equipment
manufacturer at all service points.
The Tenant shall demonstrate accessibility of all components to
the Landlord's Project Manager prior to occupancy. This information should also
be reflected on the Shop Drawing submittals.
Existing Installations
----------------------
Reuse of all or part of existing installations is subject to the
field verification of the capacity and condition of the components. Construction
documents shall provide minimum performance parameters, refurbishing
specifications and establish a verification procedure requiring a written
report. This report shall detail inspection and service performed, repairs,
additional recommendations, and performance test results including balancing
data. Copies shall be submitted to Landlord for approval.
9. Roof or Grade-Mounted Equipment
No mechanical equipment may be installed on the roof or on grade.
10. Insulation
Insulation shall be required on all surfaces to retard
undesirable heat transfer and to prevent condensation. Above ground plastic
drainage piping, where allowed, shall be insulated for sound control. All
insulation jackets, adhesives, sealers and coatings shall be noncombustible and
shall be continuous through walls, floors, partitions and sleeves. Tests,
inspections and surface cleanings shall be completed prior to insulation being
applied. Where Tenant insulation extends from an existing Landlord component,
the R-value, vapor barrier and jacketing material shall match the existing
installation.
K. PLUMBING
The Tenant is responsible for the installation of plumbing
systems for its space. Point of connections to the Base Building systems must be
confirmed on the Tenant Improvement Documents. A requirement must be noted on
the Construction Documents to schedule connection to Base Building mains.
Plumbing shall not be installed in the demising walls of a space.
Piping exposed to freezing ambient conditions shall be heat traced and
insulated. PVC piping shall be limited to code allowable installations. All
piping systems shall be pressure tested.
1. Domestic Water
A domestic water point of connection is available at
designated locations. A shutoff valve is required at the point of connection, if
none exists.
Domestic water is supplied at the pressure available from
utility minus piping pressure losses to the point of connection. Tenants
requiring specific pressures should test the available pressure and install
regulators or booster pump systems to meet their needs.
Technical Guidelines
--------------------
Provide isolation valves for all fixtures, equipment or
installations exposed to ambient conditions.
Backflow preventers shall be installed where equipment,
fountains, soda dispensers, etc., are directly connected to the domestic water
system.
Water hammer arrestors shall be installed where required for
fixture protection.
Electric water heaters may be instantaneous or storage tank
type. Tank type heaters shall be installed in a four-inch deep overflow pan. Pan
and water heater relief shall be piped to the nearest drain.
Food service Tenants and high demand water users shall
provide a domestic water check meter with remote reader.
Domestic water piping shall be Type "L" hard drawn copper
pipe and fittings. Condensate drain piping shall be Type "M" hard drawn copper
pipe and fittings.
2. Sanitary Waste
Connection to the Base Building sanitary waste system is
available at Landlord designated locations.
Garbage disposals are not permitted, unless approved in
writing by the Landlord.
Technical Guidelines
--------------------
12
<PAGE>
A minimum of one full line size cleanout shall be provided in
each Tenant space. Cleanout shall be floor or wall type accessible from within
the Tenant's space. Under-floor piping shall be configured to utilize a four-
inch waste main, where possible.
Hair and/or solids interceptors must be installed to prevent
waste from entering the sanitary waste system.
3. Sanitary Vent
A master vent system connection is available at Landlord
designated locations.
4. Grease Waste
Code-approved grease interceptors must be installed to prevent
grease-laden waste from entering the sanitary waste system. Interceptors located
within a space must be surface-mounted above the floor. Grease interceptors
outside the Premises must be approved by the Landlord.
A master grease waste system and common grease inceptor has been
provided for the Taste of San Francisco. A connection is available at
designated locations.
5. Natural Gas
Natural gas service is available for pre-designated food service
areas only. Service for individual retails spaces is not available. No Tenants
shall be allowed to use gas for domestic water heaters. The Tenant shall be
responsible for coordinating available capacity, pressure, service connection,
etc., with the Landlord. Separate metering shall not be available from PG&E.
Technical Guidelines
--------------------
Gas piping shall be schedule 40 black steel and may utilize screw
fittings for low pressure service up to two-inches in size where code allows.
All high pressure or low pressure piping (2-1/2" and larger) shall utilize all
welded fittings.
All piping shall be finished with a rust inhibitive primer, color
coded finish and identification labels.
The gas service from the meter room shall be low pressure and all
piping located within concealed areas shall be sleeved and vented.
6. Testing
Domestic Hot & Cold Water Lines - Test in accordance with the UPC
and SF Plumbing Codes.
Sanitary waste and vent piping, natural gas and storm drain
lines -Test in accordance with the UPC and SF Plumbing Codes.
Apply tests for a minimum period of four (4) hours, or until
tests are complete. Tests need to be witnessed and signed off by a
representative of the Landlord.
L. FIRE PROTECTION
The Base Building provides a wet automatic fire sprinkler system with
drops on swing-arms distributed at code minimum throughout the unfinished space.
Integrate sprinkler distribution with final design of spaces and ceilingscape,
and augment heads as required for proper coverage.
All systems shall be charged and operational when the Contractor is
not on the Premises or a fire watch shall be posted by the Tenant. Schedule all
work with the Landlord's Project Manager.
Provide freeze protection for areas exposed to freezing conditions.
M. HVAC EQUIPMENT
The Tenant is responsible for the installation of heating and cooling
equipment to complete the variable air volume system for the Premises and/or
provide supplemental equipment for specific merchandising needs.
1. VAV Boxes
VAV boxes shall utilize DDC controls consistent with the Base
Building BMS. Provide specifications for VAV boxes on the Construction
Documents. Include manufacturer data, control specifications, minimum and
maximum setpoints, and fan setpoint and heating coil information (where
applicable). Minimum primary air setpoint shall be zero CFM unless otherwise
directed by Landlord.
13
<PAGE>
Maximum primary air setpoint shall be scheduled as the quantity required to
offset the space sensible load shown in the heat gain calculations.
2. Supplemental HVAC
Supplemental HVAC equipment can be installed only with the
Landlord's written approval. The use of supplemental equipment will be limited
to merchandising needs that require 24-hour operation, temperature or humidity
control beyond that available from the Base Building system.
Technical Guidelines
--------------------
Use of reheat coils shall be confirmed with the Landlord relative
to Base Building systems.
All systems shall be provided with two-inch high efficiency
filters, compressor protection timers, and factory mixing box (where available).
Condensate drain piping shall be pitched a minimum of 1/4" per
foot away from the drain pan and incorporate a properly designed trap as
recommended by coil manufacturer to prevent air pockets, intake or loss. All
condensate drains shall terminate in a code approved building waste system.
N. AIR DISTRIBUTION
All air distribution systems shall be designed, constructed and
installed as recommended by ASHRAE and SMACNA and in compliance with Title 24
standards. Systems shall be designed and components selected such that ductwork
external to the building will not be required.
All ducts, diffusers, grilles, registers, etc., shall be protected to
maintain the rating of the construction in which they are installed or pass
through.
All ductwork shall be shop fabricated galvanized steel sealed for low
leakage. Flexible connections shall be utilized at all equipment with moving or
rotating components. Temporary filters shall be utilized for units operating
during construction. Upon completion of construction, a filter change must be
performed.
No Tenant ductwork shall be attached to the Landlord's ductwork,
sprinklers, plumbing lines, conduits, or their support, but must be
independently support from the Base Building structure.
Display windows must be ventilated to remove the lighting heat gain.
All air distribution devices and systems shall be selected for a maximum noise
criteria level of NC35.
1. Primary Air Ductwork
The Tenant is responsible for tapping and extending the primary
air ductwork from the Landlord-supplied Tenant supply main to the VAV box.
Ductwork upstream of the VAV box shall be constructed to a four-inch pressure
classification. Utilize rigid duct only. No flexible ductwork may be utilized
upstream of the VAV box.
Ductwork shall be configured to provide a minimum of four
equivalent diameters of straight run directly upstream of the VAV box inlet.
2. Secondary Air Ductwork
Ductwork downstream of the VAV box shall be constructed to a two-
inch classification. The air distribution system shall provide adequate air
motion to all portions of the demised space. All conditioned areas shall have
even temperature distribution without excessive air motion. Supply air shall be
distributed from lowest ceiling elevation.
Technical Guidelines
--------------------
Linear, slot or louvered face diffusers may be utilized for
supply air. Perforated face diffusers are not acceptable. Air diffusers,
registers, and grilles shall be factory finished. Mounting frames shall be
provided to facilitate removal.
Ductwork shall be sized for a maximum friction loss of 0.10
inches of water column per 100 feet of duct at design airflow. Branch duct
runouts shall include a balancing damper. Balancing dampers shall be installed
at all supply diffusers.
All exposed ductwork shall be rigid construction. Flexible duct
may be used only for concealed, low pressure runouts to individual diffusers. A
flexible duct runout shall not exceed five feet in length.
14
<PAGE>
3. Return Air
The ceiling cavity will be utilized as a return air plenum.
Return air registers shall be located at the highest ceiling elevation to
eliminate heat buildup.
Technical Guidelines.
Registers shall be sized for the space supply air capacity plus
an additional 50 CFM per lineal foot of storefront to accommodate return air for
the Common Area. Maximum velocity through registers shall be 400 FPM.
A 16 square foot free area (minimum) return air transfer opening
shall be provided in each demising wall shared with an adjacent Tenant. Where
the demising wall is a smoke zone separation, no opening is permitted.
Transfer ducts with a free area equivalent to the required
openings must be provided between openings where no ceilings are installed to
maintain the integrity of the return air system.
Cooking areas and kitchens shall be isolated from the general
return air plenum.
All full height walls must have normally closed dampers installed
for smoke evacuation and must be tied to the Base Building Life Safety system.
The Tenant shall extend wiring to the appropriate point and shall employ the
Landlord-designated contractor to complete and test the installation.
4. Kitchen Exhaust
The Base Building has made provisions for routing of kitchen hood
exhaust duct risers and termination of same at the roof level.
Provide auxiliary normally open and closed hood fire
extinguishing system alarm contacts for connection to Landlord's fire alarm
system. Tenant shall extend wiring from contacts to the termination point
designated by the Landlord and utilize a contractor designated by Landlord for
all hardware and software modifications required to complete the interface.
Grease filtration equipment shall be selected for optimal
efficiency.
The Tenant shall be responsible for preventing odor migration to adjacent areas.
Supplemental air treatment systems required to remove objectionable odors and
smoke shall be installed by the Tenant.
Kitchen exhaust systems shall terminate outside the building in a
manner that disperses effluents to avoid contamination of outside air intakes
and prevents down-drafting or pocketing in low points or accumulation on
adjacent building components.
O. TEMPERATURE CONTROL
The Base Building temperature control system consists of a complete
mechanical equipment automation system. All control dampers actuators,
temperature sensors, and miscellaneous equipment has been provided for all of
the Base Building-supplied equipment.
All communications and control wiring must be run in conduit. Any
changes or additions to the existing systems for Tenant Improvement work, are to
be approved by the Landlord.
The Tenant shall provide a conduit from the accessible ceiling cavity
to a wall-mounted outlet box for each wall-mounted sensor, thermostat or control
device. Conduit shall be extended to controlled equipment facilitating
installation of wiring or tubing where ceiling construction is inaccessible.
Final connection to the Landlord temperature control system and
programming of controls and sensors will be performed only by Landlord approved
contractor.
1. Supplemental HVAC
The Tenant shall provide a wall mounted thermostat or sensor for
each piece of heating and cooling equipment. Control system shall employ a seven
day timeclock or programmable thermostat to automate equipment operation. An
interface with the Base Building temperature control system must be provided for
all supplemental equipment. Equipment must be capable of being de-energized
during smoke control functions.
Exhaust system operation, other than toilet exhaust fans
connected to the Landlord system, shall provide continuous operation during
business hours.
Provide the necessary smoke or ionization detectors and
interlocking devices for Life Safety systems. Detectors shall have auxiliary
contacts. No interconnection with Base Building Life Safety System shall be
allowed except for monitoring or alarm purposes as required by local code. Where
interconnection is required, devices compatible with Base Building systems shall
be utilized. Tenants shall utilize the Landlord's approved contractor for all
hardware and software modifications to complete the system.
15
<PAGE>
Tenant shall include a sequence of operation for all mechanical
equipment.
P. ELECTRICAL DESIGN GUIDELINES
The Tenant's electrical service and equipment must be compatible with
the overall electrical system for the Center.
The Tenant is required to provide and install conduit and wiring from
the Landlord designated Electrical Room to their Tenant space, as well as
complete the electrical systems within their space. Points of connection within
the Electrical Rooms will be provided by Landlord. All connections must be
performed by a contractor approved by the Landlord.
Design, materials and installation shall conform to best engineering
practice, manufacturer's recommendations, industry technical references and
standards, and shall be in compliance with Title 24 requirements.
Tenants shall submit to the Landlord an itemized summary of their
proposed electrical requirements regarding increased load, service switch, fuse
protection, service conduit and wire. The Tenant shall submit a written request
for upgrades and/or deviations from specified utility capacities or minimum
criteria requirements.
Modifications to existing systems that are required to accommodate
Tenant Improvements shall be clearly defined in both the Tenant's construction
documents and a written request for deviation. Modifications to existing
Landlord systems, if approved, shall be performed at Tenant's expense by a
contractor approved by the Landlord.
Except as expressly provided in the Lease, Tenant shall not install
any radio or television antenna, loudspeaker, or other device on the roof or
exterior walls of the Center nor shall Tenant install or maintain in the Leased
Premises any device or equipment which might interfere with radio or television
broadcasting or reception from or in the Center or elsewhere.
1. Documentation
Calculations and documentation are required to validate design
requirements. Information shall be sufficient to allow thorough analysis of the
design.
2. Service Entrance and Metering
The Tenant is not a customer of the utility company, however, the
design should be executed as if the Tenant were acquiring power directly from
the utility company.
Permanent service to Tenant spaces shall be distributed by the
Tenant from the Base Building Electrical Equipment Room as designated by the
Landlord.
3. Maximum Service Sizes
Electrical system conduit and switches have been sized to
accommodate heating requirements for Tenants in certain areas of the building.
4. Balance
Service to each Tenant shall be arranged to maintain a balance
between phases of 10% or less.
5. Short Circuit Current
The Landlord will provide the available fault current level
existing at the connection to the Landlord's service distribution point. All
equipment shall be installed to withstand the available short circuit current
within the Tenant space.
6. Grounding
All equipment, devices and fixtures shall be grounded in
compliance with NEC and UL requirements. The plumbing piping system shall not be
used as a ground. Transformer neutrals shall be securely grounded to the
building steel only using a Cadweld connection.
7. General Provisions
Temporary power will not be provided. Tenant contractor must
install permanent feeder conductors from the Landlord's service distribution
point immediately for use as the source of light and power during construction.
16
<PAGE>
All boxes shall have devices or light fixtures installed, or they
shall be appropriately covered and capped. All panels and other electrical
equipment must have covers with complete directories. After completion of the
permanent installation remove all temporary wiring.
8. Existing Installations
Reuse of all or part of existing installations is subject to
field verification of the capacity and condition of the components and approval
by the Landlord.
Q. LIGHTING AND POWER
The Tenant is responsible for providing and installing all lighting
and power equipment necessary to complete the electrical system for its Tenant
Improvement space. It's system shall be integrated with the Base Building
energy management system.
1. Wires, Cables and Conduit
Distribution feeders and sub-feeders shall be copper with
approved compression lugs used at terminations. Maximum wire size shall be 500
MCM copper. Minimum wire size shall be #12 AWG for light and power. Insulation
shall be THW or THHN-THWN.
All wiring shall be color-coded as follows:
208/120 volt systems 480/277 volt systems
Phase A-Black Phase A-Brown
Phase B-Red Phase B-Orange
Phase C-Blue Phase C-Yellow
Neutral-White Neutral-White with tracer or gray
Color-code shall identify the same phase throughout the system,
from service switch or transformer through all branch circuitry.
Only electric metallic tubing and rigid galvanized conduit are
permitted.
All conduit runs shall be designed to present a neat and orderly
appearance, running lines parallel with building structure or walls. Proper
fittings shall be provided when crossing building expansion lines.
2. Circuit and Motor Disconnects
Disconnect switches shall be general duty. Provide NEMA 1
enclosures for interior locations. A line voltage, horsepower-rated disconnect
switch shall be installed adjacent to each motor. Label all devices external to
the lease space with the lease space name.
3. Transformers
All transformers shall be three-phase. 15 KVA and smaller shall
be wall-mounted above the panel board. Transformers shall have Class H
insulation, with multiple taps above the rated voltage. Demand load shall not be
greater than 80% of the transformer rating. The connected loads shall be
balanced so that a variation of amperage among the phases of less than 10% is
present.
4. Distribution
Tenants shall install circuit breaker type distribution panels.
If distribution is made from a trough, separate taps shall be made from the
feeder to each load. Parallel feeders shall be spliced together adjacent to each
tap.
No tap shall be made that does not terminate in circuit breaker
protection immediately adjacent to the trough. All panels are to be UL-labeled.
Circuit breakers are to be bolt-on type. The neutral bus in all panels is to be
isolated from a grounding bus.
5. Lighting and Receptacle Panels
All panels are to be UL labeled with bolt-on type circuit
breakers.
208/120 volt lighting and/or receptacle panels must be protected
individually. A device ahead of a transformer supplying that panel is
unacceptable.
480/277 volt panel bus shall be suited to its protection as well
as adequate for the design load plus a minimum of 15% spare. Multi-pole loads
shall be protected by multi-pole circuit breakers having common trip and single
handle. Handle ties and trough clips or pins are unacceptable.
Use switch duty circuit breakers when used to control loads.
17
<PAGE>
6. Illumination
UL-labels must appear on all lighting fixtures. Flexible conduit
tails, up to six feet in length, may be used between junction boxes lighting
fixtures. Outlet boxes may serve up to four separate fixtures. Ballasts shall
be high-power factor CBM labeled.
The Tenant shall supply and install all required emergency, exit
route and exit sign lighting for its Tenant space. Battery backup operated
fixtures are required for emergency and exit lighting.
Signing and storefront illumination is to be automatically
controlled and illuminated in accordance with Landlord's operating regulations.
R. LIFE SAFETY SYSTEMS
Tenant must use a contractor approved by the Landlord for all hardware
and software modifications to complete life safety systems interface.
Alarm cable is available at Landlord designated locations for Tenant's
connection to Tenant provided fire alarm devices.
A smoke detector specified by the Landlord shall be installed at the
entrance of the Tenant space and connected to the Base Building life safety
system by a contractor approved by the Landlord.
For pre-designated restaurant locations, a connection point for hood
extinguishing systems is provided at locations designated by Landlord.
S. TELECOMMUNICATIONS
The Tenant shall contact the Landlord and arrange for telephone
service. Tenant shall be responsible for providing telephone service cable from
Landlord-designated Satellite Electronic Equipment Room (SEER) to the Tenant
space.
All telecommunication cable shall be installed in conduit. All
conduit must be installed in fire-stopped sleeves when passing through fire
rated partitions. All telecommunications systems to comply to Title 24
requirements.
T. SECURITY SYSTEM
Landlord shall provide and install electronic detectors on all door
openings into the Common Area and at all exterior openings of the Building.
Landlord shall provide and install a video camera surveillance system
within the Base Building in order to provide limited surveillance of all common
areas. The Landlord is not responsible for security surveillance within Tenant
spaces. The Tenant may add its own camera surveillance system within its space
as an independent system or it may contract with the Landlord to tie into the
Base Building system. In the latter case, the Tenant shall use equipment which
is compatible with the Base Building System. All Tenant security equipment must
be approved by the Landlord.
Any Tenant installed electronic security systems and shoplifting
detection devices shall be designed to be concealed from public view. Free
standing posts, suspended rails, or walk through portals are not permitted.
Installation of Tenant security systems must be approved by the Landlord prior
to installation.
U. ACOUSTICAL CRITERIA
(Note: Tenants are required to design Premises to MC30 criteria.)
IV. TENANT DESIGN SUBMITTAL AND REVIEW
As guidance to the Tenant and its architect, these standards constitute
minimum criteria for design delivery. With the approval of the Landlord, these
standards may be modified as appropriate for the scope of a given project. All
costs associated with the design requirements described herein will be the
Tenant's responsibility.
All prints, drawing information and other material to be furnished by
Tenant to Landlord for approval as required in this Exhibit shall be addressed
to Landlord, c/o Sony Development, 3001 San Fernando Boulevard, Burbank,
California, 91504, Attention: Project Manager.
A. SELECTION OF TENANT'S ARCHITECT
The Tenant shall engage an Architect/Engineer to prepare complete
construction drawings and technical specifications for the improvements to the
Premises in compliance with the Terms of the Lease Agreement. Tenants needing
assistance in locating an experienced, locally licensed Architect/Engineer
should contact the Landlord. The Tenant must forward a copy of this Tenant Work
Agreement along with a copy of
18
<PAGE>
the Tenant Lease Plan and associated details to its Architect/Engineer. The
Tenant shall also notify Landlord of the Architect/Engineer's name, address and
telephone number.
The Architect/Engineer shall be registered in the State of California
and all construction drawings and technical specifications shall be signed and
sealed by the A/E as required by statute.
Tenant shall be responsible for all fees and costs incurred by its
architect and other consultants.
B. DOCUMENTATION PHASES
1. Concept Development
The objective of Concept Development is to develop, research, and
evaluate alternative design ideas and arrive at a recommended concept. When
drawings are required for these phases, they shall meet the standards for
Schematic Design drawings.
2. Schematic Design
Schematic documents illustrate its approved program for the
Project. From approved Concept Development documents, the Project Team shall
prepare Schematic drawings consisting of plans, elevations, sections, and other
drawings as necessary to illustrate and fix the size and character of the entire
Project. These drawings shall delineate the kinds of materials, types of
construction, show/action systems, mechanical and electrical systems, and other
work as may be necessary. Schematic drawings shall be approved by the Landlord
before proceeding with the Design Development phase.
3. Design Development
Design Development documents finalize design details; equipment
quantities, locations and functions; material selections; as well as
implementation of strategy, schedule, and budget.
Design Development drawings may be an extension of the Schematic
drawings, the beginning of Construction Documents, or a combination of both,
depending on the level of confidence in project scope. All drawing sheets that
are intended to be developed into Construction Documents shall meet the
standards for Construction Documents. Design Development drawings shall be
submitted with a list of the proposed Construction Documents that will be
required to complete the Project (the preliminary Schedule of Drawings) for
approval by the Landlord, before proceeding with the Construction Documents.
4. Construction Documents
Construction Documents are all instruments, which when combined,
form the written scope of work for the Project.
Construction Document drawings are historical records. As such,
they must be clear, concise and legible. All Construction Document Drawings
shall conform to the standards set forth in the following sections.
C. DESIGN REVIEWS
The Landlord has established procedures to expedite the required
approvals of the Tenant's drawings. Deviation from this procedure could result
in needless delay and expensive re-drafting of the Drawings. Tenant must secure
Landlord's approval as specified herein failing which design is proceeding at
Tenant's sole risk. Within fifteen (15) business days of receipt of each Tenant
Improvement submittal, Landlord shall return to Tenant's Architect one (1) set
each of prints of Tenant Improvement Drawings with modifications and/or approval
subject to modifications and an explanation of any portions disapproved.
In the event the Tenant, following receipt of Landlord approval of any
submittal hereunder, makes substantive changes to the design materials or other
contents of the submission approved, the Tenant shall resubmit for Landlord's
approval of the changes. All costs incurred by Landlord, associated with any
additional reviews after the first approval is issued, including fully burdened
internal and consultants' costs, will be reimbursed by Tenant or subtracted by
Landlord from any amounts that may become due to Tenant. Failure to provide
adequate information will be cause for the return of the submission with no
review by Landlord. If Tenant Improvement Drawings are returned to Tenant with
modifications, but not bearing Landlord's approval, said Tenant Improvement
Drawings shall be immediately revised by Tenant and resubmitted to Landlord for
approval in accordance with original submission requirements or with requested
modifications within fifteen (15) business days of their receipt by Tenant.
Once approved, the Tenant Improvement Drawings shall deemed to be a part of the
Lease.
It is the Tenant's Architect's responsibility to incorporate all of
Landlord's comments and corrections into the final construction documents before
they are released to the Tenant's contractor for construction. The Landlord
reserves the right to upgrade the Tenant's construction specification standards,
shown on the working drawings and/or specifications, where the Tenant's
construction would adversely affect the Landlord's overall insurance rating for
the Center as determined by the Landlord's insurance underwriter.
19
<PAGE>
All Design documents prepared by Tenant's Architect shall be submitted
to the Landlord for approval in the form of three (3) copies of blueline prints,
one (1) sepia print, and one copy of electronic media files. Only after the
Tenant's Architect has received one set of final Landlord approved construction
drawings, and the Tenant's contractor has obtained a building permit, can
construction be started at the site. If, after the Tenant or Tenant's Architect
has received approved drawings from Landlord, any changes in design or materials
are necessary or desired, the drawings must be resubmitted to Landlord. Only
after Landlord has approved the changes can the Tenant's contractor proceed with
the revisions.
Landlord's approval of the Construction Documents is for compliance
with the criteria established in this Tenant Work Agreement only. By reviewing
these drawings, the Landlord and its agent(s) assume no responsibility
whatsoever, including but not limited to responsibility for code or legal
compliance, dimensional accuracy, engineering adequacy, or completeness of the
drawings for construction purposes, or any other aspect of the accuracy of the
Documents.
1. CONCEPT DEVELOPMENT REVIEW-In early Concept Development, the
Tenant's designers and planners propose a fundamental idea and general goals of
the proposal to the Landlord. In the buy-off review, the Landlord approves the
proposed concept. Upon Landlord's approval, the Project can advance to the
Schematic Design Phase.
2. SCHEMATIC DESIGN REVIEW-In early Schematic Design review(s), the
Tenant's design team presents key design concepts to the Landlord. In the
Schematic coordination review('s), other disciplines provide multi-function
schematic design input. In the Schematic buy-off review, the Landlord again
critiques the Project.
In addition, with its Schematic Design Submittal, the Tenant shall
submit a detailed Budget Estimate, developed from the Schematic Design drawings
by a professional estimator, demonstrating the total estimated value of all
Tenant Improvements and compliance by Tenant of its obligations under the Lease.
3. DESIGN DEVELOPMENT AND CONSTRUCTION DOCUMENTS REVIEW
During these project phases, formal submittals and acceptance
reviews are scheduled for the completion and approval of documents through the
following milestones:
. Design Development completion (considered 30% of
construction documents) completion of Construction Documents.
. 100% completion of Construction Documents.
All Construction Documents prepared by Tenant's Architect shall
be submitted to the Landlord in the form of three (3) copies of blueline prints
and one (1) sepia print of the completed construction documents, two (2) copies
of the Specification and supporting documents (if separate from the drawings)
along with one (1) copy of electronic media files.
D. DESIGN DELIVERABLES
The following listings for Concept Design, Schematic Design, Design
Development, and Construction Documents describe the typical Design Deliverables
for each of the Design Phases. The listings shall be used as guides to produce
a specific matrix for each Project and shall be adapted to each Project's needs
and unique requirements as applicable.
To ensure that there is no misunderstanding of the Landlord's
requirements, a detailed review of standards, design criteria, and other
pertinent information shall be held with the Tenant's consultants on each
project before the start of their participation in the design work.
All Schematic Design, Design Development, and Contract (working)
Drawings shall be prepared on standard "E size (42" long x 30" high) vellum
drawing sheets.
Concept drawings may be produced in varying sizes and formats
appropriate to their use. Regardless, and without exception, all drawings shall
contain the following information.
. Firm's Name
. Project Title
. Project Location
. North Orientation
. Drawing Title
. Drawing Number
. Project Code Number
. Scale(s)
. Date
Certain Projects may, at the option of the Landlord's Project Manager
combine the Concept Development and Schematic Design drawings into one set.
Usually such projects will be classified as minor projects (projects that can be
completed on two to five drawing sheets).
20
<PAGE>
1. Deliverables-Concept Development
Typical deliverables for Concept Development are:
Script and/or storyboards
. Plan and Elevation sketches
. Illustrations
. Show lists
. Models
2. Deliverables-Schematic Design
Typical deliverables, as applicable, for Schematic Design are:
Architecture / Interiors
------------------------
. Floor Plan(s) as required to illustrate interior themes.
Overall layout and key horizontal dimensions
- Major materials indicated
- Stairs (if applicable)
- Room names
- Room sizes with the horizontal dimension first, then
the vertical dimensions (in relation to the drawing
sheet), such as 8' - 6" x 11' - 0"
- Location of partitions, doors, service-exit doors
- Lease Line relationship to adjacent tenants
- Indicate Landlord's and/or Tenant's responsibility
- Overall dimensions of space and column locations
- Built-in cabinets and millwork
- Ceiling height for each space
- Key plan showing the location of the Leased Premises
- Restaurant plans shall show seating layout and fixtures
and Kitchen layout shall show equipment locations.
- Merchandising layout of the space indicating
merchandise allocations and fixture locations, both
permanent and moveable, and stockroom plans shall show
interior shelving layout.
- All fire department requirements to be shown on the
respective drawings
. A Finish Schedule with room names and material finishes.
. Reflected ceiling plans to show ceiling materials, type of
treatment, and change in ceiling height, sprinkler head
locations
. Elevation of Tenant's Frontage
- Colored Rendering showing signage, display cases,
closure, and identifying all materials to be used.
- Size of Tenant's Frontage opening and type of security
closure proposed
- Section through Tenant's frontage
- Sketches, perspectives, sections, or other details that
will clarify the design of the storefront and the
Design Control Area.
. Interior elevations to show basic dimensions, materials,
casework, finishes, specialty items, trims, and colors.
. Building Sections with general construction systems and
materials, key vertical dimensions
. All important details affecting the design of the Project
shall be included.
. Show compliance with Title 24, A.D.A. access requirements
Structural Engineering
----------------------
. Dimensional plans showing framing concept
. Elevations and sections
. Approximate height of miscellaneous framing members
. Wall framing types and materials
. Description of unique or special requirements
. Framing concept for support of major rockwork
. Design basis - preliminary
. Value engineering recommendations
21
<PAGE>
Mechanical Engineering
----------------------
. Existing Mechanical utility systems and POC's
. Estimated A/C loads by area
. Preliminary plan showing main duct runs in single line
format
. Equipment locations
. Estimate of demand for domestic water and fire water
. Locations of sprinkler risers
. Estimate of demand for natural gas
. Preliminary description of systems and materials
. Description of unique or special requirements
. Estimate of loads for sanitary system
. Design basis - preliminary
. Value engineering recommendations
Electrical Engineering
----------------------
. Estimated electrical load and demand factors
. Preliminary single line diagram of power distribution
. Equipment locations
. Descriptions of lighting, power, control data and
communications systems
. Emergency power requirements
. Description of unique or special requirements
. Design basis - preliminary
. Value engineering recommendations
. Life Safety System - connection to the Base Building systems
Show Set
--------
. Preliminary scenic unit layout.
. Interface between architecture and scenery including
lighting positioning.
. Locations, sizes and requirements for audio-animatronics,
animated props, show action equipment, surveillance
equipment.
. Sequential identification of audio-animatronics, animated
props, show action equipment, and scenic units and props.
. Preliminary sections and elevations with dimensions and
materials identification of scenic areas, and rockwork if
any.
. Preliminary reflected ceiling plan.
. Locations of access for operators to audio-animatronics,
animated props, lighting equipment, special effects
equipment, and show action equipment.
. Conduct preliminary prop research. Develop list, source,
and photo documentation.
Show Lighting and Themed Lighting
---------------------------------
. Preliminary types, quantities and locations of fixtures.
. Types of control and quantities of dimmers.
. Preliminary lighting electrical load (total maximum capacity
or projected connected load) for basis of HVAC design.
Kitchen Design
--------------
. Kitchen equipment Floor Plans to 95% completion. Kitchen
equipment schedule to 95% completion. Gross mechanical and
electrical loads for all kitchen equipment.
. Upon approval of the Landlord, the Project may advance to
the Design Development Phase.
Interior Design
---------------
. Preliminary list of interior and exterior furnishings.
. Preliminary list of items to be furnished by Owner, with
special emphasis on long lead-items.
. Outline specifications for interiors related materials and
finishes.
. Color palette and materials sample boards for presentation
purposes.
. List of considerations which will affect lighting.
. List of considerations which will affect graphic designs.
. In addition to the above, the Tenant's architect shall
submit seven (7) sets of catalog cuts and/or photographs
and/or samples showing the flooring materials, wall
coverings, store fixtures, lighting fixtures, and other
special treatments used in the sales area (beyond the Design
Control Area) so that all aspects of the public areas of the
store can be reviewed by Landlord.
22
<PAGE>
3. Deliverables - Design Development (30% Construction Documents)
At the completion of Design Development, all design participants
have a common understanding of Project goals. All major elements are defined and
all control dimensions are fixed.
Upon approval, Design Development Drawings shall be considered to
represent 30% completion of Construction Drawings.
Typical deliverables, as applicable, for Design Development are:
Architecture
------------
. 100 Series Drawings
. Drawing list
. Abbreviations, Symbols & Legends
. Code Analysis (Including Egress Plan)
. Location Plan
Summary Plan(s)
. 200 Series drawings
Curb & Slab Plan(s) - (if not in Structural drawings):
Structural grids
Identified curbs
Control dimensions
Slab Openings
Floor Plan(s):
Structural grids
Major materials
Control dimensions
Major built-ins
Walls & partitions
Major equipment
Doors & windows
Major references
Room names and numbers
Overhead conditions
Flooring changes (dashed)
Reflected Ceiling Plan(s):
-------------------------
Structural grids
Major Materials and Type of ceiling system
Room names
Light fixtures
Other items attached to or penetrating through the
ceiling
Supply and return grilles
Major heights and variations in level for review of
sprinkler locations
. 300 Series drawings
Tenant Frontage Elevations:
--------------------------
Structural grids
Major materials
Control dimensions
Major references
Doors, windows & louvers
Building / Partial Sections:
---------------------------
Structural grids
Room names
Structural elements
Major materials
Control dimensions
Major references
Floors, walls & ceilings
. 400 Series drawings
Partition Schedule(s):
---------------------
Major types
Finish Schedule(s):
Names & Numbers
Major references
Major materials
23
<PAGE>
Door Schedule(s):
----------------
Numbers & locations
Door materials
Frame materials
Window Schedule(s):
------------------
Numbers & locations
Sash materials
Frame materials
Door & Window Details
Major design details
--------------------
Sections required to explain all construction methods
and materials proposed
Storefront details including elevation section, signage
and all applied finishes
Vertical Circulation (if applicable)
Major sections
Major materials
Major references
Control dimensions
. 500 Series drawings Exterior Envelope, if any
Major wall sections
Major materials
Structural grids
Major references
Control dimensions
. 600 Series drawings
Fixture, Furnishings and Equipment Plan:
---------------------------------------
Locate all interior and exterior furnishing items.
Major onstage elevations
Interior Elevations:
-------------------
Locate and identify all interior materials and colors.
Structural Engineering
----------------------
. Dimensional Floor Framing Plans
. Column grid dimensions
. Elevations and sections
. Design basis - final
. Value engineering reports
Mechanical Engineering
----------------------
. Mechanical Utilities:
Preliminary mechanical utilities
Plans/profiles
. HVAC:
- Equipment schedules with weights and horsepower ratings
- Diffuser/register layouts
- Zone configurations
- Equipment layouts
- Major duct and pipe space coordination
- Show thermostat location(s)
- Preliminary energy calculations
- Updated load estimates
- Plans of all duct runs in single-line format with
dimensioned connection between Landlord's main supply
ducts, and diffuser locations
- Design basis - final
- Value engineering reports
. Plumbing:
- Equipment schedules with weights and horsepower ratings
- Fixture schedules and dimensioned location
- Major pipe space coordination
- Equipment layouts
- Location of drains
- Plan of all pipe runs in single-line format
- Preliminary load and flow calculations
- Location of grease traps, clean-outs, etc.
- Riser diagram
24
<PAGE>
. Fire Protection:
- Any modifications to the fire sprinkler system must
have Fire Marshal and Landlord's approval
- A sprinkler layout shall be submitted clearly
identifying the existing heads and additional and/or
relocated heads on the Tenant's reflected ceiling plan
Electrical Engineering
----------------------
. Single line diagram showing equipment and feeder sizes
. Location and types of lighting fixtures
. Location of power and phone outlets; also indicate the total
power required in watts
. Electrical and electronic equipment layouts with dimensioned
location of electrical panelboards, switchboards and other
equipment
. Telephone connection to the Landlord's point of connection
and telephone distribution system
. Updated load estimates and size of main switch (loading
requirements in watts)
. Size of wire and disconnect switch
. Design basis - final
. Value Engineering reports
. Life Safety Systems
Show Set
--------
. Overall plans, elevations and sections
. Final requirements for foliage and rockwork
. Final materials identification
. Integration of graphics
. Identification of Owner-furnished items
. Preliminary requirements for theatrical rigging
. Outline Specifications
. Finalize preliminary prop research, source, and photo
documentation
Show Lighting and Themed Lighting
---------------------------------
. Overall plans, elevations and sections
. Symbols legend
. Lighting fixture locations
. Preliminary monitoring information
. Preliminary character fixture list
Interior Finishes
-----------------
. Finalize three color palette boards for Project.
. Finalize outline specifications for all interior related
materials and finishes.
. Advise Graphic Design about interior design decisions which
will affect Project Graphic Design.
. Advise Show Lighting about interior design decisions which
will affect Project Show Lighting.
4. Deliverables - 100% Construction Documents
The 100% Design Review marks the point at which all Documents
(Drawings, Specifications and Calculations) are essentially completed. This
includes final redline mark-ups of Specifications. This review covers all
Construction Documents and all final Building Department and related plan check
input.
Typical deliverables, as applicable, for 100% Construction
Document Review are:
Architecture
------------
All drawings (with notes, dimensions, details and references
completed) are again reviewed by the Project Team.
Structural Engineering
----------------------
Completed drawings, details, redline mark-ups of Project
Specifications, and final calculations submitted for final review and
coordination check.
Mechanical Engineering
----------------------
Completed drawings, details, redline mark-ups of Project
Specifications, and final calculations, including Title 24 Compliance, submitted
for final review and coordination check.
25
<PAGE>
Electrical Engineering
----------------------
Completed drawings, details, redline mark-ups of Project
Specifications, and final calculations, including Title 24 Compliance, submitted
for final review and coordination check.
Show Set and Show Lighting
--------------------------
Completed drawings, details, redline mark-ups of Project
Specifications submitted for final review and coordination check.
Interiors
---------
Final completion and inclusion of all information into
Construction Documents.
Kitchen Design
--------------
Final completion and inclusion of all information into
Construction Documents.
Specifications
--------------
Final, complete, typed project Technical Specifications, ready
for printing, and a hard copy with outstanding red-line mark-ups.
5. Final Review
The final review marks the point at which all Documents
(Drawings, Specifications and Calculations) are 100% complete, and are stamped
and signed by the architect and engineers of record.
The complete 100% Construction Document package is submitted to
the Landlord for review. Upon the approval of the 100% Construction Document
package by the Landlord, the Project advances to the Bid/Construction Phase.
E. CHECKING
The Tenant shall assure that a complete check of every line, word and
dimension on the Project Drawings, has been done by its design team, and a list
of all additional drawings and details that may be necessary has been compiled.
The civil, structural, mechanical, and electrical drawings shall be
cross checked with reference to dimensions, clearances, interferences, and
conformance to architectural requirements.
These checks shall be made during each review, after the completion of
all Construction Documents, and before the Drawings are issued for Bid and
Construction - Original Release.
F. DESIGN DOCUMENT CONTROL AND MANAGEMENT TERMINOLOGY
1. Original Release
----------------
Original Release is the term used to describe the first release
of 100% Construction Document Drawings and Specifications which are released
from Tenant to its Contractor for construction. The Original Release is not used
again during the Project, except as described below under the "Bulletin"
heading.
2. Bulletin
--------
Bulletin is the term used to describe revisions to Drawings and
Specifications or new Drawings and Specifications released during the
Construction Phase, and after the Original Release. A Bulletin will involve
revisions to the work which may affect the Schedule, Budget, and/or quality of
the work, and is identified on the Drawings and Specifications as "Bulletin No.
____," commencing with No. 1. When a (new) Drawing is released for the first
time after the Original Release, the Drawing shall be identified in the "Issued
For" column in the title block as "Bulletin No. ____ (Original Release)"
3. Conforming Bulletin
-------------------
Conforming Bulletin is the term used to signify and identify
revisions to the Construction Documents which have been previously issued by the
Tenant or the Tenant's Construction Manager in the form of Contract Directives,
and with the issuance of a Conforming Bulletin are officially incorporated as
part of the Construction Documents. Work which is officially incorporated by use
of a Conforming Bulletin will involve only work which has already been defined,
processed, and all issues concerning time and money have already been settled.
The Number to be used to identify the Conforming Bulletin will be the next
sequential number from the Bulletin Log.
26
<PAGE>
4. Addendum
--------
Addendum is the term used by Landlord's Project Manager and
Construction Manager to describe Construction Documents (usually Drawings and
Specifications) which are amended during the Bidding Period, and are released to
advise the Contractors preparing bids that the Document have been changed, and
the changes indicated in the revised Documents are included in the Work.
G. RELEASE PROCEDURES
1. Original Release
----------------
The Tenant shall be responsible for releases.
On the `date' line in the title block, enter the approved issue
date on all sheets in the drawing sets. Obtain the release date from the
Landlord.
In the "Issued For" box in the title block, erase all information
pertaining to Pre-releases from all sheets. Enter the approved issue date in
the "Date" box and enter the phrase "Original Release" on the first line at the
bottom of the box. In the "Approved By" box, place the initials of the
Consultant of Record.
In the blank space immediately below the "Sheet Number" in the
title block, enter the Project Code Number on all sheets, as directed by the
Landlord.
The "Description of Revisions" box is not used for the Original
Release.
Complete the "List of Drawings & Revision Status" Index on the
ID-100 Sheet.
2. Bulletin Releases
-----------------
All releases after the Original Release during the Contract
period will be referred to as Bulletin No. ___ and will be numbered
consecutively starting with #1. This includes new Drawings which are being
released for the first time but were not included in the Original Release,
except such Drawing shall be identified in the title block as "BULLETIN NO.
______ (ORIGINAL RELEASE).
For each Bulletin, erase all old clouds from the back of the
sheet and draw new clouds around all new revisions, but leave all old delta
symbols with numbers on the front of the Drawing sheet.
Place a new 3/8" high delta symbol containing the new revision
number on the front of the sheet at each newly revised portion.
In the "Description of Revisions" box in the title block, on the
first empty line from the bottom of the box, draw a delta symbol around the next
Issue No., add the release date, and add a brief description of the revision. In
the "Approved By" box, place the initials of the Consultant of Record.
In the "Issued For" box in the title block, add the release date,
and add "Bulletin No. _____". Obtain Bulletin No. from Sony (Bulletin Log). Each
sheet will not necessarily have every Bulletin No., depending on which sheets
are issued with which Bulletin. In the "Approved By" box, place the initials of
the Consultant of Record.
In the "Sheet Number" box in the title block, erase the old
revision number from the large delta symbol and replace it with the new revision
number. Number revisions sequentially on each individual drawing sheet,
regardless of revision numbers on other sheets.
Update the ID-100 Sheet "List of Drawings & Revision Status"
Index. The ID-100 Sheet shall be revised and issued with each Bulletin. Do not
add cloud and delta revisions to the ID-100 Sheet "List of Drawings & Revision
Status." Drawing titles on the ID-100 Sheet shall be exactly as they appear in
the title Blocks on the individual Drawing Sheets.
Construction Documents which are released in Bulletins shall be
signed and sealed by the Consultant of Record, and transmitted to the regulating
authorities (Bldg Dept., etc.) simultaneously with release to the Contractor.
Along with the Drawings and Specifications, deliver a Memorandum
with a detailed description of each change which has been made on each Drawing
Sheet and on each page of the Specifications.
3. Conforming Bulletins
--------------------
Periodically during the Construction Phase and at the end of the
Contract Construction Work, effective amendments (most probably Addenda and
Technical Directives) initiated by Project Management and Construction
Management shall be officially incorporated into the Construction Documents.
When this occurs, the amendments will be recorded on the Drawings and
Specifications, and released in the same manner as other Bulletins, except the
term "Conforming Bulletin No.
27
<PAGE>
____" will be inserted into the Title Block record on the Drawings and in the
top line of the header in the Specifications. The number for the Conforming
Bulletin will be the next sequential number from the Bulletin Log. The last
Conforming Bulletin for a Project shall be identified as "Conforming Bulletin
No.____ (FINAL).
V. TENANT IMPROVEMENT CONSTRUCTION
A. TENANT'S RESPONSIBILITIES
1. Tenant is responsible for all services and items of cost
necessary for the total design and construction of the Tenant Improvements for
the Leased Premises ("Tenant's Work") except for any work or services expressly
identified in this Tenant Work Agreement Exhibit to be provided by others. The
failure of Tenant to comply with its obligations and the requirements set forth
in this Exhibit, or to commence or complete the construction of the Leased
Premises in accordance with the terms of the Lease to which this Exhibit is
attached and made a part, may result in the Landlord invoking the remedies set
forth herein to protect the Landlord's interest.
2. Tenant acknowledges that when Landlord delivers the Leased
Premises to Tenant ready for the construction of Tenant's Work, portions of the
Center will still be in various stages of construction. This will necessitate,
and Tenant agrees to, reentry by the Landlord's contractors into Tenant's
Premises to complete work and punch list work. The construction of the base
building shall be managed by Lehrer McGovern Bovis, Inc. and others as may be
designated by the Landlord from time to time ("Landlord's Construction
Manager"), and Tenant agrees to cooperate with Landlord's Construction Manager
to coordinate the simultaneous construction of Tenant's Work and the Landlord's
Work. Tenant acknowledges that the prosecution of Landlord's Work in the Center
shall take precedence over Tenant's work. Tenant shall provide Construction
Manager access to the Leased Premises as necessary for the Construction Manager
to complete any work required in connection with Construction Manager's Work.
B. SELECTION OF TENANT'S GENERAL CONTRACTOR
1. Tenant shall enter into a written contract with all contractors
performing work at the Leased Premises and shall include the terms set forth in
this Section V, as well as all other applicable sections and terms of the Lease
and this Exhibit, as binding on all contractors who Tenant engages, directly or
indirectly, to provide work or services to the Leased Premises.
2. Tenant shall submit to Landlord's Project Manager, at least sixty
(60) days prior to the commencement of construction, the following information:
a. The name and address of Tenant's Project Manager who will be
responsible for all aspects of the daily management of the Project and Project
Team.
b. The names and address of the general contractor Tenant
intends to engage ("Tenant's Contractor") in the construction of its Leased
Premises and the names of all other on-site and off-site representative and
telephone numbers.
c. The names and addresses and contacts for all other Tenant's
contractors, including mechanical, electrical and plumbing subcontractors, with
names of on-site and off-site representatives and telephone numbers.
3. Tenant's needing assistance in locating experienced local general
contractors should contact the Landlord's Project Manager. All contractors
engaged by Tenant shall be licensed, possessing good labor relations policies,
capable of performing quality workmanship and working in harmony with Landlord's
Project Manager and Construction Manager and other contractors on the job. All
of Tenant's contractors and subcontractors must comply with all Affirmative
Action provisions of the Lease.
C. PERMITS
The Tenant, or its Contractor, shall submit the permit application
form and three sets of prints and specifications (four sets for restaurants) to,
and apply for a building permit from the San Francisco City and County Public
Works Department, Department of Building Inspection. The Tenant's Contractor
shall be required to pay for all building permit fees before a building permit
can be processed.
Also, prior to the issuance of a permit, the building official will
forward the prints and specifications to all other regulating authorities as may
be required for their review and approval. Refer to the listing of San
Francisco City Departments given at the beginning of this Criteria. It is a
requirement of the City of San Francisco that all contractors obtain a city
business license before a building permit can be issued. Contractors should
contact the City of San Francisco Contractors Registration Department at (415)
558-6088 for additional information.
All building permits and one set of approved drawings must be kept at
the construction site during construction.
28
<PAGE>
D. PREREQUISITES TO TENANT'S CONSTRUCTION
Before the Tenant's Contractor can mobilize to begin actual
construction, the following prerequisites must be complete:
1. The Landlord's Project Manager for Tenant Construction has been
advised of the name of the Tenant's Contractor and has given the required
approval, and all required General Contractor's information has been provided to
the Landlord's Project Manager for Tenant Construction.
2. Final working drawings and specifications have been approved for
construction by the Landlord's Project Manager and written approval to proceed
has been received. The Tenant's Contractor shall not deviate from approved
drawings and specifications without obtaining prior permission from the Tenant,
Landlord, and the applicable building department or other governmental agency.
3. The Tenant's Contractor has obtained and reviewed with the
Landlord's Project Manager, and signed and accepted, the rules and regulations
by which the Tenant's Contractor must comply.
4. Tenant's Contractor has visited the construction site, and had a
pre-construction meeting with the Landlord's Project Manager for Tenant
Construction and agreed to coordination, access and site restrictions, including
those imposed by the San Francisco Redevelopment Agency and all other regulatory
agencies, parking, security, loading and unloading and all other Project
specific issues.
5. Tenant's Contractor shall file drawings and secure all permits
prior to any construction. Building permit(s) obtained and a copy of same
submitted to the Landlord's Project Manager for Tenant Construction. The
original(s) must be posted at the Leased Premises during construction. All work
shall comply in all respects with applicable Federal, State, County and/or City
statutes, ordinances, regulations, laws and codes. All required building and
other permits in connection with the commencement and completion of construction
of Leased Premise shall be obtained and paid for by Tenant.
6. Tenant's Contractor has verified and confirmed to the Landlord in
writing the accuracy of all on-site elevations, dimensions and conditions.
7. Tenant and its contractors have submitted a program demonstrating
ongoing compliance with the affirmative action specifications of the Lease.
8. The Tenant's Contractor has provided a Project Execution Schedule
consisting of comprehensive Network Logic Diagram covering all portions of his
Work, contractors, subcontractors and suppliers. The Network Logic Diagram will
include work activity descriptions, sequence of Work, logic relationships, time
estimates and labor manpower requirements, area completion date(s), and other
information as requested by the Landlord and/or the Construction Manager.
E. TENANT'S PROJECT MANAGEMENT
1. Preconstruction Meeting- Prior to mobilizing to the building and
beginning construction, the Tenant's Project Manager and Tenant's Contractor
shall meet with the Landlord for a preconstruction meeting to discuss all
aspects of construction, including the construction work schedule, the Tenant's
safety program, barricades, parking, access, security, loading/unloading,
reservation of freight elevators, cleanliness of construction area, and
permissible times for conduct of restricted work. The Tenant's Contractor will
present its construction schedule at this meeting and submit updated iterations
of the same on a biweekly basis thereafter.
2. The Tenant's Contractor shall employ a competent Project Manager
who shall be satisfactory to the Landlord who shall be in attendance at the
Project Site during the progress of the Work. The Tenant's Contractor's Project
Manager shall be responsible for all aspects of the Tenant's Project Work. The
Contractor agrees to promptly remove any of its employees or agents (including,
without limitation, the Project Manager) from the Project upon instruction from
the Landlord.
3. The Tenant's Contractor shall be responsible to the Landlord for
the acts and omissions of its employees while on or about the Premises. It
shall also be responsible to the Landlord for the acts and omissions of its
subcontractors and sub-subcontractors, their agents and employees, and other
persons performing any of the Work, in the same manner as if they were the acts
and omissions of persons directly employed by the Contractor.
4. There is no storage space at the Building and Tenant's Contractor
must store all materials in the Premises. The Tenant and/or its Contractor
shall cause all materials and equipment to be delivered to the Building only as
required to support the Work and installation of the same. All Tenant's
materials and equipment shall be stored in the Premises and will not be allowed
to remain in common areas or to obstruct passageways.
5. Prior to mobilization to begin its Work the Tenant and shall
inspect and promptly report to the Landlord in writing any discrepancies or
defects in the Premises as constructed by the Landlord. Beginning construction
work shall constitute acceptance by the Premises as adequate and accurate, and
fit and proper for all purposes relating to the Tenant's Work, and upon
beginning construction both the Tenant and its Contractor waive all claims based
on the Premises being incomplete, incorrect or inadequate.
29
<PAGE>
6. All of Tenant's and its Contractors' Work, and all equipment,
appliances, machinery, materials, tools and like items, incorporated or used in
the Work, shall be in compliance with, and conform to: (a) all applicable laws,
ordinances, rules, regulations and orders of any public, quasi-public or other
governmental authority relating to the safety of persons and their protection
against injury, specifically including, but in no event limited to, the Federal
Occupational Safety and Health Act of 1970, as amended, and all rules and
regulations now or hereafter in effect pursuant to said Act; the Americans with
Disabilities Act, and (c) all codes, rules, regulations and requirements of the
Landlord and its insurance carriers relating thereto. In the event of
conflicting requirements, the more stringent shall govern.
F. SAFETY
1. The Tenant's Contractor shall be responsible for initiating,
maintaining and supervising safety and anti-substance abuse precautions and
programs applicable to the Work at the Building, and shall provide all
protection to prevent injury to all persons involved in any way in the Work and
all other persons, including, without limitation, the employees, agents, guests,
visitors, invitees and licensees of the Landlord who may visit or be affected
thereby. These precautions shall include, but in no event be limited to: giving
all notices required by regulatory agencies, the posting of danger signs and
personal notification to all affected persons of the existence of a hazard of
whatever nature; the furnishing and maintaining of necessary traffic control
barricades and flagman services; the use, or storage, removal and disposal of
any hazardous materials only under the supervision of qualified personnel and
after first obtaining permission of all applicable governmental authorities; and
the maintenance of adequate quantities of both hose and operable fire
extinguishers at the Work Site. The Contractor shall set forth in writing its
safety and anti-substance abuse precautions and programs in connection with the
Work and, if requested by the Landlord, submit the same to the Landlord for
review. The Landlord may, but shall not be obligated to, make suggestions and
recommendations to the Contractor with respect thereto.
2. The Contractor shall use masonite or plywood to protect the tile
flooring in the common area from damage. Masonite and/or plywood will be laid
down and taped/affixed securely so as to prevent a tripping hazard. The
Tenant's Contractor shall take all reasonable precautions for the safety of, and
shall provide all reasonable protection to prevent damage, injury or loss to:
a. all employees on the work and all other persons who may be
affected thereby;
b. all the work and all material and equipment to be
incorporated therein, whether in storage on or off the site, under the control
of the Contractor or any of his subcontractors or sub-subcontractors; and
c. other property at the site or adjacent thereto, including
trees, shrubs, lawns, walk pavements, roadways, structures and utilities not
designated for removal. The Tenant's Contractor shall be responsible for the
safe relocation or replacement of any materials if required in the course of
construction.
3. The Contractor shall designate a responsible member of its
organization at the Job Site as the Project Safety Officer, whose duties it
shall be to enforce the Contractor's safety and anti-substance abuse programs,
to conduct routine safety meetings and inspections and report accidents. This
person shall be the Contractor's Project Manager unless otherwise designated in
writing by the Contractor and approved by the Landlord. The Contractor shall
further cause each of its subcontractors and sub-subcontractors to designate a
responsible supervisory representative to assist the Contractor's Project Safety
Officer representative in the performance of his or her duties as aforesaid.
4. Should the Tenant and its Contractor fail to provide a safe area
for the construction of the Tenant's Work, the Landlord shall have the right,
but not the obligation, to suspend Work in the unsafe area. All costs of any
nature (including, without limitation, overtime pay) resulting from the
suspension, by whomsoever incurred, shall be borne by the Tenant.
5. The Tenant's Contractor shall provide to each worker on the Job
Site the proper safety equipment for the duties being performed by that worker
and will not permit any worker on the Job Site who fails or refuses to use the
same. Standard safety equipment will include, but is not limited to, safety
boots, hard hats, and long pants. The Landlord shall have the right, but not
the obligation, to order the Tenant's Contractor to send a worker home for the
day or to discharge a worker for his or her failure to comply with safe
practices or anti-substance abuse policies, with which order the Contractor
shall promptly comply.
6. The Tenant and its Contractor shall indemnify the Landlord, from
and against any and all liability, public or private, penalties, contractual or
otherwise, losses, damages, costs, attorneys' fees, expenses, causes of action,
claims or judgments resulting either in whole or in part from any failure of the
Tenant's Contractor, its subcontractors or sub-subcontractors or anyone directly
or indirectly employed by any of them or for whose acts any of them may be
liable, to comply with the terms of this Exhibit or applicable regulations.
Neither the Tenant not its Contractor shall be relieved of its responsibilities
hereunder should the Landlord act or fail to act pursuant to its rights
hereunder, nor shall the Landlord thereby assume, nor be deemed to have assumed,
any responsibilities otherwise imposed upon the Tenant to its Contractor by
Exhibit by virtue of the Landlord's construction and/or safety activities in the
Building.
7. The Landlord reserves the right, but assumes no duty, to establish
and enforce standards, and to change the same from time to time, for the
protection of persons and property, with which the Tenant's Contractor shall
comply, and to review the efficiency of all protective measures taken by the
30
<PAGE>
Contractor. The exercise of or failure to exercise any or all of these acts by
the Landlord shall not relieve the Tenant's Contractor of its duties and
responsibilities pursuant to this Exhibit as well as applicable laws and
regulations, and the Landlord shall not thereby assume, nor be deemed to have
assumed, any such duties or responsibilities of the Tenant or the Tenant's
Contractor.
G. COORDINATION AND COOPERATION
All Tenant's contractors shall maintain good labor relations, be
capable of performing quality workmanship and work in harmony with the
Landlord's contractors, other contractors on the job, and any other labor entity
at or servicing the project.
The Tenant's contractor shall cooperate with the Landlord's Project
Manger and all other contractors by coordinating the work, in order not to delay
other work in progress, interfere with the operations of existing stores, or
impede or endanger the safety of the contractors and the public. The Tenant's
Contractor shall provide competent full-time supervision, and observe suitable
safety practices.
In the event the Tenant's Contractor or any of its employees willfully
violates requirements of this Tenant Work Agreement, the Landlord may order the
Tenant's contractor(s) removed from the Building and replaced with a contractor
acceptable to the Landlord.
H. PROTECTION OF WORK AND PROPERTY; RESPONSIBILITY FOR LOSS
1. The Tenant and its Contractor shall, throughout the performance
of its Work, maintain adequate and continuous protection of all its materials
and equipment and temporary facilities against loss or damage from whatever
cause, shall protect the property of the Landlord and third parties from loss or
damage from whatever cause arising out of the performance of the Tenant's Work
and shall comply with the requirements of the Landlord and its insurance
carriers and with all applicable laws, codes, rules and regulations with respect
to the prevention of loss or damage to property as a result of fire or other
hazards. The Landlord may, but shall not be required to, make periodic patrols
of the Building as a part of its normal security program. In such event,
however, the Tenant shall not be relieved of its aforesaid responsibilities.
2. The Tenant shall have full and complete charge and care of and
shall bear all risk of loss of, except as compensated by Landlord's insurance
coverages specified in the Lease, and injury or damage to, its Work, equipment,
materials and property of any kind whatsoever located in or around the Building
(specifically including Landlord-furnished supplies, equipment or other items to
be utilized in connection with, or incorporated in, the Work) from any cause
whatsoever. The Tenant shall rebuild, repair, restore and make good all losses
of, and injuries or damages to, the Work or any portion thereof (specifically
including Landlord-furnished supplies, equipment or other items to be utilized
in connection with, or incorporated in, the Work) before final acceptance of the
Work. Such rebuilding, repair or restoration shall be at the Tenant's sole cost
and expense unless the loss, injury or damage requiring such rebuilding, repair
or restoration: (a) is caused solely by the Landlord unless (i) such loss or
damage would be covered by any policy or policies of insurance which the
Contractor is required to maintain hereunder, whether the Contractor actually
maintains such insurance or not, or (ii) is otherwise covered by a policy or
policies of insurance maintained by the Contractor, whether or not required
hereunder); or (b) is caused by a hazard against which the Landlord is required
to insure under the provisions of the Lease hereof; provided, however, that if
the loss, injury or damage would not have occurred but for the negligent act or
omission of the Tenant, its Contractor, any of its subcontractors or sub-
subcontractors, or anyone directly or indirectly employed by any of them or for
whose acts any of them may be liable, the rebuilding, repair or restoration
shall be at the Tenant's cost and expense to the extent of the deductible on
said insurance.
I. TEMPORARY FACILITIES/CLEANUP
1. Tenant shall provide and pay for all temporary facilities, and
the removal of debris, as necessary and required in connection with the
construction of the Leased Premises. Storage of Tenant's Contractor's
construction material, tools, equipment and debris shall be confined to the
Leased Premises. Tenant's Contractor may be directed to place debris in
specific locations for removal from the site by Landlord and in such case, where
Tenant's Contractor complies, only the cost of removal of debris from the site
will be charged to Tenant, who will be responsible for the recovery of such
costs from its Contractor. In no event shall any material be stored in service
corridors nor shall any debris be deposited in service corridors or other areas.
2. The Tenant's Contractor shall at all times keep the Premises
clean and free from accumulation of waste materials or rubbish (including,
without limitation, hazardous waste), caused by his performance of the Work, and
shall continuously throughout performance of the Work remove and dispose of all
such materials from the Work Site and the Building. The Tenant's Contractor
shall provide one 55 gallon drum modified for use as a trash receptacle for each
500 feet of area of construction in progress and shall empty the receptacles
regularly as they become full. The Tenant's Contractor will mop clean the
construction area, and clean to remove dust, a minimum of three times daily. In
addition, the Landlord may require the Tenant's Contractor to comply with such
standards, means and methods of cleanup, removal or disposal as the Landlord may
make known to the Contractor.
3. In the event the Contractor fails to keep the Premises clean and
free from such waste or rubbish, or to comply with such standards, means and
methods, the Landlord may take any such action it deems necessary to accomplish
and maintain the cleanup required and charge any and all costs or expenses of
whatever nature paid or incurred by the Landlord in undertaking such action
directly to the Tenant. The
31
<PAGE>
Tenant's Contractor shall notify the Landlord in advance of the generation,
importation, storage, transportation or disposal, of any hazardous waste, toxic
materials or contaminants of any type in connection with the Project.
J. BARRICADES/SITE PROTECTION
Minimum specifications for construction barricades are as follows:
1. The barricade shall be constructed of 5/8" plywood a minimum of
8'0" in height. The barricade shall include a 6" x 1" header board at the top
and a construction door with a proper closure to be maintained in operable
condition. Said barricade is to be installed in a manner to cause no damage to
the tile or any other area where it is anchored.
2. The Tenant is to provide Landlord with a camera ready logo, and
applicable camera ready tag lines for Landlord to develop graphics on the
barricade. Any additional photographs, designs or graphics proposed by Tenant
will be considered for inclusion on the barricade by Landlord. The location of
the barricade must be reviewed by Landlord management prior to installation. A
minimum of 48" must be maintained from the outside of the barricade to the
structure on the opposite side. Barricades must be painted in Sinclair Sand,
the City of San Francisco barricade standard. Barricades and entrance area to
be maintained with touch-up paint throughout the construction period.
3. All exposed public area between the inside of the barricade and
the existing facility shall be properly protected and maintained at all times.
The Tenant's Contractor will be responsible for replacing any surfaces damaged
due to the construction of the barricade on the Premises. Tenant's Contractor is
to provide a padlock on the barricade and a copy of the padlock key to
Landlord's Project Manager.
4. Before beginning construction, Tenant's Contractor shall provide
walk-off mats of masonite or plywood at the entrance to construction areas from
freight elevator stairwells and escalators. . The contractor shall use masonite
or plywood to protect the tile flooring in the common area from damage. Masonite
and/or plywood will be laid down and taped/affixed securely so as to prevent a
tripping hazard.
5. Protection to all walls and flooring in the elevators, stairwells
or applicable premises shall be provided by the Contractor. If Tenant's
Contractor damages the floors, floor tiles, carpets, walls, ceilings, passenger
elevators or any other portion of the Center, Landlord shall repair same at
Tenant's sole cost and expense
6. Escalators are not permitted for use of transporting construction
materials.
7. Flat bed carts with pneumatic wheels are permissible to transport
materials, with Landlord's approval.
8. No parking areas are available for Tenant's contractor(s) at the
Building. Tenant's Contractor must arrange for remote parking and transport its
employees to the Work area. There is never any parking provided in the Loading
Dock area. This area is used only for deliveries. NO EXCEPTIONS.
9. All permanent keying is to be provided by the Tenant. During
construction, until Tenant occupies the Premises for operation, the Tenant's
Contractor will provide locks on entry to Premises and will provide Landlord's
Project Manager a copy for security purposes.
10. Access to the Loading Dock for large shipments of materials shall
be made available by reservation only through the Building Office upon not less
than two (2) days advance notice.
11. Freight elevator service is available and required for
transporting building materials and tools to or from the Work area. Freight
elevators are available during off-peak hours and must be scheduled in advance
and coordinated with the Landlord's Construction Manager. Elevators are
available on a first come, first serve basis.
12. Freight elevator cannot be monopolized during business hours.
The freight elevator may not be held or stopped during normal hours.
13. Shipment deliveries over 20 minutes must be done after 6:00 PM or
on weekends.
14. The Contractor shall not pour any foreign matter down the
plumbing fixtures.
15. Any dust created by the construction work must be contained
within the space in which the work is performed.
16. Tenant's Contractor shall have portable fire extinguishers, as
required, at all times within the Premises during construction.
17. Any of Tenant's Work which affects the structure or structural
system of the Leased Premises shall be subject to prior written approval of
Landlord.
18. Landlord reserves the right to exclude from the Center all such
objects which violate any of these provisions or any provisions of the Lease or
of applicable laws or regulations.
32
<PAGE>
19. Tenant shall not move or install such objects in or about the
Center in such a fashion as to unreasonably obstruct the activities of other
tenants, and all such moving shall be at the sole expense, risk and
responsibility of Tenant. Tenant shall not use in the delivery, receipt or
other movement of freight, supplies, furniture, fixtures and other personal
property to, from or within the Center, or in any space or other public halls of
the Center, any hand trucks other than those equipped with rubber tires and side
guards or such other material-handling equipment as Landlord may approve.
K. ACCESS TO ROOF
Access to the roof is restricted to Landlord's personnel and
Landlord's designated contractors only. No contractor or subcontractor will be
permitted on the roof unless written permission has been obtained from the
Landlord's Project Manager for Tenant Construction
L. ELEVATORS/ESCALATORS
All material delivery/debris removal will be made as expeditiously as
possible through the Loading Dock and freight elevator only. Use of the freight
elevator must be scheduled ahead of time for after hours use.
M. FIRE PREVENTION
Tenant's Contractor shall not prop open or detach door closer on
required Exit (Fire) Doors.
All work requiring an open flame must have a permit from the Fire
Department and comply with all Fire Department regulations. This includes
plumbing, cutting, welding, etc. Also, notify Landlord's Project Manager before
use EACH DAY in order to bypass smoke alarms.
The Contractor is to provide approved flammable liquid storage
cabinets for all flammables on site or remove them each day from the Premises.
The Contractor will post a firewatch for any open flame burning and
welding.
N. UTILITIES
During construction, the Landlord will make available to the Tenant's
contractors temporary utilities consisting of electrical power through the
Tenant's permanent primary electrical service, designated toilet facilities, and
water, at a net cost of $1000.00 per month (or fraction thereof) or $.10 per
square foot per month (or fraction thereof)(whichever is greater) from the time
the Tenant's contractor starts construction until the Tenant opens for business.
Tenant's electrical contractor shall be required to provide ground fault
protections for all power equipment used in the Premises.
1. All heating, ventilation and air conditioning controls to be
Building Standard.
2. All electrical panel labeling to be performed in accordance with
the N.E.C. and Building Specifications.
3. All light fixtures shall conform with the Building Standards.
4. Upon completion of construction, completely rebalance heating,
ventilation and air conditioning systems. Balancing shall be done by a Landlord
approved Balancing Contractor, costs to be borne by Tenant.
5. Doors to equipment and electrical rooms shall NOT be left open
when Contractor is not present.
6. Cabling: This term when used in this guide will encompass all low
voltage wiring 24-volt and below, telephone wiring, all Data wiring and cables,
temperature sensing wiring, coaxial cable, thermostat wiring, any sensor wiring;
e.g. water detection tape, antennae wire, sound and intercom systems, and all
Local Area Network (LAN) wiring.
a. All outlets for any items that must be installed in a new or
existing walls shall be provided with a code conforming outlet box (not
plastic), a conduit run above the finished ceiling line and a finished cover or
trim plate. Conduit shall be minimum of one-half inch inside trade size.
b. Wiring that has emerged from the wall outlet shall be neatly
bundled or wrapped, but shall not be fastened to building surfaces in any way
unless approved by the building management. Wiring may not be run in the open on
a finished ceiling or wall surface or an occupied arm unless installed in a
communication room, phone closet or electrical closet.
c. Wiring type: All cable of any type referred to in this
criteria must be run in conduit above the ceiling or under the floors of any
given area.
33
<PAGE>
d. All Work must be performed in a neat and workmanship like
manner. If any questions arise as to existing conditions, or means and methods
not covered in this criteria, tenants must contact the Landlord.
e. All line voltage and low voltage cable runs in the ceiling
must be independently supported, according to the SF Building Code. The standard
method of support for the Building is by wire rack or trapeze.
O. DAMAGE TO WORK/DISPUTES
1. Should the Tenant's Contractor cause damage to the work or
property of the Landlord or of any other contractor on the Project (a "Separate
Contractor"), or to other work on the Job Site, or delay or interfere with the
Landlord's or any Separate Contractor's work, the Contractor shall be liable for
the same; and, in the case of any Separate Contractor, the Contractor shall
attempt to settle said claim with such Separate Contractor prior to the Separate
Contractor's institution of litigation or other proceedings against the
Contractor. If so requested by the parties to the dispute, the Landlord may,
but shall not be obligated to, arbitrate the dispute, in which event the
decision of the Landlord shall be final and binding on the parties to the
dispute. If any Separate Contractor providing work for the Building sues the
Landlord or the Landlord's Representative on account of any damage, delay or
interference caused or alleged to have been so caused by the Contractor, the
Landlord shall notify the Tenant who shall indemnify the Landlord regarding such
proceedings at the Tenant's expense.
2. Should any Separate Contractor cause damage to the Work or to the
property of the Contractor or cause delay or interference with the Contractor's
performance of the Work, the Contractor shall present to such Separate
Contractor any claims it may have as a result of such damage, delay or
interference (with an information copy to the Landlord) and shall attempt to
settle its claim against such Separate Contractor prior to the institution of
litigation or other proceedings against such Separate Contractor. If so
requested by the parties to the dispute, the Landlord may, but shall not be
obligated to, arbitrate the dispute, in which event the decision of the Landlord
shall be final and binding on the parties to the dispute.
3. In no event shall the Contractor seek to recover from the
Landlord or the Landlord's Representative, and the Tenant agrees to indemnify
the Landlord against any costs, expenses or losses incurred by the Landlord as a
result of any damage to the Work or property of the Contractor, or any claim
submitted by the Tenant's Contractor based upon delay or interference, caused or
allegedly caused by any Separate Contractor.
4. If a dispute arises between the Contractor and any Separate
Contractor as to the responsibility for cleaning as required hereunder, the
Landlord may clean and charge the cost thereof to the responsible contractor, or
apportion it among the several responsible contractors, as the Landlord shall
determine to be just.
P. LIENS
In making progress and final payments to contractors, the Tenant
should obtain valid waivers of lien, indicating payment in full for labor,
materials, and subcontractors. The Landlord may request to see evidence of such
waivers before permitting the Tenant to open the premises for business.
Q. WALK-THROUGH
At the completion of construction, tenant, its architect, contractor
and Landlord shall conduct a final walk-through of the premises detailing all
punchlist items to be completed by tenant's contractor at the contractor's
expense.
R. INSPECTION AND ACCEPTANCE
It is the Tenant's contractors' responsibility to schedule inspections
as necessary and to comply with their requirements, and all codes and
regulations. A copy of all inspection reports must be submitted to the
Landlord's Project Manager for Tenant Construction. Tenant's Contractor's work
shall be subject to the inspection of Construction Manager, Landlord and their
supervisory personnel. Any defects and/or deviations from the approved plans
shall be rectified by Tenant's Contractors at Tenant's sole cost and expense.
S. LANDLORD'S PRIOR RIGHTS
The Landlord retains prior rights to the space 1'-0" below the lowest
structural beam within the Tenant's premises to accommodate the center's
structural, mechanical, and electrical requirements, such as piping, ducts,
conduit, etc., in accordance with the Lease.
T. CERTIFICATE OF OCCUPANCY
Provided Landlord has complied with the provisions of Section 5.1 of
this Lease, the Tenant shall obtain a certificate of occupancy from the City of
San Francisco and submit a copy of this certificate to the Landlord's Project
Manager for Tenant Construction before opening the premises to the public. One
set of "as built" drawings and CAD files must be provided to the Landlord by the
Tenant.
34
<PAGE>
U. VIOLATIONS
In the event the Tenant is notified of any violations of codes,
ordinances, regulations, or of obligations hereunder, either by the
jurisdictional authorities or by the Landlord, the Tenant shall correct such
violations within seven calendar days from such date of notification. Should
the Tenant fail to correct such violations within seven calendar days, the
Landlord will correct such violations at the Landlord's actual cost plus fifteen
percent for administration cost, and invoice the Tenant accordingly.
V. WARRANTIES
Tenant shall cause its Contractor to provide warranties for not less
than one (1) year against defects in workmanship, materials and equipment.
W. BOND
Any contractor engaged by a Tenant having a contract of $50,000 or
more, shall furnish a performance and payment bond naming both the Tenant and
The Center; Sony Development and their subsidiaries; as their interest may
appear. Evidence of the bond must be filed with the Landlord's Project Manager
for Tenant Construction before construction may begin.
X. LANDLORD'S RIGHT TO PERFORM WORK
Landlord shall have the right to perform, on behalf of and for the
account of Tenant, which shall be subject to reimbursement of the cost thereof
by Tenant, any and all of Tenant's work which affects the structure of the
Leased Premises. In addition, Landlord shall have the right to perform any work
which Landlord determines in its sole discretion should be performed immediately
and on an emergency basis for the best interest of the project, including
without limitation work which pertains to structural components of the Center's
mechanical, sprinkler and general utility systems, roofing and removal of unduly
accumulated construction material and debris. In the event Tenant shall default
under any obligation under this Exhibit, in addition to the remedies contained
in the Lease Agreement, Landlord shall have the right to perform any and all of
Tenant's work hereunder. The cost of any such work carried out by Landlord on
behalf of Tenant shall be paid by Tenant to include any loading for overtime or
any other loading as a result of carrying out emergency work.
Y. LANDLORD'S SCOPE OF WORK
Without limiting the other provisions of this Lease, Landlord shall
perform or cause to be performed the work described in Revision 8 Scope of Work
Matrix dated 1/28/97, attached hereto and made a part hereof.
35
<PAGE>
EXECUTION
EXHIBIT 10.9
================================================================================
CREDIT AGREEMENT
Dated as of May 14, 1998
among
LOEWS CINEPLEX ENTERTAINMENT CORPORATION,
as Borrower,
THE LENDERS LISTED HEREIN,
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,
================================================================================
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
CREDIT AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS......................................................... 3
1.1 CERTAIN DEFINED TERMS............................................... 3
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement........................................ 35
1.3 Other Definitional Provisions....................................... 35
SECTION 2 AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.......................... 35
2.1 Commitments; Making of Loans; the Register; Notes................... 35
2.2 Interest on the Loans............................................... 43
2.3 Fees................................................................ 47
2.4 Prepayments and Reductions in Commitments of Revolving Loans;
General Provisions Regarding Payments; Termination of Commitments... 48
2.5 Use of Proceeds..................................................... 55
2.6 Special Provisions Governing Eurodollar Rate Loans.................. 56
2.7 Increased Costs; Taxes; Capital Adequacy............................ 58
2.8 Obligation of Lenders and Issuing Lenders to Mitigate............... 62
2.9 GUARANTOR DESIGNATED SENIOR INDEBTEDNESS............................ 63
SECTION 3 LETTERS OF CREDIT................................................... 63
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein.............................................. 63
3.2 Letter of Credit Fees............................................... 67
3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of
Credit.............................................................. 67
3.4 Obligations Absolute................................................ 70
3.5 Indemnification; Nature of Issuing Lenders' Duties.................. 71
3.6 Increased Costs and Taxes Relating to Letters of Credit............. 72
3.7 Existing Letters of Credit.......................................... 73
SECTION 4 CONDITIONS TO LOANS AND LETTERS OF CREDIT........................... 74
4.1 Conditions to Initial Revolving Loans............................... 74
4.2 Conditions to All Loans............................................. 81
4.3 Conditions to Letters of Credit..................................... 83
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 5 COMPANY'S REPRESENTATIONS AND WARRANTIES............................ 83
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries........................................................ 83
5.2 Authorization of Borrowing, etc..................................... 84
5.3 Financial Condition................................................. 86
5.4 No Material Adverse Change; No Restricted Junior Payments........... 86
5.5 Title to Properties; Liens.......................................... 87
5.6 Litigation; Adverse Facts........................................... 87
5.7 Payment of Taxes.................................................... 87
5.8 Performance of Agreements; Materially Adverse Agreements;
Material Contracts.................................................. 87
5.9 Governmental Regulation............................................. 88
5.10 Securities Activities............................................... 88
5.11 Employee Benefit Plans.............................................. 88
5.12 Certain Fees........................................................ 89
5.13 Environmental Protection............................................ 89
5.14 Employee Matters.................................................... 91
5.15 Solvency............................................................ 91
5.16 Disclosure.......................................................... 91
5.17 Related Agreements.................................................. 91
5.18 Insurance........................................................... 92
5.19 Intellectual Property............................................... 92
5.20 Loans and Guaranty Permitted under Subordinated Debt Documents...... 92
SECTION 6 COMPANY'S AFFIRMATIVE COVENANTS..................................... 93
6.1 Financial Statements and Other Reports.............................. 93
6.2 Corporate Existence, etc............................................ 98
6.3 Payment of Taxes and Claims; Tax Consolidation...................... 99
6.4 Maintenance of Properties; Insurance................................ 99
6.5 Inspection; Lender Meeting.......................................... 100
6.6 Compliance with Laws, etc........................................... 100
6.7 Environmental Disclosure and Inspection............................. 100
6.8 Company's Remedial Action Regarding Hazardous Materials............. 102
6.9 Execution of Guaranty and Collateral Documents by Future
Subsidiaries........................................................ 102
SECTION 7 COMPANY'S NEGATIVE COVENANTS........................................ 103
7.1 Indebtedness........................................................ 103
7.2 Liens and Related Matters........................................... 105
7.3 Investments; Joint Ventures......................................... 107
7.4 Contingent Obligations.............................................. 109
7.5 Restricted Junior Payments; Certain Other Payments.................. 110
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7.6 Financial Covenants................................................. 111
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.... 113
7.8 Fiscal Year......................................................... 114
7.9 Sale or Discount of Receivables..................................... 114
7.10 Transactions with Shareholders and Affiliates....................... 114
7.11 Disposal of Subsidiary Stock........................................ 115
7.12 Conduct of Business................................................. 115
7.13 Amendments of Related Agreement; Documents Relating to
Subordinated Indebtedness; Amendments of Material Documents......... 115
SECTION 8 EVENTS OF DEFAULT................................................... 116
8.1 Failure to Make Payments When Due................................... 116
8.2 Default in Other Agreements......................................... 116
8.3 Breach of Certain Covenants......................................... 117
8.4 Breach of Warranty.................................................. 117
8.5 Other Defaults Under Loan Documents................................. 117
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc................ 117
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.................. 118
8.8 Judgments and Attachments........................................... 118
8.9 Dissolution......................................................... 118
8.10 Employee Benefit Plans.............................................. 118
8.11 Change in Control................................................... 119
8.12 Invalidity of Guaranty.............................................. 119
8.13 Failure of Security................................................. 119
SECTION 9 AGENT............................................................... 120
9.1 Appointment......................................................... 120
9.2 Powers and Duties; General Immunity................................. 120
9.3 Representations and Warranties; No Responsibility For Appraisal
of Creditworthiness................................................. 122
9.4 Right to Indemnity.................................................. 122
9.5 Successor Agent..................................................... 122
9.6 Collateral Documents and Guaranty................................... 123
SECTION 10 MISCELLANEOUS....................................................... 123
10.1 Assignments and Participations in Loans and Letters of Credit....... 123
10.2 Expenses............................................................ 126
10.3 Indemnity........................................................... 127
10.4 Set-Off; Security Interest in Deposit Accounts...................... 128
10.5 Ratable Sharing..................................................... 129
10.6 Amendments and Waivers.............................................. 130
10.7 Independence of Covenants........................................... 131
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.8 Notices............................................................. 131
10.9 Survival of Representations, Warranties and Agreements.............. 132
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative............... 132
10.11 Marshalling; Payments Set Aside..................................... 132
10.12 Severability........................................................ 132
10.13 Obligations Several; Independent Nature of Lenders' Rights.......... 133
10.14 Headings............................................................ 133
10.15 Applicable Law...................................................... 133
10.16 Successors and Assigns.............................................. 133
10.17 Consent to Jurisdiction and Service of Process...................... 133
10.18 Waiver of Jury Trial................................................ 134
10.19 Confidentiality..................................................... 134
10.20 Counterparts; Effectiveness......................................... 135
Signature pages S-1
</TABLE>
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV-A FORM OF TRANCHE A REVOLVING NOTE
IV-B FORM OF TRANCHE B REVOLVING NOTE
V FORM OF COMPLIANCE CERTIFICATE
VI FORM OF FINANCIAL CONDITION CERTIFICATE
VII FORM OF INTERCOMPANY NOTE
VIII-A FORM OF OPINION OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
VIII-B FORM OF OPINION OF GOODMAN & CARR
IX FORM OF OPINION OF O'MELVENY & MYERS LLP
X FORM OF ASSIGNMENT AGREEMENT
XI FORM OF AUDITOR'S LETTER
XII FORM OF CERTIFICATE RE NON-BANK STATUS
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIV FORM OF TRANCHE B CONTINUATION NOTICE
XV FORM OF COMPANY SECURITY AGREEMENT
XVI FORM OF COMPANY PLEDGE AGREEMENT
XVII FORM OF COMPANY TRADEMARK SECURITY AGREEMENT
XVIII FORM OF SUBSIDIARY GUARANTY
XIX FORM OF SUBSIDIARY SECURITY AGREEMENT
XX FORM OF SUBSIDIARY PLEDGE AGREEMENT
XXI FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT
XXII INTENTIONALLY OMITTED
XXIII FORM OF NEW COMMITMENT ACCEPTANCE
XXIV FORM OF INCREASED COMMITMENT ACCEPTANCE
(v)
<PAGE>
SCHEDULES
1.1L EXISTING LETTERS OF CREDIT
1.1W CERTAIN OPERATING LEASES
1.1WH CERTAIN INDEBTEDNESS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1A(i) CERTAIN GOOD STANDING CERTIFICATE
4.1B CAPITAL AND OWNERSHIP STRUCTURE
5.1A CERTAIN LOAN PARTIES
5.1D SUBSIDIARIES OF COMPANY
5.6 LITIGATION
5.12 CERTAIN FEES
5.13 ENVIRONMENTAL MATTERS
7.1(vi) CERTAIN EXISTING INDEBTEDNESS
7.2(v) CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4(vi) CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.4(xi) CERTAIN EXISTING LETTERS OF CREDIT
7.10 CERTAIN AFFILIATE TRANSACTIONS
(vi)
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of May 14, 1998 and entered into by and
among LOEWS CINEPLEX ENTERTAINMENT CORPORATION, a Delaware corporation
("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "LENDER" and collectively as
"LENDERS"), BANKERS TRUST COMPANY ("BTCO"), as administrative agent for Lenders
(in such capacity, "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.
R E C I T A L S
---------------
WHEREAS, Company is an indirect wholly-owned Subsidiary (this and other
capitalized terms used in these recitals without definition being used as
defined in subsection 1.1) of Sony Pictures Entertainment Inc., a Delaware
corporation ("SPE");
WHEREAS, on or before the Closing Date SPE shall sell, assign and transfer
to a Subsidiary of Company all of the right, title and interest of SPE and its
Affiliates in the IMAX Agreements in exchange for a cash payment equal to the
IMAX Purchase Price (the "IMAX TRANSACTION");
WHEREAS, Company will (a) lend to various Subsidiaries of Company an amount
sufficient to, and cause such Subsidiaries to, repay the Sony Land Indebtedness,
(b) repay the Sony Capital Indebtedness and (c) refinance Indebtedness of
Cineplex Odeon under the Existing Cineplex Credit Agreement (the "EXISTING
CINEPLEX BANK REFINANCING");
WHEREAS, (i) Plitt and Cineplex Odeon are currently obligated with respect
to $200 million in aggregate outstanding principal amount of the Plitt Notes,
(ii) after giving effect to the Business Combination Transactions, (a) Plitt
shall remain obligated with respect thereto, (b) Cineplex Odeon shall be
released from its guaranty with respect thereto and (c) Company shall guarantee
Plitt's obligations with respect to the Plitt Notes on a senior subordinated
basis and (iii) Plitt shall be obligated to offer to repurchase the Plitt Notes
pursuant to the Plitt Change of Control Offer ("PLITT NOTE REPURCHASE
TRANSACTIONS");
WHEREAS, Company will pay to its shareholders of record as of the day
prior to the Closing Date the SPE Dividend;
1
<PAGE>
WHEREAS, Universal shall subscribe for 4,426,606 shares of Company's
Common Stock in consideration of the payment of not less than $84,500,000
pursuant to the Universal Subscription Agreement (the "UNIVERSAL INVESTMENT");
WHEREAS, Company and Cineplex Odeon will effect a business combination
pursuant to a plan of arrangement of Cineplex Odeon under Section 182 of the
Business Corporations Act (Ontario) in which: (i) Cineplex Odeon shall exchange
all of the issued and outstanding capital stock of Plitt with Company for
8,242,385 shares of Company Common Stock (the "EXCHANGE SHARES"), (b) Cineplex
Odeon shall distribute the Exchange Shares to its shareholders in consideration
of the purchase from them, and cancellation, of approximately 46.60% of their
shares of Cineplex Odeon Common Stock at the rate of one Exchange Share for each
ten shares of Cineplex Odeon Common Stock and (c) Company shall acquire from
Cineplex Odeon's shareholders the remaining outstanding shares of Cineplex Odeon
Common Stock (other than certain shares of Cineplex Odeon Common Stock with
respect to which the holders have exercised certain dissent rights) in exchange
for 9,437,548 shares of Company Common Stock (the "COMBINATION SHARES") at the
rate of one Combination Share for each ten shares of Cineplex Odeon Common
Stock, except that 800,000 shares of Cineplex Odeon Common Stock held by
Universal will be exchanged with Company for 80,000 shares of Company Class B
Non-Voting Common Stock and 40,000 shares of Cineplex Odeon Common Stock held by
the Bronfman Trust will be exchanged with Company for 4,000 shares of Company
Class B Non-Voting Common Stock, in each case pursuant to the Plan of
Arrangement (collectively, the "ARRANGEMENT");
WHEREAS, SPE shall (a) cause CPE Holdings, Inc. to exchange all of the
shares of stock of S&J Theatres, Inc., a wholly-owned Subsidiary of SPE
("S&J") to Loews USA Cinemas, Inc., a wholly owned Subsidiary of Company, and
(b) cause Star Theatres, Inc., a wholly-owned Subsidiary of SPE ("STAR"), to
merge with and into Loews Theatres Enterprises, Inc., a wholly owned Subsidiary
of Company, with Loews Theatres Enterprises, Inc. surviving such merger, in each
case in exchange for shares of Company Common Stock (collectively, the
"SUBSIDIARY TRANSACTIONS");
WHEREAS, Lenders have agreed to extend certain credit facilities to
Company, the proceeds of which will be used (i) to finance (a) the Existing
Cineplex Bank Refinancing, (b) the Sony Debt Repayment, (c) the Plitt Note
Repurchase Transactions, (d) the IMAX Transaction and (e) the SPE Dividend, (ii)
to pay Transaction Costs, (iii) to finance Permitted Investments and (iv) to
provide for working capital and/or other general purposes of Company and its
Subsidiaries;
WHEREAS, Company chooses to secure all of the Obligations hereunder and the
other Loan Documents by granting to Administrative Agent, on behalf of Lenders,
a first priority Lien on substantially all of its personal property, including
without limitation, a pledge of all of the equity interests in each of its
Domestic Subsidiaries and 65% of the equity interests in each of its Foreign
Subsidiaries; and
2
<PAGE>
WHEREAS, all of the Domestic Subsidiaries of Company have agreed to
guaranty the Obligations hereunder and under the other Loan Documents and each
Domestic Subsidiary has agreed to secure its guaranty by granting to
Administrative Agent a first priority Lien on substantially all of its
respective personal property including a pledge of all of the equity interests
in each of its Domestic Subsidiaries and 65% of the equity interests in each of
its Foreign Subsidiaries;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree as
follows:
Section 1 DEFINITIONS
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
"ADDITIONAL INDEBTEDNESS" has the meaning assigned to that term in
subsection 7.1(ix).
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to a Eurodollar Rate Loan, the rate per annum obtained by
dividing (i) the offered quotation (rounded upward to the nearest 1/16 of one
- --------
percent) to first class banks in the interbank Eurodollar market by BTCo for
U.S. dollar deposits of amounts in same day funds comparable to the principal
amount of the Eurodollar Rate Loan of BTCo for which the Adjusted Eurodollar
Rate is then being determined with maturities comparable to the Interest Period
for which such Adjusted Eurodollar Rate will apply as of approximately 10:00
a.m. (New York time) on such Interest Rate Determination Date by (ii) a
--
percentage equal to 100% minus the stated maximum rate of all reserve
-----
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"ADMINISTRATIVE AGENT" means BTCo in such capacity hereunder and under
the other Loan Documents.
"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.
"AFFECTED LOANS" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the
3
<PAGE>
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"AGENT" means BTCo in its capacity as Administrative Agent, and BTCo, The
Bank of New York, Credit Suisse First Boston and Bank of America NT&SA, in their
respective capacities as a Co-Syndication Agent, hereunder and under the Loan
Documents, and also means and includes any successor Agent appointed pursuant to
subsection 9.5.
"AGREEMENT" means this Credit Agreement dated as of May 14, 1998, as it
may be amended, supplemented or otherwise modified from time to time.
"ANNUALIZED PRO FORMA EBITDA" means, for any period, the sum of (i)
EBITDA of the Company and its wholly owned Subsidiaries for such period
(excluding to the extent duplicative of clauses (ii) and (iii) equity in
earnings of Joint Ventures and non-wholly owned Subsidiaries) plus (ii) (a) the
----
EBITDA of each non-wholly owned Subsidiary of Company and Joint Venture of
Company or any of Company's wholly-owned Subsidiaries multiplied by (b) the
Ownership Percentage with respect to each such non-wholly owned Subsidiary and
Joint Venture, as the case may be, plus (iii) (other than for purposes of the
----
definition of Annualized Pro Forma Wholly Owned EBITDAR) without duplication of
amounts included in clause (ii), 100% of the EBITDA of the Magic Johnson
Theatres partnership (annualized in a manner consistent with the other elements
of this definition) for any period in which Indebtedness of the Magic Johnson
Theatres partnership is included in Wholly-Owned Total Debt plus (iv) Proforma
----
EBITDA for Annualized Theatres minus Actual Fiscal Quarter EBITDA.
-----
"Proforma EBITDA for Annualized Theatres" shall be the sum of the
Proforma EBITDA for each Annualized Theatre, calculated on an
Annualized Theatre by Annualized Theatre basis in accordance with the
formula set forth below.
Proforma EBITDA for each Actual Fiscal Quarter EBITDA
----------------------------
=
Annualized Theatre Annualization Factor
Where:
"Actual Fiscal Quarter EBITDA" means the sum of EBITDA from each
Annualized Theatre for each Included Quarter.
"Included Quarter" means each full Fiscal Quarter that such
Annualized Theatre was in operation during the measurement period.
4
<PAGE>
"Annualization Factor" means the sum of annualization factors set
forth below for Included Quarters:
<TABLE>
<S> <C>
-------------------------------------------------------
Quarter ending May 31 of each year 0.16
-------------------------------------------------------
Quarter ending August 31 of each year 0.37
-------------------------------------------------------
Quarter ending November 30 of each year 0.17
-------------------------------------------------------
Quarter ending February 28 or 29 of each year 0.30
-------------------------------------------------------
Total 100.00
-------------------------------------------------------
</TABLE>
"Annualized Theatres" means, for any period, newly constructed
theatres identified to the Administrative Agent that have had at least
one complete Fiscal Quarter of operation, but less than four complete
Fiscal Quarters of operation.
"ANNUALIZED PRO FORMA WHOLLY OWNED EBITDA" means, for any period,
Annualized Pro Forma EBITDA for such period, excluding, however, (i) an amount
equal to (a) Annualized Pro Forma EBITDA attributable to each Joint Venture (in
each case to the extent otherwise included in Annualized Pro Forma EBITDA) and
(ii) an amount equal to the amount of EBITDA attributable to any non-wholly
owned Subsidiary of Company (to the extent otherwise included in Annualized Pro
Forma EBITDA) but including 100% of the EBITDA of the Magic Johnson Theatres
partnership (annualized in a manner consistent with the definition of
"Annualized Pro Forma EBITDA") for any period in which Indebtedness of the
Magic Johnson Theatres partnership is included in Wholly-Owned Total Debt .
"ANNUALIZED PRO FORMA WHOLLY OWNED EBITDAR" means, for any period, the
sum of the amounts for such period of (i) Annualized Pro Forma Wholly Owned
EBITDA plus (ii) Annualized Pro Forma Wholly Owned Rent Expense.
----
"ANNUALIZED PRO FORMA WHOLLY OWNED RENT EXPENSE" means, for any period,
the sum of (i) Wholly Owned Rent Expense for such period plus (ii) Pro forma
----
Wholly Owned Rent Expense for Annualized Theatres minus Actual Fiscal Quarter
-----
Wholly Owned Rent Expense for Annualized Theatres.
"Pro forma Wholly Owned Rent Expense for Annualized Theatres" shall be
the sum of the Pro forma Wholly Owned Rent Expense for each Annualized
Theatre, calculated on an Annualized Theatre by Annualized Theatre basis in
accordance with the formula set forth below.
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------------------------
Pro forma Wholly Owned Rent Expense for Actual base rent provided for in the
each Annualized Theatre with less than two applicable lease for such complete Fiscal
complete Fiscal Quarters of operation. Quarter multiplied by 4
----------
--------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------
Pro forma Wholly Owned Rent Expense for Actual base rent provided for in the
each Annualized Theatre with more than applicable lease for such two complete
two complete Fiscal Quarters of operation Fiscal Quarters multiplied by 2
but less than four complete Fiscal Quarters ----------
of operation.
----------------------------------------------------------------------------------------
Pro forma Wholly Owned Rent Expense for Actual base rent provided for in the
each Annualized Theatre with more than applicable lease for such three complete
three complete Fiscal Quarters of operation Fiscal Quarters multiplied by 4/3
but less than four complete Fiscal Quarters ----------
of operation.
--------------------------------------------------------------------------------------------
</TABLE>
Where:
"Actual Fiscal Quarter Wholly Owned Rent Expense" means the sum of
Wholly Owned Rent Expense from each Annualized Theatre for each
Included Quarter.
"Included Quarter" means each full Fiscal Quarter that such
Annualized Theatre was in operation during the measurement period.
"Annualized Theatres" means, for any period, newly constructed
theatres identified to the Administrative Agent that have had at least
one complete Fiscal Quarter of operation, but less than four complete
Fiscal Quarters of operation.
"APPLICABLE MARGIN" has the meaning assigned that term in subsection
2.2A.
"ARRANGEMENT" has the meaning assigned that term in the Recitals hereto.
"ASSET SALE" means the sale by Company or any of its Subsidiaries to any
Person other than Company or any of its wholly-owned Subsidiaries of (i) any of
the stock of any of Company's Subsidiaries, (ii) substantially all of the assets
of any division or line of business of Company or any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of Company or any of its
Subsidiaries (other than (a) inventory sold in the ordinary course of business,
(b) obsolete equipment and (c) any such other assets to the extent that the
aggregate value of such assets sold in any single transaction or related series
of transactions is equal to $2,000,000 or less).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the
form of Exhibit X annexed hereto.
---------
6
<PAGE>
"AUDITOR'S LETTER" means a letter, substantially in the form of Exhibit
-------
XI annexed hereto, executed by a nationally recognized accounting firm and
- --
delivered to Agent pursuant to subsection 4.1 or 6.1(ii).
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or (y)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BONY EXISTING LETTERS OF CREDIT" means the letters of credit outstanding
prior to, and with an expiration date later than, the Closing Date and listed on
part (ii) of Schedule 1.1L annexed hereto.
-------------
"BRONFMAN TRUST" means Charles Rosner Bronfman Family Trust, a trust
created under the laws of Quebec.
"BT EXISTING LETTERS OF CREDIT" means the letters of credit outstanding
prior to, and with an expiration date later than, the Closing Date and listed on
part (iii) of Schedule 1.1L annexed hereto.
-------------
"BUSINESS COMBINATION TRANSACTIONS" means the Arrangement, the Subsidiary
Transactions, the IMAX Transaction, the SPE Dividend and the Universal
Investment.
"BUSINESS DAY" means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted Eurodollar
Rate or any Eurodollar Rate Loans, any day that is a Business Day described in
clause (i) above and that is also a day for trading by and between banks in
Dollar deposits in the applicable interbank Eurodollar market.
"CANADIAN DOLLARS" and the sign "CN$" means the lawful money of Canada.
"CAPITAL EXPENDITURES" means, for any period, the sum of (i) the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the balance sheet of Company and its Subsidiaries) by Company and
its Subsidiaries during that period that, in conformity with GAAP, are included
in "additions to property, plant or equipment" or comparable items reflected
in the
7
<PAGE>
consolidated statement of cash flows of Company and its Subsidiaries plus (ii)
----
to the extent not covered by clause (i) of this definition, the aggregate of all
expenditures by Company and its Subsidiaries during that period to acquire (by
purchase or otherwise) the business, property or fixed assets of Company and its
Subsidiaries, or the stock or other evidence of beneficial ownership of, any
Person other than Company or any of its Subsidiaries plus (iii) to the extent
----
not covered by clauses (i) or (ii) of this definition, the aggregate of all
expenditures by Company and its Subsidiaries during that period to make
Permitted Investments and Permitted Acquisitions pursuant to subsection 7.3(ix).
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person; provided that, with respect to Company and its Subsidiaries,
"Capital Lease" shall also include any lease that Company or any of its
Subsidiaries is a party to with respect to a theatre which has been closed by
Company or such Subsidiary, as the case may be, and for which Company or such
Subsidiary, as the case may be, has established a liability on its balance sheet
in accordance with GAAP.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (a) marketable
securities (1) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (2) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (c) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (d) certificates of deposit or bankers' acceptances maturing within one
year after such date and issued or accepted by any Lender or by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia that (1) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (2) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (e) shares of any money market mutual fund that (1)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (a) and (b) above, (2) has net assets of not less than
$500,000,000, and (3) has the highest rating obtainable from either S&P or
Moody's.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in the
form of Exhibit XII annexed hereto delivered by a Lender to Administrative Agent
-----------
pursuant to subsection 2.7B(iii).
8
<PAGE>
"CHANGE OF CONTROL" means (i) as of any date, that any Person or any two
or more Persons acting in concert shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Exchange Act), directly or indirectly, of Securities of Company (or
other Securities convertible into such Securities) representing a percentage of
the combined voting power of all Securities of Company entitled to vote in the
election of directors (other than Securities having such power only by reason of
the happening of a contingency) which is equal to or greater than the aggregate
percentage of the combined voting power of all Securities of Company entitled to
vote in the election of directors (other than Securities having such power only
by reason of the happening of a contingency) beneficially owned by SPE,
Universal and their Affiliates in the aggregate as of such date or (ii) a
majority of the members of the Board of Directors of Company shall not be
Continuing Directors.
"CHANGE IN LAW" means the enactment, promulgation, execution or
ratification of, or any change in, modification of, or amendment to, any
applicable law, treaty or governmental rule, regulation or order, or any change
in the interpretation, administration or application thereof.
"CINEPLEX ODEON" means Cineplex Odeon Corporation, a corporation formed
under the laws of the province of Ontario, which immediately after the
consummation of the Business Combination Transactions will be a direct wholly-
owned Subsidiary of Company.
"CINEPLEX ODEON COMMON STOCK" means the common shares of Cineplex Odeon,
no par value per share.
"CLOSING DATE" means the date on or before May 30, 1998, on which the
conditions set forth in subsection 4.1 have been satisfied by Company or have
been waived in writing by Co-Syndication Agents.
"COLLATERAL" means, collectively, all of the personal property (including
capital stock) in which Liens are purported to be granted by the Collateral
Documents.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in the
Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement
executed and delivered by Company and Administrative Agent on the Closing Date,
substantially in the form of Exhibit XIII annexed hereto, as such Collateral
------------
Account Agreement may hereafter be amended, supplemented or otherwise modified
from time to time.
"COLLATERAL DOCUMENTS" means the Collateral Account Agreement, Company
Security Agreement, Company Pledge Agreement, Company Trademark Security
Agreement, Subsidiary Security Agreement, Subsidiary Pledge Agreement and
Subsidiary Trademark Security Agreement.
9
<PAGE>
"COMBINATION SHARES" has the meaning assigned that term in the Recitals
hereto.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"COMMITMENT" means any of the Tranche A Revolving Loan Commitment or
Tranche B Revolving Loan Commitment and "COMMITMENTS" means such commitments
of all Lenders in the aggregate.
"COMMITMENT FEE PERCENTAGE" has the meaning assigned to that term in
subsection 2.3A.
"COMPANY" has the meaning assigned to that term in the introduction to
this Agreement.
"COMPANY COMMON STOCK" means the common stock of Company, par value $.01
per share.
"COMPANY CLASS A NON-VOTING COMMON STOCK" means the Class A Non-Voting
Common Stock of Company, par value $.01 per share.
"COMPANY CLASS B NON-VOTING COMMON STOCK" means the Class B Non-Voting
Common Stock of Company, par value $.01 per share.
"COMPANY NON-VOTING COMMON STOCK" means the Company Class A Non-Voting
Common Stock and the Company Class B Non-Voting Common Stock.
"COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement executed and
delivered by Company on the Closing Date, substantially in the form of Exhibit
-------
XVI annexed hereto, as such Company Pledge Agreement may be amended,
- ---
supplemented or otherwise modified from time to time.
"COMPANY SECURITY AGREEMENT" means the Company Security Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of Exhibit XV annexed hereto, as such Company Security Agreement may be amended
----------
or supplemented or otherwise modified from time to time.
"COMPANY TRADEMARK SECURITY AGREEMENT" means the Company Trademark
Security Agreement executed and delivered by Company on the Closing Date,
substantially in the form of Exhibit XVII annexed hereto, as such Company
------------
Trademark Security Agreement may be amended, supplemented or otherwise modified
from time to time.
10
<PAGE>
"COMPETITOR" means any Person engaged directly or indirectly or having
any Affiliate engaged directly or indirectly in the production, distribution or
exhibition of motion pictures.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit V annexed hereto delivered to Agent and Lenders by Company pursuant to
- ---------
subsection 6.1(iii).
"CONSOLIDATED DEBT" means, as at any date of determination, the sum of
(i) Wholly-Owned Total Debt plus (ii) (a) the aggregate stated balance sheet
----
amount of all Indebtedness of each non-wholly-owned Subsidiary of Company and
Joint Venture of Company or any of Company's Subsidiaries, net of Cash of such
Subsidiary or Joint Venture (excluding, however, an amount equal to the
Indebtedness of each non-wholly owned Subsidiary of Company and Joint Venture of
Company or any of Company's Subsidiaries to the extent included in Wholly-Owned
Total Debt) multiplied by (b) the Ownership Percentage with respect to each such
---------- --
non-wholly-owned Subsidiary and Joint Venture, as the case may be.
"CONSOLIDATED EBITDA" means, for any period, the sum of the amounts for
such period of EBITDA of Company and its Subsidiaries; provided that there
--------
shall be excluded (i) the income (or loss) of any other Person (other than a
Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, and (iii) the income
of any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to purchase,
repurchase
11
<PAGE>
or otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(X) or (Y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"CONTINUING DIRECTOR" shall mean, as of any date of determination, any
member of the Board of Directors of Company who (i) was a member of such Board
of Directors on the Closing Date or (ii) was nominated for election or elected
to such Board of Directors with the affirmative vote of SPE or Universal.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision
of any Security issued by that Person or of any material indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"CO-SYNDICATION AGENTS" means BTCo, The Bank of New York, Bank of America
NT&SA and Credit Suisse First Boston, in their respective capacities as co-
syndication agents of the credit facilities described herein.
"COVERED TAX" or "COVERED TAXES" means all Tax or Taxes other than any
Excluded Tax or Excluded Taxes.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement.
"CURRENT ASSETS" means, as at any date of determination, the total assets
of Company and its Subsidiaries on a consolidated basis which may properly be
classified as current assets in conformity with GAAP, excluding Cash and Cash
Equivalents.
"CURRENT LIABILITIES" means, as at any date of determination, the total
liabilities of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current liabilities in conformity with GAAP.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
12
<PAGE>
"DOJ SETTLEMENT" means the Stipulation and Order entered April 16, 1998
in the matter of United States et al vs. Sony Corporation of America, Company,
-----
Cineplex Odeon and J.E. Seagram Corp. and the related Final Judgment in the
form entered by the court in such case.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Company other than a
Foreign Subsidiary.
"EBITDA" means, for any period, for any Person the sum of the amounts,
without duplication of component amounts, for such period of (i) Net Income,
(ii) Interest Expense, (iii) any amounts referred to in subsection 2.3 payable
to the Lenders and the Agents prior to the Closing Date to the extent such
amounts have been deducted from Net Income and excluded from Interest Expense,
(iv) provisions for taxes based on income or equity, (v) total depreciation
expense, (vi) total amortization expense, (vii) all extraordinary losses,
including losses arising from the sale or disposition of assets, (viii) any
amounts representing the amortization of deferred financing expense (to the
extent not already included in (1) Interest Expense or (2) clause (iii) above),
(ix) other non-cash items reducing Net Income less other non-cash items
----
increasing Net Income, (x) one-time costs and expenses in connection with the
Business Combination Transactions (to the extent not already included in clause
(iii) above), (xi) non-recurring and other one-time non-operating expenses and
(xii) the effect of accounting changes pursuant to opinion No. 20 of the
Accounting Principles Board, all of the foregoing as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with GAAP.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof having a combined capital and
surplus of at least $250,000,000; (ii) a savings and loan association or savings
bank organized under the laws of the United States or any state thereof having a
combined capital and surplus of at least $250,000,000; (iii) a commercial bank
organized under the laws of any other country or a political subdivision thereof
having a combined capital and surplus of at least $250,000,000; provided that
--------
(x) such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans in the ordinary course of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing companies; and
(B) any Lender and any Affiliate of any Lender; provided that (x) no Affiliate
--------
of Company shall be an Eligible Assignee and (y) no Competitor shall be an
Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Company or any of its ERISA Affiliates.
13
<PAGE>
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any of
its Subsidiaries, any of their respective Affiliates or any Facility.
"ENVIRONMENTAL LAWS" means all applicable statutes, ordinances, orders,
rules, regulations, plans, policies or decrees and requirements having the force
of law relating to (i) environmental matters, including, without limitation,
those relating to fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare from environmental hazards, in any manner applicable to
Company or any of its Subsidiaries or any of their respective properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), the
-- ---
Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the
-- ---
Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal
-- ---
Water Pollution Control Act ( 33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42
-- ---
U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601
-- ---
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
- -- ---
(S)136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S) 651 et
-- --- --
seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S)
- ---
11001 et seq.), each as amended or supplemented, and any analogous future or
-- ---
present local, state, provincial and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Internal Revenue Code of which that Person
is a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member. Any former ERISA Affiliate of a
Person shall continue to be considered an ERISA Affiliate within the meaning of
this definition with respect to the period such entity was an ERISA Affiliate of
the
14
<PAGE>
Person and with respect to liabilities arising after such period for which the
Person could be liable under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by Company or any of its ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which is reasonably likely to result in the
termination of, or the appointment of a trustee to administer, any Pension Plan;
(vi) the imposition of liability on Company or any of its ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by Company or any of its ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan which is reasonably likely
to result in the imposition of withdrawal liability therefor, or the receipt by
Company or any of its ERISA Affiliates of notice from any Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA, or that it intends to terminate or has terminated under Section 4041A or
4042 of ERISA; (viii) the occurrence of an act or omission which is reasonably
likely to result in the imposition on Company or any of its ERISA Affiliates of
fines, penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in
respect of any Employee Benefit Plan; (ix) the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against Company or any of
its ERISA Affiliates in connection with any such Employee Benefit Plan; (x)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"EURO" means the single currency of participating member states of the
European Monetary Union.
15
<PAGE>
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates determined
by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A.
"EUROPEAN MONETARY UNION" means the European Economic and Monetary Union
as contemplated in the Treaty of Rome of March 25, 1957, as amended by the
Single European Act 1986 and the Maastricht Treaty (which was signed at
Maastricht on February 7, 1992 and became effective on November 1, 1993), as
amended from time to time.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCESS CASH FLOW" means, for any period, an amount (if positive), equal
to (i) the sum, without duplication, of the amounts for such period of (a)
Consolidated EBITDA and (b) the Working Capital Adjustment minus (ii) the sum,
-----
without duplication, of the amounts for such period of (a) voluntary and
scheduled repayments of Wholly-Owned Total Debt actually made (excluding
repayments of Loans except to the extent the Commitments are permanently reduced
in connection with such repayments), (b) Capital Expenditures (net of any
proceeds of any related financings with respect to such expenditures), (c)
Wholly-Owned Total Debt Interest Expense to the extent paid in cash by Company
and its wholly-owned Subsidiaries, (d) Permitted Investments and Permitted
Acquisitions to the extent made in cash by Company or any of its wholly-owned
Subsidiaries, (e) provisions for taxes based on income or equity of Company and
its wholly-owned Subsidiaries to the extent paid in cash with respect to such
periods, and (f) amounts paid in cash by Company and its wholly-owned
Subsidiaries to the extent included in clause (x) through (xii) of the
definition of "EBITDA."
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"EXCHANGE RATE" means, on any date when an amount expressed in a currency
other than Dollars is to be determined with respect to any Letter of Credit, the
spot rate of exchange (as provided by the foreign exchange trader of the
Administrative Agent) in the New York foreign exchange market for the purchase
of such currency in exchange for Dollars on such date, expressed as a number of
units of such currency per one Dollar.
"EXCHANGE SHARES" has the meaning assigned that term in the Recitals
hereto.
"EXCLUDED TAX" or "EXCLUDED TAXES" means Tax or Taxes imposed on or
measured by a Person's net income, profits or gains (including any franchise or
similar Taxes imposed in lieu thereof and any branch profits Taxes) by the
United States or any state, local or foreign jurisdiction (or political
subdivision thereof or taxing authority thereof or therein) in which the Lender
is organized, has its principal office or has its applicable lending office.
"EXISTING CINEPLEX BANK REFINANCING" has the meaning assigned that term
in the Recitals hereto.
16
<PAGE>
"EXISTING CINEPLEX CREDIT AGREEMENT" means that certain Credit Agreement
dated as of June 23, 1994 by and among Cineplex Odeon and Plitt, as Borrowers,
the financial institutions from time to time party thereto and the Bank of Nova
Scotia, as agent, and the Operating Loan Agreement dated as of June 23, 1995
between Plitt and Bank of Nova Scotia, as Agent, in each case as each of such
credit agreement and operating loan agreement has been amended, supplemented or
otherwise modified through the date hereof.
"EXISTING LETTERS OF CREDIT" means the BONY Existing Letters of Credit
and the BT Existing Letters of Credit.
"FACILITIES" means all real property (including, without limitation, all
buildings, fixtures or other improvements located thereon) and related
facilities now, hereafter or heretofore owned, leased, operated or used by
Company or any of its Subsidiaries or any of their respective predecessors or
Affiliates.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"FINANCIAL PLAN" has the meaning assigned to that term in subsection
6.1(xii).
"FIRST PRIORITY" means, with respect to any Lien purported to be created
in any Collateral pursuant to any Collateral Document, that such Lien has
priority over any other Lien on such Collateral, other than Liens permitted
under subsection 7.2A.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries
ending on February 28 or February 29, as the case may be, of each calendar year.
"FOREIGN SUBSIDIARY" means any Subsidiary of Company (a) which is
organized under the laws of any jurisdiction outside of the United States of
America or (b) any Domestic Subsidiary whose sole assets consist of either (i)
stock of a Subsidiary, (ii) equity Securities in a Joint Venture or (iii) an
Investment in a Person, in each case that is organized under the laws of any
jurisdiction outside of the United States of America.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative Agent
located at 130 Liberty Street, New York, New York 10006 or (ii) such other
office of Administrative
17
<PAGE>
Agent as may from time to time hereafter be designated as such in a written
notice delivered by Administrative Agent to Company and each Lender.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination; provided that, with respect to financial statements
of Cineplex Odeon and its Subsidiaries not included within the consolidated
financial statements of Company and its Subsidiaries, "GAAP" shall mean
generally accepted accounting principles as applied in Canada.
"GLOBAL NOTE" means that certain promissory note dated as of May 14, 1998
issued by those certain wholly owned Subsidiaries of Company party thereto to
Company to evidence certain intercompany indebtedness, as such promissory note
may be amended, supplemented or otherwise modified in accordance with subsection
7.13A.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state,
provincial or local governmental authority, agency or court.
"GUARANTY" means the Subsidiary Guaranty.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "infectious waste", "toxic substances" or
any other formulations intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar meaning and regulatory effect import under any
applicable Environmental Laws; (ii) any oil, petroleum, petroleum fraction or
petroleum derived substance; (iii) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) asbestos in any form; (vii) urea
formaldehyde foam insulation; (viii) electrical equipment which contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million; (ix) pesticides; and (x) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
18
<PAGE>
"IMAX AGREEMENTS" means (i) the Lease Agreement between Lincoln
Metrocenter Partners, L.P. and SPE dated May 21, 1992, and all ancillary
agreements thereto, (ii) the Letter Agreement between IMAX Corporation and Sony
Retail Entertainment dated March 3, 1995 and (iii) the Agreement between IMAX
Corporation and SPE dated May 28, 1992, as amended January 19, 1996, as each
such agreement may hereafter be amended, supplemented or otherwise modified in
accordance with subsection 7.13A.
"IMAX PURCHASE PRICE" means an amount equal to the fair market value of
the IMAX Agreements on the Closing Date.
"IMAX TRANSACTION" has the meaning assigned to that term in the Recitals
hereto.
"INCREASE DATE" has the meaning assigned to that term in subsection
2.1F(ii).
"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.
"INFORMATION CIRCULAR/PROSPECTUS" means that certain Management
Information Circular and Proxy Statement/Prospectus of Cineplex Odeon
Corporation dated February 13, 1998.
"INSOLVENCY EVENT" means, with respect to any Person, the occurrence of
any of the events described in subsection 8.6 or 8.7; provided that, solely for
--------
purposes of this definition, any references to Company or any of its
Subsidiaries in subsection 8.6 or 8.7 shall be deemed to be a reference to such
Person.
"INSOLVENCY LAWS" means the Bankruptcy Code or any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect in the United
States of America or any state thereof or Canada or any province thereof.
19
<PAGE>
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Company and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Company and its Subsidiaries, taken as a whole.
"INTERCOMPANY NOTES" means the promissory notes issued by a wholly owned
Subsidiary of Company to Company or by Company to a wholly owned Subsidiary of
Company to evidence intercompany debt in the form of Exhibit VII annexed hereto,
as such Intercompany Notes may be amended, supplemented or otherwise modified in
accordance with subsection 7.13A.
"INTEREST EXPENSE" for any Person means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of such Person and its Subsidiaries with
respect to all outstanding Indebtedness of such Person and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding, however, in the
--------- -------
case of Company, any amounts referred to in subsection 2.3 payable to Agents and
Lenders on or before the Closing Date.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan,
each January 15, April 15, July 15, and October 15 of each year, commencing on
the first such date to occur after the Closing Date, and (ii) with respect to
any Eurodollar Rate Loan, the last day of each Interest Period applicable to
such Loan; provided that in the case of each Interest Period of longer than
--------
three months "Interest Payment Date" shall also include the date that is three
months after the commencement of such Interest Period or an integral multiple
thereof.
"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, stock or other Securities of any other Person (other than a Person
that prior to such purchase or acquisition was a wholly-owned Subsidiary of
Company and a party to a Guaranty), (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of
Company from any Person other than Company or any of its Subsidiaries, of any
equity Securities of such Subsidiary
20
<PAGE>
or (iii) any direct or indirect loan, advance (other than advances to employees
for moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person other than a wholly-owned
Subsidiary of Company which is a party to a Guaranty, including all indebtedness
and accounts receivable from that other Person that are not current assets or
did not arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"IP COLLATERAL" means, collectively, the Collateral under the IP
Collateral Documents.
"IP COLLATERAL DOCUMENTS" means, collectively, the Company Trademark
Security Agreement and the Subsidiary Trademark Security Agreements.
"ISSUING LENDER" means, (i) with respect to the BONY Existing Letters of
Credit, The Bank of New York, (ii) with respect to the BT Existing Letters of
Credit, BTCo, and (iii) with respect to any other Letters of Credit, BTCo or any
other Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
--------
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement and any Person becoming a Lender
pursuant to subsection 2.1F together with their successors and permitted assigns
pursuant to subsection 10.1, and the term "Lenders" shall include BTCo as an
Issuing Lender unless the context otherwise requires; provided that the term
--------
"Lenders", when used in the context of a particular Commitment, shall mean
Lenders having that Commitment.
"LETTER AGREEMENT" means that certain amended and restated letter
agreement dated as of September 30, 1997 between the Bronfman Trust and Company,
as such letter agreement may be amended, supplemented or otherwise modified in
accordance with subsection 7.13A.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Standby Letters of
Credit or Commercial Letters of Credit issued or to be issued by Issuing Lenders
for the account of Company pursuant to subsection 3.1 and includes, without
limitation, the Existing Letters of Credit pursuant to subsection 3.7.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the sum
of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing
21
<PAGE>
under all Letters of Credit then outstanding plus (ii) the aggregate amount of
----
all drawings under Letters of Credit honored by Issuing Lenders and not
theretofore reimbursed by Company. For purposes of this definition, any amount
described in clause (i) or (ii) of the preceding sentence which is denominated
in a currency other than Dollars shall be valued based on the applicable
Exchange Rate for such currency as of the applicable date of determination.
"LEVERAGE RATIO" has the meaning assigned to that term in subsection 7.6B
of this Agreement.
"LIEN" means any lien, mortgage, deed of trust, pledge, assignment,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LIRA" and the sign "L" means the lawful money of the Republic of
Italy.
"LOAN" or "LOANS" means one or more of the Tranche A Revolving Loans or
Tranche B Revolving Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of Credit
(and any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of an Issuing Lender relating to, the
Letters of Credit), the Guaranty and the Collateral Documents.
"LOAN PARTIES" means any of Company or any Subsidiary of Company
executing the Guaranty.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"MARKS" and the sign "DM" means the lawful money of the Federal
Republic of Germany.
"MASTER AGREEMENT" means that certain Amended and Restated Master
Agreement dated as of September 30, 1997 by and among SPE, Company and Cineplex
Odeon, as such Amended and Restated Master Agreement may be amended,
supplemented or otherwise modified in accordance with subsection 7.13A.
"MATERIAL ADVERSE EFFECT" means (i) (a) prior to or concurrently with the
consummation of the Subject Transactions, a material adverse effect on the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of either Company and its wholly-owned Subsidiaries
taken as a whole or Cineplex Odeon and its wholly-owned Subsidiaries
22
<PAGE>
taken as a whole or (b) after the consummation of the Subject Transactions, a
material adverse effect on the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of the Company and
its wholly-owned Subsidiaries taken as a whole, or (ii) the impairment in any
material respect of the ability of any Loan Party to perform, or of any Agent or
Lenders to enforce, the Obligations.
"MATERIAL CONTRACT" means any contract or other arrangement to which
Company or any of its Subsidiaries is a party (other than the Loan Documents)
which would be required to be filed as an exhibit to an SEC Report under Item
601(b)(10) of Regulation S-K.
"MOODY'S" means Moody's Investors Services, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates is
contributing, or ever has contributed, or to which Company or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received by Company or any of its Subsidiaries from such Asset Sale,
net of any bona fide direct costs incurred in connection with such Asset Sale,
including without limitation (i) real property transfer tax, recording charges,
brokers' fees, investment banking fees and income taxes reasonably estimated to
be actually payable within two years of the date of such Asset Sale as a result
of any gain recognized in connection with such Asset Sale and (ii) payment of
the outstanding principal amount of, premium or penalty, if any, and interest on
any Indebtedness (other than the Loans) that is secured by a Lien on the equity
Securities or assets in question and that is required to be repaid under the
terms thereof as a result of such Asset Sale.
"NET DEBT SECURITIES PROCEEDS" has the meaning assigned to that term in
subsection 2.4A(iii)(c).
"NET INCOME" of a Person means, for any period, the net income (or loss)
of such Person and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; provided
--------
that there shall be excluded (i) any after-tax gains or losses attributable to
Asset Sales or returned surplus assets of any Pension Plan, and (ii) (to the
extent not included in clause (i) above) any net extraordinary gains or net non-
cash extraordinary losses.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any Cash payments or proceeds
received by Company or any of its Subsidiaries (i) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent
23
<PAGE>
domain, condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Company or such Subsidiary in
connection with the adjustment or settlement of any claims of Company or such
Subsidiary in respect thereof and, in the case of any such taking, net of (X)
income taxes reasonably estimated to be actually payable within two years of the
date of such taking as a result of any gain recognized in connection therewith
and (Y) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the assets taken that is required to be repaid under the terms thereof
as a result of such taking.
"NOTES" means one or more of the Tranche A Revolving Notes or the Tranche
B Revolving Notes or any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of Exhibit
-------
I annexed hereto delivered by Company to Administrative Agent pursuant to
- -
subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the
form of Exhibit II annexed hereto delivered by Company to Administrative Agent
----------
pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"OBLIGATIONS" means all obligations of every nature of each Loan Party
from time to time owed to Agents, Lenders or any of them under the Loan
Documents, whether for principal, interest (including interest accruing on or
after the occurrence of an Insolvency Event), reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
"OFFER RESERVE" means, as of any date of determination, (y) $202,000,000
minus (z) an amount equal to 101% of the aggregate principal amount of Plitt
Notes repurchased by Plitt as of such date pursuant to the Plitt Change of
Control Offer.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its chief
financial officer, its treasurer or controller; provided that every Officers'
--------
Certificate with respect to the compliance with a condition precedent to the
making of any Loans hereunder shall include (i) a statement that the officer or
officers making or giving such Officers' Certificate have read such condition
and any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that, in the opinion of the signers, they have made or
have caused to be made such examination or investigation as is necessary to
enable them to express an informed opinion as to whether or not such condition
has been complied with, and (iii) a statement as to whether, in the opinion of
the signers, such condition has been complied with; and provided further that
-------- -------
with respect to any certificate required to be delivered
24
<PAGE>
pursuant to subsection 4.1, such certificate may be executed by any one such
officer approved by Administrative Agent.
"OPERATING LEASE" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"OWNERSHIP PERCENTAGE" means, as at any date of determination, with
respect to any Joint Venture or non-wholly-owned Subsidiary, the percentage of
the equity interests of such Joint Venture or non-wholly owned Subsidiary which
is owned by Company or any of its Subsidiaries, adjusted to the extent necessary
to take into account any preferred returns allocated to Company or any of its
wholly-owned Subsidiaries.
"PBGC" means the Pension Benefit Guaranty Corporation (or any successor
thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ACQUISITION" means an acquisition (whether pursuant to an
acquisition of stock, assets or otherwise) by Company or any Subsidiary from any
Person of a business or an interest in a business in which all of the following
is satisfied:
(a) such business is permitted by subsection 7.12;
(b) immediately before and after giving effect to such acquisition no
Potential Event of Default or Event of Default shall have occurred and be
continuing or would result therefrom; and
(c) Company can demonstrate in form and substance satisfactory to
Administrative Agent immediately after giving effect to such acquisition that
Company is in pro forma compliance with the covenants set forth in Section 7 of
this Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set off, statutory Liens of carriers, warehousemen, mechanics and
materialmen, and other Liens imposed by law, in each case incurred in the
ordinary course of business for sums not yet
25
<PAGE>
delinquent or being contested in good faith by appropriate proceedings, if
(1) such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor and (2) in the case of a
Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any material portion
of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any material portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, encroachments, minor
defects or irregularities in title, and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries;
(vii) any (a) interest or title of a lessor or sublessor under any
lease permitted under this Agreement, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC or other applicable personal
property financing statements relating solely to leases permitted by this
Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(x) licenses of patents, trademarks and other intellectual property
rights granted by Company or any of its Subsidiaries in the ordinary course
of business and not interfering in any material respect with the ordinary
conduct of the business of Company or such Subsidiary.
26
<PAGE>
"PERMITTED INVESTMENT" means a direct Investment by Company or a wholly-
owned Subsidiary of Company in a Joint Venture or non-wholly-owned Subsidiary
(i) in which Company or such wholly-owned Subsidiary acquires and maintains, or
is contractually obligated to acquire and maintain within 24 months of the
initial Investment, at least 50% of the equity interests in such Joint Venture
or non-wholly-owned Subsidiary and (ii) which is principally engaged in the
business of operating movie theatres. The value of any Permitted Investment
made by Company or a wholly-owned Subsidiary of Company with an asset other than
cash shall be equal to the fair market value of such asset at the time such
Permitted Investment is made, as determined in good faith by the Board of
Directors of Company or such wholly-owned Subsidiary, as the case may be.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"PESETAS" and the sign "P" means the lawful money of the Kingdom of
Spain.
"PLAN OF ARRANGEMENT" means the Plan of Arrangement of Cineplex Odeon
under Section 182 of the Business Corporations Act (Ontario) substantially in
the form attached as Annex B to the Information Circular Prospectus, with such
changes thereto as shall be consented to in writing by the Co-Syndication Agents
on or before the Closing Date.
"PLITT" means Plitt Theatres, Inc., a Delaware corporation, which, prior
to the consummation of the Business Combination Transactions, is a direct
wholly-owned Subsidiary of Cineplex Odeon and, immediately after the
consummation of the Business Combination Transactions, will be a direct wholly-
owned Subsidiary of Company.
"PLITT CHANGE OF CONTROL OFFER" has the meaning assigned the term
"Change of Control Offer" in Section 4.19 of the Plitt Indenture.
"PLITT INDENTURE" means that certain Indenture dated June 23, 1994 by and
among Plitt, as Issuer, Cineplex Odeon, as Guarantor, and The Bank of New York,
as Trustee, as amended by that certain Supplemental Indenture dated as of May
14, 1998, as such Indenture may be further amended, supplemented or otherwise
modified in accordance with subsection 7.13B.
"PLITT NOTES" means the 10 7/8% Senior Subordinated Securities due 2004
issued pursuant to the Plitt Indenture, as such Senior Subordinated Securities
may be amended, supplemented or otherwise modified in accordance with subsection
7.13B.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
27
<PAGE>
"PRIME RATE" means the rate of interest per annum publicly announced from
time to time by BTCo as its prime commercial lending rate in effect at its
principal office in New York City. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. BTCo or any other Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"PROCEEDINGS" has the meaning assigned to that term in subsection
6.1(ix).
"PRO RATA SHARE" means (i) with respect to all payments, computations and
other matters relating to the Tranche A Revolving Loan Commitment or the Tranche
A Revolving Loans of any Lender or any Letters of Credit issued or
participations therein purchased by any Lender, the percentage obtained by
dividing (x) the Tranche A Revolving Loan Exposure of that Lender by (y) the
- -------- --
aggregate Tranche A Revolving Loan Exposure of all Lenders, (ii) with respect to
all payments, computations and other matters relating to the Tranche B Revolving
Loan Commitment or the Tranche B Revolving Loans of any Lender, the percentage
obtained by dividing (x) the Tranche B Revolving Loan Exposure of that Lender by
-------- --
(y) the aggregate Tranche B Revolving Loan Exposure of all Lenders and (iii) for
all other purposes with respect to each Lender, the percentage obtained by
dividing (x) the sum of the Tranche A Revolving Loan Exposure of that Lender
- --------
plus the Tranche B Revolving Loan Exposure of that Lender by (y) the sum of the
- ---- --
aggregate Tranche A Revolving Loan Exposure of all Lenders plus the sum of the
----
aggregate Tranche B Revolving Loan Exposure of all Lenders. The initial Pro
Rata Share of each Lender for purposes of each of clauses (i), (ii) and (iii) of
the preceding sentence is set forth opposite the name of that Lender in Schedule
--------
2.1 annexed hereto; provided that Schedule 2.1 shall be amended and each
- --- -------- ------------
Lender's Pro Rata Share for purposes of each of clauses (i), (ii) and (iii) of
the preceding sentence shall be adjusted from time to time to give effect to the
addition of new Lenders pursuant to subsection 2.1F and any assignments pursuant
to subsection 10.1B.
"PROSPECTIVE LENDER" has the meaning assigned to that term in subsection
2.1F(ii).
"PURCHASE MONEY SECURITY INTEREST" has the meaning assigned to that term
in subsection 7.2A(iii).
"REFINANCING TRANSACTIONS" means the Sony Debt Repayment, the Existing
Cineplex Bank Refinancing and the Plitt Note Repurchase Transaction.
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in subsection
3.3B.
28
<PAGE>
"RELATED AGREEMENTS" means, collectively, the Master Agreement, the Plan
of Arrangement, the Universal Subscription Agreement, the Stockholders
Agreement, the Tax Sharing and Indemnity Agreement, the Sony Trademark
Agreement, the Transition Services Agreement, (if any), the Letter Agreement,
the Intercompany Notes, the Global Note and all other agreements or instruments
delivered pursuant to or in connection with any of the foregoing.
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"REQUEST FOR ISSUANCE OF LETTER OF CREDIT" means a notice substantially
in the form of Exhibit III annexed hereto delivered by Company to Administrative
-----------
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"REQUIREMENT OF LAW" means (a) the certificates or articles of
incorporation, by-laws and other organizational or governing documents of a
Person, (b) any law, treaty, rule, regulation or determination of an arbitrator,
court or other governmental authority, or (c) any franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way, right
or approval binding on a Person or any of its property.
"REQUISITE LENDERS" means Lenders having or holding a majority of the sum
of the aggregate Tranche A Revolving Loan Exposure of all Lenders plus the
----
aggregate Tranche B Revolving Loan Exposure of all Lenders.
"RESPONSIBLE OFFICER" means the chief executive officer, president, vice
president, chief financial officer, principal accounting officer or treasurer of
Company or any of its Subsidiaries.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Company now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Company now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated Indebtedness.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means May 14, 2003.
29
<PAGE>
"S&J" has the meaning assigned that term in the Recitals hereto.
"S&P" means Standard & Poor's Ratings Services.
"SEC REPORTS" means annual, quarterly and current reports filed by the
Company with the SEC under Section 13(a) of the Exchange Act and proxy
statements mailed by Company to its shareholders.
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"SENIOR DEBT RATINGS" means ratings assigned to Company's long-term
senior debt.
"SIGNIFICANT SUBSIDIARY" has the meaning set forth in Rule 1-02(w) of
Regulation S-X under the Exchange Act, substituting 5 percent whenever 10
percent appears in such Rule.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SONY CAPITAL" means Sony Capital Corporation, a Delaware corporation.
"SONY CAPITAL INDEBTEDNESS" means the intercompany Indebtedness
identified as "Working Capital Debt" in the Preliminary Closing Statement
prepared by Company pursuant
30
<PAGE>
to Section 6.9 of the Master Agreement as being subject to repayment
simultaneously with the closing of the Business Combination Transactions which
is owed by Company and its Subsidiaries to Sony Capital, plus accrued interest
thereon through the Closing Date.
"SONY DEBT REPAYMENT" means the repayment of the Sony Capital Indebtedness
and the Sony Land Indebtedness.
"SONY LAND" means New York Bright Lights Corp., a New York corporation and
the successor in interest by merger to Sony/Columbia Land Corporation, a
California corporation.
"SONY LAND INDEBTEDNESS" means the intercompany Indebtedness identified as
"Intercompany Debt" in the Preliminary Closing Statement prepared by Company
pursuant to Section 6.9 of the Master Agreement as being subject to repayment
simultaneously with the closing of the Business Combination Transactions which
is owed by certain of Company's Subsidiaries to Sony Land, plus accrued interest
thereon through the Closing Date.
"SONY TRADEMARK AGREEMENT" means that certain trademark agreement dated as
of May 14, 1998 between Sony Corporation and Company, as such trademark
agreement may be amended, supplemented or otherwise modified in accordance with
subsection 7.13A.
"SPE" has the meaning assigned that term in the Recitals hereto.
"SPE DIVIDEND" means an amount equal to (y) $409,347,000 (as such amount
may be adjusted pursuant to Section 6.9 of the Master Agreement) minus (z) the
-----
sum of (i) the Sony Debt Repayment and (ii) the IMAX Purchase Price.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) Indebtedness of Company or
any of its Subsidiaries in respect of industrial revenue or development bonds or
financings, (ii) workers' compensation liabilities of Company or any of its
Subsidiaries, (iii) the obligations of third party insurers of Company or any of
its Subsidiaries arising by virtue of the laws of any jurisdiction requiring
third party insurers, (iv) obligations with respect to Capital Leases or
Operating Leases of Company or any of its Subsidiaries, and (v) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries, in
any case if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry; provided that Standby Letters of
--------
Credit may not be issued for the purpose of supporting (a) trade payables or (b)
any Indebtedness constituting "antecedent debt" (as that term is used in Section
547 of the Bankruptcy Code).
"STAR" has the meaning assigned that term in the Recitals hereto.
"STOCKHOLDERS AGREEMENT" means that certain Amended and Restated
Stockholders Agreement dated as of September 30, 1997 among Company, SPE,
Universal, Bronfman Trust,
31
<PAGE>
Charles R. Bronfman, E. Leo Kolber, Arnold M. Ludwick, Phyllis Lambert
Foundation and 3096475 Canada Inc., as such Stockholders Agreement may be
amended, supplemented or otherwise modified in accordance with subsection 7.13A.
"SUBJECT TRANSACTIONS" means the Business Combination Transactions and the
Refinancing Transactions.
"SUBORDINATED INDEBTEDNESS" means (y) the Indebtedness evidenced by the
Plitt Notes and (z) Indebtedness of Company (other than Indebtedness to any of
its Subsidiaries) that is subordinated in right of payment to the Obligations
pursuant to documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to Administrative Agent and Requisite
Lenders; provided that, solely for purposes of subsection 7.13A "Subordinated
--------
Indebtedness" shall include Additional Indebtedness issued pursuant to
subsection 7.1(ix) and refinancing thereof pursuant to subsection 7.1(xi). The
Indebtedness evidenced by the Plitt Notes (including Plitt's and Company's
guarantees thereof) shall be "Subordinated Indebtedness" for all purposes
under this Agreement.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"SUBSIDIARY GUARANTOR" means, at any time, any of Company's wholly owned
Domestic Subsidiaries that is then a party to the Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and
delivered by Company's wholly-owned Domestic Subsidiaries on the Closing Date
and to be executed and delivered by Company's wholly-owned Domestic Subsidiaries
from time to time thereafter in accordance with subsection 6.9, substantially in
the form of Exhibit XVIII annexed hereto, as such Subsidiary Guaranty may be
-------------
amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge Agreement
executed and delivered by each Subsidiary Guarantor on the Closing Date or to be
executed and delivered by a Subsidiary Guarantor from time to time thereafter in
accordance with subsection 6.9, in each case substantially in the form of
Exhibit XX annexed hereto, as such Subsidiary Pledge Agreement may be amended,
- ----------
supplemented or otherwise modified from time to time.
32
<PAGE>
"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security Agreement
executed and delivered by each Subsidiary Guarantor on the Closing Date or to be
executed and delivered by a Subsidiary Guarantor from time to time thereafter in
accordance with subsection 6.9, in each case substantially in the form of
Exhibit XIX annexed hereto, as such Subsidiary Security Agreement may be
- -----------
amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means the Subsidiary Trademark
Security Agreement executed and delivered by each Subsidiary Guarantor on the
Closing Date or to be executed and delivered by a Subsidiary Guarantor from time
to time thereafter in accordance with subsection 6.9, in each case substantially
in the form of Exhibit XXI annexed hereto, as such Subsidiary Trademark Security
-----------
Agreement may be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY TRANSACTIONS" has the meaning assigned to that term in the
Recitals hereto.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called,
including interest, penalties, additions to tax and similar liabilities with
respect thereto, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed.
"TAX SHARING AND INDEMNITY AGREEMENT" means that certain Tax Sharing and
Indemnity Agreement dated as of May 14, 1998 between Sony Corporation of America
and Company, as such agreement may hereafter be amended, supplemented or
otherwise modified in accordance with subsection 7.13A.
"TOTAL UTILIZATION OF TRANCHE A REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount of all
outstanding Tranche A Revolving Loans made to Company plus (ii) the Letter of
----
Credit Usage with respect to all Letters of Credit issued for the account of
Company.
"TOTAL UTILIZATION OF TRANCHE B REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of the aggregate principal amount of all
outstanding Tranche B Revolving Loans made to Company.
"TRANCHE A REVOLVING LOAN COMMITMENT" means the commitment of a Lender to
make Tranche A Revolving Loans to Company pursuant to subsection 2.1A(i), and
"TRANCHE A REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders
in the aggregate.
"TRANCHE A REVOLVING LOAN EXPOSURE" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the Tranche A
Revolving Loan Commitments, that Lender's Tranche A Revolving Loan Commitment
and (ii) after the termination of the Tranche A Revolving Loan Commitments, the
sum of (a) the aggregate outstanding principal amount of the Tranche A Revolving
Loans of that Lender plus (b) in the event that Lender is an
----
33
<PAGE>
Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender (in each case net of any participations
purchased by other Lenders in such Letters of Credit or any unreimbursed
drawings thereunder) plus (c) the aggregate amount of all participations
----
purchased by that Lender in any outstanding Letters of Credit or any
unreimbursed drawings under any Letters of Credit.
"TRANCHE A REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(i).
"TRANCHE A REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E(i) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Tranche A Revolving Loan
Commitments and Tranche A Revolving Loans of any Lenders, in each case
substantially in the form of Exhibit IV-A annexed hereto, as they may be
------------
amended, supplemented or otherwise modified from time to time.
"TRANCHE B ACTIVATION DATE" means the earlier of the dates, if any,
occurring on or before the Tranche B Expiration Date on which Company either (i)
makes its first borrowing under the Tranche B Revolving Loan Commitments or (ii)
delivers a Tranche B Continuation Notice to Administrative Agent.
"TRANCHE B CONTINUATION NOTICE" means a notice substantially in the form
of Exhibit XIV annexed hereto delivered by Company to Administrative Agent
pursuant to subsection 2.1A(ii) on or before the Tranche B Expiration Date with
respect to a continuation of the Tranche B Revolving Loan Commitments beyond the
Tranche B Expiration Date.
"TRANCHE B EXPIRATION DATE" means the earlier of (i) the date which is 60
days after the Closing Date and (ii) the expiration of the Plitt Change of
Control Offer in accordance with its terms.
"TRANCHE B REVOLVING LOAN COMMITMENT" means the commitment of a Lender to
make Tranche B Revolving Loans to Company pursuant to subsection 2.1A(ii), and
"TRANCHE B REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders
in the aggregate.
"TRANCHE B REVOLVING LOAN EXPOSURE" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the Tranche B
Revolving Loan Commitments, that Lender's Tranche B Revolving Loan Commitment
and (ii) after the termination of the Tranche B Revolving Loan Commitments, the
sum of the aggregate outstanding principal amount of the Tranche B Revolving
Loans of that Lender.
"TRANCHE B REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(ii).
34
<PAGE>
"TRANCHE B REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E(ii) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Tranche B Revolving Loan
Commitments and Tranche B Revolving Loans of any Lenders, in each case
substantially in the form of Exhibit IV-B annexed hereto, as they may be
------------
amended, supplemented or otherwise modified from time to time.
"TRANSACTION COSTS" means the fees, costs and expenses payable by any
Loan Party on or before the Closing Date in connection with the transactions
contemplated hereby or by the Related Agreements.
"TRANSITION SERVICES AGREEMENT" means that certain Transition Services
Agreement between the Company, Sony Corporation of America and SPE dated as of
May 14, 1998 as such agreement may hereafter be amended, supplemented or
otherwise modified in accordance with subsection 7.13A.
"UNIVERSAL" means the Universal Studios, Inc., a Delaware corporation.
"UNIVERSAL INVESTMENT" has the meaning assigned that term in the Recitals
hereto.
"UNIVERSAL SUBSCRIPTION AGREEMENT" means that certain Amended and
Restated Subscription Agreement dated as of September 30, 1997 by and among
Universal and Company, as such Subscription Agreement may hereafter be amended,
supplemented or otherwise modified in accordance with subsection 7.13A.
"WHOLLY-OWNED RENT EXPENSE" means, for any period, the aggregate amount
of all rents paid or payable by Company and its Subsidiaries on a consolidated
basis (and not included in Interest Expense) during that period under all
Capital Leases and Operating Leases to which Company or any of its Subsidiaries
is a party as lessee excluding, however, an amount equal to the amount of all
rents paid or payable by any non-wholly owned Subsidiary of Company (to the
extent otherwise included in the aggregate amount of all rents paid or payable
by Company and its Subsidiaries) but including, however, an amount equal to the
aggregate maximum liability of Company and its wholly-owned Subsidiaries for
such period in respect of Contingent Obligations of Company or such wholly-owned
Subsidiary in respect of rent paid under Operating Leases of any non-wholly
owned Subsidiary of Company or any Joint Venture of Company or any of its
Subsidiaries (other than Contingent Obligations of Company existing on the
Closing Date in respect of rent paid under the Operating Leases set forth on
Schedule 1.1W).
- --------------
"WHOLLY-OWNED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
wholly-owned Subsidiaries, determined on a consolidated basis in accordance with
GAAP, less Cash of Company and its wholly-owned Subsidiaries plus the aggregate
----
maximum liability of Company and its wholly-owned Subsidiaries in respect of
Contingent Obligations in respect of any Indebtedness of
35
<PAGE>
any Joint Venture of Company or any of its Subsidiaries or any non-wholly-owned
Subsidiary of Company or any of its Subsidiaries (other than Contingent
Obligations of Company existing on the Closing Date in respect of the
Indebtedness set forth on Schedule 1.1Wh).
--------------
"WHOLLY-OWNED TOTAL DEBT INTEREST EXPENSE" means, for any period, total
Interest Expense of Company and its Subsidiaries with respect to Wholly-Owned
Total Debt.
"WORKING CAPITAL" means, as at any date of determination, the excess of
Current Assets over Current Liabilities.
"WORKING CAPITAL ADJUSTMENT" means, for any period on a consolidated
basis, the amount (which may be a negative number) by which Working Capital as
of the beginning of such period exceeds (or is less than) Working Capital as of
the end of such period.
"YEAR 2000 PROBLEMS" means limitations in the capacity or readiness to
handle date information for the Year 1999 or years beginning January 1, 2000 of
any of the hardware, firmware or software systems ("Systems") associated with
information processing and delivery, operations or services (e.g., security and
alarms, elevators, communications, and HVAC) operated by, provided to or
otherwise reasonably necessary to the business or operations of Company and its
Subsidiaries, which limitations could reasonably be expected to have a Material
Adverse Effect.
"YEN" and the sign "Y" means the lawful money of Japan.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
------------------------------------------------------------------------
AGREEMENT.
---------
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii) and (xii) of
subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(iv)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3. Whenever this Agreement
refers to the calculation of amounts in a currency other than U.S. Dollars, the
maintenance of any Indebtedness, Lien, Contingent Obligation or Investment in
such currency shall be permitted, regardless of subsequent fluctuations in
exchange rates, if such Indebtedness, Lien, Contingent Obligation or Investment
was permitted under this Agreement at the date on which it was incurred.
1.3 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
36
<PAGE>
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. An Event of Default shall "continue" or be "continuing" until
such Event of Default has been waived in accordance with subsection 10.6 hereof.
SECTION 2 AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.
-------------------------------------------------
A. REVOLVING LOAN COMMITMENTS.
(i) Tranche A Revolving Loan Commitments. Subject to the terms and
------------------------------------
conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, each Lender hereby severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Tranche A Revolving Loans permitted to be outstanding
from time to time, to lend to Company from time to time during the period
from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date an aggregate amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche A Revolving Loan Commitments then in
effect to be used for the purposes identified in subsection 2.5. The
original amount of each Lender's Tranche A Revolving Loan Commitment is set
forth opposite its name on Schedule 2.1 annexed hereto and the aggregate
------------
original amount of the Tranche A Revolving Loan Commitments is
$750,000,000; provided that the Tranche A Revolving Loan Commitments of
--------
Lenders shall be reduced as provided in subsection 2.4 and adjusted to give
effect to any assignments of the Tranche A Revolving Loan Commitments
pursuant to subsection 10.1B; and provided, further that, in the event that
-------- -------
(i) the Tranche B Revolving Loan Commitments terminate on the Tranche B
Expiration Date and (ii) there are no outstanding Tranche B Revolving Loans
on the Tranche B Expiration Date, after the Tranche B Expiration Date, the
amount of the Tranche A Revolving Loan Commitments may be increased from
time to time up to a maximum aggregate amount of $1,000,000,000 pursuant to
subsection 2.1F. Each Lender's Tranche A Revolving Loan Commitment shall
expire on the Tranche A Revolving Loan Commitment Termination Date and all
Tranche A Revolving Loans and all other amounts owed hereunder with respect
to the Tranche A Revolving Loans and the Tranche A Revolving Loan
Commitments shall be paid in full no later than that date. Amounts
borrowed under this subsection 2.1A(i) may be repaid and reborrowed to, but
excluding the Revolving Loan Commitment Termination Date, at any time and
from time to time without premium or penalty except as provided in
subsection 2.6D.
37
<PAGE>
Anything contained in this Agreement to the contrary notwithstanding,
in no event shall the Total Utilization of Tranche A Revolving Loan
Commitments exceed the Tranche A Revolving Loan Commitments then in effect.
(ii) Tranche B Revolving Loan Commitments. Subject to the terms and
------------------------------------
conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, each Lender hereby severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Tranche B Revolving Loans permitted to be outstanding
from time to time, to lend to Company from time to time during the period
from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date an aggregate amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche B Revolving Loan Commitments then in
effect to be used for the purposes identified in subsection 2.5. The
original amount of each Lender's Tranche B Revolving Loan Commitment is set
forth opposite its name on Schedule 2.1 annexed hereto and the aggregate
------------
original amount of the Tranche B Revolving Loan Commitments is
$250,000,000; provided that the Tranche B Revolving Loan Commitments of
--------
Lenders shall be reduced as provided in subsection 2.4 and adjusted to give
effect to any assignments of the Tranche B Revolving Loan Commitments
pursuant to subsection 10.1B. Notwithstanding anything to the contrary
contained herein, each Lender's Tranche B Revolving Loan Commitment shall
expire on the Tranche B Expiration Date unless on or before the Tranche B
Expiration Date Company shall have (i) paid any fees due and owing with
respect to the Tranche B Revolving Loan Commitments pursuant to subsection
2.3B and (ii) either (a) borrowed Tranche B Revolving Loans pursuant to the
Tranche B Revolving Loan Commitments or (b) delivered the Tranche B
Continuation Notice to Administrative Agent (the "TRANCHE B CONTINUATION
EVENT"). In the event that the Tranche B Continuation Event occurs, each
Lender's Tranche B Revolving Loan Commitment shall expire on the Revolving
Loan Commitment Termination Date and all Tranche B Revolving Loans and all
other amounts owed hereunder with respect to the Tranche B Revolving Loans
and the Tranche B Revolving Loan Commitments shall be paid in full no later
than that date. In the event that the Tranche B Continuation Event occurs,
amounts borrowed under this subsection 2.1A(ii) may be repaid and
reborrowed to, but excluding the Revolving Loan Commitment Termination
Date, at any time and from time to time without premium or penalty except
as provided in subsection 2.6D.
Anything contained in this Agreement to the contrary notwithstanding,
the Tranche B Revolving Loans and the Tranche B Revolving Loan Commitments
shall be subject to the following limitations in the amounts indicated:
(i) from the Closing Date through and including the Tranche B
Expiration Date, in no event shall the Total Utilization of Tranche B
Revolving Loan Commitments at any time exceed (i) the Tranche B
Revolving Loan Commitments then in effect minus (ii) the Offer Reserve
-----
then in effect; and
38
<PAGE>
(ii) after the Tranche B Expiration Date, in no event shall the
Total Utilization of Tranche B Revolving Loan Commitments exceed the
Tranche B Revolving Loan Commitments then in effect.
B. BORROWING MECHANICS. Revolving Loans made on any Funding Date as Base
Rate Loans shall not be subject to any minimum amounts. Revolving Loans made on
any Funding Date as Eurodollar Rate Loans shall be in an aggregate minimum
amount of $1,000,000 and integral multiples of $500,000 in excess of that
amount. Whenever Company desires that Lenders make Revolving Loans, it shall
deliver to Administrative Agent a Notice of Borrowing no later than 11:00 A.M.
(New York time) at least three Business Days in advance of the proposed Funding
Date (in the case of a Eurodollar Rate Loan), or at least one Business Day in
advance of the proposed Funding Date (in the case of a Base Rate Loan). The
Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be
a Business Day), (ii) the amount and type of Loans requested, (iii) in the case
of Loans made on the Closing Date, that such Loans shall be Base Rate Loans,
(iv) in the case of Loans not made on the Closing Date, whether such Loans shall
be Base Rate Loans or Eurodollar Rate Loans, (v) in the case of any Loans
requested to be made as Eurodollar Rate Loans, the initial Interest Period
requested therefor; provided that the initial Funding Date with respect to any
--------
Eurodollar Rate Loans requested to be made hereunder (x) as Tranche A Revolving
Loans shall not be earlier than the date (1) occurring 30 days after the Closing
Date or (2) on which Administrative Agent notifies Company in writing that the
primary syndication of the Tranche A Revolving Loan Commitments and the Tranche
A Revolving Loans has been completed and (y) as Tranche B Revolving Loans shall
not be earlier than the date (1) occurring 30 days after the Tranche B
Expiration Date or (2) on which Administrative Agent notifies Company in writing
that the primary syndication of the Tranche B Revolving Loan Commitments and the
Tranche B Revolving Loans has been completed; provided, further, that, subject
-------- -------
to the preceding proviso, (i) any Tranche A Revolving Loans made as Eurodollar
-------
Rate Loans on or before the date occurring 90 days after the Closing Date shall
not have an Interest Period in excess of one month and (ii) any Tranche B
Revolving Loans made as Eurodollar Rate Loans on or before the date occurring 90
days after the Tranche B Expiration Date shall not have an Interest Period in
excess of one month, (vi) in the case of Tranche A Revolving Loans, that, after
giving effect to the requested Loans, the Total Utilization of Tranche A
Revolving Loans will not exceed the Tranche A Revolving Loan Commitments then in
effect and (vii) (a) in the case of Tranche B Revolving Loans made on or before
the Tranche B Expiration Date, that, after giving effect to the requested Loans,
the Total Utilization of Tranche B Revolving Loan Commitments will not exceed
(i) the Tranche B Revolving Loan Commitments then in effect minus (ii) the Offer
-----
Reserve then in effect and (b) in the case of Tranche B Revolving Loans made
after the Tranche B Expiration Date, that, after giving effect to the requested
Loans, the Total Utilization of Tranche B Revolving Loan Commitments will not
exceed the Tranche B Revolving Loan Commitments then in effect. Revolving Loans
may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans
in the manner provided in subsection 2.2D. In lieu of delivering the above-
described Notice of Borrowing, Company may give Administrative Agent telephonic
notice by the required time of any proposed borrowing under this subsection
2.1B;
39
<PAGE>
provided that such notice shall be promptly confirmed in writing by delivery of
- --------
a Notice of Borrowing to Administrative Agent on or before the applicable
Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to either (i) make a borrowing in accordance
therewith or (ii) pay all amounts due under subsection 2.6D.
C. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be made
by Lenders simultaneously and proportionately to their respective Pro Rata
Shares, it being under stood that no Lender shall be responsible for any default
by any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant
to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent
shall promptly notify each Lender of the proposed borrowing. Each Lender shall
make the amount of its Loan available to Administrative Agent, in same day funds
in Dollars, at the Funding and Payment Office, not later than 11:00 A.M. (New
York time) on the applicable Funding Date. Upon satisfaction or waiver of the
conditions precedent specified in subsections 4.1 (in the case of Loans made on
the Closing Date) and 4.2 (in the case of all Loans), Administrative Agent shall
make the proceeds of such Loans available to Company on the applicable Funding
Date by causing an amount of same day funds in Dollars equal to the proceeds of
all such Loans received by Administrative Agent from Lenders to be credited only
to the account of Company at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may
40
<PAGE>
assume that such Lender has made such amount available to Administrative Agent
on such Funding Date and Administrative Agent may, in its sole discretion, but
shall not be obligated to, make available to Company a corresponding amount on
such Funding Date. If such corresponding amount is not in fact made available
to Administrative Agent by such Lender, Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the customary rate set by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify Company and Company shall immediately pay such
corresponding amount to Administrative Agent together with interest thereon, for
each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the rate payable under this Agreement for Base Rate
Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any
rights that Company may have against any Lender as a result of any default by
such Lender hereunder.
D. THE REGISTER.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from time
to time (the "REGISTER"). The Register shall be available for inspection by
Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(ii) Administrative Agent shall record in the Register the Tranche A
Revolving Loan Commitment and the Tranche B Revolving Loan Commitment and
the Tranche A Revolving Loans and the Tranche B Revolving Loans from time
to time of each Lender and each repayment or prepayment in respect of the
principal amount of the Tranche A Revolving Loans or Tranche B Revolving
Loans of each Lender. Any such recordation shall be conclusive and binding
on Company and each Lender, absent manifest error; provided that failure to
--------
make any such recordation, or any error in such recordation, shall not
affect Company's Obligations in respect of the applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each
Tranche A Revolving Loan and Tranche B Revolving Loan made by it and each
payment in respect thereof. Any such recordation shall be conclusive and
binding on Company, absent manifest error; provided that failure to make
--------
any such recordation, or any error in such recordation, shall not affect
Company's Obligations in respect of the applicable Loans; and provided,
--------
further that in the event of any inconsistency between the Register and any
-------
Lender's records, the recordations in the Register shall govern.
41
<PAGE>
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Company hereby designates Administrative Agent to serve as
Company's agent solely for purposes of maintaining the Register as provided
in this subsection 2.1E, and Company hereby agrees that, to the extent
Administrative Agent serves in such capacity, Administrative Agent and its
officers, directors, employees, agents and affiliates shall constitute
Indemnities for all purposes under subsection 10.3.
E. NOTES. Company shall execute and deliver to each Lender (or to
Administrative Agent for that Lender) on the Closing Date (i) a Tranche A
Revolving Note substantially in the form of Exhibit IV-A annexed hereto to
------------
evidence that Lender's Tranche A Revolving Loans, in the principal amount of
that Lender's Tranche A Revolving Loan Commitment and with other appropriate
insertions and (ii) a Tranche B Revolving Note substantially in the form of
Exhibit IV-B annexed hereto to evidence that Lender's Tranche B Revolving Loans,
- ------------
in the principal amount of that Lender's Tranche B Revolving Loan Commitment and
with other appropriate insertions.
F. OPTIONAL INCREASE OF TRANCHE A REVOLVING LOAN COMMITMENTS.
(i) Proposed Aggregate Tranche A Revolving Loan Commitment
------------------------------------------------------
Increase. In the event that (i) the Tranche B Revolving Loan Commitments
--------
terminate on the Tranche B Expiration Date and (ii) there are no
outstanding Tranche B Revolving Loans on the Tranche B Expiration Date,
after the Tranche B Expiration Date, and subject to the provisions of this
subsection 2.1F, not more than four times in any calendar year, Company may
propose to increase the aggregate amount of the Tranche A Revolving Loan
Commitments by an aggregate amount of not less than $50,000,000 or an
integral multiple of $25,000,000 in excess thereof in the manner set forth
in this subsection 2.1F; provided that (i) the aggregate amount of the
--------
Tranche A Revolving Loan Commitments shall in no event exceed
$1,000,000,000 and (ii) immediately prior to and after giving effect to any
increase in the Tranche A Revolving Loan Commitments, no Potential Event of
Default or Event of Default shall have occurred and be continuing.
42
<PAGE>
(ii) Procedure for Requesting Tranche A Revolving Loan Commitment
------------------------------------------------------------
Increase. In the event that Company desires to elect to increase the
--------
amount of the Tranche A Revolving Loan Commitments, (a) Company may request
any one or more Lenders, selected by Company in its sole discretion, to
elect to increase their respective Tranche A Revolving Loan Commitments
(provided that Company shall, concurrently with such request, notify
---------
Administrative Agent, and Administrative Agent shall thereafter notify all
Lenders, of such request), (b) any Lender requested by Company to do so may
(but is not obligated to) elect to increase its Tranche A Revolving Loan
Commitment and (c) with the written consent of Administrative Agent (such
consent not to be unreasonably withheld), Company may request one or more
Persons meeting the requirements of the definition of "Eligible Assignee"
(each a "PROSPECTIVE LENDER"), by execution of a New Commitment Acceptance
substantially in the form of Exhibit XXIV annexed hereto, to become parties
hereto and undertake Tranche A Revolving Loan Commitments hereunder. To the
extent that no such Lender or Prospective Lender is willing to increase its
Tranche A Revolving Loan Commitment or undertake a Tranche A Revolving Loan
Commitment, as the case may be, the Tranche A Revolving Loan Commitments
shall not be increased. In the event one or more Lenders or Prospective
Lender agrees to increase their Tranche A Revolving Loan Commitments or
undertake a Tranche A Revolving Loan Commitment, as the case may be, (a)
Company shall give written notice to Administrative Agent specifying the
aggregate amount of the increase in the Tranche A Revolving Loan
Commitments, the Tranche A Revolving Loan Commitment amount of each Lender
or Prospective Lender and the proposed effective date of the increase in
the Tranche A Revolving Loan Commitments (it being understood that such
effective date shall not occur until all of the conditions to such increase
set forth in this subsection 2.1F have been satisfied, such date being the
"INCREASE DATE") and (b) each Lender increasing its Tranche A Revolving
Loan Commitment or Prospective Lender undertaking a Tranche A Revolving
Loan Commitment shall execute and deliver to Administrative Agent (x) in
the case of a Lender, an Increased Commitment Acceptance confirming the
amount of the increase to its Tranche A Revolving Loan Commitment, in
substantially the form of Exhibit XXIII annexed hereto, or (y) in the case
-------------
of a Prospective Lender, a New Commitment Acceptance confirming the amount
of the Tranche A Revolving Loan Commitment it is undertaking, in
substantially the form of Exhibit XXIV annexed hereto. If Administrative
------------
Agent deems it appropriate in connection with any such increase, and as a
condition thereto, Company and the affected Lenders and Prospective Lender
shall execute a master assignment and acceptance agreement or other
document mutually acceptable to the parties thereto. Upon the effectiveness
of any increase in the Tranche A Revolving Loan Commitments pursuant to
this subsection 2.1F, (1) Administrative Agent shall revise Schedule 2.1
------------
annexed hereto accordingly and deliver a copy of such revised schedule to
each Lender on the Increase Date and (2) any Lender increasing its Tranche
A Revolving Loan Commitment or any Prospective Lender undertaking a Tranche
A Revolving Loan Commitment shall thereafter be treated as a Lender
hereunder for all purposes as if it had been an original signatory hereto.
43
<PAGE>
(iii) Reallocation of Outstanding Tranche A Revolving Loans. On or
-----------------------------------------------------
prior to each Increase Date, Administrative Agent will calculate the
appropriate adjustments to the Register to reflect the reallocation of
outstanding Tranche A Revolving Loans in accordance with the Pro Rata
Shares of the Lenders (including any new Lenders) after giving effect to
the increase in Tranche A Revolving Loan Commitments, and will prior to
10:00 A.M. (New York City time) on such date (i) notify each Lender and
Company of the amounts of such reallocation of Tranche A Revolving Loans
and (ii) notify each Lender of the amounts, representing the principal
amount of outstanding Tranche A Revolving Loans which are deemed to be made
by such Lender or which shall be repaid to such Lender, which such Lender
will either advance or receive, respectively, as a result of such
reallocation. No later than 12:00 Noon (New York City time) on the date of
receipt of the notice from Administrative Agent described in clause (i) of
the preceding sentence, each Lender which is deemed to make a Tranche A
Revolving Loan as described above shall make the amount of such Tranche A
Revolving Loan available to Administrative Agent in immediately available
funds. Promptly upon receipt of funds from a Lender making a Tranche A
Revolving Loan as set forth above, Administrative Agent shall remit such
amount to the Lender or Lenders entitled to receive such amount, pro rata
in proportion to the amounts to be received by them as determined above.
The making of a Tranche A Revolving Loan by a Lender as set forth above
shall be deemed to be the making of a Tranche A Revolving Loan to Company
on the date such funds are transmitted to Administrative Agent. The receipt
by a Lender of funds as set forth above shall be deemed to be a payment of
Tranche A Revolving Loans by Company on the date such payment is received.
Notwithstanding anything herein to the contrary, if any Eurodollar Rate
Loans are required to be repaid in connection with any reallocation under
this subsection 2.1F, Company shall make any payments required under
subsection 2.6D in connection with such prepayments.
2.2 INTEREST ON THE LOANS.
---------------------
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to, in the case of Loans, the Base Rate or the Adjusted
Eurodollar Rate. The applicable basis for determining the rate of interest with
respect to any Loan shall be selected by Company initially at the time a Notice
of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and
the basis for determining the interest rate with respect to any Loan may be
changed from time to time pursuant to subsection 2.2D. If on any day a Loan is
outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
44
<PAGE>
Subject to the provisions of subsections 2.2E and 2.7, the Loans shall bear
interest through maturity based on (i) the Leverage Ratio at the end of the most
recently concluded Fiscal Quarter or (ii) the Senior Debt Ratings then in effect
as follows:
(a) if a Base Rate Loan, then at the Base Rate then in effect; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted Eurodollar
Rate plus the Applicable Margin per annum then in effect.
----
The "APPLICABLE MARGIN" for each Eurodollar Rate Loan shall be the
percentage per annum set forth below for that type of Loan based upon the
Leverage Ratio for the applicable period:
<TABLE>
<CAPTION>
==================================================================================
Leverage Ratio Applicable Margin
- ----------------------------------------------------------------------------------
<S> <C>
(A) Greater than or equal to 5.0:1.00 1.75%
- ----------------------------------------------------------------------------------
(B) Greater than or equal to 4.5:1.00 but less than 5.0:1.00 1.625%
- ----------------------------------------------------------------------------------
(C) Greater than or equal to 4.0:1.00 but less than 4.5:1.00 1.375%
- ----------------------------------------------------------------------------------
(D) Greater than or equal to 3.5:1.00 but less than 4.0:1.00 1.125%
- ----------------------------------------------------------------------------------
(E) Less than 3.5:1.00 1.000%
==================================================================================
</TABLE>
; provided that, notwithstanding the foregoing, in the event that Company
--------
receives and maintains Senior Debt Ratings at or better than (i) BBB- from S&P
and (ii) Baa3 from Moody's, the "APPLICABLE MARGIN" for each Eurodollar Rate
Loan shall no longer be determined by reference to the Leverage Ratio but shall
instead be the percentage per annum set forth below for that type of Loan based
upon the Senior Debt Ratings then in effect.
<TABLE>
<CAPTION>
==============================================================
Senior Debt Ratings Applicable Margin
- --------------------------------------------------------------
S&P Moody's Eurodollar
Rate Loan
- --------------------------------------------------------------
<S> <C> <C>
BBB- Baa3 0.45%
- --------------------------------------------------------------
BBB Baa2 0.35%
- --------------------------------------------------------------
BBB+ Baa1 0.30%
==============================================================
</TABLE>
45
<PAGE>
; and provided further that if Company receives and maintains Senior Debt
-------- -------
Ratings from S&P and Moody's that do not correspond to the same Applicable
Margin set forth above, the Applicable Margin shall be the higher percentage per
annum set forth above that corresponds to one such Senior Debt Rating; and
provided still further that, notwithstanding anything to the contrary herein,
- -------- ----- -------
until Company delivers the Compliance Certificate required to be delivered
pursuant to subsection 6.1(iii) for the Fiscal Quarter ending August 31, 1998,
the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans shall
not be less than 1.75% per annum.
To the extent the Applicable Margin is determined by reference to the
Leverage Ratio, the Applicable Margin shall be adjusted, to the extent required,
on the date of delivery of each Compliance Certificate delivered pursuant to
subsection 6.1(iii), such adjustment to remain in effect until the next date of
delivery of a Compliance Certificate (and related financial information required
at such time pursuant to subsection 6.1) pursuant to subsection 6.1(iii);
provided that without limiting any Event of Default or Potential Event of
- --------
Default that may result therefrom, in the event Company does not deliver any
Compliance Certificate required pursuant to subsection 6.1 by the date specified
therefor then the Applicable Margin shall not be decreased until and following
the actual date of delivery thereof, and if the Applicable Margin is required to
be increased as a result of the information in such Compliance Certificate, then
such increase shall be retroactive to the date such Compliance Certificate was
originally required to be delivered hereunder.
In the event that Company receives and maintains Senior Debt Ratings at or
better than (i) BBB- from S&P and (ii) Baa3 from Moody's, the Applicable Margin
shall be adjusted, to the extent required, on the date of delivery to
Administrative Agent of an Officer's Certificate of Company certifying as to the
Senior Debt Ratings then in effect. During any period in which the Applicable
Margin is determined by reference to Senior Debt Ratings, Company shall deliver
an Officer's Certificate to Administrative Agent (i) each Fiscal Quarter (as
part of the applicable Compliance Certificate) and (ii) upon any change in such
Senior Debt Ratings; provided that without limiting any Event of Default or
--------
Potential Event of Default that may result therefrom, in the event that Company
does not deliver the Officer's Certificate required pursuant to this paragraph
by the date specified therefor then the Applicable Margin shall not be decreased
until and following the actual date of delivery thereof, and if the Applicable
Margin is required to be increased as a result of the information in such
Officer's Certificate, then such increase shall be retroactive to the date such
Officer's Certificate was required to be delivered pursuant to this paragraph.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three, six or, if generally
available, nine or twelve month period; provided that:
--------
46
<PAGE>
(i) the initial Interest Period for any such Loan shall commence on
the Funding Date in respect of such Loan, in the case of a Loan initially
made as a Eurodollar Rate Loan, or on the date specified in the applicable
Notice of Conversion/Continuation, in the case of a Loan converted to a
Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period shall extend beyond the Revolving Loan
Commitment Termination Date;
(vi) there shall be no more than fifteen Interest Periods
outstanding at any time; and
(vii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan, in the applicable Notice of Borrowing or Notice
of Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i)(a) from and after the earlier to occur of
(1) the date which is 30 days after the Closing Date and (2) the date on which
Administrative Agent notifies Company in writing that the primary syndication of
the Tranche A Revolving Loan Commitments and the Tranche A Revolving Loans has
been completed, to convert at any time all or any part of its outstanding
Tranche A Revolving Loans equal to $1,000,000 and integral multiples of
$1,000,000 in excess of that amount from Base Rate Loans to Eurodollar Rate
Loans; provided that any
--------
47
<PAGE>
outstanding Tranche A Revolving Loan converted from a Base Rate Loan to a
Eurodollar Rate Loan on or before the date occurring 90 days' after the Closing
Date shall not have an Interest Period in excess of one month or (b) from and
after the earlier to occur of (1) the date which is 30 days after the Tranche B
Expiration Date and (2) the date on which Administrative Agent notifies Company
in writing that the primary syndication of the Tranche B Revolving Loan
Commitments and the Tranche B Revolving Loans has been completed, to convert at
any time all or any part of its outstanding Tranche B Revolving Loans equal to
$1,000,000 and integral multiples of $1,000,000 in excess of that amount from
Base Rate Loans to Eurodollar Rate Loans provided that any outstanding Tranche B
Revolving Loan converted from a Base Rate Loan to a Eurodollar Rate Loan on or
before the date occurring 90 days after the Tranche B Expiration Date shall not
have an Interest Period in excess of one month, or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $1,000,000 in
excess of that amount as a Eurodollar Rate Loan; provided that (i) any
--------
outstanding Tranche A Revolving Loan continued as a Eurodollar Rate Loan on or
before the date occurring 90 days after the Closing Date shall not have an
Interest Period in excess of one month and (ii) any outstanding Tranche B
Revolving Loan continued as a Eurodollar Rate Loan on or before the date
occurring 90 days after the Closing Date shall not have an Interest Period in
excess of one month; or (iii) subject to the payment of all amounts due under
subsection 2.6D, to convert a Eurodollar Rate Loan into a Base Rate Loan at any
time.
Company shall deliver a Notice of Conversion/ Continuation to
Administrative Agent no later than 11:00 A.M. (New York time) of the proposed
conversion date (in the case of a conversion to a Base Rate Loan) or at least
three Business Days in advance of the proposed conversion/continuation date (in
the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A
Notice of Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount
and type of the Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case
of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Company may give Administrative Agent telephonic notice by the required time of
any proposed conversion/continuation under this subsection 2.2D; provided that
--------
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
48
<PAGE>
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable Insolvency Laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to Base Rate Loans. Payment or
acceptance of the increased rates of interest provided for in this subsection
2.2E is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed (i)
in the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as
the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of
a 360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, (i) the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan
shall be included, and (ii) the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of
such Base Rate Loan to such Eurodollar Rate Loan shall be excluded; provided
--------
that if a Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Loan.
2.3 FEES.
----
A. COMMITMENT FEES.
Company agrees to pay to Administrative Agent, for distribution (i) to each
Lender having a Tranche A Revolving Loan Commitment in proportion to that
Lender's Pro Rata Share, commitment fees for the period from and including the
Closing Date to and excluding the Revolving Loan Commitment Termination Date
equal to (a) the average of the daily excess of the Tranche A Revolving Loan
Commitments over the Total Utilization of Tranche A Revolving Loan Commitments
multiplied by (b) 0.25% per annum (the "COMMITMENT FEE PERCENTAGE") and (ii)
- -------------
each Lender having a Tranche B Revolving Loan Commitment in proportion to that
Lender's Pro Rata Share, commitment fees for the period from and including the
Tranche B Activation Date to and excluding the Revolving Loan Commitment
Termination Date equal to (a) the average of
49
<PAGE>
the daily excess of the Tranche B Revolving Loan Commitments over the Total
Utilization of Tranche B Revolving Loan Commitments multiplied by (b) the
-------------
Commitment Fee Percentage; provided that if the Leverage Ratio is less than
--------
3.5:1.00, the Commitment Fee Percentage shall be reduced to 0.20% per annum; and
provided further that if Company receives and maintains Senior Debt Ratings at
- --------
or better than (i) BBB- from S&P and (ii) Baa3 from Moody's, the Commitment Fee
Percentage shall be the percentage per annum set forth below for the applicable
periods:
<TABLE>
<CAPTION>
================================================================================
Senior Debt Ratings Commitment Fee
Percentage
- ----------------------------------------------
S&P Moody's
- --------------------------------------------------------------------------------
<S> <C> <C>
BBB- Baa3 0.15%
- --------------------------------------------------------------------------------
BBB Baa2 0.12%
- --------------------------------------------------------------------------------
BBB+ Baa1 0.10%
================================================================================
</TABLE>
; provided that, if Company receives and maintains Senior Debt Ratings from S&P
--------
and Moody's that do not correspond to the same Commitment Fee Percentage set
forth above, the Commitment Fee Percentage shall be the higher percentage per
annum set forth above that corresponds to one such Senior Debt Rating.
Such commitment fees to be calculated on the basis of a 365-day or 366-day
year and the actual number of days elapsed and to be payable quarterly in
arrears on January 15, April 15, July 15 and October 15 of each year, commencing
on the first such date to occur after the Closing Date (in the case of the
Tranche A Revolving Loan Commitments) and the Tranche B Activation Date (in the
case of the Tranche B Revolving Loan Commitments), and on the Revolving Loan
Commitment Termination Date. The Commitment Fee Percentage shall be
automatically adjusted, to the extent applicable, upon any corresponding
adjustment in the Applicable Margin pursuant to subsection 2.2A.
B. OTHER FEES. Company agrees to pay to (i) Administrative Agent such
other fees in the amounts and at the times separately agreed upon between
Company and Administrative Agent, and (ii) each Co-Syndication Agent such other
fees in the amounts and at the time separately agreed upon between Company and
such Co-Syndication Agent.
2.4 PREPAYMENTS AND REDUCTIONS IN COMMITMENTS OF REVOLVING LOANS; GENERAL
---------------------------------------------------------------------
PROVISIONS REGARDING PAYMENTS; TERMINATION OF COMMITMENTS.
---------------------------------------------------------
A. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOANS COMMITMENTS.
50
<PAGE>
(i) Voluntary Prepayments. Company may, upon not less than one
---------------------
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days' prior written or telephonic notice, in the
case of Eurodollar Rate Loans, in each case given to Administrative Agent
by 11:00 A.M. (New York City time) on the date required and, if given by
telephone, promptly confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay any Loans on any Business Day in whole or in part
in an aggregate minimum amount of $1,000,000 and integral multiples of
$1,000,000 in excess of that amount; provided, however, that a Eurodollar
-------- -------
Rate Loan may only be prepaid on the expiration of the Interest Period
applicable thereto unless Company complies with subsection 2.6D with
respect to any breakage costs resulting from such prepayment being made on
a date prior to the expiration of the applicable Interest Period. Notice
of prepayment having been given as aforesaid, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment shall be
applied as specified in subsection 2.4A(iv).
(ii) Voluntary Reductions of Commitments. Company may, upon not
-----------------------------------
less than three Business Days' prior written or telephonic notice confirmed
in writing to Administrative Agent (which original written or telephonic
notice Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate in
whole or permanently reduce in part, without premium or penalty, (a) the
Tranche A Revolving Loan Commitments in an amount up to the amount by which
the Tranche A Revolving Loan Commitments exceed the Total Utilization of
Tranche A Revolving Loan Commitments at the time of such proposed
termination or reduction after giving effect to any payments or prepayments
made on the date of such termination or reduction and (b) (1) from the
Closing Date through and including the Tranche B Expiration Date, the
Tranche B Revolving Loan Commitments in an amount up to the amount by which
the Tranche B Revolving Loan Commitments exceed the sum of (A) the Total
Utilization of Tranche B Revolving Loan Commitments at the time of such
proposed termination or reduction after giving effect to any payments or
prepayments made on the date of such termination or reduction plus (B) the
----
Offer Reserve at the time of such proposed termination or reduction and (2)
after the Tranche B Expiration Date, the Tranche B Revolving Loan
Commitments, if any, in an amount up to the amount by which the Tranche B
Revolving Loan Commitments exceed the Total Utilization of Tranche B
Revolving Loan Commitments at the time of such proposed termination or
reduction after giving effect to any payments or prepayments made on the
date of such termination or reduction; provided that any such partial
--------
reduction of the Revolving Loan Commitments shall be in an aggregate
minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess
of that amount. Company's notice to Administrative Agent shall designate
the date (which shall be a Business Day) of such termination or reduction
and the amount of any partial reduction, and such termination or reduction
of the Tranche A Revolving Loan Commitments or the Tranche B Revolving Loan
51
<PAGE>
Commitments, as the case may be, shall be effective on the date specified
in Company's notice and shall reduce the Tranche A Revolving Loan
Commitment or the Tranche B Revolving Loan Commitment, as the case may be,
of each Lender proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments and Mandatory Reductions of Commitments.
-------------------------------------------------------------
The Loans shall be prepaid and/or the Commitments shall be permanently
reduced in the amounts and under the circumstances set forth below, all
such prepayments and/or reductions to be applied as set forth below or as
more specifically provided in subsection 2.4A(iv):
(a) Prepayments and Reductions From Net Asset Sale Proceeds. No
-------------------------------------------------------
later than the first Business Day following the date of receipt by
Company or any of its Subsidiaries of any Net Asset Sale Proceeds in
respect of any Asset Sale, Company shall prepay the Loans and the
Commitments shall be permanently reduced in an aggregate amount equal
to such Net Asset Sale Proceeds; provided, however, that so long as no
-------- -------
Event of Default or Potential Event of Default has occurred and is
continuing, no (1) such reduction shall be required to the extent
Company or such Subsidiary receives less than $25,000,000 in proceeds
from the sale of any asset in any single transaction or a related
series of transactions, (2) such prepayment or reduction shall be
required if Company or such Subsidiary receives such Net Asset Sale
Proceeds in connection with the sale of assets required by the terms
of the DOJ Settlement to the extent Company determines to utilize such
Net Asset Sale Proceeds to purchase equipment or other productive
assets, and Company so utilizes or contractually commits to utilize
such Net Asset Sale Proceeds within 360 days of the receipt thereof,
and (3) such prepayment or reduction shall be required to the extent
Company determines to utilize such Net Asset Sale Proceeds to purchase
equipment or other productive assets, and Company so utilizes or
contractually commits to utilize such Net Asset Sale Proceeds within
180 days of the receipt thereof.
(b) Prepayments and Reductions from Net Insurance/Condemnation
----------------------------------------------------------
Proceeds. No later than the second Business Day following the date of
--------
receipt by Administrative Agent or by Company or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds in excess of
$5,000,000 (determined with respect to each occurrence or event giving
rise to such Net Insurance/Condemnation Proceeds), Company shall
prepay the Loans and the Commitments shall be permanently reduced in
an aggregate amount equal to the amount of such Net
Insurance/Condemnation Proceeds; provided, however, that so long as no
-------- -------
Event of Default or Potential Event of Default has occurred and is
continuing, no such prepayment and reduction shall be required to the
extent Company determines to utilize such Net Insurance/Condemnation
Proceeds to (i) repair, restore or replace the assets in respect of
which such Net
52
<PAGE>
Insurance/Condemnation Proceeds were received or (ii) purchase
equipment or other productive assets, and Company so utilizes or
contractually commits to utilize such Net Insurance/Condemnation
Proceeds within 180 days of the receipt thereof.
(c) Prepayments and Reductions Due to Issuance of Debt
--------------------------------------------------
Securities. On the date of receipt by Company or any of its
----------
Subsidiaries of the Cash proceeds (any such proceeds, net of
underwriting discounts and commissions and other reasonable costs and
expenses associated therewith, including reasonable legal fees and
expenses, being "NET DEBT SECURITIES PROCEEDS") from the issuance of
debt Securities of Company or any of its Subsidiaries after the
Closing Date (other than the proceeds of Indebtedness permitted
pursuant to subsections 7.1(i), 7.1(ii), 7.1(iii), 7.1(iv), 7.1(v),
7.1(vi), 7.1(vii), 7.1(viii), 7.1(x) and 7.1(xii)), Company shall
prepay the Loans and the Commitments shall be permanently reduced in
an aggregate amount equal to 100% of such Net Debt Securities
Proceeds; provided, however that if (x) Company issues unsecured debt
-------- -------
Securities, to the extent the Net Debt Securities Proceeds received by
Company are applied by Company or Plitt to repurchase the Plitt Notes
or pay premiums, fees or expenses incurred by Company or Plitt in
connection with repurchases of the Plitt Notes, then no such payment
or reduction shall be required or (y) if Company issues unsecured debt
Securities and the Leverage Ratio is less than 3.5:1.00 at the time of
such issuance after giving effect to such issuance, then no such
payment or reduction shall be required.
(d) Prepayments from Excess Cash Flow. In the event that there
---------------------------------
shall be Excess Cash Flow of Company and its Subsidiaries for any
Fiscal Year (commencing with the Fiscal Year beginning March 1, 1999),
Company shall, no later than 120 days after the end of such Fiscal
Year, prepay the Loans (but the Commitments shall not be permanently
reduced) in an aggregate amount equal to 50% of such Excess Cash Flow.
(e) Prepayments from Available Cash and Cash Equivalents. In
----------------------------------------------------
the event that Company and its Subsidiaries have on any date (the
"BALANCE DATE") an amount in Cash and Cash Equivalents in excess of
$20,000,000 (such amount, the "AVAILABLE CASH"), Company shall, no
later than 5 days after the Balance Date, prepay the Loans (but the
Commitments shall not be permanently reduced) in an aggregate amount
equal to the Available Cash.
(f) Calculations of Net Proceeds Amounts; Additional Prepayments
------------------------------------------------------------
and Reductions Based on Subsequent Calculations. Concurrently with
-----------------------------------------------
any prepayment of the Loans and/or reduction of the Commitments
pursuant to subsections 2.4B(iii)(a)-(e), Company shall deliver to
Administrative Agent an Officer's Certificate demonstrating the
calculation of the amount (the "NET PROCEEDS
53
<PAGE>
AMOUNT") of the applicable Net Asset Sale Proceeds, the applicable
Net Insurance/Condemnation Proceeds, the applicable Net Debt
Securities Proceeds (as such term is defined in subsection
2.4B(iii)(c)), the Available Cash or the applicable Excess Cash Flow
that gave rise to such prepayment and/or reduction. In the event that
Company shall subsequently determine that the actual Net Proceeds
Amount was greater than the amount set forth in such Officer's
Certificate, Company shall promptly make an additional prepayment of
the Loans (and the Commitments shall be permanently reduced) in an
amount equal to the amount of such excess, and Company shall
concurrently therewith deliver to Administrative Agent an Officer's
Certificate demonstrating the derivation of the additional Net
Proceeds Amount resulting in such excess.
(g) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments. Company shall from time to time prepay (1) the
----------------
Tranche A Revolving Loans to the extent necessary to give effect to
the limitations set forth in the second paragraph of subsection
2.1A(i) and (2) the Tranche B Revolving Loans to the extent necessary
to give effect to the limitations set forth in the second paragraph of
subsection 2.1A(ii).
(iv) Application of Prepayments and Unscheduled Reductions of
--------------------------------------------------------
Commitments.
-----------
(a) Application of Voluntary Prepayments by Type of Loan;
-----------------------------------------------------
Application of Voluntary Reductions of the Commitments. Any voluntary
-------------------------------------------------------
prepayments pursuant to subsection 2.4A(i) shall be applied as
specified by Company in the applicable notice of prepayment; provided
--------
that in the event Company fails to specify the Loans to which any such
prepayment shall be applied, such prepayment shall be applied first to
-----
repay outstanding Revolving Loans to the full extent thereof and
second to cash collateralize any outstanding Letters of Credit.
------
Notwithstanding the preceding sentence, (1) any voluntary prepayments
of the Revolving Loans pursuant to subsection 2.4A(i) shall be applied
to prepay the Tranche A Revolving Loans and the Tranche B Revolving
Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and (2) any voluntary
reductions of the Revolving Loan Commitments shall be applied to
reduce the Tranche A Revolving Loan Commitments and the Tranche B
Revolving Loan Commitments on a pro rata basis (in accordance with the
respective amounts thereof as of the date of such reduction).
(b) Application of Prepayments to Base Rate Loans and
-------------------------------------------------
Eurodollar Rate Loans. Any prepayment of the Revolving Loans shall
---------------------
be applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in a manner which minimizes the
amount of any payments required to be made by Company pursuant to
subsection 2.6D.
54
<PAGE>
(c) Application of Mandatory Prepayments by Type of Loans. Any
-----------------------------------------------------
amount required to be applied as a mandatory prepayment of the Loans
and/or a reduction of the Commitments pursuant to subsections
2.4A(iii)(a)-(e) shall be applied first to permanently reduce the
-----
Revolving Loan Commitments and then, to the extent that the Revolving
----
Loan Commitments are less than the Letter of Credit Usage, cash
collateralize Letters of Credit outstanding.
(d) Application of Mandatory Prepayments and Permanent
--------------------------------------------------
Reductions of Revolving Loans by Type of Loans. Any mandatory
----------------------------------------------
prepayments of the Revolving Loans pursuant to subsection 2.4A(iii)
shall be applied to prepay the Tranche A Revolving Loans and the
Tranche B Revolving Loans on a pro rata basis in accordance with the
respective outstanding principal amounts thereof. Any mandatory
permanent reductions of the Revolving Loan Commitments pursuant to
subsection 2.4A(iii) shall be applied to permanently reduce the
Tranche A Revolving Loan Commitments and the Tranche B Revolving Loan
Commitments on a pro rata basis in accordance with the respective
amounts thereof as of the date of such reduction.
B. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of
--------------------------
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York time) on the date
due at the Funding and Payment Office for the account of Lenders. Funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day. In
order to effect timely payment of any interest, fees, commissions or other
amounts due hereunder, Company hereby authorizes Administrative Agent to
charge its accounts with Administrative Agent to make Loans for its own
account.
(ii) Application of Payments to Principal and Interest. Except as
-------------------------------------------------
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to Lenders' respective Pro
Rata Shares of such Loans; provided that payments of interest in respect of
--------
Loans which are Base Rate Loans shall be apportioned
55
<PAGE>
ratably among Lenders in proportion to the average daily amount of such
Base Rate Loans of each Lender outstanding during the period in which such
interest shall have accrued. Administrative Agent shall promptly distribute
to each Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request, its Pro Rata Share of all such payments received by
Administrative Agent in respect of Loans and the commitment fees of such
Lender when received by Administrative Agent pursuant to subsection 2.3.
Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if,
pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing
-------------------
of any Note held by it, or any part thereof (other than by granting
participations therein), Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made thereon
and of the date to which interest thereon has been paid; provided that the
--------
failure to make (or any error in the making of) a notation of any Loan made
under such Note shall not limit or otherwise affect the obligations of
Company hereunder or under such Note with respect to any Loan or any
payments of principal or interest on such Note.
C. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER GUARANTY.
(i) Application of Proceeds of Collateral. Except as provided in
-------------------------------------
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral under any Collateral Document upon the occurrence and during the
continuation of an Event of Default or Potential Event of Default, may, in
the discretion of Administrative Agent, be held by Administrative Agent as
Collateral for, and/or (then or at any time thereafter) applied in full or
in part by Administrative Agent against, the applicable Secured Obligations
(as defined in such Collateral Document) in the following order of
priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or
56
<PAGE>
incurred by Administrative Agent in connection therewith, and all
amounts for which Administrative Agent is entitled to indemnification
under such Collateral Document and all advances made by Administrative
Agent thereunder for the account of the applicable Loan Party, and to
the payment of all costs and expenses paid or incurred by
Administrative Agent in connection with the exercise of any right or
remedy under such Collateral Document, all in accordance with the
terms of this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
(ii) Application of Payments Under Guaranty. All payments
--------------------------------------
received by Administrative Agent under the Guaranty shall be applied
promptly from time to time by Administrative Agent in the following order
of priority:
(a) To the payment of the costs and expenses of any collection
or other realization under the Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and the Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in the
Guaranty) for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to
the payment to the applicable Subsidiary Guarantor or to whosoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
2.5 USE OF PROCEEDS.
---------------
A. LOANS. The proceeds of any Loans (a) made on the Closing Date shall
be applied by Company to (i) finance the IMAX Transaction, (ii) refinance the
Existing Cineplex Credit Agreement, (iii) finance the Sony Debt Repayment, (iv)
finance the SPE Dividend and (v) pay Transaction Costs and (b) made after the
Closing Date shall be applied by Company to (i) repurchase Plitt Notes pursuant
to the Plitt Change of Control Offer, (ii) to finance Permitted Investments and
Permitted Acquisitions, and (iii) to provide for working capital and/or other
general purposes of Company and its Subsidiaries.
57
<PAGE>
B. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and such Lenders that the circumstances
giving rise to such notice no longer exist and (ii) any Notice of Borrowing or
Notice of Conversion/Continuation given by Company with respect to the Loans in
respect of which such determination was made shall be deemed to be rescinded by
Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the interbank Eurodollar market or the position
of such Lender in that market, then, and in any such event, such Lender shall be
an "AFFECTED
58
<PAGE>
LENDER" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company and Administrative Agent of such determination
(which notice Administrative Agent shall promptly transmit to each other
Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as,
or to convert Loans to, Eurodollar Rate Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED
LOANS"), shall be terminated at the earlier to occur of the expiration of the
Interest Period then in effect with respect to the Affected Loans or when
required by law, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the foregoing,
to the extent a determination by an Affected Lender as described above relates
to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, Company shall have the
option, subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by giving
notice (by telefacsimile or by telephone confirmed in writing) to Administrative
Agent of such rescission on the date on which the Affected Lender gives notice
of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation or
a telephonic request for conversion or continuation, (ii) if any prepayment or
other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company, or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms of this Agreement.
59
<PAGE>
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
- -------- -------
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
----------------------------------------
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
Covered Tax with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending office)
of principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special
60
<PAGE>
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder; provided that a Lender shall not be entitled to avail itself of the
--------
benefit of this subsection 2.7A to the extent that any such increased cost or
reduction in amounts was incurred more than twenty-four months prior to the time
it gives notice to Company (as provided in the next sentence) of the relevant
circumstance, unless such circumstance arose or became applicable
retrospectively, in which case such Lender shall not be limited to such twenty-
four month period so long as such Lender has given such notice to Company no
later than twenty-four months from the time circumstance became applicable to
such Lender. Such Lender shall deliver to Company (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Lender under this subsection
2.7A, which statement shall be conclusive and binding upon all parties hereto
absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company
-----------------------------
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Covered Tax imposed, levied,
collected, withheld or assessed by or within the United States of America
or any political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on behalf of
Company or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any
Covered Tax from any sum
61
<PAGE>
paid or payable by Company to Administrative Agent or any Lender under any
of the Loan Documents:
(a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company
becomes aware of it;
(b) Company shall pay any such Covered Tax before the date on
which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Company) for its own account or (if
that liability is imposed on Administrative Agent or such Lender, as
the case may be) on behalf of and in the name of Administrative Agent
or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction or withholding with respect to such Covered Tax is required
shall be increased to the extent necessary to ensure that, after the
making of that deduction or withholding, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction or withholding
been required or made; and
(d) within 30 days after the due date of payment of any such
Covered Tax which it is required by clause (b) above to pay, Company
shall deliver to Administrative Agent evidence reasonably satisfactory
to the Administrative Agent of such deduction, withholding or payment
and of the remittance of such Covered Tax to the relevant taxing or
other authority;
provided that Company will not be required to pay any additional amount to
--------
Administrative Agent or any Lender under clause (c) above with respect to
the deduction, withholding or payment of any Covered Tax or under clause
(i) of Section 2.7A or clause (i) of Section 3.6 in respect of any Covered
Tax unless, after the date hereof (in the case of each Lender listed on the
signature pages hereof) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each other
Lender) there has been a Change in Law which shall result in a required
increase in the rate of such deduction, withholding or payment with respect
to such Covered Tax from that in effect at the date of this Agreement or at
the date of such Assignment Agreement, as the case may be, in respect of
payments to such Lender or its applicable lending office on such date.
(iii) Evidence of Exemption from Withholding Taxes.
--------------------------------------------
(a) Each Lender that is not a United States Person within the
meaning of Section 7701(a)(30) of the Internal Revenue Code (for
purposes of this subsection 2.7B(iii), a "NON-US LENDER") shall
deliver to Administrative Agent and Company, on or prior to the
Closing Date (in the case of each Lender listed
62
<PAGE>
on the signature pages hereof) or on or prior to the date of the
Assignment Agreement pursuant to which it becomes a Lender (in the
case of each other Lender), and at such other times as may be
necessary in the determination of Company or Administrative Agent
(each in the reasonable exercise of its discretion), (X) two original
copies of Internal Revenue Service Form 1001 or 4224 (or any successor
forms), properly completed and duly executed by such Lender, together
with any other form, certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder,
in each case establishing that such Lender is not subject to any
deduction or withholding of United States federal income tax with
respect to any payments to such Lender of principal, interest, fees or
other amounts payable under any of the Loan Documents or (Y) if such
Lender is not a "bank" or other Person described in Section 881(c)(3)
of the Internal Revenue Code and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (X) above, a
Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8 (or any successor form), properly
completed and duly executed by such Lender, together with any other
form, certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder, in each
case establishing that such Lender is not subject to any deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of interest payable under any of the Loan
Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall (1) promptly deliver to Administrative Agent and Company,
two new original copies of Internal Revenue Service Form 1001 or 4224,
or a Certificate re Non-Bank Status and two original copies of
Internal Revenue Service Form W-8, as the case may be, properly
completed and duly executed by such Lender, together with any other
form, certificate or statement of exemption confirming or establishing
that such Lender is not subject to any deduction or withholding of
United States federal income tax with respect to payments to such
Lender under the Loan Documents or (2) notify Administrative Agent and
Company of its inability to deliver any such forms, certificates or
other evidence.
(c) Company shall not be required to pay any additional amount to
any Lender in respect of any Covered Tax under clause (c) of
subsection 2.7B(ii) or clause (i) of subsection 2.7A or clause (i) of
Section 3.6, (X) in the case of a Non-U.S. Lender, if (1) such Lender
shall have failed to satisfy the requirements of clause (a) or (b) of
this subsection 2.7B(iii) or (2) to the extent such amount results
63
<PAGE>
from any Lender being treated as a "conduit entity" within the
meaning of Treasury Regulation Section 1.881-3 or any successor
provision thereto or (Y) in the case of any Lender, to the extent that
such Covered Tax would not have been required to be imposed, deducted
or withheld but for the failure of such Lender to comply with any
certification, information or other reporting requirement as to
nationality, residence or identity of such Lender which requirement
such Lender would otherwise be able to comply with on the date
requested by the Company, provided that at least 60 days prior to the
--------
first payment date with respect to which the Company shall apply this
clause (Y), Company shall have notified such Lender, in writing, that
such Lender will be required to comply with such certification,
information or other reporting requirement and provided further that
--------
such compliance is expressly required by law, statute, treaty, ruling
regulation or administrative practice of jurisdiction imposing such
Covered Tax as a necessary precondition to reduction in the rate of,
or exemption from, such Covered Tax; provided that, if such Lender
--------
shall have satisfied the requirements of subsection 2.7B(iii) on the
Closing Date (in the case of each Lender listed on the signature pages
hereof) or on the date of the Assignment Agreement or date of request
by Company pursuant to which it became a Lender (in the case of each
other Lender) and thereafter the requirements of subsection
2.7(iii)(b), nothing in this subsection 2.7B(iii)(c) shall relieve
Company of its obligation to pay any additional amounts pursuant to
clause (c) of subsection 2.7B(ii) in the event that, as a result of
any Change in Law occurring after the date hereof (in the case of each
Lender listed on the signature pages hereof) or after the date of the
Assignment Agreement pursuant to which such Lender becomes a Lender
(in the case of each other Lender), such Lender is no longer properly
entitled to deliver any forms, certificates, statements or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in subsection 2.7B(iii)(a)
or clause (i) of subsection 3.6.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have reasonably
determined that the adoption, effectiveness, phase-in or applicability after the
date hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans, Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit, in the case of any Lender to a level below that which such Lender or
such controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard
64
<PAGE>
to capital adequacy), then from time to time, within five Business Days after
receipt by Company from such Lender of the officer's certificate referred to in
the next sentence, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to Company (with a
copy to Administrative Agent) an officer's certificate, setting forth in
reasonable detail the basis of the calculation of such additional amounts, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive any payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
--------
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office as described
in clause (i) above. An officer's certificate as to the amount of any such
expenses payable by Company pursuant to this subsection 2.8 (setting forth in
reasonable detail the basis for requesting such amount) submitted by such Lender
or Issuing Lender to Company (with a copy to Administrative Agent) shall be
conclusive absent manifest error.
In the event that any such Lender does not make, issue, fund or maintain
such Commitments, Loans or Letters of Credit through such other lending or
letter of credit office or take such other measures, as the case may be, then
Company shall have the right, but not the obligation, upon notice to such Lender
and Administrative Agent, either to terminate such Lender's commitments and
prepay (without premium or penalty) the then outstanding Loans, Letters of
Credit, together with all unpaid interest and fees in respect thereof, and all
other Obligations owed to such Lender or to cause such lender to transfer and
assign (without
65
<PAGE>
representation or warranty) the then outstanding Commitments, Loans, Letters of
Credit and other Obligations owed to such Lender at a purchase price that is no
less than the aggregate amount of such Lender's Loans and its Pro Rata Share of
outstanding Letters of Credit, together with all accrued and unpaid interest and
fees in respect thereof, plus all other Obligations, owing to such Lender, to an
Eligible Assignee, in accordance with the provisions of subsection 10.1B(i) and
(ii), that is able to make, issue, fund and maintain such Commitments, Loans or
Letters of Credit through a lending or letter of credit office that will avoid
the need for, or minimize the amount of, additional amounts or other payments
which would otherwise be required to be paid by Company under Section 2.7 or
Section 3.6.
2.9 GUARANTOR DESIGNATED SENIOR INDEBTEDNESS.
----------------------------------------
Without in any way limiting whether all or any portion of such Obligations
are Indebtedness (as defined in the Plitt Indenture) under the New Bank Credit
Facility (as defined in the Plitt Indenture), the Obligations of the Company
hereunder and under other Loan Documents are hereby designated "Guarantor
Designated Senior Indebtedness" (as such term is defined in the Plitt
Indenture) by Company.
SECTION 3 LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
----------------------------------------------------------------------
THEREIN.
-------
A. LETTERS OF CREDIT. In addition to Company requesting that Lenders
having a Tranche A Revolving Loan Commitment make Tranche A Revolving Loans
pursuant to subsection 2.1A(i), Company may request, in accordance with the
provisions of this subsection 3.1, from time to time during the period from the
Closing Date to the date which is 30 days prior to the Revolving Loan Commitment
Termination Date, that one or more Lenders having a Tranche A Revolving Loan
Commitment issue Letters of Credit for the account of Company for the purposes
specified in the definitions of Standby Letters of Credit and Commercial Letters
of Credit. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Company herein set forth,
any one or more Lenders having a Tranche A Revolving Loan Commitment may, but
(except as provided in subsection 3.1B(ii)) shall not be obligated to, issue
such Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
- --------
shall issue):
(i) (a) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Tranche A Revolving Loan Commitments
would exceed the Tranche A Revolving Loan Commitments then in effect;
66
<PAGE>
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $50,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) five Business Days prior to the Revolving Loan
Commitment Termination Date and (b) except with respect to an Existing
Letter of Credit, the date which is one year from the date of issuance of
such Letter of Credit; provided that the immediately preceding clause (b)
--------
shall not prevent any Issuing Lender from agreeing that such Standby Letter
of Credit will automatically be extended for one or more successive periods
not to exceed one year each unless such Issuing Lender elects not to extend
for any such additional period; and provided, further that such Issuing
-------- -------
Lender shall elect not to extend such Standby Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing (and has
not been waived in accordance with subsection 10.6) at the time such
Issuing Lender must elect whether or not to allow such extension;
(iv) any Commercial Letter of Credit having an expiration date (a)
later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;
(v) any Letter of Credit denominated in a currency other than (t)
Dollars, (u) Canadian Dollars, (v) Marks, (w) Pesetas, (x) Yen, (y) Lira or
(z) Euros; or
(vi) any Letter of Credit to be issued at a tenor other than on a
sight basis.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of a
------------------
Letter of Credit, it shall deliver to Administrative Agent a Request for
Issuance of Letter of Credit substantially in the form of Exhibit III
-----------
annexed hereto no later than 11:00 A.M. (New York time) at least three
Business Days, or such shorter period as may be agreed to by the Issuing
Lender in any particular instance, in advance of the proposed date of
issuance. The Request for Issuance of Letter of Credit shall specify (a)
the proposed date of issuance (which shall be a Business Day), (b) whether
the Letter of Credit is to be a Standby Letter of Credit or a Commercial
Letter of Credit, (c) the face amount of the Letter of Credit, (d) the
expiration date of the Letter of Credit, (e) the name and address of the
beneficiary, (f) that, after giving effect to the requested Letter of
Credit, the Total Utilization of Tranche A Revolving Loan Commitments will
not exceed the Tranche A Revolving Loan Commitments then in effect, (g) in
the case of a Letter of Credit which Company requests to be denominated in
a currency other than Dollars, the currency in which Company requests such
Letter of Credit to be issued and (h) either the verbatim text of the
proposed Letter of Credit or the proposed terms and conditions thereof,
including
67
<PAGE>
a precise description of any documents to be presented by the beneficiary
which, if presented by the beneficiary in conformity with the terms and
conditions of the Letter of Credit prior to the expiration date of the
Letter of Credit, would require the Issuing Lender to make payment under
the Letter of Credit; provided that the Issuing Lender, in its reasonable
--------
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents.
Company shall notify the applicable Issuing Lender (and Administrative
Agent, if Administrative Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which it is
required to certify in the applicable Request for Issuance of Letter of Credit
is no longer true and correct as of the proposed date of issuance of such Letter
of Credit, and upon the issuance of any Letter of Credit it shall be deemed to
have re-certified, as of the date of such issuance, as to the matters to which
it is required to certify in the applicable Request for Issuance of Letter of
Credit.
(ii) Determination of Issuing Lender. Upon receipt by
-------------------------------
Administrative Agent of a Request for Issuance of Letter of Credit pursuant
to subsection 3.1B(i) requesting the issuance of a Letter of Credit, in the
event Administrative Agent elects to issue such Letter of Credit,
Administrative Agent shall promptly so notify Company, and Administrative
Agent shall be the Issuing Lender with respect thereto. In the event that
Administrative Agent, in its sole discretion, elects not to issue such
Letter of Credit, Administrative Agent shall promptly so notify Company,
whereupon Company may request any other Lender having a Tranche A Revolving
Loan Commitment to issue such Letter of Credit by delivering to such Lender
a copy of the applicable Request for Issuance of Letter of Credit. Any
Lender so requested to issue such Letter of Credit shall promptly notify
Company and Administrative Agent whether or not, in its sole discretion, it
has elected to issue such Letter of Credit, and any such Lender which so
elects to issue such Letter of Credit shall be the Issuing Lender with
respect thereto. In the event that all other Lenders having a Tranche A
Revolving Loan Commitment shall have declined to issue such Letter of
Credit, notwithstanding the prior election of Administrative Agent not to
issue such Letter of Credit, Administrative Agent shall be obligated to
issue such Letter of Credit and shall be the Issuing Lender with respect
thereto, notwithstanding the fact that the Letter of Credit Usage with
respect to such Letter of Credit and with respect to all other Letters of
Credit issued by Administrative Agent, when aggregated with Administrative
Agent's outstanding Tranche A Revolving Loans, may exceed Administrative
Agent's Tranche A Revolving Loan Commitment then in effect; provided that
--------
Administrative Agent shall not be obligated to issue any Letter of Credit
denominated in a foreign currency which in the reasonable judgment of
Administrative Agent is not readily and freely available.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall
68
<PAGE>
issue the requested Letter of Credit in accordance with the Issuing
Lender's standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Standby
-----------------------
Letter of Credit the applicable Issuing Lender shall promptly notify
Administrative Agent and each other Lender having a Tranche A Revolving
Loan Commitment of such issuance, which notice shall be accompanied by a
copy of such Standby Letter of Credit. Promptly after receipt of such
notice (or, if Administrative Agent is the Issuing Lender, together with
such notice), Administrative Agent shall notify each Lender having a
Tranche A Revolving Loan Commitment of the amount of such Lender's
respective participation in such Standby Letter of Credit, determined in
accordance with subsection 3.1C.
(v) Reports to Lenders. In the event that the Issuing Lender of
------------------
Commercial Letters of Credit is other than the Administrative Agent, such
Issuing Lender will send by facsimile transmission to the Administrative
Agent, promptly on the first Business Day of each week, its daily aggregate
maximum amount available to be drawn for Commercial Letters of Credit for
the previous week. The Administrative Agent shall deliver to each other
Lender having a Tranche A Revolving Loan Commitment, upon each calendar
month end, and upon each Letter of Credit fee payment, a report setting
forth for such period the daily aggregate maximum amount available to be
drawn under the Commercial Letters of Credit issued by all the Issuing
Lenders during such period.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT.
Immediately upon the issuance of each Letter of Credit, each Lender having a
Tranche A Revolving Loan Commitment shall be deemed to, and hereby agrees to,
have irrevocably purchased from the Issuing Lender a participation in such
Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro
Rata Share of the maximum amount which is or at any time may become available to
be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
---------------------
Company agrees to pay the following fees with respect to Letters of Credit:
(i) to the applicable Issuing Lender, for its own account with
respect to each Standby Letter of Credit, a fronting fee equal to the
greater of $500 per year per Letter of Credit and 0.125% per annum of the
daily maximum amount available to be drawn under each such Letter of Credit
and with respect to each Commercial Letter of Credit a fronting fee equal
to 0.125% per annum of the daily maximum amount available to be drawn under
each such Letter of Credit. Fronting fees are payable from and including
the issue date, in arrears, on and to (but excluding) each January 15,
April 15, July 15, and October 15 of each year and will be computed on the
basis of a 360-day year for the actual number of days elapsed;
69
<PAGE>
(ii) to the Administrative Agent, for the account of the
participating Lenders having a Tranche A Revolving Loan Commitment, with
respect to each Standby Letter of Credit and Commercial Letter of Credit, a
per annum letter of credit fee equal to the Applicable Margin for
Eurodollar Rate Loans, in effect from time to time, computed on the daily
maximum amount available to be drawn under such Letters of Credit. Such fee
is payable from and including the issue date, in arrears, on and to (but
excluding) each January 15, April 15, July 15 and October 15 of each year
and will be computed on the basis of a 360-day year for the actual number
of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges in accordance with such Issuing Lender's standard
schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clauses (i) and (ii) of
this subsection 3.2, (a) the maximum amount available to be drawn under any
Letter of Credit as of any date of determination shall be determined as of the
close of business on such date and (b) any amount described in such clauses
which is denominated in a currency other than Dollars shall be valued based on
the applicable Exchange Rate for such currency as of the applicable date of
determination. Promptly upon receipt of any amount described in clause (ii) of
this subsection 3.2, the Administrative Agent shall distribute to each other
Lender having a Tranche A Revolving Loan Commitment its Pro Rata Share of such
amount. Notwithstanding the currency the Letter of Credit is denominated in,
fees payable under clauses (i) and (ii) of this subsection 3.2 shall be paid in
Dollars.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
-------------------------------------------------------------------
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to exercise
reasonable care to determine that the documents required to be delivered under
such Letter of Credit have been delivered and that they substantially comply on
their face with the requirements of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day
funds equal to the amount of such drawing (which amount, in the case of a
drawing under a Letter of Credit which is denominated in a currency other than
Dollars, shall be calculated by reference to the applicable Exchange Rate on the
date such drawing is honored); provided that, anything contained in this
--------
Agreement to the contrary notwithstanding,
70
<PAGE>
(i) unless Company shall have notified Administrative Agent and such Issuing
Lender prior to 11:00 A.M. (New York time) on the date such drawing is honored
that Company intends to reimburse such Issuing Lender for the amount of such
drawing with funds other than the proceeds of Tranche A Revolving Loans, Company
shall be deemed to have given a timely Notice of Borrowing to Administrative
Agent requesting Lenders having a Tranche A Revolving Loan Commitment to make
Tranche A Revolving Loans that are Base Rate Loans on the Reimbursement Date in
an amount in Dollars equal to the amount of such drawing (which amount, in the
case of a drawing under a Letter of Credit which is denominated in a currency
other than Dollars, shall be calculated by reference to the applicable Exchange
Rate on the date such drawing is honored) and (ii) subject to satisfaction or
waiver of the conditions specified in subsection 4.2B, Lenders having a Tranche
A Revolving Loan Commitment shall, on the Reimbursement Date, make Tranche A
Revolving Loans that are Base Rate Loans in the amount of such drawing as
aforesaid, the proceeds of which shall be applied directly by Administrative
Agent to reimburse such Issuing Lender for the amount of such drawing; and
provided, further that if for any reason proceeds of Tranche A Revolving Loans
- -------- -------
are not received by such Issuing Lender on the Reimbursement Date in an amount
equal to the amount of such drawing, Company shall reimburse such Issuing
Lender, on demand, in an amount in same day funds equal to the excess of the
amount of such drawing over the aggregate amount of such Tranche A Revolving
Loans, if any, which are so received. Nothing in this subsection 3.3B shall be
deemed to relieve any Lender having a Tranche A Revolving Loan Commitment from
its obligation to make Tranche A Revolving Loans on the terms and conditions set
forth in this Agreement, and Company shall retain any and all rights it may have
against any Lender having a Tranche A Revolving Loan Commitment resulting from
the failure of such Lender to make such Tranche A Revolving Loans under this
subsection 3.3B.
C. PAYMENT BY LENDERS OF UNREIMBURSED DRAWINGS UNDER LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Company shall fail for
------------------
any reason to reimburse any Issuing Lender as provided in subsection 3.3B
in an amount in Dollars (calculated, in the case of a drawing under a
Letter of Credit denominated in a currency other than Dollars, by reference
to the applicable Exchange Rate on the date such drawing is honored) equal
to the amount of any drawing honored by such Issuing Lender under a Letter
of Credit issued by it, such Issuing Lender shall promptly notify
Administrative Agent and Administrative Agent shall thereafter notify each
other Lender having a Tranche A Revolving Loan Commitment of the
unreimbursed amount of such drawing and of such other Lender's respective
participation therein based on such Lender's Pro Rata Share. Each Lender
having a Tranche A Revolving Loan Commitment shall make available to such
Issuing Lender an amount equal to its respective participation, in Dollars
and in same day funds, at the office of such Issuing Lender specified in
such notice, not later than 11:30 A.M. (New York time) on the first
business day (under the laws of the jurisdiction in which such office of
such Issuing Lender is located) after the date notified by such Issuing
Lender. In the event that any Lender having a Tranche A Revolving Loan
Commitment fails to make available to such Issuing Lender on such business
day the
71
<PAGE>
amount of such Lender's participation in such Letter of Credit as provided
in this subsection 3.3C, such Issuing Lender shall be entitled to recover
such amount on demand from such Lender together with interest thereon at
the rate customarily used by such Issuing Lender for the correction of
errors among banks for three Business Days and thereafter at the Base Rate.
Nothing in this subsection 3.3C shall be deemed to prejudice the right of
any Lender having a Tranche A Revolving Loan Commitment to recover from any
Issuing Lender any amounts made available by such Lender to such Issuing
Lender pursuant to this subsection 3.3C in the event that it is determined
by the final judgment of a court of competent jurisdiction that the payment
with respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Lender constituted gross negligence or
willful misconduct as determined by a final judgment of a court of
competent jurisdiction on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
-------------------------------------------------------
Company. In the event any Issuing Lender shall have been reimbursed by
-------
other Lenders having a Tranche A Revolving Loan Commitment pursuant to
subsection 3.3C(i) for all or any portion of any drawing honored by such
Issuing Lender under a Letter of Credit issued by it, such Issuing Lender
shall distribute to each other Lender having a Tranche A Revolving Loan
Commitment which has paid all amounts payable by it under subsection
3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of
all payments subsequently received by such Issuing Lender from Company in
reimbursement of such drawing when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other
address as such Lender may request.
D. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to each
------------------------------
Issuing Lender, with respect to drawings made under any Letters of Credit
issued by such Issuing Lender at its request, interest on the amount paid
by such Issuing Lender in respect of each such drawing from the date of
such drawing to but excluding the date such amount is reimbursed by Company
(including any such reimbursement out of the proceeds of Tranche A
Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the
period from the date of such drawing to but excluding the Reimbursement
Date, the rate then in effect under this Agreement with respect to Tranche
A Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which
is 2% per annum in excess of the rate of interest otherwise payable under
this Agreement with respect to Revolving Loans that are Base Rate Loans.
Interest payable pursuant to this subsection 3.3D(i) shall be computed on
the basis of a 365-day or 366-day year, as the case may be, for the actual
number of days elapsed in the period during which it accrues and shall be
payable on demand or, if no demand is made, on the date on which the
related drawing under a Letter of Credit is reimbursed in full.
72
<PAGE>
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
---------------------------------------------------
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing under a Letter of Credit
issued by it, (a) such Issuing Lender shall distribute to each other Lender
having a Tranche A Revolving Loan Commitment, out of the interest received
by such Issuing Lender in respect of the period from the date of such
drawing to but excluding the date on which such Issuing Lender is
reimbursed for the amount of such drawing (including any such reimbursement
out of the proceeds of Tranche A Revolving Loans pursuant to subsection
3.3B), the amount that such other Lender would have been entitled to
receive in respect of the letter of credit fee that would have been payable
in respect of such Letter of Credit for such period pursuant to subsection
3.2 if no drawing had been made under such Letter of Credit, and (b) in the
event such Issuing Lender shall have been reimbursed by other Lenders
having a Tranche A Revolving Loan Commitment pursuant to subsection 3.3C(i)
for all or any portion of such drawing, such Issuing Lender shall
distribute to each other Lender having a Tranche A Revolving Loan
Commitment which has paid all amounts payable by it under subsection
3.3C(i) with respect to such drawing such other Lender's Pro Rata Share of
any interest received by such Issuing Lender in respect of that portion of
such drawing so reimbursed by other Lenders for the period from the date on
which such Issuing Lender was so reimbursed by other Lenders to but
excluding the date on which such portion of such drawing is reimbursed by
Company. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
--------------------
The obligation of Company to reimburse each Issuing Lender for drawings
made under the Letters of Credit issued by it and to repay any Tranche A
Revolving Loans made by Lenders having a Tranche A Revolving Loan Commitment
pursuant to subsection 3.3B and the obligations of Lenders having a Tranche A
Revolving Loan Commitment under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of
its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
73
<PAGE>
(iii) any draft or document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
--------------------------------------------------
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Company on the one hand
and any Issuing Lender on the other hand, Company assumes all risks of the acts
and omissions of,
74
<PAGE>
or misuse of the Letters of Credit issued by such Issuing Lender by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Lender shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including without limitation any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted without gross negligence or willful misconduct, shall not
put such Issuing Lender under any resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5,
Company shall retain any and all rights it may have against any Issuing Lender
for any liability arising out of the gross negligence or willful misconduct of
such Issuing Lender, as determined by a final judgment of a court of competent
jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
-------------------------------------------------------
Subject to subsection 2.7B, in the event that any Issuing Lender or Lender
having a Tranche A Revolving Loan Commitment shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender having a Tranche A
Revolving Loan Commitment with any guideline, request or directive issued or
made after the date hereof by any central bank or other governmental or quasi-
governmental authority (whether or not having the force of law):
75
<PAGE>
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any Covered Tax with respect to the
issuing or maintaining of any Letters of Credit or the purchasing or
maintaining of any participations therein or any other obligations under
this Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
3.7 EXISTING LETTERS OF CREDIT.
--------------------------
Anything to the contrary herein notwithstanding, as of the Closing Date,
all of the Existing Letters of Credit as listed in Schedule 1.1L annexed hereto
-------------
shall be deemed to be Letters of Credit issued hereunder and shall be subject to
all of the terms and provisions of this Agreement, including all terms and
provisions applicable to Letters of Credit under this Agreement and each person
liable as account parties thereunder shall be automatically released and Company
shall be deemed to be the account party for all purposes thereunder and
hereunder. Each Lender agrees that its obligations with respect to Letters of
Credit pursuant to this Section 3 shall include the Existing Letters of Credit.
With respect to each Existing Letter of Credit, for the period commencing on the
Closing Date to and including the expiration date of any such Existing Letter of
Credit, Company shall pay all fees and commissions set forth in subsection 3.2
at the times and in the manner set forth therein. Except to the extent
otherwise set forth in this Section 3, none of The Bank of New York, as Issuing
Lender for the Existing BONY Letters of Credit, and
76
<PAGE>
BTCo, as Issuing Lender for the Existing BT Letters of Credit shall, have any
obligation to extend or renew any Existing Letter of Credit.
SECTION 4 CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to the satisfaction of the following conditions.
4.1 CONDITIONS TO INITIAL REVOLVING LOANS.
-------------------------------------
The obligations of Lenders to make the initial Revolving Loans are, in
addition to the conditions precedent specified in subsection 4.2, subject to
prior or concurrent satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall
and shall cause each other Loan Party to deliver to Lenders (or to
Administrative Agent for Lenders with sufficient originally executed copies,
where appropriate, for each Lender and its counsel) the following with respect
to Company or such Loan Party, as the case may be, each, unless otherwise noted,
dated the Closing Date:
(i) Certified copies of the constating documents of such Person,
together, except as set forth in Schedule 4.1A(i), with a good standing
certificate (or equivalent thereto) from its jurisdiction of incorporation
and, except where failure to be in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, each other state or province in which it is qualified as a foreign
corporation to do business and, except where failure to be in good
standing, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
jurisdictions, each dated a recent date prior to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Loan
Documents and Related Agreements to which it is a party, certified as of
the Closing Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing this Agreement and the other Loan Documents to which it is
a party;
77
<PAGE>
(v) Executed originals of this Agreement, the Notes (duly executed
in accordance with subsection 2.1E, drawn to the order of each applicable
Lender and with appropriate insertions) and the other Loan Documents to
which such Person is a party; and
(vi) Such other documents as Co-Syndication Agents may reasonably
request.
B. CORPORATE AND CAPITAL STRUCTURE, OWNERSHIP, MANAGEMENT, ETC.
(i) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of Company and its Subsidiaries, after giving effect to the
Subject Transactions, shall be as set forth on Schedule 4.1B annexed
-------------
hereto.
(ii) Management; Employment Contracts. The management structure of
--------------------------------
Company after giving effect to the Subject Transactions shall be as set
forth on Schedule 4.1B annexed hereto, and Co-Syndication Agents shall have
-------------
received copies of, and shall be reasonably satisfied with the form and
substance of, any and all employment contracts with senior management of
each of Company and its Subsidiaries.
C. NECESSARY CONSENTS. Company shall have obtained all Governmental
Authorizations and consents of other Persons, in each case that are necessary or
advisable in connection with the Subject Transactions, the transactions
contemplated by the Loan Documents and the Related Agreements and the continued
operation of the business conducted by (x) Company and its Subsidiaries and (y)
Cineplex Odeon and its Subsidiaries, in each case in substantially the same
manner as conducted prior to the consummation of the Subject Transactions, and
each of the foregoing shall be in full force and effect, other than those the
failure to obtain or maintain which, either individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect. All
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise
impose adverse conditions on the Subject Transactions or the financing thereof,
and no action, request for stay, petition for review or rehearing,
reconsideration or appeal with respect to any of the foregoing shall be pending,
and the time for any applicable agency to take action to set aside its consent
on its own motion shall have expired. Company shall have delivered an Officer's
Certificate in form and substance reasonably satisfactory to Co-Syndication
Agents confirming the foregoing matters and any other evidence requested by Co-
Syndication Agents in support thereof.
D. CONSUMMATION OF SUBJECT TRANSACTIONS
(i) Business Combination Transactions.
---------------------------------
(a) Related Agreements. On the Closing Date, (a) Co-Syndication
Agents shall have received executed or conformed copies of the Related
Agreements and any amendments thereto on or prior to the Closing Date, the
terms and conditions of which
78
<PAGE>
shall be in all respects satisfactory to Co-Syndication Agents, (b) the
Related Agreements shall be in full force and effect and no material term
or condition thereof shall have been amended, modified or waived after the
execution thereof without the prior written approval of Co-Syndication
Agents, (c) none of the applicable parties shall have failed in any respect
to perform any obligation or covenant required by the Related Agreements to
be performed or complied with by it on or before the Closing Date and (d)
all conditions to the Subject Transactions set forth in Section 7 of the
Master Agreement (other than with respect to the amendment of the Letter
Agreement, the election of the independent directors and the delivery of
the Five Year Plan) shall have been satisfied or the fulfillment of such
conditions shall have been waived in writing by Co-Syndication Agents;
(b) Sources, Uses and Funding Certificate. Company shall have
delivered an Officer's Certificate detailing the sources and uses of all
funds (including the Loans) for the transactions occurring on the Closing
Date, with proper wire instructions for Administrative Agent for the
application of the Loan Proceeds on the Closing Date, all in form and
substance satisfactory to Co-Syndication Agents;
(c) SPE Dividend. On the Closing Date, Company shall have paid to its
shareholders of record as of the day prior to the Closing Date the SPE
Dividend;
(d) Universal Investment. On or before the Closing Date, Universal
shall have subscribed for and purchased, pursuant to the Universal
Subscription Agreement, 4,426,606 shares of Company's Common Stock, and
Company shall have received not less than $84,500,000 in proceeds
therefrom;
(e) Arrangement. On or before the Closing Date, Company and Cineplex
Odeon shall have effected a business combination pursuant to the Plan of
Arrangement pursuant to which: (a) Cineplex Odeon shall have exchanged all
of the issued and outstanding capital stock of Plitt with Company for the
Exchange Shares, (b) Cineplex Odeon shall have distributed the Exchange
Shares to its shareholders in consideration of the purchase from them, and
cancellation, of approximately 46.60% of their shares of Cineplex Odeon
Common Stock at the rate of one Exchange Share for each ten shares of
Cineplex Odeon Common Stock, (c) Company shall have acquired from Cineplex
Odeon's shareholders the remaining outstanding shares of Cineplex Odeon
Common Stock (other than certain shares of Cineplex Odeon Common Stock with
respect to which the holders have exercised certain dissent rights) in
exchange for the Combination Shares at the rate of one Combination Share
for each ten shares of Cineplex Odeon Common Stock, except that 800,000
shares of Cineplex Odeon Common Stock held by Universal will be exchanged
with Company for 80,000 shares of Company Class B Non-Voting Stock and
40,000 shares of Cineplex Odeon Common Stock held by the Bronfman Trust
will be exchanged with Company for 4,000 shares of Company Class A Non-
Voting Common Stock, (d) all requisite shareholder approval for the
Arrangement shall have been obtained pursuant to, and the Arrangement shall
comply with, the Business Corporations Act
79
<PAGE>
(Ontario) and, if necessary, applicable securities laws (including Ontario
Securities Act Policy 9.1 and Quebec Securities Act Policy Q-27), (e) an
order approving the Arrangement shall have been granted by the Ontario
Court (General Division), and (f) the Director under the Business
Corporations Act (Ontario) shall have issued articles of arrangement in
respect of the Arrangement;
(f) IMAX Transaction. On or before the Closing Date, SPE shall sell,
assign and transfer to a Subsidiary of Company all of the right, title and
interest of SPE and its Affiliates in the IMAX Agreements for a cash
payment equal to the IMAX Purchase Price; and
(g) Subsidiary Transactions. On the Closing Date, SPE shall (a) have
caused CPE Holdings, Inc. to exchange all of the shares of stock of S&J to
Loews USA Cinemas, Inc., a wholly owned subsidiary of Company in exchange
for 291,086.591 shares of Company Common Stock and (b) have caused Star to
merge with and into a Loews Theatres Enterprises, Inc., a wholly owned
Subsidiary of Company, with Loews Theatres Enterprises, Inc. surviving such
merger, in exchange for 2,373,217.409 shares of Company Common Stock.
(ii) Refinancing Transactions.
------------------------
(a) Termination of Existing Cineplex Credit Agreement and Related
Liens. On the Closing Date, Company and its Subsidiaries shall have (1)
repaid in full all Indebtedness outstanding under the Existing Cineplex
Credit Agreement (2) terminated any commitments to lend or make other
extensions of credit thereunder and delivered to Co-Syndication Agents all
documents and instruments necessary or advisable to evidence such
termination, in form and substance satisfactory to Co-Syndication Agents,
(3) delivered to Co-Syndication Agents all documents and instruments
necessary or advisable to release all Liens securing Indebtedness or other
obligations of Cineplex Odeon and its Subsidiaries thereunder and to
evidence such termination, in form and substance satisfactory to Co-
Syndication Agents, and (4) made arrangements satisfactory to Co-
Syndication Agents with respect to the cancellation of any letters of
credit outstanding thereunder or the issuance of Letters of Credit to
support the obligations of Company and its Subsidiaries with respect
thereto; and
(b) Sony Debt Repayment. On the Closing Date, (1)(A) Company shall
have lent to certain of its Subsidiaries funds sufficient to repay, and
caused such Subsidiaries to have repaid in full, the Sony Land Indebtedness
and delivered to Co-Syndication Agents all documents and instruments
necessary or advisable to evidence such repayment, satisfactory in form and
substance to Co-Syndication Agents and (B) delivered to Co-Syndication
Agents all documents or instruments necessary or advisable to release all
Liens securing the Sony Land Indebtedness or other obligations of Company
and its Subsidiaries thereunder, in form and substance satisfactory to Co-
Syndication Agents, (2)(A) Company
80
<PAGE>
shall have repaid in full the Sony Capital Indebtedness and delivered to
Co-Syndication Agents all documents and instruments necessary or
advisable to evidence such repayment, satisfactory in form and substance
to Co-Syndication Agents and (B) delivered to Co-Syndication Agents all
documents or instruments necessary or advisable to release all Liens
securing the Sony Capital Indebtedness or other obligations of Company
and its Subsidiaries thereunder, in form and substance satisfactory to
Co-Syndication Agents.
(iii) Officer's Certificate.
---------------------
Co-Syndication Agents shall have received an Officer's Certificate in
form and substance satisfactory to Co-Syndication Agents from Company confirming
the foregoing matters and any other evidence requested by Co-Syndication Agents
in support thereof.
E. PRO FORMA BALANCE SHEET. On or before the Closing Date, Lenders
shall have received pro forma consolidated balance sheets of Company and its
Subsidiaries as at March 31, 1998, prepared in accordance with GAAP and
reflecting the consummation of the Subject Transactions and the financings and
other transactions contemplated hereby, which pro forma financial statements
shall be in form and substance satisfactory to Lenders.
F. NO MATERIAL ADVERSE EFFECT. Since February 28, 1997, in the case of
Company and its Subsidiaries, or since December 31, 1997, in the case of
Cineplex Odeon and its Subsidiaries, no Material Adverse Effect (in the sole
opinion of Co-Syndication Agents) shall have occurred, which (x) was not
disclosed to Co-Syndication Agents in writing on or before the date of this
Agreement and (y) acknowledged by the Co-Syndication Agents in writing on or
before the date of this Agreement.
G. SOLVENCY ASSURANCES. On the Closing Date, Co-Syndication Agents and
Lenders shall have received a Financial Condition Certificate dated the Closing
Date, substantially in the form of Exhibit VI annexed hereto and otherwise in
----------
form and substance satisfactory to Co-Syndication Agents and with appropriate
attachments, demonstrating that, immediately after giving effect to the
consummation of the Subject Transactions, the related financings and the other
transactions contemplated by the Loan Documents and the Related Agreements to
occur on or before the Closing Date, Company and its Subsidiaries are Solvent.
H. SECURITY INTERESTS IN PERSONAL PROPERTY. Co-Syndication Agents
shall have received evidence satisfactory to them that Company and its
Subsidiaries shall have taken or caused to be taken all such actions, executed
and delivered or caused to be executed and delivered all such agreements,
documents and instruments, and made or caused to be made all such filings and
recordings (other than the filing or recording of items described in clauses
(iii) and (iv) below) that may be necessary or, in the opinion of Co-Syndication
Agents desirable in order to create in favor of Administrative Agent, for the
benefit of Lenders, a valid and (upon such filing and recording) perfected First
Priority security interest in the entire personal and mixed property Collateral.
Such actions shall include the following:
81
<PAGE>
(i) Schedules to Collateral Documents. Delivery to Co-Syndication
---------------------------------
Agents of accurate and complete schedules to all of the applicable
Collateral Documents;
(ii) Stock Certificates and Instruments. Delivery to Co-Syndication
----------------------------------
Agents of (a) certificates, if any (which certificates shall be
accompanied by irrevocable undated stock powers, duly endorsed in blank and
otherwise satisfactory in form and substance to Co-Syndication Agents)
representing all of the capital stock pledged pursuant to the Company
Pledge Agreement and the Subsidiary Pledge Agreements and (b) all
promissory notes or other instruments (duly endorsed, where appropriate, in
a manner satisfactory to Co-Syndication Agents) evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements. Delivery to Co-
--------------------------------------------
Syndication Agents of (a) the results of a recent search, by a Person
satisfactory to Co-Syndication Agents, of all effective UCC financing
statements and fixture filings and all judgment and tax lien filings which
may have been made with respect to any personal or mixed property of any
Loan Party, together with copies of all such filings disclosed by such
search, (b) UCC termination statements duly executed by all applicable
Persons for filing in all applicable jurisdictions as may be necessary to
terminate any effective UCC financing statements or fixture filings
disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement) and (c) the results of a recent
search, by a Person satisfactory to Co-Syndication Agents, of the personal
property security register of each jurisdiction in Canada in which Company
or any of its Subsidiaries (including Cineplex Odeon and its Subsidiaries)
carries on business or in which any assets of such Person are located,
together with copies of such searches and termination statements in respect
of any filings disclosed in such searches (other than such financing
statements in respect of Liens permitted to remain outstanding pursuant to
the terms of this Agreement);
(iv) UCC Financing Statements and Fixture Filings. (a) Delivery to
--------------------------------------------
Co-Syndication Agents of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of Co-
Syndication Agents, desirable to perfect the security interests created in
such Collateral pursuant to the Collateral Documents and (b) registration
of personal property financing statements in each jurisdiction in Canada in
which Company or any of its Subsidiaries (including Cineplex Odeon and its
Subsidiaries) carries on business or in which any assets of such Person are
located with respect to all personal property of such Person as may be
necessary or, in the opinion of Co-Syndication Agents, desirable to perfect
the security interests created in such Collateral pursuant to the
Collateral Documents;
(v) PTO Cover Sheets, Etc. (a) Delivery to Co-Syndication Agents
---------------------
of all cover sheets or other documents or instruments required to be filed
with the United States Patent
82
<PAGE>
and Trademark Office in order to create or perfect Liens in respect of any
IP Collateral and (b) delivery to Co-Syndication Agents of such information
as may be necessary to create or perfect Liens in Canada in respect of any
IP Collateral with the appropriate governmental authority in Canada; and
(vi) Opinions of Counsel. Delivery to Co-Syndication Agents of an
-------------------
opinion of counsel (which counsel shall be reasonably satisfactory to Co-
Syndication Agents) under the laws of each jurisdiction in which any Loan
Party or any personal or mixed property Collateral is located with respect
to the creation and perfection of the security interests in favor of
Administrative Agent in such Collateral and such other matters governed by
the laws of such jurisdiction regarding such security interests as Co-
Syndication Agents may reasonably request, in each case in form and
substance reasonably satisfactory to Co-Syndication Agents.
I. OPINIONS OF COMPANY'S COUNSEL. Lenders shall have received originally
executed copies of one or more favorable written opinions of (i) Fried, Frank,
Harris, Shriver & Jacobson, counsel for the Loan Parties, in form and substance
reasonably satisfactory to Co-Syndication Agents and their counsel, dated as of
the Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit VIII-A annexed hereto and as to such other matters as Co-
--------------
Syndication Agents acting on behalf of Lenders may reasonably request, and (ii)
Goodman & Carr, counsel for the Company, in form and substance reasonably
satisfactory to Co-Syndication Agents and their counsel, dated as of the Closing
Date and setting forth substantially the matters in the opinions designated in
Exhibit VIII-B annexed hereto and as to such other matters as Co-Syndication
- --------------
Agents acting on behalf of Lenders may reasonably request.
J. OPINIONS OF O'MELVENY & MYERS LLP. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, dated as of the Closing Date, substantially in the form
of Exhibit IX annexed hereto and as to such other matters as Administrative
----------
Agent acting on behalf of Lenders may reasonably request.
K. OPINIONS OF COUNSEL IN SUBJECT TRANSACTIONS. Co-Syndication Agents
and their counsel shall have received copies of each of the opinions of counsel
delivered to the parties in connection with the Subject Transactions together
with a letter from each such counsel authorizing Lenders to rely upon such
opinion to the same extent as though it were addressed to Lenders.
L. AUDITOR'S LETTER. Co-Syndication Agents shall have received an
executed Auditor's Letter.
M. EVIDENCE OF INSURANCE. Company shall deliver to Co-Syndication Agents
an Officer's Certificate in form and substance reasonably satisfactory to Co-
Syndication Agents certifying as to an attached schedule setting forth each
casualty, liability and business interruption insurance policy maintained by
Company and its Subsidiaries, the expiration date of each such insurance policy,
the amount of insurance coverage provided pursuant to each such policy, any
83
<PAGE>
applicable deductibles and any other information reasonably requested by the Co-
Syndication Agents with respect to such insurance policies.
N. FEES. Company shall have paid to Administrative Agent, for
distribution (as appropriate) to Agents and Lenders, the fees payable on the
Closing Date referred to in subsection 2.3.
O. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Co-Syndication Agents an Officers' Certificate, in form
and substance satisfactory to Co-Syndication Agents, to the effect that the
representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Closing Date (after giving
effect to the consummation of the Subject Transactions) to the same extent as
though made on and as of that date (or, to the extent such representations and
warranties specifically relate to an earlier date, that such representations and
warranties were true, correct and complete in all material respects on and as of
such earlier date) and that Company shall have performed in all material
respects all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before the Closing Date
except as otherwise disclosed to and agreed to in writing by Co-Syndication
Agents.
P. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Co-Syndication
Agents, acting on behalf of Lenders, and their counsel shall be satisfactory in
form and substance to Co-Syndication Agents and such counsel, and Co-Syndication
Agents and such counsel shall have received all such counterpart originals or
certified copies of such documents as Co-Syndication Agents may reasonably
request.
4.2 CONDITIONS TO ALL LOANS.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are subject
to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing, in each case signed by the chief executive officer, the chief
financial officer or the treasurer of Company or by any executive officer of
Company designated by any of the above-described officers on behalf of Company
in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which
84
<PAGE>
case such representations and warranties shall have been true, correct and
complete in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Company shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall
be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall
not violate any law including, without limitation, Regulation T, Regulation
U or Regulation X of the Board of Governors of the Federal Reserve System;
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 5.6 or 6.1(ix) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, in the opinion of Administrative Agent or of Requisite Lenders,
would be expected to have a Material Adverse Effect; and no injunction or
other restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or
the making of Loans hereunder; and
(vii) so long as any Plitt Notes remain outstanding, (a) the Loans
requested to be made on such Funding Date, when made, together with all
other outstanding Loans and all other Obligations of Company as of such
date, shall constitute "Guarantor Senior Indebtedness" under the Plitt
Indenture, (b) such Loans shall be permitted to be incurred by Company
under the Plitt Indenture, including Section 4.03 of the Plitt Indenture,
(c) the Indebtedness (as defined in the Plitt Indenture) of Plitt incurred
by Plitt pursuant to the Subsidiary Guaranty in connection with the Loans
requested to be made on such Funding Date, when made, together with all
other Indebtedness (as defined in the Plitt Indenture) incurred by Plitt
pursuant to the Subsidiary Guaranty, shall constitute "Senior
85
<PAGE>
Indebtedness" under the Plitt Indenture and (d) the Indebtedness (as
defined in the Plitt Indenture) of Plitt incurred by Plitt pursuant to the
Subsidiary Guaranty in connection with such Loans shall be permitted to be
incurred by Plitt under the Plitt Indenture, including Section 4.03 of the
Plitt Indenture.
4.3 CONDITIONS TO LETTERS OF CREDIT.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the conditions set forth in subsection 4.1 shall
have been satisfied.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Request for Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of Company or by any executive officer of Company
designated by any of the above-described officers on behalf of Company in a
writing delivered to Administrative Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as the
applicable Issuing Lender may reasonably require in connection with the issuance
of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5 COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lenders to issue Letters of Credit and to induce other
Lenders having a Tranche A Revolving Loan Commitment to purchase participations
therein, Company represents and warrants to each Lender, on the date of this
Agreement and, except as otherwise provided, on each Funding Date and on the
date of issuance of each Letter of Credit, that the following statements are
true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
----------------------------------------------------------------
SUBSIDIARIES.
------------
A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly
organized, validly existing and, except as provided in Schedule 5.1A, in good
-------------
standing under the laws of its jurisdiction of incorporation. Each Loan Party
has all requisite corporate power and authority to
86
<PAGE>
own and operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents and the Related
Agreements to which it is a party and to carry out the transactions contemplated
hereby and thereby and, in the case of Company, to issue and pay the Notes.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.12.
D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in
Schedule 5.1D annexed hereto, as said Schedule 5.1D may be supplemented from
- ------------- -------------
time to time pursuant to the provisions of subsection 6.1(xvi). The capital
stock of Company and of each of the Subsidiaries of Company identified in
Schedule 5.1D annexed hereto (as so supplemented) is duly authorized, validly
- -------------
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Each of the Subsidiaries of Company identified in Schedule 5.1D
-------------
annexed hereto (as so supplemented) is a corporation duly organized, validly
existing and, except as set forth in Schedule 5.1D annexed hereto, in good
-------------
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1D annexed
-------------
hereto (as so supplemented) correctly sets forth the ownership interest of
Company and each of its Subsidiaries in each of the Subsidiaries of Company
identified therein. The capital and ownership structure of Company and its
Subsidiaries, both before and after giving effect to the Business Combination
Transactions and the related transactions contemplated in connection therewith,
are as set forth on Schedule 4.1B annexed hereto.
-------------
5.2 AUTHORIZATION OF BORROWING, ETC.
--------------------------------
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate action on the part of each Loan Party that is a party
thereto.
B. NO CONFLICT. The execution, delivery and performance by any Loan
Party of the Loan Documents and the Related Agreements to which it is a party
and the consummation of the transactions contemplated by the Loan Documents and
such Related Agreements do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to any
87
<PAGE>
Loan Party, the constating documents, bylaws or any shareholders agreement of
any Loan Party or any order, judgment or decree of any court or other agency of
government binding on any Loan Party, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of any Loan Party, except for such conflicts, breaches or
defaults which could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or assets of any
Loan Party (other than any Liens created under any of the Loan Documents in
favor of Administrative Agent on behalf of Lenders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of any Loan Party, except for such approvals or consents
which will be obtained on or before the Closing Date and such approvals or
consents the failure of which to obtain, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by any
Loan Party of the Loan Documents and the Related Agreements to which it is a
party, the issuance, delivery and payment of the Notes and the consummation of
the transactions contemplated by the Loan Documents and such Related Agreements
do not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state, provincial or
other governmental authority or regulatory body, except for (i) filings required
by federal or state securities laws, (ii) such other registrations, consents,
approvals, notices or other actions which have been made, obtained, given or
taken on or before the Closing Date and (iii) such other filings the failure of
which to make, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
D. BINDING OBLIGATION. Each of the Loan Documents and the Related
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. VALID ISSUANCE OF COMPANY COMMON STOCK, COMPANY NON-VOTING COMMON
STOCK AND PLITT NOTES. The Company Common Stock and the Company Non-Voting
Common Stock has been duly and validly issued and is fully paid and
nonassessable. Except as set forth on Schedule 5.2E, no stockholder of Company
has or will have any preemptive rights to subscribe for any additional
Securities of Company. The Plitt Note Documents (and all other Subordinated
Indebtedness) are the legally valid and binding obligations of Plitt or Company,
as the case may be, enforceable against Plitt or Company, as the case may be, in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Plitt Note Documents (and
all other Subordinated Indebtedness) will be enforceable against the holders
thereof and the Loans and all
88
<PAGE>
other monetary Obligations of Company hereunder are and will be within the
definition of "Senior Debt" included in such provisions, to the extent that
they are obligations of Company in respect of principal, interest,
reimbursements of amounts drawn under Letters of Credit, penalties, fees,
expenses, indemnification or other reimbursements. The issuance and sale of the
Company Common Stock, the Company Non-Voting Common Stock and the Subordinated
Indebtedness either (a) has been registered or qualified under applicable
federal, state and provincial securities laws or (b) was exempt therefrom.
5.3 FINANCIAL CONDITION.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, (i)
audited financial statements of Company and its Subsidiaries for Fiscal Years
ending February 29, 1996 and February 28, 1997, in each case consisting of
balance sheets and the related consolidated statements of income, stockholders'
equity and cash flows for such Fiscal Year, (ii) unaudited condensed combined
consolidated financial statements of Company and its Subsidiaries for the nine
months ended November 30, 1996 and November 30, 1997, in each case consisting of
balance sheets and related statements of operations and statements of cash flow,
(iii) audited financial statements of Cineplex Odeon and its Subsidiaries for
Fiscal Years ending December 31, 1996 and December 31, 1997, in each case
consisting of balance sheets and the related consolidated statements of income,
stockholders' equity and cash flows for such Fiscal Year, and (iv) unaudited
consolidated financial statements of Cineplex Odeon and its Subsidiaries for the
nine months ended September 30, 1996 and September 30, 1997, in each case
consisting of balance sheets, income statements and statements of changes in
cash resources. All such statements were prepared in conformity with GAAP and
fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
the changes resulting from audit and normal year-end adjustments and absence of
footnotes. None of the Loan Parties has (and none of the Loan Parties will have
following the funding of the initial Loans) any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is required by GAAP to be, but is not, or to the
extent not required by GAAP which is known to or reasonably should be known to
Company, but is not, reflected in the foregoing financial statements or the most
recent financial statements delivered pursuant to subsection 6.1 or the notes
thereto and which in any such case is material in relation to the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of Company and its Subsidiaries, taken as a whole.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
---------------------------------------------------------
Since December 31, 1997, in the case of Cineplex Odeon and its
Subsidiaries, or since February 28, 1997, in the case of Company and its
Subsidiaries, no event or change has occurred that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect,
89
<PAGE>
other than the events or changes set forth on Schedule 5.4 which were (x)
disclosed to the Co-Syndication Agents in writing on or before the date of this
Agreement and (y) acknowledged by the Co-Syndication Agents in writing on or
before the date of this Agreement. Since December 31, 1997, neither Company nor
any of its Subsidiaries has directly or indirectly declared, ordered, paid or
made, or set apart any sum or property for, any Restricted Junior Payment or
agreed to do so except as permitted by subsection 7.5.
5.5 TITLE TO PROPERTIES; LIENS.
--------------------------
Company and Company's Subsidiaries have (i) good and indefeasible title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of their
respective properties and assets reflected in the financial statements referred
to in subsection 5.3 or in the most recent financial statements delivered
pursuant to subsection 6.1, in each case except for assets disposed of since the
date of such financial statements in the ordinary course of business or as
otherwise permitted under subsection 7.7. All such properties and assets are
free and clear of Liens other than Liens permitted under subsection 7.2A.
5.6 LITIGATION; ADVERSE FACTS.
-------------------------
Except as set forth in Schedule 5.6 annexed hereto, there are no actions,
------------
suits, proceedings, arbitrations or governmental investigations (whether or not
purportedly on behalf of Company or any of Company's Subsidiaries) at law or in
equity or before or by any federal, state, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Company, threatened against
or affecting Company or any of Company's Subsidiaries or any property of Company
or any of Company's Subsidiaries that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Neither Company
nor any of Company's Subsidiaries is (i) in violation of any applicable laws
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect or (ii) subject to or in default with respect to
any final judgments, writs, injunctions, decrees, rules or regulations of any
court or any federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
----------------
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of Company and Company's Subsidiaries required to be filed by any of
them have been timely filed, and all material taxes, assessments, fees and other
governmental charges upon Company and Company's Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Company does not know of any
proposed material tax assessment against Company or any of Company's
Subsidiaries
90
<PAGE>
which is not being actively contested by Company or such Subsidiary in good
faith and by appropriate proceedings; provided that such reserves or other
--------
appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS; MATERIAL
------------------------------------------------------------------
CONTRACTS.
---------
A. Neither Company nor any of Company's Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of Company's Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
C. All Material Contracts of Company and Company's Subsidiaries are in
full force and effect and no defaults currently exist thereunder, except where
the consequences, direct or indirect, of such default or defaults, if any, would
not have a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
-----------------------
Neither Company nor any of Company's Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
---------------------
A. Neither Company nor any of Company's Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than 25%
of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
91
<PAGE>
5.11 EMPLOYEE BENEFIT PLANS.
----------------------
A. Company and each of its ERISA Affiliates are in compliance in all
material respects with all applicable provisions and requirements of ERISA and
the regulations and published interpretations thereunder and the terms of each
Employee Benefit Plan, and have performed all their material obligations under
each Employee Benefit Plan, except where such noncompliance or nonperformance
would not reasonably be expected to have a Material Adverse Effect.
B. No ERISA Event has occurred or is reasonably expected to occur which
would reasonably be expected to have a Material Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code or as disclosed on Schedule 5.11(c) annexed hereto, no Employee
----------------
Benefit Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employees of Company or any of
its ERISA Affiliates.
D. In accordance with the most recent actuarial valuation for any Pension
Plan, the amount of unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which assets exceed benefit liabilities), does not exceed $15,000,000.
5.12 CERTAIN FEES.
------------
Except as set forth in Schedule 5.12 annexed hereto, no broker's or
-------------
finder's fee or commission will be payable with respect to this Agreement or any
of the transactions contemplated hereby, and Company hereby indemnifies Lenders
against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
------------------------
Except as set forth in Schedule 5.13 annexed hereto:
-------------
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply with all Environmental Laws except for any such
noncompliance which would not reasonably be expected to have a Material
Adverse Effect;
(ii) Company and each of its Subsidiaries have obtained all
Governmental Authorizations under Environmental Laws necessary to conduct
their respective operations, and all such Governmental Authorizations are
being maintained in good
92
<PAGE>
standing, and Company and each of its Subsidiaries are in compliance with
such Governmental Authorizations except for any such failure to obtain,
maintain or comply which would not reasonably be expected to have a
Material Adverse Effect;
(iii) neither Company nor any of its Subsidiaries has received (a)
any notice or claim to the effect that it is or may be liable to any Person
as a result of or in connection with any Hazardous Materials or (b) any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. (S)
9604) or comparable state laws, and, to the best of Company's knowledge,
none of the operations of Company or any of its Subsidiaries is the subject
of any federal or state investigation relating to or in connection with any
Hazardous Materials at any Facility or at any other location except for
such of the foregoing which would not reasonably be expected to have a
Material Adverse Effect;
(iv) none of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the violation
of or liability under any Environmental Laws which if adversely determined
could reasonably be expected to have a Material Adverse Effect;
(v) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order or agreement with any governmental authority or private party
relating to (a) any actual or potential violation of or liability under
Environmental Laws or (b) any Environmental Claims except for such of the
foregoing which would not reasonably be expected to have a Material Adverse
Effect;
(vi) neither Company nor any of its Subsidiaries has any contingent
liability in connection with any Release of any Hazardous Materials by
Company or any of its Subsidiaries except for such of the foregoing which
would not reasonably be expected to have a Material Adverse Effect;
(vii) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any predecessor of Company or any of its Subsidiaries
has filed any notice under any Environmental Law indicating past or present
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent, except for such of the
foregoing which could not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(viii) no Hazardous Materials exist on, under or about any Facility
in a manner that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect, and neither Company
nor any of its Subsidiaries has filed any notice or report of a Release of
any Hazardous Materials that would reasonably be expected to give rise to
an Environmental Claim having a Material Adverse Effect;
93
<PAGE>
(ix) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any of their respective predecessors has disposed of
any Hazardous Materials in a manner that would reasonably be expected to
give rise to an Environmental Claim having a Material Adverse Effect;
(x) to the best knowledge of Company, no underground storage tanks or
surface impoundments are on or at any Facility, except which underground
storage tanks or surface impoundments could not reasonably be expected to
result in a Material Adverse Effect; and
(xi) no Lien in favor of any Person relating to or in connection with
any Environmental Claim has been filed or has been attached to any Facility
except for any such Lien which would not reasonably be expected to have a
Material Adverse Effect.
5.14 EMPLOYEE MATTERS.
----------------
Except as set forth in Schedule 5.14 annexed hereto, there is no strike or
-------------
work stoppage in existence or, to the knowledge of Company or any of its
Subsidiaries, threatened involving Company or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
5.15 SOLVENCY.
--------
Company and each of its Subsidiaries is and, upon the incurrence of any
Obligations by Company on any date on which this representation is made, will
be, Solvent.
5.16 DISCLOSURE.
----------
No representation or warranty of Company or any of its Subsidiaries
contained in the Information Circular/Prospectus, any Loan Document or Related
Agreement or in any other document, certificate or written statement furnished
to Lenders by or on behalf of Company or any of its Subsidiaries for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact (known to
Company, in the case of any document not furnished by it) necessary in order to
make the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Company to be reasonable at the time made,
it being recognized by Lenders that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results and that
such projections are subject to significant uncertainties and contingencies,
many of which are beyond Company's control, and that no assurance can be given
that such projections will be realized. There are no facts known (or which
should upon the reasonable exercise of diligence be known) to Company (other
than
94
<PAGE>
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lenders for use in connection with the transactions
contemplated hereby.
5.17 RELATED AGREEMENTS.
------------------
A. Company has delivered to Lenders complete and correct copies of the
Related Agreements and of all exhibits and schedules thereto.
B. Except to the extent otherwise set forth herein or in the schedules
hereto, each of the representations and warranties in the Related Agreements is
true and correct in all material respects as of the Closing Date, subject to the
qualifications set forth in the schedules to the applicable Related Agreements.
C. Notwithstanding anything in the Related Agreements to the contrary,
the representations and warranties of Company set forth in the Related
Agreements shall, solely for purposes of this Agreement, survive the Closing
Date for the benefit of Lenders.
5.18 INSURANCE.
---------
Company and its Subsidiaries maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and business of its Subsidiaries, against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar business of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations all
as determined by the officers of the Company in their reasonable discretion.
Attached as Schedule 5.18 hereto is a complete and accurate description of all
-------------
policies of insurance that are in effect for Company and its Subsidiaries.
5.19 INTELLECTUAL PROPERTY.
---------------------
A. Company and its Subsidiaries possess all of the trademarks,
tradenames, copyrights, patents and licenses reasonably necessary for the
conduct of their respective businesses. Company and its Subsidiaries own, or
are licensed to use, the Intellectual Property and all such Intellectual
Property is fully protected and duly and properly registered, filed or issued in
the appropriate office and jurisdictions for such registrations, filing or
issuances, except for such filings the failure of which to make, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
B. No material claim has been made, or to the best knowledge of Company,
asserted by any Person with respect to the use of any such Intellectual
Property, or challenging or questioning the validity or effectiveness of any
such Intellectual Property. The use of such
95
<PAGE>
Intellectual Property by Company or any of its Subsidiaries does not infringe on
the rights of any Person, subject to such claims and infringements as do not, in
the aggregate, give rise to any liabilities on the part of Company or any of its
Subsidiaries that are material to Company or any of its Subsidiaries. The
consummation of the transactions contemplated by this Agreement will not in any
material manner or to any material extent impair the ownership of (or the
license to use, as the case may be) any of such Intellectual Property by Company
or any of its Subsidiaries.
5.20 LOANS AND GUARANTY PERMITTED UNDER SUBORDINATED DEBT DOCUMENTS.
--------------------------------------------------------------
At the time of borrowing thereof, (a) all Loans outstanding or requested
hereunder, together with all other Obligations of Company, are and will be
"Guarantor Senior Indebtedness" under the Plitt Indenture, (b) such Loans and
other Obligations shall be permitted to be incurred by Company under the Plitt
Indenture, including Section 4.03 of the Plitt Indenture, (b) the Indebtedness
(as defined in the Plitt Indenture) incurred by Plitt pursuant to the Subsidiary
Guaranty in connection with such Loans and such other Obligations are and will
be "Senior Indebtedness" under the Plitt Indenture.
5.21 YEAR 2000 PROBLEMS.
------------------
Company and its Subsidiaries do not have Year 2000 Problems.
SECTION 6 COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent:
(i) Quarterly Financials: as soon as available and in any event
--------------------
within 45 days after the end of each of the first three Fiscal Quarters,
(a) the consolidated balance sheets of Company and its Subsidiaries as at
the end of such Fiscal Quarter and the related consolidated statements of
income, stockholders' equity and cash flows of Company and its Subsidiaries
for such Fiscal Quarter, and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter (including segment
information
96
<PAGE>
regarding Company's Canadian and international operations in accordance
with GAAP and, so long as the Plitt Notes shall remain outstanding, capsule
balance sheet and income statement data regarding Plitt providing detail
comparable to that included in the Cineplex Odeon SEC Reports), setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year (it being understood that
the segment information and capsule information referred to in the
preceding parenthetical will not be available for comparative purposes for
the corresponding period of any Fiscal Year prior to the Fiscal Year ending
February 28, 1999) and the corresponding figures from the Financial Plan
for the current Fiscal Year, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments and the absence of footnotes, and (b)
a narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management for
such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter;
(ii) Year-End Financials: as soon as available and in any event
-------------------
within 90 days after the end of each Fiscal Year, (a) the consolidated
balance sheets of Company and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal Year,
(including segment information regarding Company's Canadian and
international operations in accordance with GAAP and, so long as the Plitt
Notes shall remain outstanding, capsule balance sheet and income statement
data regarding Plitt providing detail comparable to that included in the
Cineplex Odeon SEC Reports), setting forth in each case in comparative form
the corresponding figures for the previous Fiscal Year (it being understood
that the segment information and capsule information referred to in the
preceding parenthetical will not be available for comparative purposes for
any Fiscal Year prior to the Fiscal Year ending February 28, 1999) and the
corresponding figures from the Financial Plan for the Fiscal Year covered
by such financial statements, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated, (b) a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for
presentation to senior management for such Fiscal Year, and (c) in the case
of such consolidated financial statements, (1) a report thereon of a
nationally recognized independent accounting firm, which report shall be
unqualified as to scope of audit, shall express no doubts about the ability
of Company and its Subsidiaries to continue as a going concern, and shall
state that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of Company and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with
97
<PAGE>
prior years (except as otherwise disclosed in such financial statements)
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards and (2) a letter from such accounting
firm, substantially in the form of Exhibit XI annexed hereto;
----------
(iii) Officers' and Compliance Certificates: together with each
-------------------------------------
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (i) and (ii) above, (a) an Officers' Certificate of Company
stating that the signers have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Company and its Subsidiaries
during the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any condition or
event that constitutes an Event of Default or Potential Event of Default,
or, if any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at the
end of the applicable accounting periods with the restrictions contained in
Section 7, in each case to the extent compliance with such restrictions is
required to be tested at the end of the applicable accounting period;
(iv) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivision (i), (ii) or (xii) of this subsection 6.1 will
differ in any material respect from the consolidated financial statements
that would have been delivered pursuant to such subdivisions had no such
change in accounting principles and policies been made, then (a) together
with the first delivery of financial statements pursuant to subdivision
(i), (ii) or (xii) of this subsection 6.1 following such change,
consolidated financial statements of Company and its Subsidiaries for (y)
the current Fiscal Year to the effective date of such change and (z) the
two full Fiscal Years immediately preceding the Fiscal Year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (b) together with each
delivery of financial statements pursuant to subdivision (i), (ii) or (xii)
of this subsection 6.1 following such change, a written statement of the
chief accounting officer or chief financial officer of Company setting
forth the differences (including without limitation any differences that
would affect any calculations relating to the financial covenants set forth
in subsection 7.6) which would have resulted if such financial statements
had been prepared without giving effect to such change;
(v) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (ii) above, a written statement by the independent certified
public accountants giving the report
98
<PAGE>
thereon (a) stating that their audit examination has included a review of
the terms of this Agreement and the other Loan Documents as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default or
Potential Event of Default with respect to the covenants set forth in
Section 7, has come to their attention and, if such a condition or event
has come to their attention, specifying the nature and period of existence
thereof; provided that such accountants shall not be liable by reason of
--------
any failure to obtain knowledge of any such Event of Default or Potential
Event of Default that would not be disclosed in the course of their audit
examination, and (c) stating that based on their audit examination nothing
has come to their attention that causes them to believe either or both that
the information contained in the certificates delivered therewith pursuant
to subdivision (iv) above is not correct or that the matters set forth in
the Compliance Certificates delivered therewith pursuant to clause (b) of
subdivision (iv) above for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(vi) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(vii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders or by any Subsidiary of Company to its security holders
other than Company or another Subsidiary of Company, (b) all regular and
periodic reports and all registration statements (other than on Form S-8 or
a similar form) and prospectuses, if any, filed by Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally by
Company or any of its Subsidiaries to the public concerning material
developments in the business of Company or any of its Subsidiaries;
(viii) Events of Default, etc.: promptly upon any Responsible
-----------------------
Officer of Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender has given any notice (other than to Administrative
Agent) or taken any other action with respect to a claimed Event of Default
or Potential Event of Default, (b) that any Person has given any notice to
Company or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Company were required to file such
99
<PAGE>
reports under the Exchange Act, or (d) of the occurrence of any event or
change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action Company have taken, are taking
and propose to take with respect thereto;
(ix) Litigation or Other Proceedings: (a) promptly upon any
-------------------------------
Responsible Officer of Company obtaining knowledge of (X) the institution
of, or non-frivolous threat of, any non-frivolous action, suit, proceeding
(whether administrative, judicial or otherwise), governmental investigation
or arbitration against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to Lenders
or (Y) any material development in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within twenty days after the end of each
Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, Company or any of its
Subsidiaries equal to or greater than $5,000,000 or the equivalent amount
in any other currency, and promptly after request by Administrative Agent
such other information as may be reasonably requested by Administrative
Agent to enable Administrative Agent and its counsel to evaluate any of
such Proceedings;
(x) ERISA Events: promptly upon becoming aware of the occurrence of
------------
or forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action Company or any of its ERISA Affiliates has
taken, is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(xi) ERISA Notices: with reasonable promptness, copies of (a) each
-------------
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by Company or any of its ERISA Affiliates with the Internal Revenue
Service with respect to each Pension Plan; (b) all material notices
received by Company or any of its ERISA Affiliates from a Multiemployer
Plan sponsor concerning an ERISA Event; and (c) such other documents
100
<PAGE>
or governmental reports or filings relating to any Employee Benefit Plan as
Administrative Agent shall reasonably request;
(xii) Financial Plans: as soon as practicable, a consolidated plan
---------------
and financial forecast for such Fiscal Year (the "FINANCIAL PLAN" for
such Fiscal Year), including without limitation (a) a forecasted
consolidated balance sheet and forecasted consolidated statements of income
and cash flows of Company and its Subsidiaries for such Fiscal Year,
together with a pro forma Compliance Certificate for such Fiscal Year and
--- -----
an explanation of the assumptions on which such forecasts are based, and
(b) forecasted consolidated statements of income and cash flows of Company
and its Subsidiaries for each month of such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based;
(xiii) Insurance: as soon as practicable and in any event by the
---------
last day of each Fiscal Year, an Officer's Certificate of Company attaching
a schedule in form and substance satisfactory to Administrative Agent
outlining all material insurance coverage maintained as of the date of such
Officer's Certificate by Company and its Subsidiaries and all material
insurance coverage planned to be maintained by Company and its Subsidiaries
in the immediately succeeding Fiscal Year;
(xiv) Environmental Audits and Reports: as soon as practicable
--------------------------------
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim in either case
which could reasonably be expected to result in a Material Adverse Effect;
provided that the delivery of such reports would not in the opinion of
--------
counsel to Company adversely affect the availability of any privilege to
which it may be entitled in respect of such audits or reports; provided,
--------
further, that Company shall give Administrative Agent prompt written notice
-------
of any audits or reports not delivered in accordance with the preceding
proviso;
(xv) Board of Directors: with reasonable promptness, written notice
------------------
of any change in the Board of Directors of Company; provided that delivery
--------
of a current SEC Report containing a disclosure of such change in the Board
of Directors of Company shall be deemed to satisfy the requirements of this
subsection 7.1(xv);
(xvi) New Subsidiaries: promptly upon any Person becoming a
----------------
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company and
(b) all of the data required to be set forth in Schedule 5.1 annexed hereto
------------
with respect to all Subsidiaries of Company (it being understood that such
written notice shall be deemed to supplement Schedule 5.1D annexed hereto
-------------
for all purposes of this Agreement);
101
<PAGE>
(xvii) Material Contracts: promptly, and in any event within 10
------------------
Business Days after any Material Contract of Company or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto; provided that
--------
Company shall have no obligation to deliver such written notice to the
extent that disclosure of such event would not be required to be disclosed
in an SEC Report; and provided further that delivery of an SEC Report
-------- -------
containing a disclosure of any such event shall be deemed to satisfy the
requirements of this subsection 7.1(xvii); and
(xviii) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by any Lender.
6.2 CORPORATE EXISTENCE, ETC.
-------------------------
Except as permitted under subsection 7.7, Company will, and will cause each
of its Subsidiaries to, at all times preserve and keep in full force and effect
its corporate existence and all rights and franchises material to its business;
provided, however, that neither Company nor any of its Subsidiaries shall be
- -------- -------
required to preserve any such right or franchise and, solely with respect to
Company's Subsidiaries, such existence, if the Board of Directors of Company or
such Subsidiary determines in good faith that the preservation thereof is no
longer desirable in the conduct of the business of Company or such Subsidiary,
as the case may be, and that the loss thereof, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
material taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its income, businesses
or franchises before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
material penalty or fine shall be incurred with respect thereto; provided that
--------
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
B. Company will not, and will not permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company or any of its Subsidiaries).
102
<PAGE>
6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
------------------------------------
Company will, and will cause each of its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear and
tear excepted, all of their respective material properties used or useful in the
business of Company and its Subsidiaries (including, without limitation,
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof; provided, however, that
-------- -------
(x) Company and its Subsidiaries may dispose of obsolete equipment in the
ordinary course of business, (y) Company and its Subsidiaries may sell or
otherwise dispose of theatres to the extent necessary to comply with the terms
of the DOJ Settlement and (z) Company and its Subsidiaries may close or
otherwise cease to operate theatres if the Board of Directors of Company or such
Subsidiary, as the case may be, determines in good faith that the maintenance
and continued operation thereof is no longer desirable in the conduct of the
business of Company or such Subsidiary, as the case may be, and that the loss
thereof, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses.
6.5 INSPECTION; LENDER MEETING.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries once during each Fiscal
Year, including its and their financial and accounting records, and to make
copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (provided that Company may, if it so chooses, be present at or
--------
participate in any such discussion) upon reasonable notice and at such
reasonable times during normal business hours as may be reasonably requested;
provided that, at any time after the occurrence and during the continuance of an
- --------
Event of Default, Company shall, and shall cause each of its Subsidiaries to
permit such additional audits as Administrative Agent may deem necessary or
advisable, upon reasonable notice and at such reasonable times during normal
business hours as may be reasonably requested. Without in any way limiting the
foregoing, Company will, upon the request of Administrative Agent or Requisite
Lenders, participate in a meeting of Agents and Lenders once during each Fiscal
Year to be held at Company's corporate offices (or such other location as may be
agreed to by Company and Administrative Agent) at such time as may be agreed to
by Company and Administrative Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance
103
<PAGE>
with which could reasonably be expected to cause, individually or in the
aggregate at any time, a Material Adverse Effect.
6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
---------------------------------------
A. Company shall, and shall cause each of its Subsidiaries to, exercise
commercially reasonable due diligence in order to comply in all material
respects, and cause (i) all tenants under any leases or occupancy agreements
affecting any portion of the Facilities and (ii) all other Persons on or
occupying such property to comply in all material respects, with all
Environmental Laws, except where failure to comply, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
B. Company agrees that Administrative Agent may, upon a reasonable belief
that Company has breached any covenant or representation with respect to
environmental matters set forth herein or that there has been a violation of
Environmental Laws at any Facility or by Company which breach or violation could
reasonably be expected to have a Material Adverse Effect, retain, at Company's
reasonable expense, an independent professional consultant (the selection of
which shall be subject to Company's reasonable consent) to review any report
relating to Hazardous Materials prepared by or for Company in connection with
such potential breach or violation and to conduct its own reasonable
investigation of such matter at such Facility currently owned, leased, operated
or used by Company or any of its Subsidiaries which is the subject of such
potential breach or violation, and Company agrees to use its commercially
reasonable efforts to obtain permission for Administrative Agent's professional
consultant to conduct its own investigation of any such matter at any Facility
previously owned, leased, operated or used by Company or any of its Subsidiaries
which is the subject of such potential breach or violation. Company hereby
grants to Administrative Agent and its agents, employees, consultants and
contractors the right to enter into or onto the aforementioned Facilities
currently owned, leased, operated or used by Company or any of its Subsidiaries
upon reasonable notice to Company to perform such assessments on such property
as are reasonably necessary to conduct such a review and/or investigation. Any
such investigation of any such Facility shall be conducted, unless otherwise
agreed to by Company and Administrative Agent, during normal business hours and,
to the extent reasonably practicable, shall be conducted so as not to interfere
with the ongoing operations at any such Facility or to cause any damage or loss
to any property at such Facility. Company and Administrative Agent hereby
acknowledge and agree that any report of any investigation conducted at the
request of Administrative Agent pursuant to this subsection 6.7B may be obtained
and may be used by Administrative Agent and Lenders only for the purposes of
Lenders' internal credit decisions, to monitor and police the Loans and to
protect Lenders' security interests, if any, created by the Loan Documents.
Administrative Agent agrees to deliver a copy of any such report to Company with
the understanding that Company acknowledges and agrees that (i) it will
indemnify and hold harmless Administrative Agent and each Lender from any
reasonable costs, losses or liabilities relating to Company's use of or reliance
on such report, (ii) neither Administrative Agent nor any Lender makes any
representation or warranty with respect to such report, and (iii) by delivering
such report to Company, neither Administrative
104
<PAGE>
Agent nor any Lender is requiring or recommending the implementation of any
suggestions or recommendations contained in such report.
C. Company shall promptly advise Lenders in writing and in reasonable
detail of (i) any Release of any Hazardous Materials required to be reported to
any federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, which Release has a reasonable possibility of
giving rise to a Material Adverse Effect, (ii) any and all written
communications with respect to any Environmental Claims that have a reasonable
possibility of giving rise to a Material Adverse Effect or with respect to any
Release of Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency which Release has a reasonable
possibility of giving rise to a Material Adverse Effect, (iii) any remedial
action taken by Company or any other Person in response to (x) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (y) any Environmental Claim that has a reasonable possibility
of having a Material Adverse Effect, (iv) Company's discovery of any occurrence
or condition on any real property adjoining or in the vicinity of any Facility
that could reasonably be expected to cause such Facility or any part thereof to
be subject to any material restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws which restriction
would have a reasonable possibility of having a Material Adverse Effect, and (v)
any request for information from any governmental agency that suggests such
agency is investigating whether Company or any of its Subsidiaries may be
potentially responsible for a Release of Hazardous Materials, which Release has
a reasonably possibility of giving rise to a Material Adverse Effect.
D. Company shall promptly notify Lenders of any proposed acquisition of
stock, assets, or property by Company or any of its Subsidiaries that could
reasonably be expected to expose Company or any of its Subsidiaries to, or
result in, Environmental Claims that could reasonably be expected to have a
Material Adverse Effect.
E. Company shall, at its own expense, provide copies of such documents or
information as Administrative Agent may reasonably request in relation to any
matters disclosed pursuant to this subsection 6.7.
6.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
-------------------------------------------------------
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about any Facility to the extent required under all applicable
Environmental Laws and Governmental Authorizations except where failure to
comply, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. In the event Company or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on, under or about any Facility, Company or such Subsidiary shall
conduct and complete such remedial action in compliance with applicable
105
<PAGE>
Environmental Laws, except where failure to comply, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
6.9 EXECUTION OF GUARANTY AND COLLATERAL DOCUMENTS BY FUTURE SUBSIDIARIES.
---------------------------------------------------------------------
A. EXECUTION OF SUBSIDIARY GUARANTY AND COLLATERAL DOCUMENTS. In the
event that any Person becomes a wholly-owned Domestic Subsidiary of Company
after the date hereof, Company will promptly notify Administrative Agent of that
fact and cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and a Subsidiary Pledge Agreement, a
Subsidiary Trademark Security Agreement, a Subsidiary Security Agreement and to
take all such further action and execute all such further documents and
instruments as may be reasonably required to grant and perfect in favor of
Administrative Agent, for the benefit of Lenders, a First Priority security
interest in all of the personal property assets of such Subsidiary described in
the applicable Collateral Documents. With respect to any Person that becomes a
Subsidiary of Company or a Joint Venture of Company or any of its wholly owned
Domestic Subsidiaries after the date hereof, Company shall also deliver to
Administrative Agent a pledge amendment to the Company Pledge Agreement or the
Subsidiary Pledge Agreement, as appropriate, granting to Administrative Agent on
behalf of Lenders a First Priority security interest in one hundred percent
(100%) of the equity interests in such Subsidiary (sixty-five percent (65%) of
such equity interests if such Subsidiary is a Foreign Subsidiary) or one hundred
percent (100%) of the equity interests owned by Company or any of its wholly
owned Domestic Subsidiaries in such Joint Venture, as the case may be, and
Company shall take, or cause to be taken, all such other actions as
Administrative Agent shall deem necessary or desirable to perfect such security
interest.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall
deliver to Administrative Agent, together with the counterpart to the Subsidiary
Guaranty and such Collateral Documents, (i) certified copies of such
Subsidiary's constating documents, together with a good standing certificate (or
equivalent thereof) from the jurisdiction of its incorporation, each to be dated
a recent date prior to their delivery to Administrative Agent, (ii) a copy of
such Subsidiary's Bylaws, certified by its corporate secretary or an assistant
corporate secretary as of a recent date prior to their delivery to
Administrative Agent, (iii) a certificate executed by the secretary or an
assistant secretary of such Subsidiary as to (a) the incumbency and signatures
of the officers of such Subsidiary executing the Subsidiary Guaranty and the
Collateral Documents to which such Subsidiary is a party and (b) the fact that
the attached resolutions of the Board of Directors of such Subsidiary
authorizing the execution, delivery and performance of the Subsidiary Guaranty
and such Collateral Documents are in full force and effect and have not been
modified or rescinded, (iv) an Intercompany Note executed and delivered by such
Subsidiary evidencing all intercompany Indebtedness permitted with respect to
such Subsidiary pursuant to subsection 7.1(iv) and cause such Intercompany Note
to be pledged to Administrative Agent on behalf of Lenders under the applicable
Collateral Document, and (v) a favorable opinion of counsel to such Subsidiary,
in form and substance satisfactory to Administrative Agent and its counsel, as
to (a) the due organization and good standing of such Subsidiary, (b) the due
106
<PAGE>
authorization, execution and delivery by such Subsidiary of the Subsidiary
Guaranty, and such Collateral Documents, (c) the enforceability of the
Subsidiary Guaranty and such Collateral Documents against such Subsidiary, and
(d) such other matters as Administrative Agent may reasonably request, all of
the foregoing to be satisfactory in form and substance to Administrative Agent
and its counsel.
SECTION 7 COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other wholly-owned Subsidiary of Company;
provided that (a) all such intercompany Indebtedness shall be evidenced by
--------
(a) an Intercompany Note that is pledged to Administrative Agent pursuant
to the terms of the applicable Collateral Document or (b) the Global Note
that is pledged to Administrative Agent pursuant to the terms of the
applicable Collateral Documents; provided that Company shall cause the
--------
Global Note to be amended and restated in the form of an Intercompany Note
in form and substance reasonably satisfactory to Administrative Agent on or
before November 1, 1998, (b) all such intercompany Indebtedness shall be
subordinated in right of payment to the payment in full of the Obligations
pursuant to the terms of the applicable promissory notes or an intercompany
107
<PAGE>
subordination agreement, and (c) any payment by any wholly-owned Subsidiary
of Company under any guaranty of the Obligations shall result in a pro
---
tanto reduction of the amount of any intercompany Indebtedness owed by such
-----
wholly-owned Subsidiary to Company or to any of its wholly-owned
Subsidiaries for whose benefit such payment is made;
(v) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness secured by Liens permitted under subsection
7.2A(iii);
(vi) Company and its Subsidiaries may remain liable with respect to
Indebtedness existing on the Closing Date set forth in Schedule 7.1(vi);
(vii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness of a Person existing at the time such Person is
merged into or consolidated with Company or any Subsidiary of Company or
becomes a Subsidiary of Company; provided that such Indebtedness was not
--------
incurred in connection with, in contemplation of, or with the purpose of
financing such merger, consolidation or acquisition, provided, further that
-------- -------
Company can demonstrate in form and substance satisfactory to
Administrative Agent that, immediately before and after giving effect to
the incurrence of such Indebtedness, (x) Company is in compliance on a pro
forma basis with all covenants set forth in Section 7 of this Agreement and
(y) there is no Potential Event of Default or Event of Default;
(viii) Plitt may remain liable with respect to the Plitt Notes;
(ix) so long as at the time of incurrence thereof no Event of
Default or Potential Event of Default has occurred and is continuing or
would be caused thereby, Company may from time to time following the
Closing Date issue debt Securities (the "ADDITIONAL INDEBTEDNESS");
provided that (a) such Additional Indebtedness is unsecured, (b) the
--------
maturity of such Additional Indebtedness is no earlier than November 30,
2003 and such Additional Indebtedness shall not have any amortization prior
to November 30, 2003, (c) such Additional Indebtedness includes
representations and warranties, covenants, events of default and other
provisions that are not more restrictive or burdensome to Company or any of
its Subsidiaries than the Plitt Notes are to Company and its Subsidiaries,
(d) immediately before and after giving effect to the incurrence of such
Additional Indebtedness (other than Additional Indebtedness the net
proceeds of which are utilized to refinance the Plitt Notes) and to the
application of the net proceeds of such incurrence, the Leverage Ratio
shall be less than 4.0:1.00, (e) the mandatory redemption, retirement,
sinking fund or payment provisions of such Additional Indebtedness do not
require redemption, repurchase or payment of any amount in any
circumstances which the Plitt Notes would not require redemption,
repurchase or similar payment of any amount, (f) Company can demonstrate in
form and substance satisfactory to Administrative Agent that, immediately
before and after giving effect to the incurrence of such Additional
108
<PAGE>
Indebtedness, Company is in compliance on a pro forma basis with all
covenants set forth in Section 7 of this Agreement through the Revolving
Loan Commitment Termination Date, (g) such Additional Indebtedness is
otherwise reasonably satisfactory in form and substance to Administrative
Agent and Requisite Lenders, (h) none of Company's Subsidiaries incurs any
Contingent Obligations with respect to such Additional Indebtedness and (i)
Company applies the Net Debt Securities Proceeds of such Additional
Indebtedness to prepay the Loans and reduce the Commitments pursuant to
subsection 2.4A(iii)(c) to the extent required thereby;
(x) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $30,000,000 at any time outstanding;
(xi) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness which refinances Indebtedness permitted under
clause (ix) of this subsection 7.1; and
(xii) non-wholly owned Subsidiaries may become and remain liable with
respect to Investments by the Company and its Subsidiaries in such non-
wholly owned Subsidiaries to the extent permitted by subsection 7.3(ix).
7.2 LIENS AND RELATED MATTERS.
-------------------------
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) (A) Liens securing Indebtedness incurred to finance the
acquisition, construction or improvement of any real property assets
acquired or held by Company or any of its Subsidiaries in the ordinary
course of business (hereinafter referred to individually as a "MORTGAGE"),
and (B) purchase money mortgages or security interests, conditional sale
arrangements and other similar security interests, on motor vehicles and
equipment acquired by Company or any Subsidiary (hereinafter referred to
individually as a "PURCHASE MONEY SECURITY INTEREST"); provided, however,
-------- -------
that:
109
<PAGE>
(a) the aggregate amount of Indebtedness outstanding at any time
secured by Mortgages and Purchase Money Security Interests shall not
exceed $50,000,000 or the equivalent amount in any other currency;
(b) the transaction in which any Mortgage or Purchase Money
Security Interest is proposed to be created is not then prohibited by
this Agreement;
(c) any Mortgage or Purchase Money Security Interest shall
attach only to the property or asset acquired, constructed or improved
(in the case of a Mortgage) or acquired (in the case of a Purchase
Money Security Interest) in such transaction and, in each case, shall
not extend to or cover any other assets or properties of Company, or,
as the case may be, a Subsidiary;
(d) the Indebtedness secured or covered by any Mortgage or
Purchase Money Security Interest shall not exceed the lesser of the
cost or fair market value of the property or asset acquired and shall
not be renewed, extended or prepaid from the proceeds of any borrowing
by Company or any Subsidiary;
(iv) Other Liens securing Indebtedness in an aggregate amount not to
exceed $30,000,000 or the equivalent amount in any other currency at any
time outstanding;
(v) Liens existing on the Closing Date set forth on Schedule 7.2(v)
or extending (without increasing the amount of Indebtedness secured by such
Lien at the time of such extension) any of the Liens set forth on Schedule
7.2(v);
(vi) Liens securing Indebtedness permitted by subsection 7.1(vii) on
property or assets of a Person existing at the time such Person is merged
into or consolidated with Company or any Subsidiary of Company or becomes a
Subsidiary of Company; provided that such Liens were not incurred in
--------
connection with, in contemplation of, or for the purpose of facilitating
the financing of, such merger, consolidation or acquisition; and
(vii) Liens securing payment of Currency Agreements or Interest Rate
Agreements in each case to the extent the counterparty to any such
agreement is (or at the time such agreement was entered into, was) a Lender
or an Affiliate of a Lender.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
--------
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
110
<PAGE>
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to (i) specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale and (ii) Liens
on properties leased in the ordinary course of business with respect to the
property so leased, none of Company or any of its Subsidiaries shall enter into
any agreement prohibiting the creation or assumption of any Lien for the benefit
of the Lenders upon any of its properties or assets, whether now owned or
hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except (i) as provided herein and in the Plitt Note Indenture,
(ii) for restrictions on non-wholly owned Subsidiaries, (iii) for customary
provisions restricting subletting or assignment of leases, licenses and other
contractual rights and obligations, and (iv) by reason of applicable law,
Company will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay or
prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to Company
or any other Subsidiary of Company.
7.3 INVESTMENTS; JOINT VENTURES.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the Investments
owned by them as of the Closing Date in any Subsidiaries of Company;
(iii) Company and its wholly-owned Subsidiaries may make intercompany
loans to the extent permitted under subsection 7.1(iv);
(iv) Company and its wholly-owned Subsidiaries may make and continue
to own equity Investments in any Person which, upon the making of such
Investments, is or becomes a wholly-owned Subsidiary of Company;
(v) Company and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7.3 annexed hereto;
------------
(vi) [Intentionally Omitted]
111
<PAGE>
(vii) Company and its Subsidiaries may make Investments constituting
(a) accounts receivable arising, (b) prepaid film rentals, (c) deposits
made in connection with the purchase price of goods or services, in each
case in the ordinary course of business or (d) refundable construction
advances made with respect to the construction of properties that are to be
used in the business of the Company or its wholly-owned Subsidiaries and
that are not outstanding more than one year from the date made; provided
--------
that any Investments made pursuant to the preceding clause (d) that are not
repaid within one year of being made shall be deemed to be Permitted
Investments for the purpose of calculating compliance with subsection
7.3(ix) and subsection 7.7(iii);
(viii) Company and its Subsidiaries may make Investments constituting
(i) payroll advances, (ii) travel and entertainment advances and (iii)
relocation loans to officers and employees of Company or any of its
Subsidiaries in the ordinary course of business; provided, that the
--------
aggregate amount of Investments permitted under this clause shall not
exceed $2,500,000 or the equivalent amount in any other currency at any
time outstanding; and
(ix) Company and its Subsidiaries may make and continue to own
Permitted Investments and Permitted Acquisitions; provided that (i) Company
--------
and its Subsidiaries shall not make Permitted Investments and Permitted
Acquisitions in an aggregate amount (net of the amount of loans, advances
and Contingent Obligations constituting Permitted Investments that are
repaid, released or cancelled, as the case may be, during the term of this
Agreement) in excess of $200,000,000 or the equivalent amount in any other
currency during the term of this Agreement and (ii) Company's non-wholly
owned Subsidiaries shall not make Permitted Investments and Permitted
Acquisitions in an aggregate amount (net of the amount of loans, advances
and Contingent Obligations constituting such Permitted Investments that are
repaid, released or cancelled, as the case may be, during the term of this
Agreement) in excess of $20,000,000 or the equivalent amount in any other
currency during the term of this Agreement; and provided further that if
-------- -------
Company and its Subsidiaries have made Permitted Investments and Permitted
Acquisitions equal to $200,000,000 or the equivalent amount in any other
currency and the Leverage Ratio is less than 4.0:1.00, Company and its
wholly-owned Subsidiaries may make additional Permitted Investments and
Permitted Acquisitions until the Leverage Ratio is equal to or greater than
4.0:1.00;
provided, that the foregoing shall not prohibit any Subsidiary from making
- --------
dividends or distributions to Company or any wholly-owned Subsidiary; and
provided further, that any Investment which when made complies with the
- -------- -------
requirements of the definition of the term Cash Equivalent may continue to be
held notwithstanding that such Investment if made thereafter would not comply
with such requirements.
7.4 CONTINGENT OBLIGATIONS.
----------------------
112
<PAGE>
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of Letters of Credit;
(ii) Each of Company's Subsidiaries may become and remain liable with
respect to Contingent Obligations arising under the Guaranty;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets;
(iv) (A) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of any Indebtedness of
Company or any of its wholly-owned Subsidiaries and (B) Company and its
Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of any Indebtedness, Operating Leases or other
obligations of any Joint Venture or non-wholly-owned Subsidiary; provided
--------
that the aggregate maximum liability of Company and its Subsidiaries with
respect to the Contingent Obligations permitted under the preceding clause
(B) shall not exceed $30,000,000 or the equivalent amount in any other
currency at any time; provided further than the aggregate maximum liability
-------- -------
of Company and its Subsidiaries with respect to the Contingent Obligations
permitted under the preceding clause (B) shall be deemed to be a "Permitted
Investment" for purposes of calculating to be included in such calculation
upon the permanent release or cancellation of such Contingent Obligations;
(v) The Company may become and remain liable with respect to
Contingent Obligations in respect of the Plitt Notes; provided, however,
-------- -------
that the principal amount of such Contingent Obligation shall not exceed
the principal amount of the Plitt Notes; provided, further that, any such
-------- -------
Contingent Obligation shall be subordinate to the Obligations to the same
extent, and on the same terms, as the Plitt Notes are so subordinated;
(vi) Company and its Subsidiaries may remain liable with respect to
the Contingent Obligations existing on the Closing Date set forth in
Schedule 7.4(vi);
(vii) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $20,000,000 or the equivalent amount in any other currency;
113
<PAGE>
(viii) Company and its Subsidiaries may become and remain liable with
respect to guaranties of Operating Leases, construction contracts and other
contracts and agreements of Company and its wholly-owned Subsidiaries
entered into the ordinary course of business of Company and its wholly-
owned Subsidiaries;
(ix) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of Currency Agreements and
Interest Rate Agreements, in each case to the extent the counterparty to
any such Currency Agreements and Interest Rate Agreements is (or at the
time such Currency Agreement or Interest Rate Agreement was entered into,
was) a Lender or an Affiliate of a Lender;
(x) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of leases assumed by other
Persons in connection with theatres that are closed by Company or any of
its Subsidiaries, in each case to the extent Company or any of its
Subsidiaries remains liable for any deficiencies thereunder; and
(xi) Company and its Subsidiaries may remain liable with respect to
Contingent Obligations in respect of the letters of credit set forth on
Schedule 7.4(xi) annexed hereto; provided that the aggregate amount of such
---------------- --------
letters of credit issued by the Royal Bank of Canada shall not exceed
CN$44,000; provided, further, that such letters of credit shall not be
-------- -------
reissued, renewed or extended beyond the expiration date of such letters of
credit as in effect on the date hereof (except to the extent refinanced
with a Letter of Credit issued under this Agreement in accordance with the
terms hereof).
7.5 RESTRICTED JUNIOR PAYMENTS; CERTAIN OTHER PAYMENTS.
--------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment, except that Company may make payments on the
Additional Indebtedness as required by the terms of the instruments evidencing
such Additional Indebtedness, and Company and Plitt may make payments on the
Plitt Notes as required by the terms of the Plitt Notes, but subject, in each
case to the subordination provisions contained therein; provided that (v)
--------
Company and Plitt may repurchase the Plitt Notes pursuant to the Plitt Change of
Control Offer to the extent required; (w) Company and Plitt may repurchase, in
one or a series of transactions, Plitt Notes; provided that (a) no Event of
--------
Default or Potential Event of Default shall have occurred and be continuing at
the time of such purchase or repurchase, and (b) immediately after giving effect
to each such purchase or repurchase, Company is in compliance on a pro forma
basis with all covenants set forth in Section 7 of this Agreement, (x) Plitt may
redeem the Plitt Notes on the maturity date thereof strictly in accordance with
the terms of the Plitt Indenture; provided, that (a) no Event of Default or
--------
Potential Event of Default shall have occurred and be continuing at the time of
such redemption and (b) immediately after giving effect to such redemption,
Company is in compliance on a pro forma basis with all covenants set forth in
Section 7 of this Agreement, (y) Company may make payments in connection with
the Business Combination Transactions on or before the Closing Date
114
<PAGE>
and in accordance with the terms of the Related Agreements, and (z) so long as
no Potential Event of Default or Event of Default has occurred and is continuing
or would result therefrom, Company may purchase, redeem, acquire, cancel or
otherwise retire for value shares of capital stock of Company, or warrants or
options on any such shares or related stock appreciation rights or similar
securities, in each case that are owned by officers or employees (or their
estates or beneficiaries under their estates), upon the death, disability,
retirement, termination of employment or pursuant to the terms of the stock
option plan or any other agreement under which such shares of capital stock,
options, related rights or similar securities were issued or under which they
may be put or called; provided, that the aggregate cash consideration paid for
--------
such purchase, redemption, acquisition, cancellation or other retirement for
value of such shares of capital stock, options, related rights or similar
securities shall not exceed $10,000,000 during the term of this Agreement.
7.6 FINANCIAL COVENANTS.
-------------------
A. MAXIMUM TOTAL LEVERAGE RATIO. Company shall not permit the ratio of
(i) Wholly-Owned Total Debt on the last day of a Fiscal Quarter ending during
any of the periods set forth below to (ii) Annualized Pro Forma Wholly Owned
EBITDA (plus (w) for the period ending on the last day of the first Fiscal
Quarter ending after the Closing Date, $17,600,000, (x) for the period ending on
the last day of the second Fiscal Quarter ending after the Closing Date,
$17,600,000, (y) for the period ending on the last day of the third Fiscal
Quarter ending after the Closing Date, $11,700,000 and (z) for the period ending
on the last day of the fourth Fiscal Quarter ending after the Closing Date,
$5,800,000) for the four-Fiscal Quarter period ending on such last day to exceed
the correlative ratio indicated:
<TABLE>
<CAPTION>
================================================================================
Period Maximum Total Leverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
Closing Date - February 29, 2000 5.25 : 1:00
- --------------------------------------------------------------------------------
March 1, 2000 - February 28, 2001 4.80 : 1.00
- --------------------------------------------------------------------------------
March 1, 2001 - February 28, 2002 4.60 : 1.00
- --------------------------------------------------------------------------------
March 1, 2002 and thereafter 4.25 : 1.00
================================================================================
</TABLE>
B. MAXIMUM CONSOLIDATED LEVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated Debt of Company and its Subsidiaries on the last day
of a Fiscal Quarter ending during any of the periods set forth below to (ii)
Annualized Pro Forma EBITDA of Company and its Subsidiaries (plus (w) for the
period ending on the last day of the first Fiscal Quarter ending after the
Closing Date, $17,600,000, (x) for the period ending on the last day of the
second Fiscal Quarter ending after the Closing Date, $17,600,000, (y) for the
period ending on the last day of the third Fiscal Quarter ending after the
Closing Date, $11,700,000 and (z) for the period ending on the last day of the
fourth Fiscal Quarter ending after the Closing Date, $5,800,000) for the
115
<PAGE>
four-Fiscal Quarter period ending on such last day (the "LEVERAGE RATIO") to
exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
================================================================================
Period Maximum Consolidated Leverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
Closing Date - February 29, 2000 5.00 : 1.00
- --------------------------------------------------------------------------------
March 1, 2000 - February 28, 2001 4.50 : 1.00
- --------------------------------------------------------------------------------
March 1, 2001 - February 28, 2002 4.25 : 1.00
- --------------------------------------------------------------------------------
March 1, 2002 and thereafter 3.75 : 1.00
================================================================================
</TABLE>
C. MINIMUM DEBT SERVICE COVERAGE RATIO. Company shall not permit the
ratio of (i) Annualized Pro Forma Wholly Owned EBITDAR (plus (a) for the period
ending on the last day of the first Fiscal Quarter ending after the Closing
Date, $17,600,000, (b) for the period ending on the last day of the second
Fiscal Quarter ending after the Closing Date, $17,600,000, (c) for the period
ending on the last day of the third Fiscal Quarter ending after the Closing
Date, $11,700,000 and (d) for the period ending on the last day of the fourth
Fiscal Quarter ending after the Closing Date, $5,800,000) for any four-Fiscal
Quarter period ending during any of the periods set forth below to (ii) 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 correlative ratio
indicated.
<TABLE>
<CAPTION>
================================================================================
Period Minimum Debt Service Coverage Ratio
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
Closing Date - February 29, 2000 1.35 : 1.00
- --------------------------------------------------------------------------------
March 1, 2000 - February 28, 2002 1.40 : 1.00
- --------------------------------------------------------------------------------
March 1, 2002 and thereafter 1.45 : 1.00
================================================================================
</TABLE>
In making the foregoing calculations, (A) pro forma effect shall be given to
asset dispositions (including Asset Sales) and acquisitions (including the
Business Combination Transactions) that occur during such reference period or
thereafter and on or prior to the reporting date as if they had occurred on the
first day of such reference period; and (B) pro forma effect shall be given to
asset dispositions and asset acquisitions that have been made by any Person
that has become a Subsidiary of Company or has been merged with or into the
Company or any Subsidiary of Company during such reference period or subsequent
to such period and on or prior to the reporting date as if such asset
dispositions or asset acquisitions had occurred on the first day of such
reference period; provided that, notwithstanding anything to the contrary
--------
contained in the sentence preceding this proviso, pro forma effect shall not be
given to any cost savings, synergies or similar anticipated benefits from such
asset dispositions and acquisitions to which pro forma effect would not be
permitted to be given in pro forma financial information prepared in accordance
with rules 11-01 and 11-02 of Regulation S-X.
116
<PAGE>
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
----------------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
alter the corporate, capital or legal structure of Company or any of its
Subsidiaries, or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease or sub-lease (as lessor or sub-lessor),
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(i) any wholly-owned Subsidiary of Company may be merged with or
into Company or any wholly-owned Subsidiary of Company, or may be
liquidated, wound up or dissolved, or all or any part of its business,
property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to Company or
any wholly-owned Subsidiary of Company; provided that, in the case of such
--------
a merger described in the foregoing clause (a) or (b), Company or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (as reasonably determined by the
Board of Directors of Company);
(iii) Company and its Subsidiaries may make Permitted Acquisitions
and Permitted Investments; provided that (i) Company and its Subsidiaries
--------
shall not make Permitted Acquisitions and Permitted Investments in an
aggregate amount (net of the amount of loans, advances and Contingent
Obligations constituting Permitted Investments that are repaid, released or
cancelled, as the case may be, during the term of this Agreement) in excess
of $200,000,000 or the equivalent amount in any other currency during the
term of this Agreement and (ii) Company's non-wholly owned Subsidiaries
shall not make Permitted Investments and Permitted Acquisitions in an
aggregate amount (net of the amount of loans, advances and Contingent
Obligations constituting such Permitted Investments that are repaid,
released or cancelled, as the case may be, during the term of this
Agreement) in excess of $20,000,000 or the equivalent amount in any other
currency during the term of this Agreement; and provided further that if
-------- -------
Company and its Subsidiaries have made Permitted Investments and Permitted
Acquisitions equal to $200,000,000 or the equivalent amount in any other
currency and the Leverage Ratio is less than 4.0:1.00, Company and its
wholly-owned Subsidiaries may make additional Permitted Investments and
Permitted Acquisitions until the Leverage Ratio is greater than or equal to
4.0:1.00;
117
<PAGE>
(iv) Company and its Subsidiaries may make Asset Sales in compliance
with subsection 2.4A(iii); and
(v) Company may cause the dissolution of any Subsidiary to the
extent permitted by subsection 6.2.
7.8 FISCAL YEAR.
-----------
Company shall not change its Fiscal Year-end from February 28 or February
29, as the case may be, of each calendar year.
7.9 SALE OR DISCOUNT OF RECEIVABLES.
-------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable other
than sales for collection of defaulted receivables over 120 days past due.
7.10 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any material transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time in a comparable
arms-length transaction from Persons who are not such a holder or Affiliate;
provided that the foregoing restriction shall not apply to (i) any transaction
- --------
between Company and any of its wholly-owned Subsidiaries or between any of its
wholly-owned Subsidiaries; (ii) reasonable and customary fees paid to members of
the Boards of Directors of Company and its Subsidiaries, (iii) the Subject
Transactions, (iv) the transactions set forth on Schedule 7.10 hereto, (v)
-------------
transactions contemplated by the Related Agreements, (vi) transactions
contemplated in the Transition Services Agreements, or (vii) Restricted Junior
Payments permitted by subsection 7.5.
7.11 DISPOSAL OF SUBSIDIARY STOCK.
----------------------------
Except pursuant to the Collateral Documents and except for any sale of (x)
100% of the capital stock or other equity Securities of any of its Subsidiaries
in compliance with the provisions of subsection 7.7 and (y) in connection with
the formation or sale of interests in Joint Ventures and non-wholly-owned
Subsidiaries in compliance with subsection 2.4A(iii), Company shall not:
118
<PAGE>
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Company, to a wholly-owned Subsidiary of Company, or
to qualify directors if required by applicable law.
7.12 CONDUCT OF BUSINESS.
-------------------
From and after the Closing Date, Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the business
of operating movie theatres and similar or related businesses and (ii) such
other lines of business as may be consented to in writing by Requisite Lenders.
7.13 AMENDMENTS OF RELATED AGREEMENT; DOCUMENTS RELATING TO SUBORDINATED
-------------------------------------------------------------------
INDEBTEDNESS; AMENDMENTS OF MATERIAL DOCUMENTS.
-----------------------------------------------
A. Company shall not, and shall not permit any Subsidiary to, modify,
amend, supplement or terminate, or agree to modify, amend, supplement or
terminate any Related Agreement (other than (i) Subordinated Indebtedness which
is governed by subsection 7.13B below and (ii) amendments or waivers which
individually or together with all other amendments, waivers or changes made,
would not be adverse to any Loan Party, any Agent or any Lender) without
obtaining the written consent of Administrative Agent and Requisite Lenders.
B. Company shall not, and shall not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Subordinated Indebtedness (or any
documents, instruments or agreements pursuant to which such Subordinated
Indebtedness is issued including, without limitation, the Plitt Indenture), or
make any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default), change the redemption, prepayment or
defeasance provisions thereof, change the subordination provisions thereof (or
of any guaranty thereof), or change any collateral therefor (other than to
release such collateral), or if the effect of such amendment or change, together
with all other amendments or changes made, is to increase materially the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Subordinated Indebtedness (or a trustee or other representative
on their behalf) which would be adverse to any Loan Party, any Agent or any
Lender.
C. Company shall not, and shall not permit any of its Subsidiaries to,
agree to any material amendment to, or waive any of its material rights under,
its Certificate or Articles of
119
<PAGE>
Incorporation, its Bylaws, its Certificate of Limited Partnership, Agreement of
Limited Partnership or other organizational documents (other than amendments or
waivers which individually, or together with all other amendments, waivers or
changes made, would not be adverse to any Loan Party, any Agent or any Lender)
without, in each case, obtaining the written consent of Administrative Agent and
Requisite Lenders to such amendment or waiver.
SECTION 8 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
---------------------------------
Failure by Company to pay any installment of principal on any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay when
due any amount payable to an Issuing Lender in reimbursement of any drawing
under a Letter of Credit; or failure by Company to pay any interest on any Loan
or any fee or any other amount due under this Agreement within five days after
the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay when due any
principal of or interest on one or more items of Indebtedness (other than
Indebtedness referred to in subsection 8.1) or Contingent Obligations in an
individual principal amount of $5,000,000 or the equivalent amount in any other
currency or more or with an aggregate principal amount of $10,000,000 or the
equivalent amount in any other currency or more, in each case beyond the end of
any grace period provided therefor; or (ii) breach or default by Company or any
of its Subsidiaries with respect to any other material term of (a) one or more
items of Indebtedness or Contingent Obligations in the individual or aggregate
principal amounts referred to in clause (i) above or (b) any loan agreement,
mortgage, indenture or other agreement relating to such item(s) of Indebtedness
or Contingent Obligation(s), if the effect of such breach or default is to
cause, or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse of
time, both, or otherwise); provided, however, that no such Event of Default
-------- -------
shall be deemed to occur as a result of an event of default under Section
6.01(h) of the Plitt Indenture solely to the extent that such event of default
occurs as a direct result of the Business Combination Transactions; or
120
<PAGE>
8.3 BREACH OF CERTAIN COVENANTS.
---------------------------
Failure of Company to perform or comply with any term or condition
contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
------------------
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
-----------------------------------
Company or any of its Subsidiaries shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the earlier of (i) an officer of Company or such Subsidiary becoming
aware of such default or (ii) receipt by Company or such Subsidiary of notice
from Agent or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Significant Subsidiaries in
an involuntary case or similar proceeding under the Bankruptcy Code or under any
other Insolvency Laws which decree or order is not stayed; or any other similar
relief shall be granted under any applicable Insolvency Laws; or (ii) an
involuntary case or similar proceeding shall be commenced against Company or any
of its Significant Subsidiaries under the Bankruptcy Code or under any other
Insolvency Laws; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Company or any of its
Significant Subsidiaries, or over all or a substantial part of its property,
shall have been entered; or there shall have occurred the involuntary
appointment or similar proceeding of an interim receiver, trustee or other
custodian of Company or any of its Significant Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Significant Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
---------------------------------------------------
(i) Company or any of its Significant Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case or similar
proceeding under the Bankruptcy Code
121
<PAGE>
or under any other Insolvency Laws, or shall consent to the entry of an order
for relief in an involuntary case or similar proceeding, or to the conversion of
an involuntary case or similar proceeding to a voluntary case or similar
proceeding, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Company or any of its Significant Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Significant Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due; or
the Board of Directors of Company or any of its Significant Subsidiaries (or any
committee thereof) shall adopt any resolution or otherwise authorize any action
to approve any of the actions referred to in clause (i) above or this clause
(ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5,000,000 or the
equivalent amount in any other currency or (ii) in the aggregate at any time an
amount in excess of $10,000,000 or the equivalent amount in any other currency
(in either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against Company or any of its Significant Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
8.9 DISSOLUTION.
-----------
Any order, judgment or decree shall be entered against Company or any of
its Significant Subsidiaries decreeing the dissolution or split up or similar
proceeding of Company or that Significant Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
----------------------
There shall occur one or more ERISA Events which individually or in the
aggregate results in or would reasonably be expected to result in liability of
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
excess of $15,000,000 or the equivalent amount in any other currency during the
term of this Agreement; or there shall exist an amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which assets exceed benefit liabilities), which
exceeds $20,000,000 or the equivalent amount in any other currency; or
122
<PAGE>
8.11 CHANGE IN CONTROL.
-----------------
There shall have occurred a Change of Control; or
8.12 INVALIDITY OF GUARANTY.
----------------------
The Guaranty for any reason, other than the satisfaction in full of all
Obligations or the release of the Guaranty in accordance with its terms and the
terms of this Agreement, ceases to be in full force and effect (other than in
accordance with its terms) or is declared to be null and void, or any Loan Party
denies that it has any further liability, including without limitation with
respect to future advances by Lenders, under any Loan Document to which it is a
party, or gives notice to such effect; or
8.13 FAILURE OF SECURITY.
-------------------
Any Collateral Document shall, at any time, cease to be in full force and
effect (other than by reason of a release of Collateral in accordance with the
terms thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or Administrative
Agent shall not have or cease to have a valid and perfected First Priority
security interest in the Collateral:
THEN (i) upon the occurrence of any Event of Default described in
subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans, (b) an amount equal to the maximum amount that may at any
time be drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Company, and the obligation of each Lender to make any Loan,
the obligation of Administrative Agent to issue any Letter of Credit and the
right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, Administrative Agent shall, upon the written request or with
the written consent of Requisite Lenders, by written notice to Company, declare
all or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
--------
foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i).
Any amounts described in clause (b) above, when received by Administrative
Agent, shall be held by Administrative Agent pursuant to the terms of the
Collateral Account Agreement and shall be applied as therein provided.
123
<PAGE>
Notwithstanding anything contained in the second preceding paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this
paragraph are intended merely to bind Lenders to a decision which may be made at
the election of Requisite Lenders and are not intended to benefit Company and do
not grant Company the right to require Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.
SECTION 9 AGENT
9.1 APPOINTMENT.
-----------
BTCo is hereby appointed Administrative Agent and each of BTCo, Bank of
America NT&SA, The Bank of New York and Credit Suisse First Boston is hereby
appointed a Co-Syndication Agent hereunder and under the other Loan Documents
and each Lender hereby authorizes each such Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents.
Except as to the determination of the satisfaction of certain conditions set
forth in subsection 4.1, the Co-Syndication Agents shall have no duties or
obligations under this Agreement or the other Loan Documents. Each such Agent
agrees to act upon the express conditions contained in this Agreement and the
other Loan Documents, as applicable. The provisions of this Section 9 are
solely for the benefit of Agents and Lenders and Company shall have no rights as
a third party beneficiary of any of the provisions thereof. In performing its
functions and duties as an Agent under this Agreement, each Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Company or any of its Subsidiaries.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
-----------------------------------
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each such
Agent may exercise such powers, rights and remedies and perform such duties by
or through its agents or employees. No
124
<PAGE>
Agent shall have, by reason of this Agreement or any of the other Loan
Documents, a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be so construed as to impose upon any Agent any obligations
in respect of this Agreement or any of the other Loan Documents except as
expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by any Agent to Lenders or by or on behalf of
Company to any Agent or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall any Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, no Agent
shall have any liability arising from confirmations of the amount of outstanding
Loans or the Letter of Credit Usage or the component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither any Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by such Agent ("ACTING AGENT") or any other Agent under or in
connection with any of the Loan Documents except to the extent caused by Acting
Agent's gross negligence or willful misconduct. If any Agent shall request
instructions from Lenders with respect to any act or action (including the
failure to take an action) in connection with this Agreement or any of the other
Loan Documents, such Agent shall be entitled to refrain from such act or taking
such action unless and until such Agent shall have received instructions from
Requisite Lenders. Without prejudice to the generality of the foregoing, (i)
each Agent shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Company and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against any Agent as a result
of such Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders. Each Agent shall be entitled to refrain from exercising
any power, discretion or authority vested in it under this Agreement or any of
the other Loan Documents unless and until it has obtained the instructions of
Requisite Lenders.
125
<PAGE>
D. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection with this Agreement
and otherwise without having to account for the same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
------------------------------------------------------------------
CREDITWORTHINESS.
----------------
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 RIGHT TO INDEMNITY.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as an Agent in any way relating to or arising out of this
Agreement or the other Loan Documents; provided that no Lender shall be liable
--------
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent's gross negligence or willful misconduct. If any indemnity furnished to
any Agent for any purpose shall, in the opinion of such Agent, be insufficient
or become impaired, such Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional indemnity
is furnished.
126
<PAGE>
9.5 SUCCESSOR AGENT.
---------------
Any Agent may resign at any time by giving 30 days' prior written notice
thereof to Lenders and Company, and any Agent may be removed at any time with
cause by an instrument or concurrent instruments in writing delivered to Company
and such Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to Company, to appoint a successor Agent to the
retiring or removed Agent. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent to the retiring or removed Agent, that successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Agent and the retiring or
removed Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as an Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was such
Agent under this Agreement.
9.6 COLLATERAL DOCUMENTS AND GUARANTY.
---------------------------------
Each Lender hereby further authorizes Administrative Agent to enter into
each Collateral Document as secured party on behalf of and for the benefit of
Lenders and agrees to be bound by the terms of each Collateral Document;
provided that, subject to any provision of subsection 10.6 requiring the consent
- --------
of any additional Lenders, Administrative Agent shall not enter into or consent
to any amendment, modification, termination or waiver of any provision contained
in any Collateral Document or the Guaranty without the prior consent of
Requisite Lenders, but Administrative Agent may (i) release any Lien covering
any items of Collateral that are the subject of a sale or other disposition of
assets permitted by this Agreement or to which Requisite Lenders have consented
and (ii) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of
the capital stock of such Subsidiary Guarantor is sold to a Person that is not
any Affiliate of Company pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have consented. Anything contained in
any of the Loan Documents to the contrary notwithstanding, each Lender agrees
that no Lender shall have any right individually to realize upon any of the
Collateral under any Collateral Document or to enforce the Guaranty, it being
understood and agreed that all rights and remedies under the Collateral
Documents and the Guaranty may be exercised solely by Administrative Agent for
the benefit of Lenders in accordance with the terms thereof.
SECTION 10 MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
-------------------------------------------------------------
A. GENERAL. Subject to subsection 10.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or
127
<PAGE>
participations therein or any other interest herein or in any other Obligations
owed to it; provided that no such sale, assignment, transfer or participation
--------
shall, without the consent of Company, require Company to file a registration
statement with the Securities and Exchange Commission or apply to qualify such
sale, assignment, transfer or participation under the securities laws of any
state; provided, further that no such sale, assignment or transfer described in
-------- -------
clause (i) above shall be effective unless and until an Assignment Agreement
effecting such sale, assignment or transfer shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii); and provided, further that no such sale, assignment, transfer or
-------- -------
participation of any Letter of Credit or any participation therein may be made
separately from a sale, assignment, transfer or participation of a corresponding
interest in the Tranche A Revolving Loan Commitment and the Tranche A Revolving
Loans of the Lender effecting such sale, assignment, transfer or participation;
and provided further that no Lender shall sell any participation to a Person
-------- -------
that is a Non-U.S. Person that is unable to deliver to such Lender either an
Internal Revenue Service Form 4224 or Form 1001 pursuant to clause (x) of
subsection 2.7B(iii)(a). Except as otherwise provided in this subsection 10.1,
no Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or any
granting of participations in, all or any part of its Commitments or the Loans,
the Letters of Credit or participations therein, or the other Obligations owed
to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit or participation therein, or other Obligation may (a) be assigned
in any amount to another Lender, or to an Affiliate of the assigning Lender
or another Lender, with the giving of notice to Company and Agent or (b) be
assigned in an aggregate amount of not less than $5,000,000 (or such lesser
amount as shall constitute the aggregate amount of the Commitments, Loans,
Letters of Credit and participations therein, and other Obligations of the
assigning Lender) to any other Eligible Assignee with the consent of
Administrative Agent and Company (which consent shall not be unreasonably
withheld). To the extent of any such assignment in accordance with either
clause (a) or (b) above, the assigning Lender shall be relieved of its
obligations with respect to its Commitments, Loans, Letters of Credit or
participations therein, or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the Register, an
Assignment Agreement, together with a processing and recordation fee of
$3,500 and such forms, certificates or other evidence, if any, with respect
to United States federal income tax withholding matters as the assignee
under such Assignment Agreement may be required to deliver to
Administrative Agent and Company pursuant to subsection 2.7B(iii)(a). Upon
such execution, delivery, acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(z) the assigning Lender
128
<PAGE>
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights and be released from its obligations under this Agreement, subject
to subsection 10.9B (and, in the case of an Assignment Agreement covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto; provided that, anything contained in any of the Loan Documents to
--------
the contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue to
have all rights and obligations of an Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters of
Credit and the reimbursement of any amounts drawn thereunder). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its applicable Notes to
Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and/or to the assigning Lender, substantially in the
form of Exhibit IV-A or Exhibit IV-B annexed hereto, as the case may be,
------------ ------------
with appropriate insertions, to reflect the new Commitments, of the
assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
-----------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing and recordation fee referred to in subsection 10.1B(i) and
any forms, certificates or other evidence with respect to United States
federal income tax withholding matters that such assignee may be required
to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a),
Administrative Agent shall, if Administrative Agent and Company have
consented to the assignment evidenced thereby (in each case to the extent
such consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein
(which acceptance shall evidence any required consent of Administrative
Agent to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company. Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 10.1B(ii).
(iii) In the event that any Lender shall be or become a Competitor,
then Company shall have the right but not the obligation, upon notice to
such Lender and the Administrative Agent, to replace such Lender with an
Eligible Assignee (a "Replacement Lender") acceptable to Company and the
Administrative Agent (such consent not to be unreasonably withheld or
delayed; provided, that no such consent shall be required if the
--------
Replacement Lender is an existing Lender). Subject to the preceding
sentence, each such Lender which is a Competitor hereby agrees to transfer
and assign all of its Commitments, Loans, Letters of Credit or
participations therein or other Obligations owed to it to such Replacement
Lender in accordance with subsection 10.1B(i) and (ii); provided, however,
-------- -------
129
<PAGE>
that (i) such assignment shall be without recourse, representation or
warranty (other than to the effect that such Lender owns the Commitments,
Loans and Letters of Credit or participations therein or other Obligations
being assigned, free and clear of any Liens) and (ii) the purchase price
paid by the Replacement Lender shall be in the aggregate amount of such
Lender's Loans and its Pro Rata Share of outstanding Letters of Credit,
together with all accrued and unpaid interest and fees in respect thereof,
plus all other amounts, owing to such Lender hereunder. Upon any such
termination or assignment, such Lender shall cease to be a party hereto but
shall continue to be entitled to the benefits of any provisions of this
Agreement which by their terms survive the termination of this Agreement.
(iv) Upon the effective date of an assignment described in clause
(iii), Company shall issue a replacement Note or Notes, as the case may be,
to such Replacement Lender and such Replacement Lender shall become a
"Lender" for all purposes under this Agreement and the other Loan
Documents.
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
and all amounts payable by Company hereunder (including without limitation
amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall
be determined as if such Lender had not sold such participation. Company and
each Lender hereby acknowledges and agrees that, solely for purposes of
subsections 10.4 and 10.5, (a) any participation will give rise to a direct
obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
--------
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit
to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
130
<PAGE>
10.2 EXPENSES.
--------
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents and any consents, amendments,
waivers or other modifications thereto; (ii) all the reasonable costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental and insurance requirements; (iii) the reasonable
fees, expenses and disbursements of counsel to Administrative Agent and each of
the other Agents (including allocated costs of internal counsel) in connection
with the negotiation, preparation, execution and administration of the Loan
Documents and any consents, amendments, waivers or other modifications thereto
and any other documents or matters requested by Company; (iv) all the actual
costs and reasonable expenses of creating and perfecting Liens in favor of
Administrative Agent on behalf of Lenders pursuant to the Loan Documents,
including without limitation costs of conducting record searches, examining
Collateral, opening bank accounts and lockboxes, depositing checks, receiving
and transferring funds (including charges for checks for which there are
insufficient funds), and fees and taxes in connection with the filing of
financing statements, costs of preparing and recording Loan Documents, fees and
expenses of counsel for providing such opinions as Agents or Requisite Lenders
may reasonably request, and fees and expenses of legal counsel to Administrative
Agent; (v) all other actual and reasonable costs and expenses incurred by Agents
in connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and the transactions contemplated
thereby; and (vi) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Agents and Lenders in
enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 INDEMNITY.
---------
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend, indemnify, pay and hold harmless Agents and Lenders, and the
officers, directors, employees, agents and affiliates of Agents and Lenders
(collectively called the "INDEMNITIES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnities in connection with any investigative, administrative or
judicial proceeding commenced or threatened by any Person,
131
<PAGE>
whether or not any such Indemnitee shall be designated as a party or a potential
party thereto), whether direct, indirect or consequential and whether based on
any federal, state or foreign laws, statutes, rules or regulations (including
without limitation securities and commercial laws, statutes, rules or
regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of this Agreement
or the other Loan Documents or the Related Agreements or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans hereunder or the use or intended use of the proceeds of any of
the Loans or the issuance of Letters of Credit hereunder or the use or intended
use of any of the Letters of Credit) or the statements contained in the
commitment letter delivered by any Lender to Company with respect thereto
(collectively called the "INDEMNIFIED LIABILITIES"); provided, however, that
-------- -------
Company shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Company shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them.
Without limiting the generality of the foregoing, Company further agrees to
fully and promptly pay, perform, discharge, defend (subject to Indemnitee's
selection of counsel), indemnify and hold harmless each Indemnitee from and
against any Indemnified Environmental Liabilities; provided that Company shall
--------
not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Environmental Liabilities to the extent such Indemnified
Environmental Liabilities arise from the gross negligence or willful misconduct
of that Indemnitee as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to defend, indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Environmental Liabilities
incurred by the Indemnities or any of them. As used herein, "INDEMNIFIED
ENVIRONMENTAL LIABILITIES" means any liabilities, obligations, losses, damages
(including, without limitation, natural resource damages), penalties, actions,
judgments, suits, claims (including Environmental Claims), costs (including,
without limitation, the costs of any investigation, study, sampling, testing,
abatement, cleanup, removal, remediation, or other response action necessary to
remove, remediate, clean up, or abate any Hazardous Materials or any activity
relating to Hazardous Materials that is in violation of any Environmental Laws
or that presents a material risk of giving rise to an Environmental Claim),
expenses and disbursements of any kind or nature whatsoever, whether direct,
indirect or consequential and whether based on any federal, state or foreign
laws, statutes, rules or regulations (including without limitation securities
and commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any
132
<PAGE>
manner relating to or arising out of: (i) any Release, threatened Release or
disposal of any Hazardous Materials at any of the Facilities; (ii) the Release,
threatened Release, or disposal at any location of any Hazardous Materials
generated at or originating from any of the Facilities by or at the direction of
Company or any of its Subsidiaries; (iii) any Environmental Claim in connection
with any of the Facilities; or (iv) the operation of or violation of any
Environmental Law at any of the Facilities.
10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default and after consultation with Administrative
Agent each Lender is hereby authorized by Company at any time or from time to
time, without prior notice to Company or to any other Person, any such prior
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of Company against and
on account of the obligations and liabilities of Company to that Lender under
this Agreement, the Letters of Credit and participations therein and the other
Loan Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
Administrative Agent and each Lender a security interest in all deposits and
accounts maintained with Administrative Agent or such Lender as security for the
Obligations.
10.5 RATABLE SHARING.
---------------
AMOUNTS OWED BY COMPANY. Lenders hereby agree among themselves that if any
of them shall, whether by voluntary payment, by realization upon security,
through the exercise of any right of set-off or banker's lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code or under any other Insolvency Laws, receive payment or
reduction of a proportion of the aggregate amount of principal, interest,
amounts payable in respect of Letters of Credit, fees and other amounts then due
and owing to that Lender from Company hereunder or under the other Loan
Documents (collectively, the "AGGREGATE AMOUNTS DUE FROM COMPANY" to such
Lender) which is greater than the proportion received by any other Lender in
respect of the Aggregate Amounts Due From Company to such other Lender, then the
Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to
133
<PAGE>
purchase participations (which it shall be deemed to have purchased from each
seller of a participation simultaneously upon the receipt by such seller of its
portion of such payment) in the Aggregate Amounts Due From Company to the other
Lenders so that all such recoveries of Aggregate Amounts Due From Company shall
be shared by all Lenders in proportion to the Aggregate Amounts Due From Company
to them; provided that if all or part of such proportionately greater payment
--------
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Company or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Company to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 AMENDMENTS AND WAIVERS.
----------------------
A. AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Agreement or of the Notes, and no consent to any
departure by Company therefrom, shall in any event be effective without the
written concurrence of Company and Requisite Lenders; provided that any such
--------
amendment, modification, termination, waiver or consent which: increases the
amount of any of the Commitments or reduces the principal amount of any of the
Loans; changes in any manner the definition of "Pro Rata Share" or the
definition of "Requisite Lenders" (it being understood that, with the consent
of Requisite Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of Pro Rata Share and Requisite Lenders on
substantially the same basis as the extensions of credit set forth in this
Agreement on the date hereof); changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or concurrence of
all Lenders; postpones the scheduled final maturity date (but not the date of
any scheduled installment of principal) of any of the Loans; postpones the date
on which any interest or any fees are payable to Lenders; decreases the interest
rate borne by any of the Loans (other than any waiver of any increase in the
interest rate applicable to any of the Loans pursuant to subsection 2.2E) or the
amount of any fees payable to Lenders hereunder; increases the maximum duration
of Interest Periods permitted hereunder; reduces the amounts or postpones the
due date of any amount payable in respect of, or extends the required expiration
date beyond the Revolving Loan Commitment Termination Date of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; releases any Lien granted in
favor of Administrative Agent with respect to all or substantially all of the
Collateral (except as expressly provided in the Loan Documents); or releases any
Loan Party from its obligations under the Guaranty in each case other than in
accordance with the terms of the Loan Documents or changes in any manner the
provisions contained in subsection 8.1 or this subsection 10.6 shall be
effective only if evidenced by a writing signed by or on behalf of all Lenders
affected thereby; provided further that no such amendment, modification,
-------- -------
termination, waiver or consent shall increase the Commitments of a Lender over
the amount hereof then in effect without the consent
134
<PAGE>
of such Lender. In addition, (i) any amendment, modification, termination or
waiver of any of the provisions contained in Section 4 shall be effective only
if evidenced by a writing by or on behalf of Agents, Requisite Lenders and
Company, (ii) no amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of the Lender
which is the holder of that Note and (iii) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Administrative Agent shall be effective without the written
concurrence of Administrative Agent. Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Company in any case
shall entitle Company to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Company, on
Company.
B. REPLACEMENT OF LENDER. If, in connection with any proposed change,
waiver, discharge or termination to any of the provisions of this Agreement as
contemplated by the first proviso to subsection 10.6A, the consent of the
Requisite Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then Company shall have the
right, so long as all non-consenting Lenders whose individual consent is
required are treated as described in either clauses (A) or (B) below, to either
(A) replace each such non-consenting Lender or Lenders with one or more Persons
satisfying the requirements of the definition of Eligible Assignee (each such
Person being a "REPLACEMENT LENDER") so long as at the time of such
replacement each outstanding Loan, Letter of Credit and other Obligations owed
to each such Lender being replaced is repaid in full and so long as each such
Replacement Lender consents to the proposed change, waiver, discharge or
termination or (B) terminate such non-consenting Lender's Commitments and/or
repay in full each outstanding Loan, Letters of Credit and other Obligations
owed to such Lender; provided that, unless the Commitments that are terminated,
--------
and Loans, Letters of Credit and other Obligations repaid, pursuant to preceding
clause (B) are immediately replaced in full at such time through the addition of
new Lenders or the increase of the Commitments and/or outstanding Loans of
existing Lenders (who in each case must specifically consent thereto), then in
the case of any action pursuant to preceding clause (B) the Requisite Lenders
(determined after giving effect to the proposed action) shall specifically
consent thereto; provided further, that in any event Company shall not have the
-------- -------
right to replace a Lender, terminate its Commitments or repay its Loans, Letters
of Credit and other Obligations owed to such Lender solely as a result of the
exercise of such Lender's rights (and the withholding of any required consent by
such Lender) pursuant to the second proviso to subsection 10.6A.
135
<PAGE>
10.7 INDEPENDENCE OF COVENANTS.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to any Agent shall not be
--------
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4, 10.5, and 10.19 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of any Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
136
<PAGE>
10.11 MARSHALLING; PAYMENTS SET ASIDE.
-------------------------------
Neither any Agent nor any Lender shall be under any obligation to marshal
any assets in favor of Company or any other party or against or in payment of
any or all of the Obligations. To the extent that Company makes a payment or
payments to any Agent or Lenders (or to any Agent for the benefit of Lenders),
or any Agent or Lenders enforce any security interests or exercise their rights
of setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
10.12 SEVERABILITY.
------------
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
137
<PAGE>
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Each
Letter of Credit shall be governed by, and shall be construed and enforced in
accordance with, the laws or rules designated in such Letter of Credit, or if no
such laws or rules are designated, the Uniform Customs and Practices for
Documentary Credits (1993 Revisions), International Chamber of Commerce,
Publication No. 500 (the "UNIFORM CUSTOMS") and as to matters not governed by
the Uniform Customs, the laws of the State of New York.
10.16 SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the permitted successors and permitted assigns of Lenders (it being
understood that Lenders' rights of assignment are subject to subsection 10.1).
None of Company's rights or obligations hereunder nor any interest therein may
be assigned or delegated by Company without the prior written consent of all
Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN
DOCUMENT OR SUCH OBLIGATION. Company hereby agrees that service of all process
in any such proceeding in any such court may be made by registered or certified
mail, return receipt requested, to Company at its address provided in subsection
10.8, such service being hereby acknowledged by Company to be sufficient for
personal jurisdiction in any action against Company in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Lender to bring proceedings against Company in the courts
of any other jurisdiction.
10.18 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
138
<PAGE>
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including without limitation contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO),
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
10.19 CONFIDENTIALITY.
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, it being understood and agreed
by Company that in any event a Lender may after the proposed recipient of such
information has agreed in writing to be bound by this subsection 10.19, make
disclosures to Affiliates (other than any Affiliate that is a Competitor) of
such Lender or disclosures reasonably required by any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of any Loans or any participations therein or
disclosures required or requested by any governmental agency or representative
thereof or pursuant to legal process; provided that, unless specifically
--------
prohibited by applicable law or court order, each Lender shall notify Company of
any request by any governmental agency or representative thereof (other than any
such request in connection with any examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
-------- -------
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
139
<PAGE>
10.20 COUNTERPARTS; EFFECTIVENESS.
---------------------------
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
140
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
LOEWS CINEPLEX ENTERTAINMENT
CORPORATION
By: /s/ John J. Walker
____________________________________
Name: John J. Walker
Title: Senior Vice President and
Chief Financial Officer
Notice Address:
711 Fifth Avenue, 11th Floor
New York, New York 10022
Attention: Lawrence J. Ruisi
With a copy to:
Loews Cineplex Entertainment Corporation
711 Fifth Avenue, 11th Floor
New York, New York 10022
Attention: General Counsel
S-1
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
as Administrative Agent, Co-Syndication Agent and as a
Lender
By: /s/ James Reilly
_________________________________________
Name: James Reilly
Title: Vice President
Notice Address:
130 Liberty Street
New York, New York 10006
Attention: James Reilly
Telephone: (212) 250-9545
Facsimile: (212) 250-7218
S-2
<PAGE>
CREDIT SUISSE FIRST BOSTON,
as a Co-Syndication Agent and as a
Lender
By: /s/ Judith E. Smith
______________________________
Name: Judith E. Smith
Title: Director
By: /s/ Todd C. Morgan
______________________________
Name: Todd C. Morgan
Title: Director
Notice Address:
11 Madison Avenue
New York, New York 10010
Attention: Judith Smith
Telephone: (212) 325-9174
Facsimile: (212) 325-8314
S-3
<PAGE>
BANK OF AMERICA NT&SA,
as a Co-Syndication Agent and as a
Lender
By: /s/ Jon M. Varnell
___________________________
Name: Jon M. Varnell
Title: Managing Director
Notice Address:
555 South Flower
11th Floor
Los Angeles, California 90071
Attention: Jeff Bailard
Telephone: (213) 228-2891
Facsimile: (213) 228-2641
S-4
<PAGE>
THE BANK OF NEW YORK,
as a Co-Syndication Agent and as a
Lender
By: /s/ Geoffrey C. Brooks
____________________________
Name: Geoffrey C. Brooks
Title: Vice President
Notice Address:
One Wall Street
New York, New York 10286
Attention: Geoffrey C. Brooks
Telephone: (212) 635-8475
Facsimile: (212) 635-8593
S-5
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Paul de Klerk
_______________________________
Name: Paul de Klerk
Title: Vice President
By: /s/ Anne-Maureen Sarfati
_______________________________
Name: Anne-Maureen Sarfati
Title: Vice President
Notice Address:
500 Park Avenue
3rd Floor
New York, New York 10022
Attention: Thomas Heslenfeld
Telephone: (212) 446-4271
Facsimile: (212) 757-6114
S-6
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ Terry K. Fryett
______________________________
Name: Terry K. Fryett
Title: Authorized Signatory
Notice Address:
One Liberty Plaza
New York, New York 10006
Attention: Vincent J. Fitzgerald, Jr.
Telephone: (212) 225-5042
Facsimile: (212) 225-5090
S-7
<PAGE>
THE BANK OF TOKYO MITSUBISHI TRUST
By: /s/ Glenn B. Eckert
___________________________
Name: Glenn B. Eckert
Title: Vice President
Notice Address:
1251 Avenue of the Americas
12th Floor
New York, New York 10020
Attention: Glenn Eckert
Telephone: (212) 782-4559
Facsimile: (212) 782-4935
S-8
<PAGE>
BARCLAYS BANK PLC
By: /s/ Les Bek
______________________________
Name: Les Bek
Title: Director
Notice Address:
388 Market Street
Suite 1700
San Francisco, CA 94111
Attention: Emeline Brown
Telephone: (415) 765-4705
Facsimile: (415) 765-4760
S-9
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ Anthony Rock By: /s/ Brian O'Leary
______________________ ___________________
Name: Anthony Rock Name: Brian O'Leary
Title: Vice President Title: Vice President
Notice Address:
520 Madison Avenue
37th Floor
New York, New York 10022
Attention: Anthony Rock
Telephone: (212) 715-4666
Facsimile: (212) 715-4535
S-10
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Kasuki Shimizu
__________________________
Kasuki Shimizu
Vice President
Notice Address:
One World Trade Center
38th Floor
New York, New York 10048
Attention: Frank Bertelle
Telephone: (212) 432-6639
Facsimile: (212) 524-0579
S-11
<PAGE>
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By: /s/ David Manheim By: /s/ John Runnion
_______________________________ _______________________
Name: David Manheim Name: John Runnion
Title: Assistant Vice President Title: First Vice President
Notice Address:
280 Park Avenue
West Building
32nd Floor
New York, New York 10017
Attention: David Manheim
Telephone: (212) 984-5633
Facsimile: (212) 984-5627
S-12
<PAGE>
THE FUJI BANK, LIMITED - NEW YORK
BRANCH
By: /s/ Teiji Teramoto
________________________________
Name: Teiji Teramoto
Title: Vice President & Manager
Notice Address:
Two World Trade Center
79th Floor
New York, New York 10048
Attention: Mark Gronich
Telephone: (212) 898-2082
Facsimile: (212) 898-2399
S-13
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Jeffrey Cole
________________________________
Name: Jeffrey Cole
Title: Senior Vice President
Notice Address:
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention: William Kennedy
Telephone: (212) 282-3516
Facsimile: (212) 282-4490
S-14
<PAGE>
RIGGS BANK, N.A.
By: /s/ Louanne Baily
________________________
Name: Louanne Baily
Title: Vice President
Notice Address:
808 17th Street, N.W.
10th Floor
Washington, D.C. 20006
Attention: Louanne Baily
Telephone: (202) 835-5037
Facsimile: (202) 835-5977
S-15
<PAGE>
SUMMIT BANK
By: /s/ Wayne R. Trotman
_________________________
Name: Wayne R. Trotman
Title: Vice President &
Regional Manager
Notice Address:
750 Walnut Avenue
3rd Floor
Cranford, New Jersey 07016
Attention: Bruce A. Gray
Telephone: (908) 709-5340
Facsimile: (908) 709-6433
S-16
<PAGE>
THE TOYO TRUST & BANKING CO., LTD.
By: /s/ T. Mikumo
_______________________________
Name: T. Mikumo
Title: Vice President
Notice Address:
666 Fifth Avenue
33rd Floor
New York, New York 10103-3395
Attention: Nicholas A. Fiore
Telephone: (212) 307-3405
Facsimile: (212) 307-3498
S-17
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Beatrice Kossodo
___________________________
Name: Beatrice Kossodo
Title: Senior Vice President
Notice Address:
520 Madison Avenue
25th Floor
New York, New York 1022
Attention: Bea Kossado
Telephone: (212) 891-8363
Facsimile: (212) 755-2349
S-18
<PAGE>
April 30, 1998
Mr. Lawrence J. Ruisi
121 Whippoorwill Road
Armonk, NY 10504
Dear Mr. Ruisi:
Reference is made to the Employment Agreement dated as of July 1, 1991,
between you and Sony Retail Entertainment (the "Company"), a division of
Sony Corporation of America ("SCA"), as amended by the Letter Agreement dated as
of July 1, 1994 and as further amended by the Letter Agreement dated October 4,
1996 (as amended, the "Agreement"). All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Agreement. Pursuant
to the Agreement, your areas of responsibility include supervision of the world
wide movie theater exhibition business of SCA and its subsidiaries. It is
contemplated that LTM Holdings Inc. ("LTMH"), a subsidiary of SCA, will
consummate a combination with Cineplex Odeon Corporation (the "Combination") in
or about May, 1998. You and the Company desire to terminate the Agreement
effective as of the effective date of and contingent on consummation of the
Combination and you and LTMH have agreed to enter into a new Employment
Agreement (the "New Employment Agreement") contingent upon and effective as of
the effective date of the Combination. Accordingly, the parties hereby agree as
follows:
Contingent upon and effective as of the effective date of the Combination
and the commencement of the Employment Period under the New Employment
Agreement, the Agreement shall terminate and no party to the Agreement shall
have any rights or obligations thereunder.
The parties acknowledge that you are entitled to (a) $500,000 in respect of
the Fiscal 1998 Bonus Plan, (b) $996,100 in respect of the Fiscal 1998 LTEC/LTIP
Plan, and (c) $800,833 in satisfaction of all other obligations of the Company
under the Agreement. The amounts referred to in clause (a) and (b) (i.e., an
aggregate of $1,496,100) will be paid by the Company to you within the earlier
of (a) (30) days after the effective date of the Combination, or (b) such
earlier date as such amounts would have otherwise been payable to you under the
relevant plans. The amount referred to in clause (c) (i.e., $800,833) will be
paid within 30 days after the effective date of the Combination. All such
amounts will be paid by wire transfer to an account designated by you. The
payments provided for in this Paragraph 2 are in full and complete
1
<PAGE>
satisfaction of all obligations of the Company under the Agreement, including,
without limitation, in respect of any salary, bonus, LTEC, LTIP, or other long
term incentive compensation program payments. Notwithstanding the foregoing,
nothing contained herein shall in any way affect any vested rights that you have
as of the effective date of the Combination pursuant to any of the Company's or
its Affiliates' Employee Benefit Plans (other than those relating to bonuses or
long-term incentive compensation) and nothing contained herein shall affect any
vacation that you may have accrued and/or carried forward in accordance with the
Company's policies.
All payments made to you hereunder shall be subject to all applicable laws,
statutes, governmental regulations or orders, the terms of all applicable
Employee Benefit Plans and the terms of all agreements between or binding upon
the Company and you requiring the deduction or withholding of any amounts from
such payments, and the Company shall have the right to make such deductions and
withholdings in accordance with the Company's interpretation thereof and the
Company's sole judgement.
Paragraphs 11, 12 and 13 of Exhibit A to the Agreement are incorporated
herein by this reference and shall apply to this Letter Agreement, mutatis
-------
mutandis, as if set forth in full herein.
- --------
Except as otherwise provided herein, the Agreement remains unchanged.
Please acknowledge your agreement to the above, by signing below.
Very truly yours,
SONY RETAIL ENTERTAINMENT,
a division of Sony Corporation
of America
By: /s/ Howard Stringer
---------------------------
AGREED TO AS OF THE DATE
FIRST ABOVE WRITTEN:
/s/ Lawrence J. Ruisi
- --------------------------
Lawrence J. Ruisi
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of April 30, 1998, between LTM Holdings Inc., a
Delaware corporation, which maintains offices at 711 Fifth Avenue, New York, NY
10022 (the "Company"), and Lawrence J. Ruisi ("Employee"), residing at 121
Whippoorwill Road, Armonk, NY 10504.
WHEREAS, Employee is currently employed by Sony Retail Entertainment
("SRE"), a division of Sony Corporation of America and an Affiliate of the
Company, pursuant to an Employment Agreement, dated as of July 1, 1991, as
amended by a letter agreement, dated as of July 1, 1994, and by a letter
agreement, dated as of October 4, 1996 (as amended, the "Current Employment
Agreement"); and
WHEREAS, Employee's areas of responsibility pursuant to the Current
Employment Agreement include supervision of the Company's movie theater
exhibition business; and
WHEREAS, it is contemplated that the Company will consummate a combination
with Cineplex Odeon Corporation (the "Combination") in or about May, 1998; and
WHEREAS, Employee and SRE have agreed, pursuant to a separate agreement of
even date herewith, to terminate the Current Employment Agreement, contingent
upon and effective as of the date of consummation of the Combination; and
WHEREAS, Employee and the Company desire to enter into this Employment
Agreement to be effective as of the date of and contingent upon consummation of
the Combination.
NOW, THEREFORE, the parties hereby agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee
------------------
hereby accepts employment, on the terms and subject to the conditions
hereinafter set forth, for a term (the "Employment Period") commencing on the
effective date of the Combination and continuing until the fifth anniversary of
the effective date of the Combination (the "Expiration Date").
2. DUTIES AND PRIVILEGES. During the Employment Period, Employee shall
----------------------
(a) serve as President and Chief Executive Officer of the Company and be
responsible to and report to the Board of Directors of the Company and (b) be a
member of the Company's Board of Directors and of its principal Canadian
subsidiary's Board of Directors, and of any Executive or similar committee of
either corporation having the power to act for the Board of Directors generally.
During the Employment Period, Employee shall have such authority and perform
such duties which are consistent with Employee's title and position as President
and Chief Executive Officer of the Company as the Board of Directors may from
time to time prescribe;
<PAGE>
devote Employee's entire business time, ability and energy exclusively to the
performance of Employee's duties hereunder (except that Employee may participate
in charitable and industry activities that do not interfere with his duties
hereunder); and use Employee's best efforts to advance the interests and
businesses of the Company, its divisions and subsidiaries. Employee's principal
office shall be located at the Company's offices in the New York metropolitan
area.
3. COMPENSATION.
-------------
(a) The Company shall pay to Employee a salary at the rate of $750,000
per year during the Employment Period. Employee's salary may be subject to such
merit increases, if any, as the Company may determine in its sole discretion
from time to time, based on an annual review of Employee's performance in
accordance with its regular policies and procedures.
(b) During the Employment Period, Employee shall be eligible to
participate in all then-operative employee benefit plans of the Company which
are applicable generally to the Company's senior executives ("Employee Benefit
Plans"), subject to the respective terms and conditions of such Employee Benefit
Plans. Notwithstanding the foregoing, Employee shall be entitled to no less
than four weeks paid vacation each year during the Employment Period. Nothing
contained in this Agreement shall obligate the Company to adopt or implement any
Employee Benefit Plan, or prevent or limit the Company from making any blanket
amendments, changes or modifications of the eligibility requirements or any
other provisions of, or terminating, any Employee Benefit Plan at any time
(whether during or after the Employment Period), and Employee's participation in
or entitlement under any such Employee Benefit Plan shall at all times be
subject in all respects thereto. To the extent permitted by law and provided
for by the applicable Employee Benefit Plan, Employee shall be entitled to prior
service credit for his years of service with any group of which the Company (or
its predecessor) was a member in respect of any medical or retirement Employee
Benefit Plan for which years of service are generally applicable.
(c) During the Employment Period, Employee shall be eligible to
receive an annual bonus ("Annual Bonus"), the amount of which will be targeted
at $500,000, plus the amount, if any, added to the Minimum Annual Bonus in
respect of the COLA Adjustment, as defined below, it being understood that the
Annual Bonus payable to the Employee shall be the sum of (x) the Annual Bonus
payable hereunder without regard to said COLA Adjustment, plus (y) any COLA
Adjustment. Payment of the Annual Bonus shall be based on performance criteria
to be developed by the Company and approved by its Board (and the Board shall
also have the right to approve the amount of each Annual Bonus); provided,
however, that the amount of the Annual Bonus for each of the Company's full
fiscal years during the Employment Period shall in no event be less than
$250,000 plus, with respect to the second and subsequent Annual Bonuses paid
hereunder, the COLA Adjustment (the "Minimum Annual Bonus"). The Minimum Annual
Bonus will be prorated for partial fiscal years during the Employment Period.
As used herein, the "COLA Adjustment" with respect to the second and subsequent
Annual Bonuses paid hereunder, shall be the amount obtained by multiplying (x)
$750,000 plus, with respect to the third and subsequent Annual Bonuses paid
hereunder, the COLA Adjustment component of the prior year's Annual Bonus, by
(y) the percentage by which the Consumer Price Index for the
<PAGE>
New York-New Jersey Metropolitan Area, as reported as of April 1 of the
applicable year by the Bureau of Labor Statistics of the United States
Department of Labor has increased over its level as of the prior April 1 or, if
such data is not available, such other similar measure of cost of living
increases as the parties shall mutually agree. Employee's Annual Bonus for a
fiscal year shall be paid not later than 90 days following the close of such
fiscal year. Subject to the Minimum Annual Bonus, the determination of the
amount of Employee's Annual Bonus for each fiscal year shall be made by the
Company based on the performance criteria to be developed as described in this
Section 3(c), and such determination by the Company shall be final and binding.
(d) The Company has adopted a stock option plan (together with the
applicable option agreement thereunder, the "Option Plan"). Employee has
received a grant of 9,000,000 options (the "Initial Options") under the Option
Plan. The Initial Options entitle the Employee, subject to the terms of the
Option Plan, to purchase shares of Company Common Stock at $1.3125 per share.
The Initial Options shall vest as follows: (i) 5,000,000 of the Initial Options
have vested on grant and (ii) the balance of the Initial Options shall vest in
increments of 1,000,000 options on the first day immediately following the first
through fourth anniversaries of the effective date of the Combination.
Employee shall be granted not less than an additional 1,000,000 options (the
"Additional Options") on each of the last day immediately preceding the second,
third and fourth anniversaries of the effective date of the Combination,
pursuant to and subject to the terms of the Option Plan. The Initial Options
and Additional Options are hereinafter referred to collectively as the
"Options." Subject to the specific provisions of this Section 3(d), the terms
and provisions of the Option Plan shall control as to all matters relating to
the Options. All references to the number and exercise price of options set
forth herein are based on the common stock of the Company as it is contemplated
to exist immediately following consummation of the Combination but prior to a 10
for 1 reverse stock split that will be effectuated in connection with the
Company's recapitalization following consummation of the Combination, and
Employee acknowledges that the number and exercise price of the Initial and
Additional Options set forth herein will be subject to adjustment for such
reverse stock split.
(e) To facilitate Employee's performance of Employee's duties
hereunder, the Company shall make available to Employee, during the Employment
Period, either (at the Company's option) a leased automobile or car allowance in
accordance with the Company's automobile policy as from time to time in effect,
but in no event less than the amount of his current car allowance, which is
based on a car with a delivered retail cost of approximately $85,000. Company
shall pay for or provide parking to Employee near Employee's New York office.
(f) To facilitate Employee's performance of Employee's duties
hereunder, the Company shall pay the cost of Employee's membership in a luncheon
club in Manhattan, provided that the initiation costs and the amount of the
monthly dues are approved by the Board of Directors.
4. EXPIRATION OF TERM AND TERMINATION.
----------------------------------
<PAGE>
(a) Employee's employment by the Company and this Agreement shall
automatically expire and terminate on the Expiration Date unless sooner
terminated pursuant to the provisions of this Section 4.
(b) Employee's employment by the Company and this Agreement shall
automatically terminate upon Employee's death.
(c) The Company shall have the right and option, exercisable by giving
written notice to Employee, to terminate Employee's employment by the Company
and this Agreement at any time after Employee has been unable to perform the
services or duties required of Employee in connection with Employee's employment
by the Company as a result of physical or mental disability (or disabilities)
which has (or have) continued for a period of twelve (12) consecutive weeks, or
for a period of sixteen (16) weeks in the aggregate, during any twelve (12)
month period.
(d) The Company shall have the right and option, exercisable by giving
written notice to Employee, to terminate Employee's employment by the Company
and this Agreement at any time after the occurrence of any of the following
events or contingencies (any such termination being deemed to be a termination
"for cause"):
(i) Employee materially breaches, materially repudiates or
otherwise materially fails to comply with or perform any of the terms of this
Agreement, any duties of Employee in connection with Employee's employment by
the Company or any of the Company's policies or procedures, or deliberately
interferes with the material compliance by any other employee of the Company
with any of the foregoing and such action (if correctable) is not materially
corrected within 30 days after notice from the Company;
(ii) The conviction by Employee of a felony or the pleading by
Employee of no contest (or similar plea) to any felony (other than a crime for
which vicarious liability is imposed upon Employee solely by reason of
Employee's position with the Company, and not by reason of Employee's conduct);
(iii) Any act or omission by Employee constituting fraud, gross
negligence or willful misconduct in connection with Employee's employment by the
Company and, if correctable, is not corrected within 30 days after notice from
the Company; or
(iv) Any other act, omission, event or condition constituting
cause for the discharge of an employee under the laws of New York and, if
correctable, is not corrected within 30 days after notice from the Company.
(e) The Company shall have no obligation to renew or extend the
Employment Period. Neither (i) the expiration of the Employment Period, (ii)
the failure or refusal of the Company to renew or extend the Employment Period,
this Agreement, or Employee's employment by the Company upon the Expiration Date
nor (iii) the termination of this Agreement by the Company pursuant to any
provision of this Section 4 (except Section
<PAGE>
4(g)), shall be deemed to constitute a termination of Employee's employment by
the Company "without cause" for the purpose of triggering any rights of or
causes of action by Employee.
(f) If this Agreement, the Employment Period or Employee's employment
by the Company is terminated or expires pursuant to any provision of this
Section 4 (other than Section 4(g)), or is terminated by Employee by reason
other than Employer's material breach of this Agreement, Employee's right to
receive salary or other compensation from the Company and all other rights and
entitlements of Employee pursuant to this Agreement or as an employee of the
Company shall forthwith cease and terminate, and the Company shall have no
liability or obligation whatsoever to Employee, except that:
(i) The Company shall be obligated to pay to Employee (x) not
later than the effective date of such termination all unpaid salary, car
allowance (if any), parking, vacation and reimbursable expenses which shall have
accrued as of the effective date of such termination and (y) as soon as
practicable after the effective date of such termination, a pro rata portion of
the Minimum Annual Bonus for the Company fiscal year in which such termination
occurs through the effective date of such termination;
(ii) The terms and conditions of applicable Employee Benefit
Plans, if any, shall control Employee's entitlement, if any, to receive benefits
thereunder; and
(iii) The terms and conditions of the Option Plan shall control
the vesting, expiration and Employee's entitlement, if any, to exercise the
Options.
(g) The Company shall have the unilateral right, at any time, without
notice, in the Company's sole and absolute discretion, to terminate Employee's
employment by the Company, without cause, and for any reason or for no reason
(the Company's "Termination Rights"). If the Company materially reduces the
duties or responsibilities of the Employee hereunder, or otherwise materially
breaches this Agreement, such action shall be deemed an exercise by the Company
of its Termination Rights. The Company's Termination Rights are not limited or
restricted by, and shall supersede, any policy of the Company requiring or
favoring continued employment of its employees during satisfactory performance,
any seniority system or any procedure governing the manner in which the
Company's discretion is to be exercised. No exercise by the Company of its
Termination Rights shall, under any circumstances, be deemed to constitute (i) a
breach by the Company of any term of this Agreement, express or implied
(including without limitation a breach of any implied covenant of good faith and
fair dealing), (ii) a wrongful discharge of Employee or a wrongful termination
of Employee's employment by the Company, (iii) a wrongful deprivation by the
Company of Employee's corporate office (or authority, opportunities or other
benefits relating thereto) or (iv) the breach by the Company of any other duty
or obligation, express or implied, which the Company may owe to Employee
pursuant to any principle or provision of law (whether contract or tort);
provided, however, that notwithstanding the foregoing, a breach by the Company
of its payment obligations pursuant to this Section 4(g) shall be deemed to be a
breach of this Agreement. If the Company elects to terminate Employee's
employment by the Company or is deemed to exercise its Termination Rights
pursuant to this Section 4(g) prior to the Expiration Date, the Company shall
have no
<PAGE>
obligation or liability to Employee pursuant to this Agreement, or otherwise,
except to pay to Employee within 30 days of such termination, in addition to the
amounts specified in Section 4(f) above, the aggregate amounts equal to (x) the
salary and benefits (to the extent quantifiable) payable for the balance of the
Employment Period (in each case as if this Agreement had not been terminated) as
provided in Sections 3(a) and (b) hereof (excluding car allowance or car leasing
benefits), and (y) the Minimum Annual Bonus, payable for the balance of the
Employment Period (in each case as if this Agreement had not been terminated).
With respect to benefits that are not quantifiable (e.g., health insurance), the
Company shall continue to pay such benefits to the Employee for the balance of
the Employment Period (in each case as if this Agreement had not been
terminated). From and after the date of such termination, notwithstanding
anything else contained herein, no Additional Options shall be granted to
Employee. The Initial Options and Additional Options awarded prior to the date
of such termination, if any, shall vest immediately upon such termination and
all options which had vested prior to such termination shall continue to be
exercisable in accordance with the Option Plan, provided that all Initial
Options and Additional Options, if any, theretofore awarded to Employee shall,
unless exercised, expire on the date that is 12 months after the date of such
termination. Subject to the specific provisions of the preceding sentence, the
terms and conditions of the Option Plan shall control as to all matters relating
to the Options. If the Company exercises its Termination Rights, Employee shall
have no obligation to mitigate; it being expressly agreed that if Employee
receives employment income from a third party after such termination and on or
before the Expiration Date, such employment income shall not be set off against
any payments to be made to Employee by the Company in connection with its
exercise of its Termination Rights.
(h) Immediately upon any termination of Employee's employment
hereunder or of this Agreement (whether or not pursuant to this Section 4),
Employee shall return to the Company all property of the Company heretofore
provided to Employee by the Company, or otherwise in the custody, possession or
control of Employee (including, without limitation, the "Confidential Materials"
described in Paragraph 6(b) of Exhibit A attached hereto). Notwithstanding any
provision of this Agreement to the contrary, no termination of this Agreement or
of Employee's employment for any reason whatsoever shall in any manner operate
to terminate, limit or otherwise affect the Company's ownership of any of the
rights, properties or privileges granted to the Company hereunder.
(i) Except in the event that Employee's employment shall be terminated
"for cause" in accordance with Section 4(d), for a period of three months
following termination of Employee's employment, Employee shall be entitled,
without cost, to the exclusive use of an office at either 711 Fifth Avenue or
550 Madison Avenue (the location to be at the discretion of the Company), as
well as access to secretarial, receptionist and telephone services.
5. STANDARD TERMS. Attached as Exhibit A hereto and deemed a part hereof
---------------
are the Company's Standard Terms and Conditions of Employment Agreement, all of
which terms are binding on the parties hereto and incorporated herein. For
convenience, provisions of this Agreement shall be referred to as "Sections" and
provisions of the Standard Terms shall be
<PAGE>
referred to as "Paragraphs". In the case of any conflict between the terms of
this Agreement and the terms of Exhibit A hereto, the terms of this Agreement
shall govern.
6. SUPERSEDING AGREEMENT. The Company and Employee agree that this
----------------------
Agreement shall not be effective unless and until the Combination shall have
been consummated. If the effective date of the Combination shall not have
occurred on or before December 31, 1998, this Agreement shall terminate and be
of no further force and effect. Upon the effective date of the Combination,
this Agreement, including Exhibit A hereto, shall constitute the full and entire
understanding of the parties hereto with respect to the subject matter hereof
and, upon the
<PAGE>
effective date of the Combination, shall supersede any prior agreements
with respect thereto, including, without limitation, the Current Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed on their behalf as of the date first above written.
/s/ Lawrence J. Ruisi
--------------------------------
LAWRENCE J. RUISI
LTM HOLDINGS INC.
By: /s/ Howard Stringer
----------------------------------
<PAGE>
EXHIBIT A
---------
STANDARD TERMS AND CONDITIONS OF EMPLOYMENT AGREEMENT
-----------------------------------------------------
1. DEFINITIONS. All capitalized terms used herein shall have the meanings
------------
ascribed to them in the Agreement attached hereto. The following words, terms
and phrases (and variations thereof) used herein shall have the following
meanings:
(a) An "Affiliate", of a party means a Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, such party.
(b) "Intellectual Property" means any and all intellectual, artistic,
literary, dramatic or musical rights, works or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, characters, plots, themes, dialogue, stories, scripts,
treatments, outlines, submissions, ideas, concepts, packages, compositions,
artwork and logos, and all audio, visual or audio-visual works of every kind and
in every stage of development, production and completion, and all rights to
distribute, advertise, promote, exhibit or otherwise exploit any of the
foregoing by any means, media or processes now known or hereafter devised.
(c) "Media Business" means all Persons engaging in any of the
following: (i) the creation, production, distribution, exhibition or other
exploitation of theatrical motion pictures, television programs, sound
recordings or other visual, audio or audio-visual works or recordings of any
kind; (ii) television (including pay, free, over-the-air, cable and satellite)
or radio broadcasting; (iii) book, newspaper or periodical publishing; (iv)
music publishing; (v) "merchandising" (as that term is generally understood in
the entertainment industry); or (vi) advertising.
(d) "Person" means any individual, corporation, trust, estate,
partnership, joint venture, company, association, league, group, governmental
agency or other entity of any kind or nature.
2. COMPENSATION.
------------
(a) Employee's salary shall be payable in equal installments (not less
frequently than monthly) in accordance with the Company's customary payroll
practices. No additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of any hours worked on Saturdays,
Sundays, holidays or otherwise. All compensation payable to Employee hereunder
(whether in the form of salary, benefits or otherwise) shall be subject to all
applicable laws, statutes, governmental regulations or orders,
A-1
<PAGE>
the terms of all applicable Employee Benefit Plans and the terms of all
agreements between or binding upon the Company and Employee requiring the
deduction or withholding of any amounts from such payments, and the Company
shall have the right to make such deductions and withholdings in accordance with
the Company's interpretation thereof in the Company's sole judgment.
(b) Subject to Section 4 of the Agreement, Employee shall be eligible
to participate in fringe benefits, if any, maintained by the Company for
employees generally on the same basis as comparable employees of the Company.
(c) Subject to the requirements of Employee's position and corporate
office, Employee shall be entitled to annual vacations in accordance with the
Company's vacation policy in effect from time to time.
(d) The Company recognizes that, in connection with Employee's
performance of Employee's duties and obligations hereunder, Employee will incur
certain ordinary and necessary expenses of a business character. The Company
shall pay Employee for such business expenses on the presentation of itemized
statements of such expenses, provided their extent and nature are approved in
accordance with the policies and procedures of the Company.
3. RIGHT TO INSURE. The Company shall have the right to secure, in its
----------------
own name or otherwise and at its own expense, life, health, accident or other
insurance covering or otherwise insuring Employee, and Employee shall have no
right, title or interest in or to any such insurance or any of the proceeds or
benefits thereof. Employee shall fully assist and cooperate with the Company in
procuring any such insurance, including without limitation by submitting to such
examinations, and by signing such applications and other instruments, as may
reasonably be required by any insurance carrier to which application is made by
the Company for any such insurance.
4. EMPLOYMENT EXCLUSIVE. Employee shall not perform services for any
---------------------
Person other than the Company during the Employment Period without the prior
written consent of the Company and will not during the Employment Period engage
in any activity which would interfere with the performance of Employee's
services hereunder, or become financially interested in or associated with,
directly or indirectly, any Media Business.
5. INTEREST IN OTHER CORPORATIONS. Notwithstanding anything to the
-------------------------------
contrary contained in Paragraph 4 hereof, Employee may own up to one percent
(1%) of any class of any Person's outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934 or otherwise publicly traded, provided that the holdings of
Employee of any such security of a Media Business or any Person which does
business with the Company or its Affiliates do not represent more than 10% of
the aggregate of Employee's investment portfolio at any time.
6. OWNERSHIP OF PROCEEDS OF EMPLOYMENT; CONFIDENTIALITY OF INFORMATION,
--------------------------------------------------------------------
ETC.
- ----
A-2
<PAGE>
(a) The Company shall be the sole and exclusive owner throughout the
universe in perpetuity of all of the results and proceeds of Employee's
services, work and labor during the Employment Period in connection with
Employee's employment by the Company, including without limitation all
Intellectual Property which Employee may develop, create, write or otherwise
produce during the Employment Period, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Employee's services, work
and labor during the Employment Period shall be deemed to be works-made-for-hire
for the Company within the meaning of the copyright laws of the United States
and the Company shall be deemed to be the sole author thereof in all territories
and for all purposes.
(b) All information, documents, notes, memoranda and Intellectual
Property of any kind received, compiled, produced or otherwise made available to
Employee during or in connection with Employee's employment by the Company
relating in any way to the business of the Company or of any of its Affiliates
and which has not been made available or confirmed to the public by the Company
("Confidential Materials") shall be the sole and exclusive property of the
Company and shall in perpetuity (both during and after Employee's employment by
the Company) be maintained in utmost confidence by Employee and held by Employee
in trust for the benefit of the Company. Employee shall not during the
Employment Period or at any time thereafter directly or indirectly release or
disclose to any other Person any Confidential Materials, except with the prior
written consent of the Company and in furtherance of the Company's business or
as required by law.
(c) Employee shall not (without the Company's consent), directly or
indirectly, at any time during the Employment Period or until Employee's earlier
termination (and, in the case of clause (i) below, for a period of twelve (12)
months thereafter), nor shall Employee during such time period authorize or
assist any other Person to, solicit, entice, persuade or induce any Person to do
any of the following:
(i) Terminate or refrain from extending or renewing (on the same
or different terms) such Person's employment by, or contractual or business
relationship with, the Company or any of its Affiliates; or
(ii) Become employed by, enter into contractual relationships
with, or make, create, produce or distribute any motion picture, television
program or other Intellectual Property, or otherwise engage in any Media
Business, for any Person other than the Company or its Affiliates (this clause
(ii) shall not apply if the Company has exercised its Termination Rights
pursuant to Section 4(g) of the Agreement).
(d) The Company shall have the right to use the Employee's name,
approved biography (such approval not to be unreasonably withheld), and likeness
in connection with its business, including in advertising its products and
services, and may grant this right to others, but not for use as an endorsement.
A-3
<PAGE>
7. WARRANTIES AND COVENANTS. Employee warrants, represents and covenants
-------------------------
to the Company as follows:
(a) Employee is free to enter into this Agreement and to perform the
services contemplated hereunder.
(b) Employee is not currently (and will not, to the best knowledge and
ability of Employee, at any time during the Employment Period be) subject to any
agreement, understanding, obligation, claim, litigation, condition or disability
which could adversely affect Employee's performance of any of Employee's
obligations hereunder or the Company's complete ownership and enjoyment of all
of the rights, powers and privileges granted to the Company hereunder.
(c) No Intellectual Property written, composed, created or submitted
by Employee at any time during Employee's employment by the Company shall, to
the best of Employee's knowledge, violate the rights of privacy or publicity,
constitute a libel or slander or infringe upon the copyright, literary,
personal, private, civil, property or other rights of any Person.
8. EMPLOYMENT AFTER TERM. Employee's employment by the Company may be
----------------------
continued beyond the Expiration Date by the express consent of both parties
(which consent each party shall have the right to grant or withhold in its sole
and absolute discretion). In the event of any such continuation of Employee's
employment by the Company beyond the Expiration Date, the relationship between
the Company and Employee shall be that of employment-at-will which may be
terminated by either the Company or Employee at any time upon ten (10) days'
written notice, with or without cause, for any reason or for no reason, and
without liability of any nature. Employee's employment by the Company, if any,
after the Expiration Date shall be governed by all of the terms and conditions
of this Agreement not inconsistent with the at-will nature of such employment.
9. IMMIGRATION. In accordance with the Immigration Reform and Control Act
------------
of 1986 and the regulations adopted thereunder (8 CFR, Parts 109 and 274a), the
obligations of the Company under this Agreement are subject to and conditioned
upon Employee verifying and delivering to the Company, within three (3) business
days of Employee's first date of employment, the Form I-9 prescribed by the
Immigration and Naturalization Service, and presenting to the officer of the
Company designated therefor the original documentation required under such
regulations to establish (i) the identity of Employee and (ii) that Employee is
lawfully authorized to work in the United States. If Employee is unable to
provide the documents required within the aforesaid three (3) business-day
period, Employee must (i) present to such designated officer within said three
(3) business days a receipt for the application for the documents prescribed and
(ii) the original documents required within twenty-one (21) days of Employee's
first date of employment. If Employee fails to verify and deliver the Form I-9
and present the required original documents within the stated time period, this
Agreement and Employee's employment hereunder shall cease and terminate as if
this Agreement had never
A-4
<PAGE>
been entered into and neither party shall have any further right, duty or
obligation to the other under this Agreement.
10. EQUITABLE RELIEF. Employee acknowledges that the services to be
-----------------
rendered by Employee under this Agreement, and the rights and privileges granted
by Employee to the Company hereunder, are of a special, unique, extraordinary
and intellectual character which gives them a peculiar and special value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law, and a breach by Employee of any of the provisions hereof will
cause the Company great and irreparable injury. Employee acknowledges that the
Company shall, therefore, be entitled, in addition to any other remedies which
it may have under this Agreement or at law, to receive injunctive and other
equitable relief (including without limitation specific performance) to enforce
any of the rights and privileges of the Company or any of the covenants or
obligations of Employee hereunder. Nothing contained herein, and no exercise by
the Company of any right or remedy, shall be construed as a waiver by the
Company of any other rights or remedies which the Company may have. In the
event that any court or tribunal shall at any time hereafter hold any covenants
or restrictions contained in this Agreement to be unenforceable or unreasonable
as to the scope, territory or period of time specified therein, such court shall
have the power, and is specifically requested by Employee and the Company, to
declare or determine the scope, territory or period of time which it deems to be
reasonable or enforceable and to enforce the restrictions contained therein to
such extent.
11. GOVERNING LAW. The substantive laws (as distinguished from the choice
--------------
of law rules) of the State of New York shall govern (i) the validity and
interpretation of this Agreement, (ii) the performance by the parties hereto of
their respective duties and obligations hereunder and (iii) all other causes of
action (whether sounding in contract or in tort) arising out of or relating in
any fashion to Employee's employment by the Company or the termination of such
employment.
12. NOTICES. All notices, requests, demands or other communications in
--------
connection with this Agreement shall be in writing and shall be deemed to have
bean duly given if delivered in person, by telegram, by telecopier to the
applicable telecopier number listed below, or by United States mail, postage
prepaid, certified or registered, with return receipt requested, or otherwise
actually delivered:
If to Employee, to him at the address listed on page 1 of this Agreement.
If to the Company, to it at:
711 Fifth Avenue
New York, NY 10022
Attention: General Counsel
or such other addresses as Employee or the Company shall have designated by
written notice to the other party hereto. Any such notice, demand or other
communication shall be deemed to have been given on the date actually delivered
(or, in the case of telecopier, on the date actually sent by telecopier) or upon
the expiration of three (3) days after the date mailed, as the case may be.
A-5
<PAGE>
13. SERVICE AS EXPERT WITNESS. Employee acknowledges that during the
--------------------------
Employment Period Employee will have access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Employee
agrees that Employee shall not at any time either during or after the term of
this Agreement serve as an "expert witness" or in any similar capacity in any
litigation or other proceeding to which the Company or any of its Affiliates or
subsidiaries is a party without the prior written consent of the Company or such
affiliate or subsidiary, as the case may be.
14. MISCELLANEOUS.
--------------
(a) This Agreement and the exhibits hereto contain a complete
statement of all of the arrangements between the parties with respect to
Employee's employment by the Company, supersede all existing agreements between
them concerning Employee's employment and cannot be changed or terminated
orally. No provision of this Agreement shall be interpreted against any party
because that party or its legal representative drafted the provision. There are
no warranties, representations or covenants, oral or written, express or
implied, except as expressly set forth herein. Employee acknowledges that
Employee does not rely and has not relied upon any representation or statement
made by the Company or any of its representatives relating to the subject matter
of this Agreement except as set forth herein.
(b) If any provision of this Agreement or any portion thereof is
declared by any court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, the remainder of such provision, and all of the
remaining provisions of this Agreement, shall continue in full force and effect
and no provision shall be deemed dependent on any other provision unless so
expressed herein.
(c) The failure of a party to insist on strict adherence to any term
of this Agreement shall not be considered a waiver of, or deprive that party of
the right thereafter to insist on strict adherence to, that term or any other
term of this Agreement.
(d) The headings in this Agreement (including the exhibits hereto) are
solely for convenience of reference and shall not affect its interpretation.
(e) The relationship between Employee and the Company is exclusively
that of employer and employee, and the Company's obligations to Employee
hereunder are exclusively contractual in nature.
(f) Employee shall, at the request of the Company, execute and deliver
to the Company all such documents as the Company may from time to time deem
necessary or desirable to evidence, protect, enforce or defend its right, title
and interest in or to any Confidential Materials, Intellectual Property or other
items described in Paragraph 6 hereof. If Employee shall fail or refuse to
execute or deliver to the Company any such document upon request, the Company
shall have, and is granted, the power and authority to execute the same in
A-6
<PAGE>
Employee's name, as Employee's attorney-in-fact, which power is coupled with an
interest and irrevocable.
(g) The Company may assign this Agreement, Employee's services
hereunder or any of the Company's interests herein (i) to any Person which is a
party to a merger or consolidation with the Company, (ii) to any Affiliate of
the Company or (iii) to any Person acquiring substantially all of the assets of
the Company or the unit of the Company for which Employee is rendering services;
and, provided that any such assignee assumes the Company's obligations under
this Agreement, the Company shall thereupon be relieved of any and all liability
hereunder. Employee shall not have the right to assign this Agreement or to
delegate any duties imposed upon Employee under this Agreement without the
written consent of the Company, and any such purported assignment or delegation
shall be void ab initio.
---------
A-7
<PAGE>
EXHIBIT 10.12
ASSUMPTION OF AMENDED AGREEMENT
TO: ALLEN KARP
_______________________________________________________________________________
The undersigned hereby assumes the Amended Agreement (as such term is defined in
the Management Information Circular and Proxy Statement/Prospectus of Cineplex
Odeon Corporation ("Cineplex") dated February 13, 1998) and will cause Cineplex
to employ you on the terms contained in the Amended Agreement and to pay you the
amounts contemplated therein.
DATED the 14th day of May, 1998
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
Per: /s/ John C. McBride, Jr
__________________________
<PAGE>
EXHIBIT 10.18
December 15, 1997
Private & Confidential
Ms. Mindy Tucker
8 Seneca Road
Scarsdale, NY 10583
Dear Mindy:
I am pleased to offer you a position with Loews Cineplex Entertainment
(currently LTM Holdings) as Corporate Vice President Strategic Planning &
Secretary. The purpose of this letter is to outline the material terms of the
employment offer which, if you accept, will be memorialized in a formal contract
of employment.
1. Title and Reporting Responsibilities. You will become Corporate Vice
------------------------------------
President Strategic Planning & Secretary of Loews Cineplex Entertainment
Corporation ("LCE"), the entity to be formed in connection with the combination
of Loews and Cineplex Odeon: You will report directly to the Chief Executive
Officer of LCE or such other senior executive as designated by the CEO but in no
instance to an executive with a title less than executive vice president.
2. Term. The term of the employment contract will be for three years,
----
commencing as we mutually agree with an option by LCE for years 4 & 5.
3. Base Salary. The initial annual base salary will be $200,000 with annual
-----------
cost of living increases at the end of years 1, 2 and 4 and a $25,000 increase
at the option year.
4. Annual Bonus. You will be eligible for an annual bonus, the range for which
------------
is targeted at between $50,000 and $100,000, subject in each case to the
attainment of goals to be established by LCE's Board of Directors (the "Board")
each year.
5. Stock Options. Subject to the approval of the Board, you will be granted at
-------------
the date of this letter a nonqualified option, to purchase 750,000 shares of
LCE's common stock at a per share exercise price of the greater of market value
at 12/16/97 or $1.3125 (subject to adjustment upon completion of the anticipated
reverse stock split). The options will vest at the rate of 20% per year. The
vesting and other material terms of the options will be consistent with the
terms of stock options being offered generally to the other senior executives of
LCE in connection with the combination.
<PAGE>
6. Fiscal 1998 Bonus and Profit Sharing. You will continue to be eligible to
------------------------------------
receive a fiscal 1998 bonus from Sony Retail Entertainment and your fiscal 1998
profit sharing contribution from SCA will be made at the appropriate date.
7. Automobile. Loews will provide you with an automobile allowance of $900 per
----------
month.
8. Termination. If your employment is terminated by LCE for cause, you will be
-----------
entitled only to your accrued salary through the date of termination and any
accrued but unpaid bonus. If LCE terminates your employment without cause, you
will be entitled to receive your base salary and bonus through the end of the
contract term, reduced by any compensation paid or payable to you in respect of
subsequent employment (including self-employment) for the same period. However,
there will be no obligation on your part to mitigate LCE's obligation to you by
seeking any subsequent employment.
If the foregoing terms are acceptable to you, please indicate your
acceptance by signing below where indicated. Upon receipt of your acceptance,
we will have a formal employment agreement prepared incorporating the foregoing
terms and containing such other terms as are customary for such agreements.
Sincerely yours,
/s/ Lawrence J. Ruisi
---------------------
Lawrence J. Ruisi
President
Sony Retail Entertainment
Accepted: December 15, 1997
-----------------
/s/ Mindy Tucker
- ---------------------------------
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF LOEWS CINEPLEX ENTERTAINMENT CORPORATION
1. LTM New York, Inc.
2. LTM Spanish Holdings Inc.
3. Loews Theatre Management Corp.
4. Star Theatres, Inc.
5. Star Theatres of Michigan, Inc.
6. Rochester Hills Star Theatres, Inc.
7. Taylor Star Theatres, Inc.
8. Loews USA Cinemas Inc.
9. S & J Theatres Inc.
10. Hawthorne Amusement Corporation
11. Hinsdale Amusement Corporation.
12. Loews Bay Terrace Cinemas, Inc.
13. Loews Boulevard Cinemas, Inc.
14. Loews Broadway Cinemas, Inc.
15. Loews Crystal Run Cinemas, Inc.
16. Loews Dewitt Cinemas, Inc.
17. Loews East Village Cinemas, Inc.
18. Loews Elmwood Cinemas, Inc.
19. Loews Fine Arts Cinemas, Inc.
20. Loews Greece Cinemas, Inc.
<PAGE>
21. Loews Levittown Cinemas, Inc.
22. Loews Lincoln Theatre Holding Corp.
23. Loews Monroe Cinema, Inc.
24. Loews Orpheum Cinemas, Inc.
25. Loews Palisades Center Cinemas, Inc.
26. Loews Paradise Cinemas, Inc.
27. Loews Pittsford Cinemas, Inc.
28. Loews Roosevelt Field Cinemas, Inc.
29. Loews South Shore Cinemas, Inc.
30. Loews Stonybrook Cinemas, Inc.
31. Loews 34th St. Showplace Cinemas, Inc.
32. Loews Towne Cinemas, Inc.
33. Loews Trylon Theatre, Inc.
34. Loews Westgate Cinemas, Inc.
35. Poli-New England Theatres, Inc.
36. Putnam Theatrical Corporation
37. 71st & 3rd Ave. Corp.
38. Tri-Son Supply Corp.
39. Westchester Cinemas, Inc.
40. Cinema 275 East, Inc.
41. Cityplace Cinemas, Inc.
42. Colorado Cinemas, Inc.
43. Crestwood Cinemas, Inc.
44. District Amusement Corporation
-2-
<PAGE>
45. Eton Amusement Corporation
46. Forty-Second Street Cinemas, Inc.
47. Fountain Cinemas, Inc.
48. Gerard Theatre Corporation
49. Kips Bay Cinemas, Inc.
50. Lance Theatre Corporation
51. Liberty Tree Cinema Corp.
52. Loews Akron Cinemas, Inc.
53. Loews Arlington Cinemas, Inc.
54. Loews Arlington West Cinemas, Inc.
55. Loews Astor Plaza, Inc.
56. Loews Baltimore Cinemas, Inc.
57. Loews Berea Cinemas, Inc.
58. Loews California Theatres, Inc.
59. Loews Cedar Cinemas, Inc.
60. Loews Centerpark Cinemas, Inc.
61. Loews Century Mall Cinemas, Inc.
62. Loews Cheri Cinemas, Inc.
63. Loews Cherry Tree Mall Cinemas, Inc.
64. Loews Chicago Cinemas, Inc.
65. Loews Chisholm Place Cinemas, Inc.
66. Loews Cinemas Advertising, Inc.
67. Loews Clarksville Cinemas, Inc.
68. Loews Connecticut Cinemas, Inc.
-3-
<PAGE>
69. Loews Coral Spring Cinemas, Inc.
70. Loews Deauville Gulf Cinemas, Inc.
71. Loews Deauville Kingwood Cinemas, Inc.
72. Loews Deauville North Cinemas, Inc.
73. Loews Deauville Southwest Cinemas, Inc.
74. Loews East Hanover Cinemas, Inc.
75. Loews Exhibition Ride Inc.
76. Loews Fort Worth Cinemas, Inc.
77. Loews Freehold Mall Cinemas, Inc.
78. Loews Fresh Pond Cinemas, Inc.
79. Loews Front Street Cinemas, Inc.
80. Loews Fuqua Park Cinemas, Inc.
81. Loews Greenwich Cinemas, Inc.
82. Loews Greenwood Cinemas, Inc.
83. Loews Harmon Cove Cinemas, Inc.
84. Loews Houston Cinemas, Inc.
85. Loews I-45 Cinemas, Inc.
86. Loews Indiana Cinemas, Inc.
87. Loews Kentucky Cinemas, Inc.
88. Loews Lafayette Cinemas, Inc.
89. Loews Lincoln Plaza Cinemas, Inc.
90. Loews Louisville Cinemas, Inc.
91. Loews Meadowland Cinemas 8, Inc.
92. Loews Meadowland Cinemas, Inc.
-4-
<PAGE>
93. Loews Memorial City Cinemas, Inc.
94. Loews Merrillville Cinemas, Inc.
95. Loews Montgomery Cinemas, Inc.
96. Loews Mountainside Cinemas, Inc.
97. Loews New Jersey Cinemas, Inc.
98. Loews Newark Cinemas, Inc.
99. Loews Norgate Cinemas, Inc.
100. Loews Norwalk Cinemas, Inc.
101. Loews Operational Ride Theaters Inc.
102. Loews Orland Park Cinemas, Inc.
103. Loews Park Central Cinemas, Inc.
104. Loews Pembroke Pines Cinemas, Inc.
105. Loews Pentagon City Cinemas, Inc.
106. Loews Piper's Theatres, Inc.
107. Loews Pocono Cinemas, Inc.
108. Loews Preston Park Cinemas, Inc.
109. Loews Richmond Mall Cinemas, Inc.
110. Loews Ridgefield Park Cinemas, Inc.
111. Loews Rolling Meadows Cinemas, Inc.
112. Loews Saks Cinemas, Inc.
113. Loews Showboat Cinemas, Inc.
114. Loews Southland Cinemas, Inc.
115. Loews Theatres Clearing Corp.
116. Loews Toms River Cinemas, Inc.
-5-
<PAGE>
117. Loews Vestal Cinemas, Inc.
118. Loews Washington Cinemas, Inc.
119. Loews West Cinemas, Inc.
120. Loews West Long Branch Cinemas, Inc.
121. Loews Westerville Cinemas, Inc.
122. Loews Westport Cinemas, Inc.
123. Loews Williston Cinemas, Inc.
124. Loews Worldgate Cinemas, Inc.
125. Loews Yorktown Cinemas, Inc.
126. Loews-Hartz Music Makers Theatres, Inc.
127. Andy Candy Co., Inc.
128. Castle Theatre Corp.
129. Cinnaminson Theatre Corp.
130. Circle Twin Cinema Corp.
131. Freehold Cinema Center, Inc.
132. Middlebrook Theatre Corporation
133. Music Makers Theatres, Inc.
134. Berkeley Cinema Corp.
135. Brick Plaza Cinemas, Inc.
136. Bricktown Picture Corp.
137. College Theatre Corp.
138. New Brunswick Cinemas, Inc.
139. Crofton Quad Corporation
140. H&M Cinema Corporation
-6-
<PAGE>
141. East Windsor Picture Corp.
142. Eatontown Theatre Corp.
143. Freehold Picture Corp.
144. Mall Picture Corp.
145. Paramay Picture Corp.
146. Toms River Theatre Corp.
147. Quad Cinema Corp.
148. Red Bank Theatre Corporation
149. Stroud Mall Cinemas, Inc.
150. Triangle Theatre Corp.
151. Massachusetts Cinema Corp.
152. Minnesota Cinemas, Inc.
153. Nutmeg Theatre Circuit, Inc.
154. Parkchester Amusement Corporation
155. Parsippany Theatre Corp.
156. Plainville Cinemas, Inc.
157. Talent Booking Agency, Inc.
158. Theatre Holdings, Inc.
159. Crescent Advertising Corporation
160. Downstate Theatre Corporation
161. Fall River Cinema, Inc.
162. Loews Brookfield Cinemas, Inc.
163. Loews Post Cinemas, Inc.
164. Midstate Theatre Corp.
-7-
<PAGE>
165. U.S.A. Cinemas, Inc.
166. Loews Bristol Cinemas, Inc.
167. Loews Burlington Cinemas, Inc.
168. Loews Holiday Cinemas, Inc.
169. Loews Mohawk Mall Cinemas, Inc.
170. Mid-States Theatres, Inc.
171. Beaver Valley Cinemas, Inc.
172. Campus Cinemas, Inc.
173. Cine West, Inc.
174. Cinema Development Corporation
175. Cinema Investments, Inc.
176. Continent Cinemas, Inc.
177. Garfield Advertising Agency, Inc.
178. Flat Woods Theater Corporation
179. I-75 Theatres, Inc.
180. J-Town Cinemas, Inc.
181. Lexington Mall Cinemas Corporation
182. Lexington North Park Cinemas, Inc.
183. Lexington South Park Cinemas, Inc.
184. Mickey Amusements, Inc.
185. Midcin Inc.
186. Midtown Cinema, Inc.
187. Montclair Cinemas, Inc.
188. Oxmoor Cinemas, Inc.
-8-
<PAGE>
189. Plaza Cinemas, Inc.
190. Raceland Cinemas, Inc.
191. Salem Mall Theatre, Inc.
192. Sycamore Theatre, Inc.
193. Times Theatres Corporation
194. Towne Center Cinemas, Inc.
195. Tri-County Cinemas, Inc.
196. Westland Cinemas, Inc.
197. Moviehouse Cinemas, Inc.
198. Nickelodeon Boston, Inc.
199. Northern New England Theatres, Inc.
200. Sack Theatres, Inc.
201. Village Cinemas, Inc.
202. Webster Chicago Cinemas, Inc.
203. White Marsh Cinemas, Inc.
204. Woodridge Cinemas, Inc.
205. LTM Spain, S.L.
206. Plitt Theatres, Inc.
207. RKO Century Warner Theatres, Inc.
208. The Walter Reade Organization, Inc.
209. Plitt Southern Theatres, Inc.
210. Cineplex Odeon Films, Inc.
211. Cineplex Odeon Films International, Inc.
212. C.O.H. Entertainment, Inc.
-9-
<PAGE>
213. Sedgwick Music Company
214. Cineplex Odeon Corporation
215. Cineplex Odeon (Quebec) Inc.
216. 158983 Canada Inc.
217. Les Films Cineplex Odeon Quebec Inc.
218. 619918 Ontario Ltd. (Canada Square)
219. 796278 Ontario Limited
220. 796279 Ontario Limited
221. 1002817 Ontario Limited
222. 1002818 Ontario Limited
223. 140075 Canada Limited/Ltee.
224. Cine Parc Mercier Inc.
225. The Film House Group Inc.
226. Cineplex Odeon International B.V.
227. Cineplex Odeon (Barbados) Inc.
228. Cineplex Odeon Hungary KFT
229. Cineplex Odeon S.R.O.
-10-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-52453) of LTM Holdings, Inc. 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 on pages 25 and 69, respectively, of this
Form 10-K.
New York, New York
May 27, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<EXCHANGE-RATE> 1
<CASH> 9,064
<SECURITIES> 0
<RECEIVABLES> 5,479
<ALLOWANCES> 0
<INVENTORY> 1,146
<CURRENT-ASSETS> 18,209
<PP&E> 897,898
<DEPRECIATION> 288,746
<TOTAL-ASSETS> 728,551
<CURRENT-LIABILITIES> 67,514
<BONDS> 10,513
0
0
<COMMON> 231
<OTHER-SE> 324,511
<TOTAL-LIABILITY-AND-EQUITY> 728,551
<SALES> 104,009
<TOTAL-REVENUES> 413,510
<CGS> 16,147
<TOTAL-COSTS> 291,421
<OTHER-EXPENSES> 89,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,319
<INCOME-PRETAX> 2,612
<INCOME-CONTINUING> (139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
