UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)*
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(formerly LTM Holdings Inc.)
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Shares
- -------------------------------------------------------------------------------
(Title of Class of Securities)
54023-10-0
- -------------------------------------------------------------------------------
(CUSIP Number)
Clifford L. Michel, Esq.
Cahill Gordon & Reindel
80 Pine Street, New York, NY 10005
(212) 701-3200
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 14, 1998
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
THE CHARLES ROSNER BRONFMAN DISCRETIONARY TRUST - 06-6455069
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States (Connecticut)
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,918,907
SHARES _____________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _____________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,918,907
_____________________________________________
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,918,907
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES /X/
Excludes 4,000 Class B Non-Voting Common Shares
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.36%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- -------------------------------------------------------------------------------
Page 2 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
THE CHARLES BRONFMAN TRUST - 98-6048671
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States (New York)
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,000,000
SHARES _____________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _____________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,000,000
_____________________________________________
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.27%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- -------------------------------------------------------------------------------
Page 3 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
THE CHARLES R. BRONFMAN TRUST - 98-6048672
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States (New York)
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,000,000
SHARES _____________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _____________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,000,000
_____________________________________________
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.27%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- -------------------------------------------------------------------------------
Page 4 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
CHARLES ROSNER BRONFMAN
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES ______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 3,918,907
REPORTING ______________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
______________________________________________
10 SHARED DISPOSITIVE POWER
3,918,907
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,918,907
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
Excludes 9,926 shares of Common Stock owned by Mr. Bronfman's wife.
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.91%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
Page 5 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
THE PHYLLIS LAMBERT FOUNDATION
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 31,410
SHARES ______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING ______________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
31,410
----------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,410
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.07%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
Page 6 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
E. LEO KOLBER
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 350,309
SHARES ______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING ______________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
----------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
350,309
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
Excludes 7,500 shares of Common Stock owned by Sen Kolber's wife.
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.80%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
Page 7 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
BOJIL EQUITIES INC.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - See Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British West Indies
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES _____________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _____________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
350,309
---------------------------------------------
10 SHARED DISPOSITIVE POWER / /
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
350,309
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.80%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------------------
Page 8 of 78
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No.
540423-10-0
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
LOUIS LUDWICK
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /X/
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A - see Item 3
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 23,377
SHARES _____________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _____________________________________________
PERSON WITH 9 SOLE DISPOSITIVE POWER
23,377
---------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,377
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES * / /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.05%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
Page 9 of 78
<PAGE>
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to the common stock, par value $0.01
per share ("Common Stock"), of Loews Cineplex Entertainment Corporation
(formerly LTM Holdings Inc.), a Delaware corporation (the "Company"), with its
principal executive offices at 711 Fifth Avenue, 11th Floor, New York, N.Y.
10022.
Item 2. Identity and Background.
The persons filing this Statement on Schedule 13D (collectively referred to
as the "Claridge Group") and certain information with respect to such persons
are:
1. The Charles Rosner Bronfman Discretionary Trust - a United States trust
organized under the laws of the State of Connecticut, with its principal purpose
being to invest in securities and other business interests. Its principal
business and office address is c/o Bergman, Horowitz & Reynolds, 157 Church
Street, New Haven, CT 06502. The sole trustee of this trust is Bruce I.
Judelson, a United States citizen. Mr. Judelson is a partner of Bergman,
Horowitz & Reynolds (attorneys). This trust is for the benefit of Charles Rosner
Bronfman.
2. The Charles R. Bronfman Trust - a United States trust organized under
the laws of the State of New York with its principal purpose being to invest in
securities and other business interests. Its principal business and office
address is c/o Goodman Phillips & Vineberg, 430 Park Avenue, New York, New York
100202. Information with respect to the trustees of said trust is set out in
Appendix A. This trust is primarily for the benefit of Charles Rosner Bronfman,
and his son Stephen Rosner Bronfman, a Canadian citizen, is a private investor
with his business address at 1170 Peel Street, 8th Floor, Montreal, Quebec,
Canada, H3B 4P2.
3. The Charles Bronfman Trust - a United States trust organized under the
laws of the State of New York with its principal purpose being to invest in
securities and other business interests. Its principal business and office
address is c/o Goodman Phillips & Vineberg, 430 Park Avenue, New York, New York
10022. Information with respect to the trustees of this trust is set out in
Appendix B. This trust is primarily for the benefit of Charles Rosner Bronfman,
and his daughter Ellen J. Bronfman Hauptman and her descendants. Mrs. Hauptman,
a Canadian citizen, is a private investor with her business address being c/o
Withers Solicitors, 12 Gough Square, London EC4A 3DE, England.
4. Charles Rosner Bronfman - a Canadian citizen whose principal occupation
is Co-Chairman of the Board and Chairman of the Executive Committee of The
Seagram Company Ltd. (said corporation's principal executive office being at
1430 Peel Street, Montreal, Quebec, Canada H3A 1S9).
5. The Phyllis Lambert Foundation - a charitable foundation organized under
the laws of Canada, with its principal business and office address being c/o
Claridge Inc., 1170 Peel Street, 8th Floor, Montreal, Quebec, Canada H3B 4P2.
Information with respect to the trustees and executive officers of The Phyllis
Lambert Foundation is set forth on Annex C.
6. E. Leo Kolber - a Canadian citizen, whose principal occupation is as a
Member of the Senate of Canada. His principal office and business address is c/o
Claridge Inc., 1170 Peel Street, 8th Floor, Montreal, Quebec, Canada H3B 4P2.
7. Bojil Equities Inc. - a company established under the laws of the
British Virgin Islands ("Bojil Equities"), with its principal business and
purpose being to invest in securities and business interests of all types. Its
principal business address is c/o Tortola Corporation Company Limited c/o Citco
B.V.I. Limited, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin
Islands. Tortola Corporation Company Limited is the sole director o Bojil
Equities. See Appendix D for information with respect to the executive officers
of Bojil Equities. Bojil Equities is wholly owned by The Kolber Trust, which is
a trust organized under the laws of the Cayman Islands, British West Indies,
with its principal business and purpose being to invest in securities and
business interests of all types. Its principal business and office address is
c/o Cayman
Page 10 of 78
<PAGE>
International Trust Company Ltd., c/o Ansbacher Limited, Ansbacher
House, Grand Cayman, Cayman Islands, B.W.I. Information with respect to the
trustee of The Kolber Trust, which is for the benefit of the Kolber family,
including Jonathan Kolber, is set forth in Appendix E. Jonathan Kolber is a dual
citizen of Canada and Israel, who is a business executive serving principally as
President of Claridge Israel (1996) Ltd. at Europe House, 37 Shaul Hamelech
Blvd., Tel Aviv 64928 Israel and, effective July 1, 1998, President and Chief
Executive Officer of Koor Industries Limited, 4 Kaufman Street, Tel Aviv 68012,
Israel.
8. Louis Ludwick - is a Canadian citizen whose principal business and
occupation is sales support manager with Tandberg Canada Inc. (video
conferencing equipment) 175 Montpellier Blvd., Montreal, Canada H4N 2G5.
During the last five years none of the members of the Claridge Group nor,
to the best of their knowledge, any of the persons or entities named herein or
in the appendices hereto has been (i) convicted in any criminal proceeding
(excluding traffic violations and similar misdemeanors) or (ii) a party to a
court proceeding of a judicial or administrative body of competent jurisdiction
and as a result of which has been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Because of certain relationships among the members of the Claridge Group
who are successor parties to the Stockholder Agreement with the Company
discussed under Item 6, said persons and entities may be deemed to be members of
a "group" within the meaning of Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder. Universal Studios
Inc. (100 Universal City Plaza, Universal City, CA 91608) and Sony Pictures
Entertainment Inc. (10202 West Washington Boulevard, Culver City, CA 90232) are
also significant shareholders of the Company (see Item 4) and parties to said
Stockholders Agreement any may also be deemed to be members of a "group". The
Claridge Group is advised that each of such entities is separately filing a
Statement on Schedule 13D with respect to its ownership in the Company pursuant
to Reg. 13(d)-1(f)(2).
Item 3. Source and Amount of Funds or Other Consideration.
The members of the Claridge Group acquired the shares of Common Stock of
the Company owned by them as set forth in Item 5 in exchange for all of their
common shares (43,454,324) of Cineplex Odeon Corporation pursuant to an
arrangement implementing the business combination of Cineplex Odeon Corporation
and a subsidiary of Sony Pictures Entertainment Inc., all as more fully
described in the Management Information Circular and Proxy Statement/Prospectus
dated February 13, 1998 (the "Prospectus") included in registration statement on
Form S-4 (no. 333-4613). Fractional shares are being settled in cash. The
closing occurred on May 14, 1998.
Item 4. Purpose of the Transaction.
The Company is the business entity resulting from the Transactions
described in the Prospectus providing for the business combination of Cineplex
Odeon and a subsidiary of Sony Pictures Entertainment Inc. and certain related
matters. The Prospectus states:
"Upon consummation of the Transactions, it is contemplated that Sony
Pictures Entertainment Inc. ("SPE") will indirectly own 21,934,625 Loews
Cineplex Common Shares and 1,202,486 Loews Cineplex Class A Non-Voting
Common Shares, representing approximately 51.13% of the outstanding Loews
Cineplex Shares, Universal Studios, Inc. ("Universal") will own 11,691,249
Loews Cineplex Common Shares and 80,000 Loews Cineplex Cass B Non-Voting
Common Shares, representing approximately 26.01% of the outstanding Loews
Cineplex Shares, the Charles Rosner Bronfman Family Trust (the "Trust") and
certain related individuals and entities (and permitted Transferees
therefrom) (collectively the "Claridge Group") will own 4,324,003 Loews
Cineplex Common Shares and 4,000 Loews Cineplex Class B Non-Voting Common
Shares, representing approximately 9.57% of the outstanding Loews Cineplex
Shares, and the shareholders of Cineplex
Page 11 of 78
<PAGE>
Odeon, other than Universal and the Claridge Group, will own 6,013,456
Loews Cineplex Common Shares, representing approximately 13.29% of the
outstanding Lowed Cineplex Shares. As a result of their collective equity
ownership, upon consummation of the Transactions, SPE, Universal and the
Claridge Group, collectively, will have the ability to control the outcome
of any vote submitted to the holders of Loews Cineplex Common Shares,
including, without limitation, election of directors."
Reference is made to Item 6. Subject to the foregoing, the members of the
Claridge Group have not formulated specific plans or proposals which would
result in any of the matters or actions referred to in paragraphs (a) through
(d) of Item 4 of Schedule 13D. The members of the Claridge Group have selected
Charles R. Bronfman to effect the designation of the designated director of the
Claridge Group on the Board of Directors of the Company. Sen. Kolber has been so
designated.
The members of the Claridge Group reserve the right to sell or otherwise
dispose of shares of Common Stock in market transactions or negotiated private
transactions from time to time.
Item 5. Interest in Securities in Loews Cineplex.
(a)-(b) At the close of business on May 14, 1998, the members of the
Claridge Group beneficially owned, directly and indirectly, an aggregate of
4,324,003 shares of Common Stock representing approximately 9.57% of the
outstanding Common Stock. The wives of Mr. Bronfman and Sen. Kolber own an
additional 17,426 shares of Common Stock (0.04%) in the aggregate, as to which
beneficial ownership is disclaimed by Mr. Bronfman and Sen. Kolber. The
ownership of each member of the Claridge Group is set forth in the following
table:
Shareholder Common Stock %
----------- ------------ -
The Charles Rosner Bronfman 1,918,907 4.35
Discretionary Trust
The Charles Bronfman Trust 1,000,000 2.27
The Charles R. Bronfman Trust 1,000,000 2.27
The Phyllis Lambert Foundation 31,410 0.07
Bojil Equities Inc. 350,309 0.80
Louis Ludwick 23,377 0.05
Charles Rosner Bronfman(1) 3,918,907 8.91
E. Leo Kolber(2) 350,309 0.80
- ----------
1 Reflects (i) 1,918,907 Common Shares owned by The Charles Rosner
Bronfman Discretionary Trust, (ii) 1,000,000 Common Shares owned by The
Charles R. Bronfman Trust, and (iii) 1,000,000 Common Shares owned by
The Charles Bronfman Trust. Excludes 9,926 Common Shares owned by Mr.
Bronfman's wife. Mr. Bronfman disclaims all beneficial interest in and
to the shares owned by his wife.
2 Reflects 350,309 shares of Common Stock owned by Bojil Equities as to
which Sen. Kolber holds all voting rights. Excludes 7,500 shares of
Common Stock owned by Sen. Kolber's
Footnote continued on next page.
Page 12 of 78
<PAGE>
The foregoing percentages are based on 43,963,333 shares of Common Stock
expected to be outstanding upon closing of the business combination transactions
on May 14, 1998 as reported in the Prospectus. The Charles Rosner Bronfman
Discretionary Trust also own 4,000 shares of Class B Non-Voting Common Shares or
approximately 4.76% of such class, with the balance of such class being owned by
Universal Studios. The shares of Class B Non-Voting Common shares are
convertible into shares of Common Stock on a share for share basis upon the
later of (i) their transfer to a person other than an affiliate of such trust or
(ii) May 14, 2003.
The Seagram Company Ltd. owns indirectly approximately 84% of the
outstanding voting equity of Universal Studios Inc. 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 common shares of Seagram ("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 limition, the Trust and (ii) pursuant to two voting trust
agreements, Charles R. Bronfman serves as the voting trustee for approximately
33.5% of the then outstanding Seagram Shares and a voting trustee for
approximately 0.7% the then outstanding Seagram Shares, which shares are
beneficially owned by the Bronfman Trusts and certain other entities.
(c) See Item 5.
(d)-(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to the Securities
of Cineplex.
The Company, SPE, Universal, the Trust and the other 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 following the Closing. The following description of the
agreements made by the Company pursuant to the Stockholders Agreement is
excerpted from the Prospectus.
The Loews Cineplex Board
Pursuant to the Stockholders Agreement, effective as of the Closing, the
Loews Cineplex Board will 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 will be designated by such
parties prior to the Closinig. The Independent Directors will be designated by
mutual agreement of LTM, SPE, Universal and a majority of the members of the
Independent Committee prior to the Closing. 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 LTM or an Affiliate. The initial Management Directors will be Lawrence J.
Ruisi, who will be President and Chief Executive Officer of Loews Cineplex, and
Allen Karp, who will be Chairman and Chief Executive Officer of Cineplex Odeon.
- ----------
Footnote continued from previous page.
wife. Sen. Kolber disclaims all beneficial interest in and to the shares
owned by his wife.
Page 13 of 78
<PAGE>
The Stockholders Agreement provides that after the Closing, 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"):
Applicable Percentage Number of Directors
equals or exceeds 6.25% and less than 9.375%............. 1
equals or exceeds 9.375% and less than 15.625%........... 2
equals or exceeds 15.625% and less than 21.875%.......... 3
equals or exceeds 21,875% and less than 28.125%.......... 4
equals or exceeds 28.125% and less than 34.375%.......... 5
equals or exceeds 34.375% and less than 40.625%.......... 6
equals or exceeds 40.625% and less than 46.875%.......... 7
equals or exceeds 46.875% and less than 53.125%.......... 8
equals or exceeds 53.125% and less than 59.375%.......... 9
equals or exceeds 59.375% and less than 65.625%.......... 10
equals or exceeds 65.625% and less than 71.875%.......... 11
equals or exceeds 71.875% and less than 78.125%.......... 12
equals or exceeds 78.125% and less than 84.375%.......... 13
84.375% and greater.................................... 14
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 designate the number of Loews Cineplex
Directors set forth in the Directors Chart based on such Stockholder's
Applicable Percentage and (y) the limitation contained in this clause (iii)
regarding a Stockholder's entitlement to designate Loews Cineplex Directors
will thereupon terminate.
Each of SPE and Universal have agreed with the other and each member of the
Claridge Group has agreed with each of SPE and Universal that, notwithstanding
the foregoing:
(i) no Stockholder shall be entitled to designate more than six Loews
Cineplex Directors; provided, however, that if any Stockholder would be
Page 14 of 78
<PAGE>
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, however, that, if at any time
commencing on the three-year anniversary of the Closing, any Stockholder's
Applicable Percentage exceeds 45%, the limitation contained in this clause
(i) regarding a Stockholder's entitlement to designate Loews Cineplex
Directors will be increased from six Loews Cineplex Directors to seven
Loews Cineplex Directors;
(ii) at any time that SPE's Applicable Percentage equals or exceeds
40.625%, but the number of SPE Directors is limited to six by the
immediately preceding clause (i) of this paragraph, Universal has agreed
with SPE that one of the individuals designated by Universal to serve as a
Loews Cineplex Director shall be an Independent Director so long as
Universal's Applicable Percentage equals or exceeds 21.875%; and
(iii) at any time that Universal's Applicable Percentage equals or
exceeds 40.625%, but the number of Universal Directors is limited to six by
clause (i) of this paragraph, SPE has agreed with Universal that one of the
individuals designated by SPE to serve as a Loews Cineplex Director shall
be an Independent Director so long as SPE's Applicable percentage exceeds
21.875%.
If the Stockholders collectively have the right to designate at least 13 of
the members of the 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 a Loews Cineplex Director shall
be an Independent Director; provided that if one of such Stockholders shall be
entitled to designate only one Director, such Stockholder shall not be required
to designate an Independent Director and the other such Stockholder shall be
required to designate two Independent Directors.
The parties to the Stockholders Agreement have agreed that the following
the Closing Date, except for the designees of the Stockholders and for the
Management Directors, individuals to be nominated for election as Loews Cineplex
Directors shall all be Independent Directors (unless the Independent Directors
shall otherwise agree), and there shall be at least two Independent Directors
and two Management Directors nominated in each such election. Each Stockholder
has agreed to vote (and to cause its Affiliates to vote) any Voting Shares
beneficially owned by it to cause the designees of SPE, Universal and the
Claridge Group and each of the Independent Directors and Management Directors
designated by the Nominating Committee (as described below) to be elected to the
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
Stockholder 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
Page 15 of 78
<PAGE>
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 or removal 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.
Consent Rights
The Stockholders Agreement provides SPE and Universal with specified
consent rights in respect of specified actions by Loews Cineplex and its
Subsidiaries, so long as their respective Applicable Percentages equal or exceed
the Minimum Percentage. These events include: (a) voluntary bankruptcy filings
by Loews Cineplex or any Significant Subsidiary; (b) acquisitions and
dispositions meeting specified tests of materiality; (c) entering into or
engaging in any business other than the exhibition of films with certain limited
exceptions; (d) any transaction or series of related transactions with SPE or
Universal or any of their respective affiliates involving more than $1,000,000
per calendar year (excluding arm's-length transactions in the ordinary course of
business, including film booking arrangements); (e) changing the number of
directors comprising the entire 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 consent rights if Loews Cineplex fails to meet certain budgeted
financial targets and their respective Applicable Percentages then equal or
exceed the Minimum Percentage. These rights include the right to approve a new
five-year strategic business plan for Loews Cineplex and the following actions
by Loews Cineplex or any Subsidiary thereof: (a) making capital expenditures
exceeding specified thresholds; (b) incurring any Debt in excess of specified
amounts with certain specified exceptions; (c) incurring liens to secure
unsecured Debt; and (d) with certain exceptions, issuing or selling any capital
stock of Loews Cineplex.
If Loews Cineplex and either SPE or Universal, as the case may be, disagree
in good faith as to whether the consent rights of such Stockholder described
above are triggered in connection with an action proposed to be taken by Loews
Cineplex, the parties have agreed to submit such a dispute to arbitration by an
independent arbitrator. Pending resolution of such dispute (which generally must
be resolved within ten business days of the submission of the dispute), Loews
Cineplex may not take the action which is the subject of the dispute and its
operations may be interrupted or delayed during such time period as a result.
In addition to the foregoing consent rights, in connection with any vote or
action by written consent of the 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)
Page 16 of 78
<PAGE>
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 designated by such
Stockholder to vote against such action at the request of SPE or Universal if
its Applicable Percentage exceeds the Minimum Percentage. The Stockholders have
also agreed to vote (and not to consent to) the Voting Shares beneficially owned
by them against any of the foregoing items in connection with any vote or action
be written consent of the stockholders of Loews Cineplex related thereto at the
request of SPE or Universal if its Applicable Percentage exceeds the Minimum
Percentage.
So long as the Applicable Percentage of SPE or Universal equals or exceeds
the Minimum Percentage, (i) 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 holders 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 Boad shall have approved 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 of, 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 in 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. Either 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.
Page 17 of 78
<PAGE>
Tag-Along Rights of Universal and the Claridge Group. Neither SPE nor any
of its Affiliates may Transfer an aggregate of more than 50% of SPE's Initial
Interest to any Person (including any Group), other than an SPE Permitted
Transferee, in one or a series of related transactions, unless Universal and the
Claridge Group has the right to participate in such Transfer on the same basis
as SPE and its Affiliates.
Right of First Refusal of SPE and Universal. The following Transfers of
Voting Shares by SPE or Universal or their respective Affiliates (the proposed
transferor, the "Transferring Party") will be subject to the right of first
refusal in favor of the other: (a) any Transfer in one or a series of related
privately negotiated transactions or a public offering if (i) 5% or more of the
then outstanding Voting Shares are subject to the Transfer, (ii) any transferee,
or any Group of which a transferee is a member, would, following such Transfer,
beneficially own 5% or more of the outstanding Voting Shares (except, in the
case of any public offering, the limitation set forth in this clause (ii) shall
not be applicable if the Transferring Party has taken all reasonable steps to
assure that such limitation shall have been satisfied) or (iii) in the case of
any Transfer by SPE or any of its Affiliates, SPE's Applicable Percentage
exceeds 25%; (b) any Transfer pursuant to a bona fide third party tender offer
or exchange offer; (c) any Transfer to Loews Cineplex or to a subsidiary of
Loews Cineplex pursuant to a self-tender offer or otherwise; and (d) any
Transfer in a Market Sale. No right of first refusal applies to any Transfer
between SPE or Universal and any of their respective Permitted Transferees.
Standstill Agreements
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
Share 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:
(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
Page 18 of 78
<PAGE>
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 33-1/3% at any time Universal and its Affiliates
beneficially own more Voting Shares than any other 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 a 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 such
acquisition, (i) such Stockholder and its Affiliates would beneficially own an
aggregate of more than 50% of the Voting Shares, excluding Voting Shares
acquired from another Stockholder or its Permitted Transferees, or (ii) the
Public Stockholders would beneficially own less than 20% of the outstanding
Voting Shares. The restrictions described in clause (ii) does not apply to a
Stockholder and its Affiliates, if, upon consummation of such acquisition, such
Stockholder's Applicable Percentage would be less than 25%. This restriction
does not prohibit the acquisition of 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 pursuant to a tender offer or exchange
offer commenced by a Stockholder prior to such time); or (c) any Person (other
than a Stockholder or a Permitted Transferee) beneficially owns more than 15% of
the Voting Shares, excluding Voting Shares acquired from a Stockholder or a
Permitted Transferee, but only if the sum of the Applicable Percentages of SPE
and Universal is less than 45%.
Registration Rights
The Stockholders Agreement grants to the Stockholders 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 Common 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 a transaction in respect of which
SPE or Universal
Page 19 of 78
<PAGE>
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 of 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 that the rights described under "--Consent
Rights" above would be incorporated in such class and SPE and Universal will
cease to have any consent rights under the Stockholders Agreement. Such new
class of common 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 7. Material to be Filed as Exhibits.
Page 20 of 78
<PAGE>
The following exhibits are filed with this initial Statement on Schedule
13D.
1. to 3. Powers of attorney for the The Charles Bronfman Trust.*
2. to 6. Powers of attorney for the The Charles R. Bronfman Trust.*
7. Power of attorney for The Charles Rosner Bronfman Discretionary
Trust.*
8. Power of attorney for Charles Rosner Bronfman.*
9. Power of attorney for the The Phyllis Lambert Foundation.*
10. Power of attorney for Sen. E. Leo Kolber.*
11. Power of attorney for Bojil Equities Inc.*
12. Power of attorney for Louis Ludwick.*
13. Letter dated December 1, 1997 to E. Leo Kolber from Bojil Equities
pertaining to voting rights.
14. Amendment and Restated Stockholders Agreement dated as of September
30, 1997.
---------------------------------
* Incorporated by reference to power of attorney previously
filed with the SEC in respect of a Schedule 13D filed
concerning Cineplex Odeon Corporation.
Page 21 of 78
<PAGE>
Signatures
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 20, 1998
THE CHARLES ROSNER BRONFMAN DISCRETIONARY TRUST
THE CHARLES R. BRONFMAN TRUST
THE CHARLES BRONFMAN TRUST
CHARLES ROSNER BRONFMAN
THE PHYLLIS LAMBERT FOUNDATION
BOJIL EQUITIES INC.
E. LEO KOLBER
LOUIS LUDWICK
By: /s/ Michel Boucher
------------------------------
Michel Boucher
Attorney-in-Fact
Page 22 of 78
<PAGE>
APPENDIX A
TRUSTEES OF THE CHARLES R. BRONFMAN TRUST
Principal Business
Name and Business Address or Occupation Citizenship
- ------------------------- ------------- -----------
Gary J. Gartner Resident counsel of Goodman Canada
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys)
430 Park Avenue
New York, NY 10022
Steven H. Levin Resident counsel of Goodman United States
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys)
430 Park Avenue
New York, NY 10022
Jeffrey D. Scheine Resident counsel of Goodman United States
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys)
430 Park Avenue
New York, NY 10022
Page 23 of 78
<PAGE>
APPENDIX B
TRUSTEES OF THE CHARLES BRONFMAN TRUST
Principal Business
Name and Business Address or Occupation Citizenship
- ------------------------- ------------- -----------
Gary J. Gartner Resident counsel of Goodman Canada
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys
430 Park Avenue
New York, NY 10022
Steven H. Levin Resident counsel of Goodman United States
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys)
430 Park Avenue
New York, NY 10022
Jeffrey D. Scheine Resident counsel of Goodman United States
Goodman Phillips & Vineberg Phillips & Vineberg (attorneys)
430 Park Avenue
New York, NY 10022
Page 24 of 78
<PAGE>
APPENDIX C
TRUSTEES AND EXECUTIVE OFFICERS
OF
THE PHYLLIS LAMBERT FOUNDATION
Principal Occupation or
Name and Business Address Employment Citizenship
- ------------------------- ---------- -----------
Phyllis Lambert Architect Canada
1920 Baile Street
Montreal, Quebec
Canada H3H 2S6
Charles Rosner Bronfman Co-Chairman of the Board and Canada
1170 Peel Street Chairman of the Executive Committee
8th Floor of The Seagram Company Limited
Montreal, Quebec (beverages and entertainment)
Canada H3B 4P2
Arnold M. Ludwick Deputy Chairman of Canada
1170 Peel Street Claridge Inc. (investments)
8th Floor
Montreal, Quebec
Canada H3B 4P2
Robert Rabinovitch Executive Vice President of Claridge Canada
1170 Peel Street Inc. (investments)
8th Floor
Montreal, Quebec
Canada 43B 4P2
Pierre-Andre Themens Partner, Goodman Phillips & Vineberg Canada
1501 McGill College Avenue (barristers and solicitors)
26th Floor
Montreal, Quebec
Canada H3A 3N9
Page 25 of 78
<PAGE>
APPENDIX D
DIRECTOR AND EXECUTIVE OFFICERS
OF BOJIL EQUITIES INC.
Principal Business or Citizenship or
Name and Business Address Occupation Incorporation
- ------------------------- ---------- -------------
Tortola Corporation Company Trust services British Virgin Islands
Limited, sole director
c/o Citco B.V.I. Limited
Citco Building
P.O. Box 662
Road Town, Tortola
British Virgin Islands
The directors and executive officers of Tortola Corporation Company Limited and
their respective citizenships in parentheses following their names are Kariem
Adbellatif (Netherlands), Fay Roberts (Grenada), Hamphrey Leue (Netherlands),
Selina O'Neal (BVI), Linda Romney Leue (BVI), Walter Reich (Canada), Agnita
Solomon (BVI), Ray George (BVI), Phillip Williams (United Kingdom), Harriette
Skelton (BVI) and Daphney Wattley (BVI).
Page 26 of 78
<PAGE>
APPENDIX E
TRUSTEES OF THE KOLBER TRUST
Principal Business or Citizenship or
Name and Business Address Occupation Incorporation
- ------------------------- ---------- -------------
Cayman International Trust Trust services Cayman Islands
Company Ltd.
c/o Ansbacher Limited
Ansbacher House
Grand Cayman, Cayman Islands
British West Indies
The directors of Cayman International Trust Company Ltd. are Hugh Hart, John
Collins, J. Bryan Bothwell, Gary C. Linford and Roy A.N. Ellis, all of whom are
British citizens, except for Mr. Bothwell who is a citizen of the Cayman Islands
and Mr. Linford who is a citizen of the Republic of South Africa.
Page 27 of 78
EXHIBIT 13
December 1, 1997
Senator E. Leo Kolber
100 Summit Circle
Westmount, Quebec
H3Y 1N8
Dear Father:
This will serve to confirm our understanding and agreement that you shall
continue to exercise all voting rights with respect to the three million, five
hundred and three thousand, ninety-two (3,503,092) common shares of Cineplex
Odeon Corporation (as well as the shares of LTM Holdings Inc. into which the
same may be transferred pursuant to the presently contemplated corporate
reorganization) which the undersigned has acquired this day from you.
At your request, the undersigned will execute proxies for shareholders
meetings in order to give effect to these presents.
Yours very truly,
BOJIL EQUITIES INC.
/S/
TORTOLA CORPORATION COMPANY LIMITED
Director
Page 28 of 78
EXHIBIT 14
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of September 30, 1997
among LTM Holdings, Inc., a Delaware corporation (the "Company"), Sony Pictures
Entertainment Inc., a Delaware corporation ("SPE"), Universal Studios, Inc., a
Delaware corporation ("USI"), the Charles Rosner Bronfman Family Trust, a trust
created under the laws of the province of Quebec (the "Trust"), and the other
persons listed on Exhibit A (such persons, together with the Trust,
collectively, the "Signatory Claridge Group").
WHEREAS, the parties to that certain Stockholders Agreement, dated as of
September 30, 1997, have agreed that such agreement shall be amended and
restated in its entirety as set forth in this Agreement.
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company, SPE and Cineplex Odeon Corporation, a corporation formed under the
laws of the province of Ontario ("CO"), are entering into a Amended and Restated
Master Agreement dated as of the date hereof (the "Master Agreement") pursuant
to which and subject to the terms and conditions thereof, among other things,
(i) CO and the Company will engage in a business combination (the "Transaction")
and (ii) the shareholders of CO will exchange shares of CO for shares of Common
Stock (as defined below);
WHEREAS, certain members of the Signatory Claridge Group have transferred
their Cineplex Odeon Common Shares (as defined in the Master Agreement) to
Permitted Transferees (as defined below) thereof (members of the Signatory
Claridge Group and their Permitted Transferees to whom Cineplex Odeon Common
Shares have been transferred by members of the Signatory Claridge Group are
hereinafter collectively referred to as the "Claridge Group");
WHEREAS, upon the closing of the Transaction (the "Closing"), and before
giving effect to any Equity Offering (as defined below), (i) SPE will
beneficially own 51.13% of the issued and outstanding Common Shares (as defined
below), 49.9% of the issued and outstanding Common Stock and 100% of the issued
and outstanding LTM Class A Non-Voting Common Stock (as defined below), (ii) USI
will beneficially own 26.01% of the issued and outstanding Common Shares, 26.6%
of the issued and outstanding Common Stock and 95.24% of the issued and
outstanding LTM Class B Non-Voting Common Stock (as defined below), and (iii)
the Claridge Group will beneficially own 9.57% of the issued and outstanding
Common Shares and 9.8% of the issued and outstanding Common Stock and 4.76% of
the issued and outstanding LTM Class B Non-Voting Common Stock, and
WHEREAS, the parties hereto desire to enter into certain post-Closing
arrangements relating to the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
"Adjusted Applicable Percentage" means, with respect to any Stockholder, at
any time, such Stockholder's Applicable Percentage, recalculated after
subtracting from (x) the Voting Shares beneficially owned by such Stockholder
and its Permitted Transferees and, in the case of the Claridge Group, all other
members of the Claridge Group and their respective Permitted Transferees (y) all
Voting Shares acquired in open market purchases, in privately-negotiated
transactions (other than from a Stockholder or a Permitted Transferee of any
Stockholder) or from the Company (other than pursuant to Section 7.1 or a
transaction described in clause (ii) of Section 7. 1 (g)).
Page 29 of 78
<PAGE>
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person. For
purposes of this definition, (i) no member of the Claridge Group shall be
considered an Affiliate of USI or any Subsidiary of USI, (ii) Matsushita
Electric Industrial Co., Ltd. ("MEI") shall not be considered an Affiliate of
USI or any Subsidiary of USI, provided, that clause (ii) shall not be applicable
at any time that USI shall disclose in a Schedule 13D filed pursuant to the
Exchange Act that USI and MEI have formed a Group with respect to Voting Shares,
and (iii) each member of the Claridge Group shall be considered an Affiliate of
each other member of the Claridge Group.
"Agreement" means this Stockholders Agreement as it may be amended,
supplemented, restated or modified from time to time.
"Applicable Percentage" means, with respect to any Stockholder, at any
time, the ratio, expressed as a percentage, of (i) the then outstanding Voting
Shares beneficially owned by such Stockholder and (a) in the case of SPE or USI,
such Stockholder's Permitted Transferees, and (b) in the case of any member of
the Claridge Group, all other members of the Claridge Group and all Permitted
Transferees of the Claridge Group, to (ii) the sum of (x) the total then
outstanding Voting Shares and (y) with respect to such Stockholder, any Voting
Shares included in clause (i) that are issuable upon conversion, exchange or
exercise of Voting Share Equivalents, provided, that if the Company shall issue
or sell Voting Shares in a transaction (other than the Equity Offering) in
respect of which either SPE or USI does not have the right to consent pursuant
to clause (vii) of Section 3.1(a) at a time when such Stockholder has an Article
III Consent Right, the aggregate amount of Voting Shares issued or sold pursuant
to all such transactions shall be subtracted from the amount of outstanding
Voting Shares in calculating such Stockholder's Applicable Percentage for
purposes of Articles II and III and for any calculation of such Stockholder's
Applicable Percentage under the Certificate, subject to the applicable rules of
any stock exchange on which the Common Stock shall then be listed.
"Article III Consent Right" means, with respect to SPE or USI, the right of
such Stockholder pursuant to Section 3. I (a) to approve the actions specified
in clauses (i)-(xiv) of such Section.
"beneficial owner" or "beneficially own" has the meaning given such term in
Rule 13d-3 under the Exchange Act and a Person's beneficial ownership of Voting
Shares shall be calculated in accordance with the provisions of such Rule,
provided, however, that (i)) in determining beneficial ownership for purposes of
Article II, Section 4.3 and clauses (ii) and (iii) of Section 4.5(b) and for any
calculation of such Stockholder's Applicable Percentage under the Certificate
(including in the calculation of a Stockholder's Applicable Percentage and
Adjusted Applicable Percentage in such provisions), a Person shall not be deemed
to be the beneficial owner of any Voting Shares which may be acquired by such
Person upon the conversion, exchange or exercise of any Voting Share
Equivalents, except for purposes of Section 4.3, a Person shall be deemed to
beneficially own such Voting Shares if such Person has irrevocably agreed to
convert, exchange or exercise the related Voting Share Equivalent upon
consummation of the applicable Third Party Sale, (ii) in determining beneficial
ownership for purposes of the other provisions of this Agreement, a Person shall
be deemed to be the beneficial owner of any Voting Shares which may be acquired
by such Person, whether within 60 days or thereafter, upon the conversion,
exchange or exercise of any warrants, options, rights or other securities issued
by the Company or any Subsidiary thereof and (iii) in determining beneficial
ownership for purposes of Sections 2.1(a), (b) and (c), clauses (i) and (ii) of
Section 2.1(g), Sections 4.2, 4.3 and 5.12, Article VII and Section 8.2 and for
any calculation of such Stockholder's Applicable Percentage under the
Certificate (including in the calculation of a Stockholder's Applicable
Percentage and Adjusted Applicable Percentage in such provisions), a Person
shall not be deemed to be the beneficial owner of any Voting Shares unless such
Person has a pecuniary interest in such Voting Shares.
"Board" means the Board of Directors of the Company.
"Business Day"- shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in The
City of New York.
Page 30 of 78
<PAGE>
"Bylaws" means the Amended and Restated Bylaws of the Company in the form
attached as Exhibit F to the Master Agreement, as the same may be amended,
supplemented or modified from time to time.
"Capital Lease Obligations" of a Person means the obligation to pay rent or
other payment amounts under a lease of (or other arrangements conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on a balance
sheet of such Person in accordance with GAAP. The principal amount of such
obligation shall be the capitalized amount thereof that appears on a balance
sheet of such Person in accordance with GAAP.
"Capital Stock" means, with respect to any Person at any time, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited) or equivalent ownership interests in or issued by such
Person.
"Cash Flow" means, for purposes of determining the cash flow of an asset
under clauses (i) or (ii) of Section 3.1(a), (i) with respect of any motion
picture theater, "Cash Flow" as defined in the Master Agreement, and (ii) with
respect to any other type of asset, cash flow shall be defined as the Company
and each Stockholder who at the time of determination has an Article III Consent
Right shall jointly determine in good faith and, in making any such
determination, such parties shall consider any definition of cash flow that is
customarily utilized by nationally recognized investment banking firms to
measure the cash flow of such assets.
"Certificate" means the Amended and Restated Certificate of Incorporation
of the Company in the form attached as Exhibit A to the Master Agreement, as the
same may be amended, supplemented or modified from time to time.
"Certificate Amendment" means any amendment or restatement of the
Certificate after the Closing.
"Claridge Director" means any Director designated pursuant to Section 2.1
by the Claridge Group.
"Commission" means the Securities and Exchange Commission, and any
successor commission or agency having similar powers.
"Common Shares" means, collectively, the Common Stock and the Non-Voting
Common Stock.
"Common Stock" means common stock, par value $0.01 per share, of the
Company and any securities issued in respect thereof, or in substitution
therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger. consolidation, exchange or other
similar reorganization.
"Company Expenses" means (i)(a) fees and disbursements of counsel for the
Company and (b) fees and disbursements of all independent public accountants
(including the expenses of any audit and/or "cold comfort" letter) and fees and
expenses of other Persons, including special experts retained by the Company,
incident to the Company's performance of or compliance with its obligations
under Article V, and (ii) if the Company participates in a registration pursuant
to Article V, the Company's pro rata share of other Expenses related to such
registration on the basis of the number of securities included in such
registration by the Company relative to the total number of securities included
in such registration.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its consolidated
Subsidiaries for such period as reported on such Person's financial statements
for such period and determined in accordance with GAAP.
"Consolidated Interest Expense" of any Person means for any period the
consolidated interest expense included in a consolidated income statement (net
of interest income) of such Person and its consolidated Subsidiaries for such
period as reported on such Person's financial statements for such period and
determined in accordance with GAAP.
Page 31 of 78
<PAGE>
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as reported on such Person's financial statements
for such period and determined in accordance with GAAP; provided that there
shall be excluded therefrom (i) gains or losses on asset dispositions by such
Person or its consolidated Subsidiaries, (ii) all extraordinary gains and
extraordinary losses, (iii) any net income (loss) of a consolidated Subsidiary
that is attributable to a minority interest in such consolidated Subsidiary,
(iv) all non-cash non-recurring charges and credits during such period not in
the ordinary course of business and (v) the tax effect of any of the items
described in clauses (i) through (iv) above.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise.
"Current Market Value" means, with respect to any security, the average of
the daily closing prices on the New York Stock Exchange (or such principal
exchange or market on which such security may be listed or may trade) for such
security for the 20 consecutive trading days commencing on the 22nd trading day
prior to the date with respect to which the Current Market Value is being
determined. The closing price for each day shall be the closing price, if
reported, or, if the closing price is not reported, the average of the closing
bid and asked prices as reported by the New York Stock Exchange (or such
principal exchange or market) or a similar source selected from time to time by
the Company for such purpose. In the event such closing prices are unavailable,
the Current Market Value shall be the Fair Market Value of such security
established by a Determination of the Independent Directors. If a determination
is required under this Agreement of the Current Market Value of any Non-Voting
Common Stock, such value shall be deemed to be equal to the Current Market Value
of an equivalent number of shares of Common Stock.
"Debt" means (without duplication), with respect to any Person, whether or
not recourse is to all or a portion of the assets of such Person or any of its
Subsidiaries, (i) every obligation of such Person or any of its Subsidiaries for
money borrowed, (ii) every obligation of such Person or any of its Subsidiaries
evidenced by bonds, debentures, notes or other similar instruments, (iii) every
reimbursement obligation of such Person or any of its Subsidiaries with respect
to letters of credit (including standby letters of credit to the extent drawn
upon), bankers' acceptances or similar facilities issued for the account of such
Person or any of its Subsidiaries, (iv) every obligation of such Person or any
of its Subsidiaries issued or assumed as the deferred purchase price of property
or services (but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (v) every Capital Lease Obligation of such
Person or any of its Subsidiaries other than Capital Lease Obligations of such
Person or any of its Subsidiaries for real property, and (vi) every obligation
of the type referred to in clauses (i) through (v) of another Person and all
dividends of another Person the payment of which, in either case, such Person or
any of its Subsidiaries has guaranteed or for which such Person is responsible
or liable, directly or indirectly, jointly or severally, as obligor, guarantor
or otherwise; provided that, in the case of joint venture Debt, there shall only
be included that portion of such Debt equal to the ratable share in such joint
venture of such Person or any of its Subsidiaries.
"DGCL" means the Delaware General Corporation Law.
"Determination of the Independent Directors" means, with respect to any
matter, a determination made in good faith, on the basis of such relevant
factors as the Independent Directors consider, in their judgment, appropriate,
by the vote of a majority of the Independent Directors present at a meeting of
the Independent Directors called for such purpose, a quorum being present (or at
a meeting of the Board if a quorum of the Independent Directors is present at
such meeting), or without a meeting if a majority of all Independent Directors
consent thereto in writing. For these purposes, a majority of all Independent
Directors, acting at a meeting duly assembled, shall constitute a quorum for the
making of any such determination at such meeting.
"Director" means any member of the Board.
"Directors Chart" means the chart attached as Schedule I.
Page 32 of 78
<PAGE>
"Disinterested Directors" means, with respect to any matter that is subject
to approval under Section 3.4, all Directors other than any Director who is a
designee of SPE (in the case of Section 3.4(a)) or USI (in the case of Section
3.4(b)).
"Dissolution " means a voluntary liquidation, dissolution or winding up of
the Company.
"EBITDA" of any Person means for any period the Consolidated Net Income for
such period increased by the sum of (i) Consolidated Interest Expense of such
Person for such period, plus (ii) Consolidated Income Tax Expense of such Person
for such period, plus (iii) the consolidated depreciation and amortization
expense deducted in determining the Consolidated Net Income of such Person for
such period (excluding amortization of Capitalized Lease Obligations other than
those incurred to finance equipment); provided, however, that the Consolidated
Interest Expense, Consolidated Income Tax Expense and consolidated depreciation
and amortization expense of a consolidated Subsidiary of such Person shall be
added to the Consolidated Net Income of such Person pursuant to the foregoing
only to the extent and in the same proportion that the Consolidated Net Income
of such consolidated Subsidiary was included in calculating the Consolidated Net
Income of such Person.
"Equity Offering" means the sale for cash by the Company in one or more
underwritten public offerings of common Stock for an aggregate offering price of
$200 million (before deducting underwriting discounts or commissions).
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Excluded Securities" means options issued by the Company to employees or
directors of the Company or its Subsidiaries pursuant to any stock option or
similar plan (and any Common Stock issuable thereunder) approved by the Board
and any Common Stock issuable upon conversion of Non-Voting Common Stock.
"Expenses" means any and all fees and expenses incident to the Company's
performance of or compliance with its obligations under Article V (other than
internal expenses incurred by the Company including the services of the
Company's executives and legal department), including: (i) listing and filing
fees of the Commission or any stock exchange registration, (ii) fees and
expenses of compliance with state and provincial securities or "blue sky" laws
and in connection with the preparation of a "blue sky" survey, including
reasonable fees and expenses of "blue sky" counsel, (iii) fees and expenses of
compliance with any Canadian securities laws, (iv) printing and copying
expenses, (v) messenger and delivery expenses, (vi) expenses incurred in
connection with any road show, (vii) fees and disbursements of counsel for the
Company, (viii) with respect to each registration, the reasonable fees and
disbursements of one counsel for the selling Holder(s) (selected by the
Initiating Holder, in the case of a Demand Registration, or by the Requisite
Percentage of Participating Holders, in the case of a Piggyback Registration),
(ix) fees and disbursements of all independent public accountants (including the
expenses of any audit and/or "cold comfort" letter) and fees and expenses of
other Persons, including special experts, retained by the Company, and (x) any
other fees and disbursements of underwriters, if any, customarily paid by
issuers or sellers of securities.
"Fair Market Value" means, as to any securities or other property, the cash
price at which a willing seller would sell and a willing buyer would buy such
securities or property in an arm's-length negotiated transaction without time
constraints.
"Five-Year Plan" means (i) the Initial Five-Year Plan, or any replacement
of such plan adopted in accordance with Section 3.1(b), and (ii) after the
expiration of the Initial Five-Year Plan, or any replacement thereof, subsequent
five-year strategic business plans of the Company adopted by the Board in
accordance with Section 3.1(d) or any replacement thereof adopted in accordance
with Section 3.1(b).
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Group" shall have the meaning assigned to it in Section 13(d)(3) of the
Exchange Act.
Page 33 of 78
<PAGE>
"Holder" means SPE, USL, each member of the Claridge Group and any of their
respective Permitted Transferees, and any Third Party Transferee (i) to the
extent the rights and obligations of a Holder are specifically assigned to such
Third Party Transferee by a Stockholder in accordance with Section 4.5(b)(iv)
and (ii) who agrees, pursuant to Sections 4.5(b) and 4.5(c), to be bound by the
provisions of this Agreement as a "Holder" hereunder.
"Independent Director" means any Director who satisfies the criteria set
forth in the second paragraph of Section 2.1(i).
"Initial Five-Year Plan" means the Company's five-year strategic business
plan in effect as of the Closing, as adopted by the Board.
"Initial Interest" means, with respect to any Stockholder, all of the
Common Shares beneficially owned by such Stockholder and its Permitted
Transferees immediately following the Closing.
"LTM Class A Non-Voting Common Stock" means class A non-voting common
stock, par value $0.01 per share, of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"LTM Class B Non-Voting Common Stock" means class B non-voting common
stock, par value $0.01 per share. of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"Management Director" means any Director who is also an executive officer
of the Company.
"Market Capitalization" means, as of any Determination Date, the product of
(i) the number of Common Shares outstanding and (ii) the Current Market Value.
"Market Sale" means a "brokers' transaction" within the meaning of Section
4(4) of the Securities Act.
"Maximum Debt Ratio" means 6.0 to 1.0, provided that such ratio shall be
decreased by 0.25 to 1.0 if the Company shall have issued Common Stock in a
public offering after the Closing for an aggregate net offering price of $40
million and by an additional 0.25 to 1.0 for each additional $40 million that
the Company shall issue in a public offering after the Closing, provided,
further, that in no event shall such ratio be less than 4.75 to 1.0.
"Merger" means any merger or consolidation in which the Company is a
constituent corporation or any sale of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole, provided that a merger which
satisfies all of the following criteria shall not be deemed a Merger for
purposes of this definition: (i) the Company 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 Company resulting from such merger is
the issuance of shares of Capital Stock pursuant thereto, and (iii) no consent
of the Stockholders would be required in connection therewith either under the
DGCL or under Article III.
"Minimum Percentage" means, with respect to SPE or USI, an Applicable
Percentage of 17.86%, provided that if such Stockholder and its Permitted
Transferees beneficially own at least 80% of such Stockholder's Initial
Interest, such percentage shall equal 15%.
"Non-Voting Common Stock" means, collectively, the LTM Class A Non-Voting
Common Stock and the LTM Class B Non-Voting Common Stock.
"pecuniary interest" has the meaning given such term in Rule l6a-l(a)(2)
under the Exchange Act.
Page 34 of 78
<PAGE>
"Permitted Transferee" means, (i) with respect to SPE, any direct or
indirect wholly-owned Subsidiary of Sony Corporation which is incorporated in
the United States, (ii) with respect to USI, any direct or indirect wholly-owned
Subsidiary of The Seagram Company Ltd. or USI which is incorporated in the
United States, and (iii) with respect to each member of the Claridge Group, (a)
any member of the Claridge Group, (b) any one or more of the lineal descendants
of Charles R. Bronfman, Senator E. Leo Kolber or Arnold M. Ludwick, (c) the
spouses of any, one or more of the foregoing Persons referred to in this clause
(iii), (d) any trust of which any one or more of the foregoing Persons referred
to in this clause (iii) is the principal beneficiary, (e) Phyllis Lambert, (f)
the legal representatives of any one or more of the Persons referred to in
clauses (a), (b) or (c) of this clause (iii), (g) any corporation, partnership
or other entity directly or indirectly of which more than 90% of the total
voting power of the Capital Stock entitled to vote in the election of directors,
managers or administrators thereof is beneficially owned by Persons referred to
in this clause (iii), and (h) any private charitable foundation of which one or
more of the foregoing Persons referred to in this clause (iii) constitutes a
majority of the members. In addition, each of SPE, USI and each member of the
Claridge Group shall each be a Permitted Transferee of its respective Permitted
Transferees.
"Person" means any individual. corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivisions thereof or any Group comprised of two or more of the foregoing.
"Public Stockholder" means any stockholder of the Company other than (i)
the Stockholders and their respective Permitted Transferees and (ii)
stockholders of the Company who are required to file a Schedule 13D pursuant to
the Exchange Act with respect to their ownership of Voting Shares, excluding any
such stockholders that (a) are investment advisers registered under Section 203
of the Investment Advisers Act of 1940, as amended, (b) are not participating
and have not publicly disclosed (in a Schedule 13D filing or otherwise) an
intention to participate in an election contest affecting the Company and (c)
have not publicly disclosed (in a Schedule 13D filing or otherwise) any
intention or purpose of influencing control of the Company in any material
respect (including seeking representation on the Board).
"Registrable Securities" means any Common Stock beneficially owned by any
Holder (including any Common Stock issuable upon conversion of Non-Voting Common
Stock), whether beneficially owned as of the Closing or thereafter acquired. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been sold (other than in
a privately-negotiated sale) pursuant to Rule 144 (or any successor provision)
under the Securities Act or (iii) such securities shall have ceased to be
outstanding.
"Requisite Percentage of Participating Holders" means, with respect to any
registration pursuant to Article V, Holders of a majority of the total
Registrable Securities which the Company has been requested to register by all
Holders.
"Securities Act" means the Securities Act of 1933, as amended.
"SPE Director" means any Director designated pursuant to Section 2.1 by
SPE.
"Stockholder" means each of SPE, USI and each member of the Claridge Group.
"Subsidiary " means, with respect to any Person, any corporation,
partnership, joint venture, limited liability company or other entity controlled
by such Person directly or indirectly through one or more intermediaries.
"Targeted EBITDA" means (i) for the 12-month period commencing on the
Closing Date, if the Closing Date shall be on the first day of a month, or
otherwise for the 12-month period commencing on the first day of the month
following the month during which the Closing shall occur, and (ii) for each
12-month period thereafter (each full 12-month period, including the initial
period described in clause (i), a "Measurement Period"), Targeted EBITDA of the
Company as set forth in the Five-Year
Page 35 of 78
<PAGE>
Plan, subject to the following adjustments: (x) Targeted EBITDA shall be reduced
(but not increased) as at the end of any Measurement Period if subsidiaries or
assets specifically identified in the Five-Year Plan to be disposed of or closed
during such period shall not have been disposed of or closed, such reduction to
be in an amount equal to the extent to which the aggregate actual EBITDA of such
assets or subsidiaries during such Measurement Period is negative (net of any
positive actual EBITDA of any such assets or subsidiaries), and if such assets
or subsidiaries are not disposed of or closed within 12 months following the
date projected in the Five-Year Plan for such disposition or closure, Targeted
EBITDA in respect of such 12-month period shall be reduced (but not increased)
in an amount equal to the extent to which the aggregate actual EBITDA of such
assets or subsidiaries during such 12-month period is negative (net of any
positive actual EBITDA of any such assets or subsidiaries), (y) Targeted EBITDA
shall be reduced (but not increased) as at the end of any Measurement Period if
expansions and acquisitions specifically identified in the Five-Year Plan to be
made during such period shall not have occurred during such period, such
reduction to be in an amount equal to the amount of EBITDA specifically
identified in the Five-Year Plan as being associated with such expansions and
acquisitions (net of any positive actual EBITDA during such Measurement Period
from expansions and acquisitions that were not specifically identified in the
Five-Year Plan), and (z) Targeted EBITDA shall be reduced by an amount equal to
25% of the projected expense savings that are specifically identified in the
Five-Year Plan.
"Third Party Transferee" means any Person to whom a Stockholder (including
a Third Party Transferee subject to this Agreement pursuant to Sections 4.5(b)
and 4.5(c)) or a Permitted Transferee Transfers Voting Shares, other than a
Permitted Transferee of such Stockholder.
"Transfer" means, directly or indirectly, to sell, transfer, assign,
pledge, encumber, hypothecate or similarly dispose of, either voluntarily or
involuntarily, or to enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, assignment, pledge,
encumbrance, hypothecation or similar disposition of, any Voting Shares or any
interest in any Voting Shares, provided, however, that, subject to the second to
last sentence of Section 4.5(a), a merger or consolidation in which a
Stockholder is a constituent corporation shall not be deemed to be the Transfer
of any Voting Shares beneficially owned by such Stockholder (provided, that the
primary purpose of any such transaction is not to avoid the provisions of this
Agreement).
"USI Director" means any Director designated pursuant to Section 2.1 by
USI.
"USI Subscription Agreement" means the Agreement between USI and the
Company attached as Exhibit I to the Master Agreement, as the same may be
amended, supplemented or modified from time to time.
"Voting Share EquivalentsI" means any warrants, options, rights or
securities convertible into, or exchangeable or exercisable for, Voting Shares.
"Voting Shares" means any securities of the Company the holders of which
are generally entitled to vote for members of the Board and any securities
issued in respect thereof, or in substitution therefor, in connection with any
stock split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
SECTION 1.2 Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
Term Section
---- -------
Aggrieved Stockholder 8.11(c)
Arbitration Agreement 3.3(c)
Arbitrator 3.3(c)
Bylaw Amendment 2.4(a)
CO Recitals
Claims 5.8(a)
Claridge Group Preamble
Closing Recitals
Company Preamble
Page 36 of 78
<PAGE>
Demand Exercise Notice 5.1(a)
Demand Registration Requests 5.1(a)
Demand Registrations 5.1(a)
Determination Date 3.1(a)
Initiating Holder 5.1(a)
Issuance Notice 7.1(b)
Issuance Shares 7.1(a)
Litigation 8.13
Master Agreement Recitals
New Five-Year Plan 3.1(b)
Nominating Committee 2.1(i)
Offer Notice 4.4(b)
Offer Price 4.4(c)
Offered Shares 7.1(a)
Offeree 7.1(a)
Other Holders 5.1(b)
Other Stockholder 4.4(b)
Permitted Debt 3.1(a)
Piggyback Registration 5.2(a)
Reorganization Proposal 3.1(f)
Significant Sale 4.2(a)
Significant Sale Initiator 4.2(a)
Significant Sale Notice 4.2(a)
Significant Sale Shares 4.2(a)
SPE Preamble
Tag-Along Notice 4.3(a)
Tag-Along Offeree 4.3(a)
Tag-Along Sale 4.3(a)
Tag-Along Shares 4.3(a)
Target 3.1(a)
Transaction Recitals
Transferring Party 4.4(a)
Trust Preamble
USI Preamble
SECTION 1.3 Other Definitional Provisions. (a) The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 1.4 Methodology for Calculations. For purposes of this Agreement,
the Transfer or issuance of a Voting Share Equivalent shall be treated as the
Transfer or issuance of the Voting Shares into which such Voting Share
Equivalent can be converted, exchanged or exercised. For purposes of calculating
the amount of outstanding Voting Shares as of any date and the amount of Voting
Shares beneficially owned by any Person as of any date, (i) the amount of any
Voting Shares shall be equal to the number of votes such Voting Shares shall
then entitle the holder thereof to cast in an election for members of the Board,
(ii) any Voting Shares held in the Company's treasury or owned by any
Subsidiaries of the Company shall be disregarded, (iii) the Stockholders shall
not be deemed to share beneficial ownership of any Voting Shares as a result of
any of the provisions of this Agreement and (iv) if any Voting Shares shall
otherwise be deemed to be beneficially owned by more than one Stockholder, such
shares shall be deemed to be beneficially owned only by the Stockholder with the
greatest pecuniary interest in such shares (provided that if such Stockholders
shall have an equal pecuniary interest in any such shares, each Stockholder
shall be deemed to beneficially own an equal portion of such shares (which
portions shall not exceed 100% in the aggregate)).
Page 37 of 78
<PAGE>
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1 Composition of the Board. (a) Effective as of the Closing, the
Board shall be comprised of 16 members, consisting of six designees of SPE,
three designees of USI, one designee of the Claridge Group, two Management
Directors and four Independent Directors. The designees of SPE, USI and the
Claridge Group shall have been designated by SPE, USI and the Claridge Group
prior to the Closing in accordance with the provisions of Section 6.18 of the
Master Agreement, the Independent Directors shall have been designated by SPE,
USI and a majority of the members of the Special Committee (as defined in the
Master Agreement) prior to the Closing in accordance with the provisions of
Section 6.18 of the Master Agreement and the Management Directors shall be the
individuals satisfying the criteria set forth in Section 2.10).
(b) After the Closing, SPE, USI and the Claridge Group shall be entitled to
designate for nomination for election to the Board the number of Directors set
forth in the Directors Chart which corresponds to such Stockholder's Applicable
Percentage; provided, however, that:
(i) (x) until the five-year anniversary of the Closing, the Claridge
Group shall be entitled to designate one 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 Directors shall be determined in accordance with this Section 2.1 on
the same basis as the entitlement of the other Stockholders;
(ii) if the Directors Chart provides that the Stockholders would in
the aggregate be entitled to designate more than 14 Directors, each
reference to a percentage in such chart under the "Applicable Percentage"
column, shall be increased by the least number of percentage points that
would result in the Stockholders in the aggregate being entitled to
designate 14 Directors (after giving effect to the provisions of clause
(i)(x) above; and
(iii) prior to the four-year anniversary of the Closing, no
Stockholder shall be entitled to designate more than eight Directors,
provided, however, that if any Stockholder would be entitled to designate
more than eight Directors pursuant to the Directors Chart based on such
Stockholder's Adjusted Applicable Percentage (rather than such
Stockholder's Applicable Percentage), (x) such Stockholder shall be
entitled to designate the number of 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 Directors shall thereupon terminate.
(c) Notwithstanding anything to the contrary contained in Section 2.1(b),
each of SPE and USI covenants and agrees with the other and each member of the
Claridge Group covenants and agrees with each of SPE and USI that:
(i) no Stockholder shall be entitled to designate more than six
Directors, provided, however, that if any Stockholder would be entitled to
designate more than eight 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 Directors and the limitation contained in
this clause (i) regarding a Stockholder's entitlement to designate
Directors shall 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
Directors shall be increased from six Directors to seven 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 clause (i) of
this Section 2.1(c), USI agrees with SPE that one of the individuals
designated by USI to serve as a Director shall be an Independent Director
so long as USI's Applicable Percentage equals or exceeds 21.875% (provided
that in determining whether such individual is an Independent Director, the
opinion of such Stockholder shall be substituted for the opinion of the
Nominating Committee for purposes of clauses (i) and (iii) of Section
2.1(i)); and
Page 38 of 78
<PAGE>
(iii) at any time that USI's Applicable Percentage equals or exceeds
40.625% but the number of USI Directors is limited to six by clause (i) of
this Section 2.1(c), SPE agrees with USI that one of the individuals
designated by SPE to serve as a Director shall be an Independent Director
so long as SPE's Applicable Percentage exceeds 21.875% (provided that in
determining whether such individual is an Independent Director, the opinion
of such Stockholder shall be substituted for the opinion of the Nominating
Committee for purposes of clauses (i) and (iii) of Section 2.1(i)).
(d) After the Closing, except for the designees of the Stockholders and for
the Management Directors (who shall be selected in accordance with Section
2.1(i) and (j)), the individuals to be nominated for election as Directors shall
all be Independent Directors and shall be selected in accordance with Section
2.1(i), unless the Independent Directors (based on a Determination of the
Independent Directors) shall otherwise agree, provided that there shall be at
least two Independent Directors and at least two Management Directors nominated
in each such election.
(e) Each Stockholder agrees to vote (and cause each of its Affiliates to
vote, if applicable), or act by written consent with respect to, any Voting
Shares beneficially owned by it to cause the designees of SPE, USI and the
Claridge Group and each of the Independent Directors and Management Directors
designated by the Nominating Committee to be elected to the Board, and the
Company agrees to use its best efforts to cause the election of each such
designee to the Board, including nominating such individuals to be elected as
members of the Board as provided herein. At least 45 days prior to its
distribution of its proxy statement or information statement with respect to
each meeting of stockholders at which Directors are to be elected, the Company
shall notify each Stockholder that is then entitled to designate Directors
pursuant to Section 2.1(b) of (i) the aggregate number of Directors to be
elected at the meeting, (ii) such Stockholder's Applicable Percentage as of the
record date for such meeting and (iii) the number of Directors such Stockholder
is entitled to designate (calculated based on such Stockholder's Applicable
Percentage as of the record date). Each Stockholder shall notify the Company of
the Directors designated by it pursuant to this Section on or prior to the close
of business on the later of (x) the 15th day following its receipt of the
Company's notice and (y) the 20th day prior to the Company's distribution of
such proxy statement or information statement.
(f) In the event that a vacancy is created at any time by the death,
disability, retirement, resignation or removal (with or without cause) of any
SPE Director, USI Director or Claridge Director, SPE, USI or the Claridge Group,
as the case may be, shall have the right to designate a replacement Director to
fill such vacancy and the Company agrees to use its best efforts to cause such
vacancy to be filled with the replacement Director so designated. Upon the
written request of SPE, USI or the Claridge Group, each Stockholder shall vote
(and cause each of its Affiliates to vote, if applicable), or act by written
consent with respect to, all Voting Shares beneficially owned by it and
otherwise take or cause to be taken all actions necessary to remove any Director
designated by such requesting party and to elect any replacement Director
designated as provided in the first sentence of this Section 2.1(f). Unless all
the Stockholders otherwise agree, no Stockholder or any of its Affiliates shall
take any action to cause the removal of any SPE Director, USI Director, Claridge
Director, Management Director or Independent Director without cause, except (i)
in the case of an SPE Director, USI Director or Claridge Director, upon the
written request of the Stockholder which designated such Director, (ii) in the
case of a Management Director, if such individual shall cease to serve as one of
the two most senior executive officers of the Company, and (iii) as provided in
Section 2.1(g). For purposes of the preceding sentence, "cause" shall mean the
willful and continuous failure of a Director to substantially perform such
Director's duties to the Company or the willful engaging by a Director in gross
misconduct materially and demonstrably injurious to the Company.
(g) If, at any time, any of the Stockholders or any of their respective
Permitted Transferees shall Transfer Voting Shares and, upon consummation of
such Transfer, the Applicable Percentage of such Stockholder is reduced such
that the number of Directors such Stockholder is entitled to designate pursuant
to Section 2.1(b) and 2.1(c) is reduced by one or more Directors, then:
(i) the number of SPE Directors, USI Directors and Claridge Directors
shall be recalculated by the Company in accordance with Section 2.1 (b) and
2.1(c) as of the consummation of such Transfer (and after giving effect
thereto);
Page 39 of 78
<PAGE>
(ii) to the extent that, after giving effect to the recalculation
described in clause (i), any of SPE, USI or the Claridge Group is entitled
to designate fewer Directors than the number of Directors then serving as
designees of such Stockholder(s), any such Stockholder shall use its best
efforts to cause Director(s) designated by such Stockholder to resign from
the Board as promptly as practicable so that the number of Directors
designated by such Stockholder does not exceed the number of designees such
Stockholder shall then be entitled to designate based on such
recalculation.
(iii) if a sufficient number of SPE Directors, USI Directors or
Claridge Directors, as the case may be, shall not have resigned within 30
days of the event requiring such recalculation, each Stockholder shall vote
(and cause each of its Affiliates to vote, if applicable), or act by
written consent with respect to, all Voting Shares beneficially owned by it
and otherwise take or cause to be taken all actions necessary to remove
such excess number of Directors designated by the Stockholder(s) whose
designees have not resigned in accordance with clause (ii);
(iv) upon the effectiveness of the resignation(s) or removal(s)
described in clauses (ii) and (iii), the Company shall cause the Board (and
each Stockholder shall use its best efforts to cause its respective
designees to the Board) to fill all vacancies created by such
resignation(s) or removal(s) (x) by appointing to the Board designees of
any Stockholder (including any Third Party Transferee described in clause
(ii) of Section 4.5(b)) who is entitled, as a result of the recalculation
described in clause (i), to designate more Directors than the number of
Directors then serving as designees of such Stockholder and (y) to the
extent vacancies remain after giving effect to clause (x), by filling such
remaining vacancies with Independent Directors designated by the Nominating
Committee pursuant to Section 2.1(i); and
(v) if the vacancies to the Board have not be filled in accordance
with clause (iv), each Stockholder shall vote (and cause each of its
Affiliates to vote, if applicable), or act by written consent with respect
to, all Voting Shares beneficially owned by it and otherwise take or cause
to be taken all actions necessary to fill all vacancies as provided in
clause (iv).
(h) The Company agrees not to take any action that would cause the number
of Directors constituting the entire Board to be other than 16 and each
Stockholder agrees to use its best efforts to cause the number of Directors
constituting the entire Board to be 16.
(i) In connection with each election of Directors, the Company will use its
best efforts to cause there to be nominated for election as Directors, in
accordance with the Company's procedures for the nomination of Directors and to
the extent permissible in accordance with applicable legal requirements, (1) the
two Management Directors who satisfy the criteria set forth in Section 2.1(j)),
and (2) the number of Independent Directors required to be nominated in
accordance with Section 2.1(d). With respect to each election held after the
Closing, the Management Directors referred to in clause (1) above and the
Independent Directors referred to in clause (2) above shall be designated by a
nominating committee of the Board (the "Nominating Committee") established to
determine whether prospective nominees meet the criteria set forth in Section
2.1(j) with respect to such Management Directors and the criteria set forth in
the following paragraph with respect to such Independent Directors. The Company
agrees to cause the Nominating Committee to 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 USI Director, provided if
at any time there shall cease to be at least one USI Director or one SPE
Director, then the Nominating Committee shall include two SPE Directors or two
USI Directors, as the case may be, to the extent SPE or USI, as applicable, then
has two designees serving as Directors.
An Independent Director is a Director who, and each future qualified
nominee for election as an Independent Director shall be an individual who:
(i) is free from any relationship that, in the opinion of the
Nominating Committee, would interfere with the exercise of independent
judgment as a member of the Board;
Page 40 of 78
<PAGE>
(ii) is not an Affiliate of the Company, SPE, USI or the Claridge
Group or a current or former officer of the Company or any of its
Subsidiaries or a current or former officer or director of SPE or USI or
any of their respective Subsidiaries:
(iii) does not, in addition to such individual's role as a Director,
also act on a regular basis as an individual or representative of an
organization serving as a professional advisor, legal counsel or consultant
to management of the Company or SPE, USI or the Claridge Group or any of
their respective Subsidiaries: and
(iv) does not represent, and is not a member of the immediate family
of, a Person who does not satisfy the requirements of clauses (i), (ii) or
(iii) above.
In the event that the Stockholders collectively have the right to designate
at least 13 of the members of the Board pursuant to Section 2.1, SPE and USI
agree that at least one of the individuals designated by each such Stockholder
to serve as a 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
(provided, further, that such designees shall qualify to serve on the Audit
Committee of the Board in accordance with the policies of the New York Stock
Exchange governing membership on audit committees).
(j) The two Management Directors referenced in clause (1) of Section 2.1(i)
shall be the two most senior executive officers of the Company, provided that so
long as Allen Karp shall be an executive officer of the Company or any Affiliate
thereof he shall be a Management Director even if he is not one of the two most
senior executive officers and, in such circumstances, the Management Directors
shall be the most senior executive officer of the Company and Mr. Karp. If any
Management Director shall cease to satisfy the foregoing criteria, the Company
shall cause such individual to immediately resign as a Management Director, and
upon such resignation, the Company shall cause the Board (and each Stockholder
shall use its best efforts to cause its respective designees to the Board) to
fill the vacancy created thereby in accordance with Section 2.1.
(k) If, on the three-year anniversary of the Closing, any Stockholder shall
then be entitled to designate seven Directors rather than six Directors in
accordance with the second proviso contained in clause (i) of Section 2.1(c), at
the request of such Stockholder, the Company shall take such action as may be
necessary to cause one of the Independent Directors to resign from the Board so
as to enable such Stockholder to designate a seventh Director, and if an
Independent Director has not so resigned within 30 days of such Stockholder's
request to the Company, at the request of such Stockholder, each other
Stockholder shall vote (and cause each of its Affiliates to vote, if
applicable), or act by written consent with respect to, all Voting Shares
beneficially owned by it and otherwise take or cause to be taken all actions
necessary to remove the Independent Director designated by the requesting
Stockholder.
(l) If the number of SPE Directors or USI Directors shall have been limited
to six by clause (i) of Section 2.1(c) and as a result thereof one of the USI
Directors or the SPE Directors shall be an Independent Director in accordance
with clauses (ii) or (iii), as the case may be, of Section 2.1(c), and if the
number of SPE Directors or USI Directors shall cease to be limited to six on the
three-year anniversary of Closing in accordance with the second proviso
contained in clause (i) of Section 2.1(c), at the request of USI or SPE, as the
case may be, the Company shall take such action as may be necessary to cause the
Independent Director designated by USI or SPE, as the case may be, to resign
and, if such Independent Director has not resigned within 30 days of such
Stockholder's request to the Company, at the request of such Stockholder, each
other Stockholder shall vote (and cause each of its Affiliates to vote, if
applicable), or act by written consent with respect to, all Voting Shares
beneficially owned by it and otherwise take or cause to be taken all actions
necessary to remove the Independent Director designated by USI or SPE, as the
case may be.
SECTION 2.2 Board Procedures. The Company shall cause the following
procedures to be followed:
Page 41 of 78
<PAGE>
(a) Meetings. The Board shall hold at least six regularly scheduled
meetings per year at such times as may from time to time be fixed by resolution
of the Board and no notice (other than the resolution) need be given as to a
regularly scheduled meeting. Special meetings of the Board may be held at any
time upon the call of the Chairman of the Board or at least two Directors,
following notice to each Director which shall be given orally or by personal
delivery, facsimile or reliable overnight courier at least three Business Days
before the meeting. Reasonable efforts shall be made to ensure that each
Director actually receives timely notice of any such special meeting. An annual
meeting of the Board shall be held without notice immediately following the
annual meeting of the stockholders of the Company.
(b) Agenda. A reasonably detailed agenda shall be supplied to each Director
reasonably in advance of each meeting of the Board, together with other
appropriate documentation with respect to agenda items calling for Board action,
to inform adequately the Directors regarding matters to come before the Board.
Any Director wishing to place a matter on the agenda for any meeting of the
Board may do so by communicating with the Chairman of the Board sufficiently in
advance of the meeting of the Board so as to permit timely dissemination to all
Directors of information with respect to the agenda items.
(c) Powers of the Board. The Board shall reserve to itself the power to
approve transactions that are of a type customarily subject to board approval as
a matter of good corporate practice for public companies in the United States.
The Board shall not delegate to any committee of the Board or to any officers of
the Company the authority to conduct business in any manner that would
circumvent, or deprive SPE, USI or the Claridge Group or any of their respective
Permitted Transferees of, any of their respective rights set forth in this
Agreement. In no event will the Board establish an executive committee, or any
committee performing functions comparable to those customarily performed by
executive committees of boards of directors of public companies in the United
States, without the prior written consent of SPE and USI. All committees of the
Board will report to and be accountable to the Board. The Board shall establish,
in cooperation with the Chief Executive Officer of the Company, a schedule for
Board review or action, as appropriate, with respect to matters which shall
typically come before the Board, including, but not limited to (i) annual and
multi-year business plans (including capital expenditures and operating
budgets), (ii) major collaborative arrangements with third parties not in the
ordinary and normal course of business as theretofore conducted and (iii)
appointments of officers.
SECTION 2.3 Committees. Except for the Nominating Committee and except for
an audit committee and compensation committee performing functions comparable to
those customarily performed by audit committees and compensation committees of
boards of directors of public companies in the United States, the Company shall
cause the Board not to establish any committees without the prior written
consent of SPE and USI. Except for the Nominating Committee, the members of
which shall be determined in accordance with Section 2. 1 (i) above, the Company
shall cause each committee of the Board to, subject to any requirements under
the Exchange Act or applicable to securities, or the issuance of securities,
traded on the principal United States exchange or market on which the Common
Stock shall be listed or trade, include (x) at the request of SPE, a number of
SPE Directors (rounded to the nearest whole number, but in no event less than
one such SPE Director) equivalent to the proportion of SPE Directors then
serving on the whole Board multiplied by the total number of members comprising
such committee and (y) at the request of USI, a number of USI Directors (rounded
to the nearest whole number, but in no event less than one such USI Director)
equivalent to the proportion of USI Directors then serving on the whole Board
multiplied by the total number of members comprising such committee. Subject to
the rights of SPE and USI pursuant to clause (xi) of Section 3.1, the Company
shall cause matters relating, to the hiring, termination or compensation of
executive officers of the Company (including any entering into, amendment,
termination or renewal (including option renewals) of any agreement with an
executive officer of the Company) to be approved by the compensation committee
of the Board. The Company shall not permit any Management Director to serve on
the audit or compensation committee of the Board. Subject to the foregoing, the
Board shall have the power at any time to fill vacancies in, to change the
membership of or to discharge any committee.
SECTION 2.4 Voting on Certain Matters. (a) In connection with any vote or
action by written consent of the Board relating to a Merger, Dissolution or
Certificate Amendment or the amendment or repeal of any provision of, or the
addition of any provision to, the Bylaws (a "Bylaw Amendment"), each Stockholder
agrees to use its best efforts to cause the Director(s) designated by such
Stockholder, to vote against (and not consent to) such Merger, Dissolution,
Certificate Amendment or Bylaw Amendment at
Page 42 of 78
<PAGE>
the request of SPE or USI, provided, that at the time SPE or USI delivers such
request its Applicable Percentage exceeds the Minimum Percentage.
(b) In connection with any vote or action by written consent of the
stockholders of the Company relating to a Merger, Dissolution, Certificate
Amendment or Bylaw Amendment, each Stockholder agrees (and agrees to cause each
of its Affiliates, if applicable), with respect to any Voting Shares
beneficially owned by it, to vote against (and not consent to) such Merger,
Dissolution, Certificate Amendment or Bylaw Amendment at the request of SPE or
USI (which, in the case of a vote at a meeting of stockholders, shall be
delivered to such Stockholder no later than fifteen Business Days prior to the
applicable meeting), provided, that at the time SPE or USI delivers such request
its Applicable Percentage exceeds the Minimum Percentage.
SECTION 2.5 Irrevocable Proxy. (a) At least ten Business Days prior to any
meeting of stockholders (or three Business Days following receipt of proxy
solicitation materials from the Company, if later), each Stockholder agrees to
deliver a duly executed irrevocable proxy to the Company (and a copy of such
proxy to each other Stockholder by such day) specifying how such Stockholder
intends to vote as to each matter scheduled to be brought before the meeting.
Such proxy shall appoint the Chief Executive Officer of the Company and
Secretary of the Company as such Stockholder's true and lawful proxies and
attorneys-in-fact as to the matters to be voted at the meeting, shall state that
it is irrevocable and shall be voted in accordance with the provisions of this
Agreement. Such proxy shall also state that it is not effective until the date
of the applicable meeting of stockholders and that its effectiveness is
contingent upon the Company not having received, prior to the third Business Day
before the meeting, a notification from any other Stockholder asserting such
other Stockholder's good faith belief that such proxy does not comply with the
provisions of this Agreement.
(b) In connection with any proposed action by written consent of the
stockholders , each Stockholder agrees that it shall execute and deliver its
written consent to the Company (with simultaneous delivery of a copy thereof to
each other Stockholder). Such consent shall state that it is not effective until
a specified date (which date shall be at least ten Business Days following
delivery to the Company), and that its effectiveness is contingent upon the
Company not having received prior to the third Business Day before such
specified date a notification from any other Stockholder asserting such other
Stockholder's good faith belief that such consent does not comply with the
provisions of this Agreement. Any written consent delivered by any Stockholder
shall be made in accordance with the terms of this Agreement.
(c) If any Stockholder shall fail to deliver a proxy to the Company and the
other Stockholders by the date described in Section 2.5(a) or a consent to the
Company and the other Stockholders by the date described in Section 2.5(b) or if
such proxy (or consent) shall not comply with the provisions of this Agreement,
or shall be voted in a manner that is contrary to this Agreement, the
irrevocable proxies set forth in Section 2.5(d) below shall thereupon be
irrevocably activated with respect to the matters to be brought before the
meeting, or which are subject to the consent, as the case may be.
(d) In order to secure each Stockholder's obligation to vote (or to act or
not act by written consent with respect to) all Voting Shares beneficially owned
by it in accordance with the provisions of this Article II and Sections 3.2 and
8.11, each Stockholder hereby appoints each other Stockholder as its true and
lawful proxy and attorney-in-fact, with full power of substitution, to vote (or
to act or not act by written consent with respect to) all of the Voting Shares
beneficially owned by it in accordance with the terms of this Agreement and to
take all such other actions as are necessary to enforce the rights of such other
Stockholders under this Article II and Sections 3.2 and 8.11 in the event the
Stockholder fails to comply with any provision of this Agreement granting such
other Stockholder rights under this Article II and Sections 3.2 and 8.11. The
proxies and powers granted by each Stockholder pursuant to this Section 2.5 are
irrevocable and are coupled with an interest and are given to secure the
performance of the Stockholders' obligations under this Article II and Sections
3.2 and 8.11. Such proxies and powers shall survive the bankruptcy, insolvency,
dissolution or liquidation of a Stockholder. Notwithstanding the foregoing, upon
termination of the rights and obligations of a Stockholder pursuant to Section
8.2 any proxy granted by such Stockholder or granted to such Stockholder
pursuant to this Section 2.5 shall terminate.
Page 43 of 78
<PAGE>
SECTION 2.6 Certain Restrictions. Without the prior written consent of SPE
and USI, each Stockholder agrees not to, and to cause each of its Affiliates not
to, directly or indirectly, alone or in concert with others:
(a) seek election to, seek to place a representative on, or seek the
removal (other than for cause) of any member of, the Board, except pursuant to
Section 2.1;
(b) deposit any Common Shares in a voting trust or subject any Common
Shares to any arrangement or agreement with respect to the voting of such Common
Shares (other than this Agreement or a voting trust, arrangement or agreement
solely among members of the Claridge Group);
(c) engage in any "solicitation" (within the meaning of Rule l4a-1 under
the Exchange Act) of proxies or consents (whether or not relating to the
election or removal of directors) with respect to the Company, or become a
"participant" in any "election contest" (within the meaning of Rule 14a-11 under
the Exchange Act) or, except as contemplated by this Agreement, execute any
written consent in lieu of a meeting of the holders of any class of Common
Shares, provided that the foregoing shall not prohibit any such action (i) in
response to a solicitation conducted by any Person that is neither a Stockholder
nor an Affiliate thereof or (ii) to facilitate a tender offer or exchange offer
by such Stockholder in response to a bona fide tender or exchange offer to
acquire more than 20% of the Voting Shares made by any Person other than such
Stockholder or any Affiliate thereof, in each case so long as such Stockholder
otherwise remains in compliance with its obligations under this Agreement in all
material respects; or
(d) form, join or in any way participate in or assist in the formation of a
Group with respect to any Common Shares, other than any such Group consisting
exclusively of Stockholders, any of their Affiliates or Permitted Transferees.
SECTION 2.7 Cooperation. Each Stockholder shall vote (or act or not act by
written consent with respect to) all of its Voting Shares and shall take all
other necessary or desirable actions within its control (including attending all
meetings in person or by proxy for purposes of obtaining a quorum, executing all
written consents in lieu of meetings and voting to remove members of the Board,
as applicable), and the Company shall take all necessary and desirable actions
within its control (including calling special Board and stockholder meetings, as
applicable), to effectuate the provisions of this Article II.
ARTICLE III
CONSENT RIGHTS
SECTION 3.1 Consent for Certain Actions. (a) The Company shall not, and
shall cause its Subsidiaries not to, directly or indirectly, take any of the
following actions without the prior written consent of (i) SPE, if its
Applicable Percentage equals or exceeds the Minimum Percentage, and (ii) USI, if
its Applicable Percentage equals or exceeds the Minimum Percentage:
(i) in the case of the Company or any Subsidiary of the Company that
is a "significant subsidiary" as defined in Rule 405 under the Securities
Act, voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code as now constituted or
hereafter amended, or any other federal, state or foreign bankruptcy,
insolvency or similar law;
(ii) merge or consolidate with, purchase or otherwise acquire any
other Person (the "Target") or all or substantially all of the business or
any assets of another Person in one or a series of related transactions if
(x) the book value of the assets of the Target (in the case of an
acquisition of a Target) or of the business and/or assets to be acquired as
reflected on the books of the seller of such business or assets, as the
case may be, as of the end of such Person's most recently ended fiscal
quarter preceding the earlier of the date the Company or a Subsidiary
thereof enters into definitive agreements in respect of such transaction or
publicly announces such transaction (the "Determination Date") (based on a
Determination of the Independent Directors) would exceed 20%
Page 44 of 78
<PAGE>
of the book value of the Company's total assets as of the end of the
Company's most recently ended fiscal quarter preceding the Determination
Date or (y) the Fair Market Value (based on a Determination of the
Independent Directors) of the consideration paid or payable for the Target,
the business and/or assets to be acquired as of the Determination Date
(including, with respect to any asset acquisition, the value of any Debt
assumed or to be assumed in such transaction) would exceed 20% of the
Company's Market Capitalization as of the Determination Date or (z) EBITDA
of the Target and/or of the business and/or the Cash Flow of the assets to
be acquired as reflected on the books of the Target and/or such seller, as
the case may be, for its last four fiscal quarters preceding the
Determination Date exceeds 20% of the Company's EBITDA for the Company's
last four fiscal quarters preceding the Determination Date;
(iii) sell, lease, transfer or otherwise dispose of (including by
merger, dividend or other distribution or other transaction involving one
or more stockholders of the Company, formation of a joint venture or
otherwise) any other Person, business or assets in one or a series of
related transactions if (x) the book value of such Person, business and/or
assets exceeds 15% of the book value of the Company's total assets as of
the end of the Company's most recent fiscal quarter preceding the
Determination Date or (y) the Fair Market Value (based on a Determination
of the Independent Directors) of the consideration received or receivable
for such Person, the business and/or assets (including, with respect to any
asset acquisition, the value of any Debt assumed or to be assumed in such
transaction) exceeds 15% of the Company's Market Capitalization as of the
Determination Date or (z) the EBITDA of such Person and/or business and/or
the Cash Flow of such assets for the Company's last four fiscal quarters
preceding the Determination Date exceeds 15% of the Company's EBITDA for
such four fiscal quarters;
(iv) enter into, commence or engage in any business other than the
exhibition of films (including as a result of an acquisition or pursuant to
a joint venture) except as otherwise provided for in the Five-Year Plan and
except for matters customarily related to the exhibition of films in
respect of which the Company and its Subsidiaries do not expend more than
an aggregate of $5 million of cash during any calendar year;
(v) enter into any contract with or otherwise engage in or become
obligated to engage in any transaction or series of related transactions
with SPE or USI or any of their respective Affiliates involving more than
$1 million per calendar year; provided, however, that (A) all such
contracts and transactions (whether or not exceeding the $1 million
limitation) shall be on an arms' length basis and (B) the $1 million
limitation shall not apply to transactions that occur in the ordinary
course of the Company's business, including film booking arrangements;
(vi) increase or decrease the number of Directors that comprise the
entire Board or that constitute a quorum for purposes of convening a
meeting of the Board;
(vii) issue or sell (including by merger or otherwise) any Voting
Shares or Voting Share Equivalents (other than pursuant to the Equity
Offering or upon conversion of the Non-Voting Common Stock) that would,
upon closing of such issuance or sale (A) together with the aggregate
amount of all such issuances or sales during the 12-month period preceding
the proposed date of issuance or sale, increase the number of Voting Shares
by more than 10% of the average number of Voting Shares outstanding as of
the last day of each of the 12 full calendar months preceding the proposed
date of issuance or sale or (B) together with the aggregate amount of all
such issuances or sales during the 24-month period preceding the proposed
date of issuance or sale, increase the number of Voting Shares by more than
15% of the average number of Voting Shares outstanding as of the last day
of each of the 24 full calendar months preceding the proposed date of
issuance or sale; provided, (1) in determining whether SPE or USI shall
have an Article III Consent Right in respect of issuances or sales
described in clauses (A) or (B), issuances or sales pursuant to the Equity
Offering shall be disregarded in calculating the aggregate amount of
issuances or sales during the applicable period (but shall not be
disregarded in calculating the outstanding Voting Shares as of any date)
and (2) the issuance or sale of Voting Shares upon the exercise, conversion
or exchange of Voting Share Equivalents shall not be an issuance or sale
that is subject to this clause (vii) but
Page 45 of 78
<PAGE>
the issuance or sale of Voting Share Equivalents shall be subject to this
clause (vii) in accordance with Section 1.4;
(viii) pay, declare or set aside any sums for the payment of any cash
dividends on, or make any other cash distributions on (including by merger
or otherwise), any shares of Capital Stock, or any warrants, options,
rights or securities convertible into, exchangeable or exercisable for,
Capital Stock (excluding any such payment or distribution made to the
Company or any of its Subsidiaries), if the amount thereof, together with
the aggregate amount of any other items referred in this clause (viii) and
clause (ix) below, during the prior 12 months, exceeds 5% of the Company's
Market Capitalization at the time of such action, provided that the payment
of any such dividend or distribution shall be permitted to be made within
60 days of its declaration if such declaration was not subject to an
Article III Consent Right;
(ix) redeem, purchase or otherwise acquire for cash (including by
merger or otherwise), any shares of Capital Stock or any warrants, options
and rights or securities convertible into, exchangeable or exercisable for,
Capital Stock, or redeem or purchase for cash or make any cash payments
with respect to any stock appreciation rights or phantom stock plans
(excluding any such redemption, purchase or payment from the Company or any
of its Subsidiaries), if the amount thereof, together with the aggregate
amount of any other items referred to in clause (viii) above and this
clause (ix), during the prior 12 months, exceed 5% of the greater of (x)
the Company's Market Capitalization at the time of such payment and (y) the
Company's Market Capitalization at the time it commits to make such
redemption, purchase or payment;
(x) incur, assume or otherwise become obligated with respect to, any
Debt (x) if immediately after giving effect to the incurrence of such Debt
and the receipt and application of the proceeds thereof, the ratio of the
Company's consolidated Debt to EBITDA for the four full fiscal quarters
next preceding the incurrence of such Debt, calculated on a pro forma basis
as if such Debt had been incurred and the proceeds thereof had been
received and so applied at the beginning of the four full fiscal quarters,
would be greater than the Maximum Debt Ratio or (y) in excess of
$100,000,000 in aggregate principal amount in one or a series of related
transactions, provided that this clause (y) shall not apply to (1) Debt
owed by the Company to any of its Subsidiaries or Debt owed by a Subsidiary
of the Company to the Company or to another Subsidiary of the Company, (2)
Debt outstanding immediately following the Closing and (3) Debt incurred to
renew, extend, refinance or refund any outstanding Debt permitted in
clauses (1) or (2) and any Debt incurred in connection with subsequent
refinancings of such Debt (collectively, "Permitted Debt"), provided,
further, that any Debt described in clause (3) shall not be Permitted Debt
if the amount of such Debt shall exceed the amount of the outstanding Debt
that is being renewed, extended, refinanced or refunded.
(xi) hire, or renew the employment contract (including option
renewals) of, either the Chief Executive Officer of the Company or the
second most senior executive officer of the Company;
(xii) enter into any arrangement (other than this Agreement or
pursuant to this Agreement) with any holder of Voting Shares in such
holder's capacity as a holder of Voting Shares which subjects actions taken
by the Company or any Subsidiary to the prior approval of any Person, or
issue or sell any series or class of Capital Stock of the Company having
either (x) more than one vote per share or (y) a class vote on any matter,
except to the extent such class vote is required by the DGCL or to the
extent that the holders of any series of preferred stock may have the
right, voting separately as a class, to elect a number of Directors upon
the occurrence of a default in payment of dividend or redemption price;
(xiii) adopt any stockholder rights plan, or any other plan or
arrangement that could reasonably be expected to disadvantage any
stockholder on the basis of the size of its shareholding, such that any
holder of Common Shares or any of its Affiliates would be adversely
affected; or
(xiv) adopt a Bylaw Amendment by action of the Board.
Page 46 of 78
<PAGE>
Notwithstanding anything to the contrary contained in this Section 3.1(a),
neither SPE nor USI shall have an Article III Consent Right to the extent such
action requires the approval of holders of Common Stock under the CDGCL or the
Certificate.
(b) If any of the following shall occur and be continuing:
(i) the Company's actual EBITDA in each of the two most recently ended
fiscal years is less than 80% of Targeted EBITDA for such year.
(ii) at the end of the most recent fiscal quarter, the Company's ratio
of consolidated Debt as reported in its financial statements to EBITDA for
the last four fiscal quarters exceeds the Maximum Debt Ratio, or
(iii) at the end of the most recent fiscal quarter, the Company's
EBITDA for the last four fiscal quarters is less than 8.5% of the Company's
consolidated total assets as reported in its financial statements
(excluding intangible assets and construction work-in-process);
the Company (x) shall submit to SPE, if its Applicable Percentage equals or
exceeds the Minimum Percentage, and USI, if its Applicable Percentage equals or
exceeds the Minimum Percentage, for approval a new plan for the Company covering
a new five-year term, commencing with the first day of the next fiscal year of
the Company (the "New Five-Year Plan") which shall replace the Five-Year Plan
and which shall be consistent in form and contain a corresponding level of
detail with the Initial Five-Year Plan and (y) pending the effectiveness of the
New Five-Year Plan, shall submit to SPE, if its Applicable Percentage equals or
exceeds the Minimum Percentage, and USI, if its Applicable Percentage equals or
exceeds the Minimum Percentage, for approval no later than the last Business Day
of the month immediately preceding the end of the Company's fiscal year, annual
operating and capital budgets for the next fiscal year. The Company and any such
Stockholder agree to cooperate in good faith to adopt the New Five-Year Plan and
such budgets as promptly as practicable.
(c) If any of the conditions specified in paragraph (b)(i) through (iii)
above shall have occurred, then until the Company's actual EBITDA for each of
two consecutive fiscal years shall equal or exceed Targeted EBITDA for each of
such years as reflected in the New Five-Year Plan, the Company shall not, and
shall cause its Subsidiaries not to, directly or indirectly, take any of the
following actions without the prior written consent of SPE (so long as its
Applicable Percentage equals or exceeds the Minimum Percentage) and USI (so long
as its Applicable Percentage equals or exceeds the Minimum Percentage): (w)
make, or agree to make, any capital expenditures not specifically identified in
the New Five-Year Plan in excess of $5,000,000 per expenditure or series of
related expenditures or 10,000,000 in the aggregate during any 12-month period,
(x) incur an aggregate amount of Debt in excess of $25,000,000, excluding Debt
specifically identified in the New Five-Year Plan and Permitted Debt, (y) create
or incur any lien on the assets of the Company or any of its Subsidiaries to
secure unsecured Debt of the Company or any of its Subsidiaries and (z) except
for issuances or sales of Excluded Securities, authorize the issuance of, or
issue or sell, any additional shares of, or any new series or class of, Capital
Stock of the Company.
(d) So long as any Stockholder shall have an Article III Consent Right, at
least six months prior to the expiration of the period covered by any Five-Year
Plan, the Company shall in good faith prepare a Five-Year Plan for the
subsequent five year period, which shall be subject to prior approval by the
Board and which shall be consistent in form and contain a corresponding level of
detail with the Initial Five-Year Plan. The provisions of Sections 3. 1 (a), (b)
and (c) shall be applicable to all Five-Year Plans or New Five-Year Plans,
whether adopted prior to, on or after the five-year anniversary of the Closing.
(e) Any action or attempted action of the Company or any Subsidiary of the
Company in violation of any provision of Section 3.1 shall be void.
(f) The Company agrees to notify the Trust when practicable of any proposed
(A) corporate reorganization, (B) share capital reorganization, (C) transaction
involving the exchange of Capital Stock of the Company for other equity of the
Company or any other corporation or (D) merger with another corporation (any one
of such proposals, a "Reorganization Proposal") which would, in the opinion of
counsel for the Company, constitute a disposition of Common Stock pursuant to
the Income Tax Act (Canada) or any successor legislation, for Canadian resident
holders thereof in respect
Page 47 of 78
<PAGE>
of which any resulting gain would be taxable pursuant to such Act. In the event
of any such Reorganization Proposal, the Company shall assist the Claridge
Group, at the request of the Claridge Group and at its expense, with an
application for a remission order pursuant to the Financial Administration Act
(Canada), provided that counsel to the Company considers that the Department of
Finance (Canada) is likely to issue a remission order providing fiscal relief to
Canadian resident stockholders of the Company.
(g) In connection with the grant of any consent relating to a matter
described in clauses (ii) or (iii) of Section 3.1(a), the Company and each
Stockholder who then has an Article III Consent Right agree to negotiate in good
faith appropriate adjustments to Targeted EBITDA. If after 21 days following the
grant of such consent, the Company and the Stockholders have not agreed upon
appropriate adjustments, then each of SPE and USI shall have the opportunity to
submit its reasonable estimate of the appropriate adjustments to Targeted EBITDA
to any "Big Six" accounting firm mutually selected by SPE and USI that is not
the principal outside accounting firm for SPE, CO or USI within the 10 days (the
"Submission Period") following the end of such 21-day period. If the parties
cannot agree upon such an accounting firm, the principal outside accounting
firms of SPE and USI shall mutually select another "Big Six" accounting firm to
act hereunder.
Along with their proposed adjustments to Targeted EBITDA, the Company and
each Stockholder who then has an Article III Consent Right may submit to the
accounting firm such written memoranda, arguments, briefs and other evidence in
support of their respective adjustments as they see fit, copies of which shall
also be provided to the other parties hereto. Within 10 days following the
expiration of the Submission Period, the accounting firm shall make a
determination as to which of the adjustments submitted by the parties is the
most reasonable estimate of the impact on the Company's EBITDA of the matter
which was subject to consent (the adjustment so chosen, the "Final Adjustment").
The accounting firm shall be limited to selecting one of the adjustments
submitted by the parties as the Final Adjustment and shall have no authority to
alter in any way any adjustment so submitted.
The Final Adjustment shall be deemed to be approved by all parties to this
Agreement for all purposes of this Agreement. If the accounting firm shall
select the adjustment submitted by USI, SPE shall bear all fees and expenses of
the accounting firm, including the fees and expenses of any experts hired by the
accounting firm to assist it in rendering a decision hereunder. If the
accounting firm shall select the adjustment submitted by SPE, USI shall bear all
such fees and expenses.
Following the determination of the Final Adjustment, the Company shall
cause the Final Adjustment to be submitted to the Board for its approval. The
Company shall use its best efforts to cause the Final Adjustment to be adopted
by the Board, and SPE and USI covenant and agree with each other to use their
respective best efforts to cause the Company to fulfill the Company's
obligations under this Section 3.1(g).
SECTION 3.2 Certain Certificate Provisions. So long as the Applicable
Percentage of SPE or USI equals or exceeds the Minimum Percentage, (i) the
Company agrees that the Certificate will provide that effecting a Merger or
Dissolution or adopting a Certificate Amendment or adopting a Bylaw Amendment by
action of the stockholders of the Company shall require the affirmative vote or
written consent of the holders of at least 80% of the outstanding Common Stock,
provided that in the case of any of the foregoing matters (other than adopting a
Bylaw Amendment by action of the stockholders) such 80% stockholder approval
requirement shall not be applicable if 14 members of the Board shall have
approved such matter, provided, further, that in the case of any Merger that is
approved by 14 members of the Board, such Merger shall require the affirmative
vote or written consent of the holders of at least 66 2/3% of the outstanding
Common Stock and (ii) no Stockholder shall vote in favor of, consent in writing
to, or take any other action to effect an amendment or repeal of such provisions
of the Certificate.
SECTION 3.3 Arbitration. (a) At least seven Business Days prior to the
Company or any Subsidiary thereof (i) merging or consolidating with, or
purchasing or otherwise acquiring, any other entity or assets, except in the
ordinary course of business consistent with past practice, (ii) selling,
leasing, transferring or otherwise disposing of any assets, except in the
ordinary course of business consistent with past practice, (iii) issuing or
selling any Voting Shares or new series or class of Capital Stock (other than
Excluded Securities), (iv) incurring or assuming any Debt, other than
incurrences of Debt in the ordinary course of business consistent with past
practice that could not reasonably be expected to trigger an Article III Consent
Right, or (v)
Page 48 of 78
<PAGE>
taking any action described in clauses (i), (iv), (v), (vi), (viii), (ix), (xi),
(xii), (xiii) or (xiv) of Section 3.1(a), the Company shall provide SPE and USI
with a notice that describes the material terms of such proposed action and
indicates whether the Company reasonably believes in good faith that any Article
III Consent Right will be triggered by such action. The Company shall also
provide such Stockholders with all information reasonably relevant and necessary
to determine whether an Article III Consent Right will be triggered by such
action. The foregoing notification requirement will be satisfied if the Company
provides the requisite information to any SPE Director, in the case of SPE, and
any USI Director, in the case of USI. If either SPE or USI disagrees with the
Company's conclusion and reasonably believes in good faith that such Stockholder
has an Article III Consent Right in connection with such action, such
Stockholder shall provide the Company with written notice of its disagreement by
the close of business on the sixth Business Day following receipt of the
Company's notice.
(b) In addition, if either SPE or USI reasonably believes in good faith
that the Company intends to take any action in respect of which the Company has
not delivered a notice described in Section 3.3(a) and that such Stockholder has
an Article III Consent Right in connection with such action, such Stockholder
may provide the Company with written notice of such belief. By the close of
business on the sixth Business Day following receipt of such Stockholder's
notice and prior to taking any such action, the Company shall provide such
Stockholder with a notice that indicates whether the Company reasonably believes
in good faith that such action would trigger an Article III Consent Right and
with all information reasonably relevant and necessary to determine whether an
Article III Consent Right will be triggered by such action.
(c) If within five Business Days following the Company's receipt of a
notice described in the last sentence of Section 3.3(a) or a Stockholder's
receipt of a notice described in the second sentence of Section 3.3(b), as the
case may be, the Company and such Stockholder cannot reach an agreement as to
whether an Article III Consent Right is triggered in connection with the
proposed action, the issue shall be submitted for arbitration by the Company and
the objecting Stockholder(s) in accordance with the Arbitration Agreement, a
form of which is attached as Exhibit B (the "Arbitration Agreement"). The scope
of the dispute to be resolved by the arbitrator thereunder (the "Arbitrator") in
connection with any such dispute is limited to whether, under the terms of this
Agreement, an Article III Consent Right is triggered in connection with the
proposed action.
(d) Prior to the Closing Date, SPE, USI, the members of the Claridge Group
and the Company agree to cooperate in good faith in selecting the Arbitrator,
who shall be reasonably acceptable to each such party, and agree to execute and
deliver the Arbitration Agreement at the Closing. If the parties cannot so
select the Arbitrator by such date, SPE, USI and the Independent Directors shall
each designate an individual who qualifies to serve as the Arbitrator under the
Arbitrator Agreement and the three such individuals shall jointly select to
Arbitrator.
SECTION 3.4 Approval of Disinterested Directors. (a) If the Applicable
Percentage of SPE equals or exceeds the Minimum Percentage, neither SPE nor any
of its Affiliates shall enter into any contract with the Company or any
Subsidiary thereof, nor shall the Company otherwise engage in or become
obligated to engage in any transaction or series of related transactions with
SPE and/or its Affiliates, in either case involving more than $1 million 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, provided,
however, that the foregoing shall not apply to contracts or transactions that
occur in the ordinary course of the Company's business, including film booking
arrangements, or to any Transactions contemplated by the Documents.
(b) If the Applicable Percentage of USI equals or exceeds the Minimum
Percentage, neither USI nor any of its Affiliates shall enter into any contract
with the Company or any Subsidiary thereof, nor shall the Company otherwise
engage in or become obligated to engage in any transaction or series of related
transactions with USI and/or its Affiliates, in either case involving more than
$1 million 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, provided, however, that the foregoing shall not apply to contracts or
transactions that occur in the ordinary course of the Company's business,
including film booking arrangements, or to any Transactions contemplated by the
Documents.
Page 49 of 78
<PAGE>
SECTION 3.5 Additional Shares. Notwithstanding anything to the contrary in
Section 3. 1, without the prior written consent of USI, the Company agrees that
it shall not issue or sell any Common Shares or any Voting Share Equivalents
(other than Excluded Securities) at or after the Closing (other than pursuant to
the Amalgamation or the USI Subscription Agreement) unless USI or its designee
shall be issued Additional Shares (as defined in the USI Subscription Agreement)
to the extent required by, and in accordance with, the terms of Section 4.6 of
such agreement.
ARTICLE IV
TRANSFER OF COMMON SHARES
SECTION 4.1 Restrictions on Transfer during Six-Months Following Closing.
Without the consent of a majority of the Independent Directors, during the
period commencing on the Closing and ending on the six-month anniversary
thereof, each of SPE and USI agrees not to, and to cause its respective
Permitted Transferees not to, Transfer in privately-negotiated transactions more
than 20% of such Stockholder's Initial Interest, provided, that the foregoing
shall not be applicable to Transfers (i) between such Stockholder and its
Permitted Transferees, (ii) to another Stockholder or its Permitted Transferees,
(iii) pursuant to a merger or consolidation in which the Company 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.
SECTION 4.2. Tag-Along for All Stockholders. (a) Subject to prior
compliance with Section 4.4, neither SPE nor USI nor any of their respective
Affiliates shall be permitted to Transfer, individually or collectively, an
aggregate of more than 50% of the then outstanding Common 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) (a "Significant Sale") unless each
stockholder of the Company has the right to participate in the Significant Sale
on the same basis as the proposed transferor(s) (all such proposed transferors,
collectively the "Significant Sale Initiator"). If the Significant Sale
Initiator desires to effect a Significant Sale, it shall give not less than 20
days prior written notice of such intended Transfer to each Stockholder and the
Company. Such notice (the "Significant Sale Notice") shall set forth the terms
and conditions of such proposed Significant Sale, including the name of the
proposed transferee, the number of shares of Common Stock (the "Significant Sale
Shares") proposed to be Transferred by the Significant Sale Initiator
(specifying the number of shares of Common Stock for each proposed transferor,
if more than one), the purchase price per Share proposed to be paid therefor and
the payment terms and other material terms of the proposed Transfer.
(a) Within 10 days after delivery of the Significant Sale Notice to the
Company, the Independent Directors shall review the terms of the proposed
Significant Sale and, subject to compliance with applicable law and stock
exchange requirements, establish procedures to ensure that each stockholder of
the Company (including each Stockholder which is not a Significant Sale
Initiator) shall have the opportunity and right to sell to the proposed
transferee (upon the same terms and conditions as the Significant Sale
Initiator) up to that number of Common Shares owned of record by such
stockholder as shall equal the product of (x) a fraction, the numerator of which
is the number of Significant Sale Shares and the denominator of which is the
aggregate number of Common Shares beneficially owned as of the date of the
Significant Sale Notice by the Significant Sale Initiator and its Permitted
Transferees (provided that if there shall be more than one proposed transferor,
the denominator shall be the aggregate number of Common Shares beneficially
owned as of such date by all the proposed transferors), multiplied by (y) the
number of Common Shares owned of record by such stockholder as of the date of
the Significant Sale Notice. The number of Common Shares that a stockholder,
including the Significant Sale Initiator, may sell pursuant to this Section 4.2
shall be determined by multiplying the maximum number of Common Shares that the
proposed transferee of the Significant Sale Shares is willing to purchase on the
terms set forth in the Significant Sale Notice by a fraction, the numerator of
which is the number of Common Shares that such stockholder proposes to sell
hereunder and the denominator of which is the aggregate number of Common Shares
that all stockholders exercising rights under this Section 4.2, including the
Significant Sale Initiator, propose to sell hereunder.
(b) No Transfer or Transfers constituting a Significant Sale shall be
effected absent compliance with this Section 4.2.
Page 50 of 78
<PAGE>
SECTION 4.3 Tag-Along for USI and Claridge Group. (a) Subject to prior
compliance with Section 4.4, if SPE or any of its Affiliates shall desire to
Transfer an aggregate of more than 50% of SPE's Initial Interest to any Person
(including any Group), other than an SPE Permitted Transferee, in one or a
series of related transactions (a "Tag-Along Sale"), SPE shall give not less
than 20 days prior written notice of such intended Transfer to USI and the
Claridge Group (each, a "Tag-Along Offeree"). Such notice (the "Tag-Along
Notice") shall set forth the terms and conditions of such proposed Transfer,
including the name of the proposed transferee, the number of Common Shares
proposed to the Transferred (the "Tag-Along Shares"), the purchase price per
Share proposed to be paid therefor and the payment terms and type of Transfer to
be effectuated.
(b) Within 10 days after delivery of the Tag-Along Notice by SPE to the
Tag-Along Offerees, each Tag Along Offeree shall, by written notice to SPE, have
the opportunity and fight to sell to the transferee in such proposed Transfer
(upon the same terms and conditions as SPE) up to that number of Common Shares
beneficially owned by such Tag-Along Offeree as shall equal the product of (x) a
fraction, the numerator of which is the number of Tag-Along Shares and the
denominator of which is the aggregate number of Common Shares beneficially owned
as of the date of the Tag-Along Notice by SPE and its Affiliates, multiplied by
(y) the number of Common Shares beneficially owned by such Tag-Along Offeree as
of the date of the Tag-Along Notice, provided, that in respect of any proposed
Transfer to USI or a USI Permitted Transferee, for purposes of this clause (y),
the number of Common Shares beneficially owned by the Claridge Group shall be
reduced by the number of Common Shares acquired (net of Transfers) by the
Claridge Group after the Closing (other than from the Company or other members
of the Claridge Group). The number of Common Shares that a Stockholder,
including SPE, may sell pursuant to this Section 4.3 shall be determined by
multiplying the maximum number of Common Shares that the proposed transferee of
the Tag-Along Shares is willing to purchase on the terms set forth in the
Tag-Along Notice by a fraction, the numerator of which is the number of Common
Shares that such Stockholder proposes to sell hereunder (subject to the maximum
amount for each Stockholder calculated pursuant to the preceding sentence) and
the denominator of which is the aggregate number of Common Shares that all
Stockholders exercising rights under this Section 4.3, including SPE, propose to
sell hereunder.
(c) At the closing of any proposed Transfer in respect of which a Tag-Along
Notice has been delivered, each Stockholder electing to sell Common Shares shall
deliver, free and clear of all liens, to the proposed transferee certificates
evidencing the Common Shares to be sold thereto duly endorsed with Transfer
powers and shall receive in exchange therefore the consideration to be paid by
the proposed transferee in respect of such Common Shares as described in the
Tag-Along Notice.
(d) No Transfer or Transfers constituting a Tag-Along Sale shall be
effected absent compliance with this Section 4.3.
(e) This Section 4.3 shall not be applicable to any Transfer which
constitutes a Significant Sale with respect to which each stockholder of the
Company has the right to participate pursuant to Section 4.2.
SECTION 4.4. Right of First Refusal. (a) The following Transfers of Voting
Shares by SPE or USI or their respective Affiliates (the proposed transferor,
the "Transferring Party") will be subject to the right of first refusal
provisions of this Section 4.4:
(i) any Transfer in one or a series of related privately-negotiated
transactions or a public offering if (A) 5% or more of the then outstanding
Voting Shares are subject to the Transfer, (B) 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
(B) shall not be applicable if the Transferring Party has taken all
reasonable steps to assure that such limitation shall have been satisfied)
or (C) in the case of any Transfer by SPE or any of its Affiliates, SPE's
Applicable Percentage exceeds 25%;
(ii) any Transfer pursuant to a bona fide third party tender offer or
exchange offer;
Page 51 of 78
<PAGE>
(iii) any Transfer to the Company or to a Subsidiary of the Company
pursuant to a self-tender offer or otherwise; and
(iv) any Transfer in a Market Sale.
Notwithstanding the foregoing and subject to compliance with Section 4.5(a), the
provisions of this Section 4.4 shall not apply to any Transfer between SPE or
USI and any of their respective Permitted Transferees.
(b) Prior to effecting any Transfer described in Section 4.4(a), the
Transferring Party shall deliver a written notice (the "Offer Notice") to USL if
the Transferring Party is SPE or an Affiliate thereof, or to SPE, if the
Transferring Party is USI or an Affiliate thereof (the recipient of such notice,
the "Other Stockholder"), which Offer Notice shall specify (i) the Person to
whom the Transferring Party proposes to make such Transfer or the proposed
manner of Transfer in the case of a public offering or a Market Sale, (ii) the
number or amount and description of the Voting Shares to be Transferred, (iii)
except in the case of a public offering or a Market Sale, the Offer Price (as
defined below), and (iv) all other material terms and conditions of the proposed
Transfer, including a description of any non-cash consideration sufficiently
detailed to permit valuation thereof, and which Offer Notice shall be
accompanied by any written offer from the prospective transferee to purchase
such Voting Shares, if available and permitted pursuant to the terms thereof.
The Offer Notice shall constitute an irrevocable offer to the Other Stockholder
or its designee, for the period of time described below, to purchase all (but
not less than all) of such Voting Shares upon the same terms specified in the
Offer Notice, subject to Section 4.4(g) and as otherwise set forth in this
Section 4.4. The Other Stockholder may elect to purchase all (but not less than
all) of the Voting Shares at the Offer Price (or, if the Offer Price includes
property other than cash, the equivalent in cash of such property as determined
in accordance with Section 4.4(g)) and upon the other terms and conditions
specified in the Offer Notice.
(c) For purposes of this Section 4.4, "Offer Price" shall be defined to
mean on a per share or other amount of Voting Shares basis (i) in the case of a
third party tender offer or exchange offer, the tender offer or exchange offer
price per Voting Share taking into account any provisions thereof with respect
to proration and any proposed second step or "back-end" transaction, (ii) in the
case of a public offering or a Market Sale, the Current Market Value per Voting
Share as of the date the election notice of the Other Stockholder hereinafter
described is delivered and (iii) in the case of a privately-negotiated
transaction, the proposed sale price per Voting Share.
(d) If the Other Stockholder elects to purchase the offered Voting Shares,
it shall give notice to the Transferring Party within 20 days of its receipt of
the Offer Notice of its election (or in the case of a third party tender offer
or exchange offer, not later than five Business Days prior to the expiration
date of such offer, provided that all conditions to such offer (other than with
respect to the number of Voting Shares tendered) shall have been satisfied or
waived and the Offer Notice shall have been provided at least ten Business Days
prior to the expiration date of such offer), which shall constitute a binding
obligation, subject to standard terms and conditions for a stock purchase
contract between two significant stockholders of an issuer (provided that the
Transferring Party shall not be required to make any representations or
warranties regarding the business, of the Company), to purchase the offered
Voting Shares, which notice shall include the date set for the closing of such
purchase, which date shall be no later than 60 days following the delivery of
such election notice. Notwithstanding the foregoing, such time periods shall not
be deemed to commence with respect to any purported notice that does not comply
in all material respects with the requirements of this Section 4.4(d). The Other
Stockholder may assign its fights to purchase under this Section 4.4 to any
Person (including the Company).
(e) Subject to Section 4.4(f) in the case of a Market Sale, if the Other
Stockholder does not respond to the Offer Notice within the required response
time period or elects not to purchase the offered Voting Shares, the
Transferring Party shall be free to complete the proposed Transfer (to the same
proposed transferee, in the case of privately-negotiated transaction) on terms
no less favorable to the Transferring Party or its Affiliate, as the case may
be, than those set forth in the Offer Notice, the latest of (A) the expiration
of the foregoing required response time periods, or (B) the receipt by the
Transferring Party of the foregoing election notice or, in the case of a public
offering, within 20 days of the declaration by the Commission of the
effectiveness of a registration statement filed with the Commission pursuant to
Page 52 of 78
<PAGE>
this Agreement, and (y) the price at which the Voting Shares are transferred
must be equal to or higher than the Offer Price (except in the case of a public
offering, in which case the price at which the Voting Shares are sold (before
deducting underwriting discounts and commissions) shall be equal to at least 90%
of the Offer Price). Such periods within which such Transfer must be closed
shall be extended to the extent necessary to obtain required governmental
approvals and other required approvals and the Transferring Party and the Other
Stockholder shall use their respective best efforts to obtain such approvals.
(f) If the Other Stockholder does not respond to the Offer Notice with
respect to a Market Sale within the required response time period or elects not
to purchase the offered Voting Shares, the Transferring Party shall be free to
complete the proposed Market Sale in one or more transactions during the 90-day
period commencing on the latest of (i) the expiration of the required response
time period described in Section 4.4(d) or (ii) receipt by the Transferring
Party of the election notice described in Section 4.4(d), provided that the
price at which each Voting Share is transferred (excluding brokerage
commissions) shall be at least equal to 90% of the Offer Price.
(g) If (i) the consideration specified in the Offer Notice consists of, or
includes, consideration other than cash or a publicly traded security for which
a closing market price is published for each Business Day, or (ii) any property
other than Voting Shares is proposed to be transferred in connection with the
transaction to which the Offer Notice relates, then the price payable by the
Other Stockholder under this Section 4.4 for the Voting Shares being transferred
shall he the Determination of the Independent Directors of the Fair Market Value
of the consideration per share or amount in the case of clause (i) and the
Determination of the Independent Directors of the Fair Market Value of the
consideration per share or amount determined to be properly allocable to the
Voting Shares in the case of clause (ii). Notwithstanding anything to the
contrary contained in this Section 4.4, the time periods applicable to an
election by the Other Stockholder to purchase the offered securities set forth
in Section 4.4(a) shall not be deemed to commence until the Determination of the
Independent Directors under this Section 4.4(g) has been made, provided that, in
the case of a third party tender offer or exchange offer, in no event shall any
such election be permitted later than 24 hours prior to the latest time by which
Voting Shares shall be tendered in order to be accepted pursuant to such offer
or to qualify for any proration applicable to such offer if all conditions to
such offer (other than the number of shares tendered) have been satisfied or
waived. The Company agrees to use its best efforts to cause the Determination of
the Independent Directors under this Section 4.4(g) to be made as promptly as
practicable but in no event later than ten Business Days after the receipt by
the Company of the Offer Notice.
(h) The provisions of this Section 4.4 shall be applicable to any proposed
Transfer of Non-Voting Common Stock to any Person other than an SPE Permitted
Transferee as if the Common Stock that is issuable upon Transfer in accordance
with clause (i) of Section 4(b) of Article IV of the Certificate were being
Transferred.
SECTION 4.5 Transferees. (a) Any Permitted Transferee of a Stockholder
shall be subject to the terms and conditions of this Agreement as if such
Permitted Transferee were SPE (in the case SPE or a Permitted Transferee of SPE
is the transferor), USI (in the case USI or a Permitted Transferee of USI 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). Prior to
the initial acquisition of beneficial ownership of any Voting Shares or
Non-Voting Common Stock by any Permitted Transferee, and as a condition thereto,
each Stockholder agrees (i) to cause its respective Permitted Transferees to
agree in writing with the other parties hereto to be bound by the terms and
conditions of this Agreement to the extent described in the preceding sentence
and (ii) that such Stockholder shall remain directly liable for the performance
by its respective Permitted Transferees of all obligations of such Permitted
Transferees under this Agreement; provided, however, that, unless the Trust
elects otherwise, the foregoing shall not be applicable to any Permitted
Transferee described in clause (iii)(b) of the definition thereof or any spouse
of any such Permitted Transferee so long as such Person has not purchased Voting
Shares for aggregate consideration (excluding brokerage commissions) exceeding
$20,000 (measured at the time of the applicable acquisition) and that such
Voting Shares have been acquired solely in open market purchases; provided,
further, that the Trust shall not permit all Persons described in the preceding
proviso who the Trust has not elected to be subject to clause (i) and (ii) above
to so acquire Voting Shares for aggregate consideration (excluding brokerage
commissions) exceeding $100,000 (measured at the time of the applicable
acquisition). Each of SPE and USI agrees not to cause or permit any of its
respective Permitted Transferees to cease to be directly or indirectly
wholly-owned by such Stockholder so
Page 53 of 78
<PAGE>
long as such Permitted Transferee beneficially owns any Voting Shares or
Non-Voting Common Stock, and if any such Permitted Transferee shall cease to be
so wholly-owned, such Permitted Transferee shall automatically upon the
occurrence of such event cease to be a "Permitted Transferee" for any purpose
under this Agreement. Each Stockholder agrees not to Transfer any Voting Shares
or Non-Voting Common Stock to any Affiliate other than a Permitted Transferee of
such Stockholder.
(b) No Third Party Transferee shall have any rights or obligations under
this Agreement, except:
(i) if such Third Party Transferee (together with its Affiliates)
would beneficially own more than 10% of the outstanding Voting Shares upon
consummation of any Transfer or if such Third Party Transferee (together
with its Affiliates) shall acquire beneficial ownership of more than 3.5%
of the outstanding Voting Shares in any Transfer or series of related
Transfers from members of the Claridge Group and Permitted Transferees
thereof, such Third Party Transferee shall be subject to the terms and
conditions of Article I, Article II (but shall not have the right to
designate any Directors pursuant thereto, except in the circumstances
described in clauses (ii) or (iii) below), Section 4.4 (but only with
respect to the rights and obligations of a "Transferring Party" thereunder,
and such Third Party Transferee shall not have the right to purchase Voting
Shares pursuant thereto or any other rights of an "Other Stockholder"
thereunder), this Section 4.5, Section 4.6 and Articles VI and VIII as if
such Third Party Transferee were SPE (in the case SPE or a Permitted
Transferee of SPE is the transferor), USI (in the case USI or a Permitted
Transferee of USI 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);
(ii) if such Third Party Transferee (together with its Affiliates)
would beneficially own more than 10% of the outstanding Voting Shares upon
consummation of any Transfer from SPE or USI or any of their respective
Permitted Transferees, and if such Third Party Transferee shall have
acquired from SPE or USI (or such Permitted Transferees) all Voting Shares
then beneficially owned by such Stockholder and its Permitted Transferees,
such Third Party Transferee shall have the right to designate Directors
pursuant to Article II if the applicable transferor elects to assign such
right to such Third Party Transferee.
(iii) if in a Transfer or series of related Transfers from any member
of the Claridge Group and Permitted Transferees thereof to any Third Party
Transferee, such Third Party Transferee (together with its Affiliates)
shall acquire beneficial ownership of more than 3.5% of the outstanding
Voting Shares constituting more than 50% of the Initial Interest of the
Claridge Group, such Third Party Transferee shall have the right to
designate Directors pursuant to Section 2.1(b)(i) if (x) the applicable
transferor elects to assign such right to such Third Party Transferee
(which in the event of the grant of an option upon Voting Shares, may be
assigned either upon the grant or the exercise thereof) and (y) SPE and USI
shall have given their prior written consent to the assignment of such
right to the Third Party Transferee (which consent shall not be
unreasonably withheld), provided that (i) upon any such Transfer or series
of related Transfers the Claridge Group shall cease to have a right to
elect Directors pursuant to Section 2.1 in the event that such right is
transferred in accordance with the provisions of this subsection
4.5(b)(iii) and (ii) such Third Party Transferee shall not have the right
to assign such right to any Person (other than a Permitted Transferee
thereof); and
(iv) if such Third Party Transferee (together with its Affiliates)
shall acquire beneficial ownership of more than 3.5% of the outstanding
Voting Shares in any Transfer or series of related Transfers from a
Stockholder and/or its Permitted Transferees, such Third Party Transferee
shall have the right to initiate Demand Registrations pursuant to Section
5.1 and the other rights and obligations of a Holder pursuant to Article V
to the extent the transferor to such Third Party Transferee assigns, in
whole or in part, any such rights and obligations to such Third Party
Transferee (provided that no rights of a Holder under Article V shall be
assigned unless the obligations of a Holder thereunder are also assigned).
(c) Prior to the consummation of a Transfer described in Section 4.5(b) to
the extent rights and obligations are to be assigned, and as a condition
thereto, the applicable Third Party Transferee shall agree in writing with the
other
Page 54 of 78
<PAGE>
parties hereto to be bound by the terms and conditions of this Agreement to the
extent described in Section 4.5(b). To the extent the Third Party Transferee is
not an "ultimate parent entity" (as defined in the HSR Act), the ultimate parent
entity of such Third Party Transferee shall agree in writing to be directly
liable for the performance of the Third Party Transferee to the same extent USI
or SPE would be liable for their respective Permitted Transferees.
SECTION 4.6 Notice of Transfer. To the extent any Stockholder and its
Permitted Transferees shall Transfer any Voting Shares, such Stockholder shall,
within three Business Days following consummation of such Transfer, deliver
notice thereof to the Company and the other Stockholders, provided, however,
that no such notice shall be required to be delivered unless the aggregate
Voting Shares transferred by such Stockholder and its Permitted Transferees
since the date of the last notice delivered by such Stockholder pursuant to this
Section 4.6 or Section 8.4(b) exceeds 1% of the outstanding Voting Shares.
SECTION 4.7 Compliance with Transfer Provisions. Any Transfer or attempted
Transfer of Voting Shares in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee of such Voting Shares as the owner of such Voting
Shares for any purpose.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.1 Demand Registrations. (a) Subject to Section 5.1(d), at any
time and from time to time after the one-year anniversary of the Closing, any
Holder shall have the right to require the Company to file a registration
statement under the Securities Act and/or a prospectus under applicable Canadian
securities laws covering all or any part of their respective Registrable
Securities, by delivering a written request therefor to the Company specifying
the number of Registrable Securities to be included in such registration by such
Holder(s) and the intended method of distribution thereof. All such requests
pursuant to this Section 5.1(a) are referred to herein as "Demand Registration
Requests" and the registrations so requested are referred to herein as "Demand
Registrations" (with respect to any Demand Registration, the Holder making such
demand for registration being referred to as the "Initiating Holder"). As
promptly as practicable, but no later than 15 days after receipt of a Demand
Registration Request, the Company shall give written notice (the "Demand
Exercise Notice") of such Demand Registration Request to all Holders of record
of Registrable Securities.
(b) The Company shall include in a Demand Registration (i) the Registrable
Securities of the Initiating Holder and (ii) the Registrable Securities of any
other Holder (collectively, the "Other Holders ") that shall have made a written
request to the Company for inclusion thereof in such registration (which request
shall specify the maximum number of Registrable Securities intended to be
disposed of by such Holder(s)) within 30 days after the receipt of the Demand
Exercise Notice.
(c) The Company shall, as expeditiously as possible following a Demand
Registration Request, use its best efforts to (i) effect the registration under
the Securities Act (including by means of a shelf registration pursuant to Rule
415 under the Securities Act if so requested and if the Company is then eligible
to use such a registration) of the Registrable Securities which the Company has
been so requested to register by such Holder, for distribution, in accordance
with such intended method of distribution, and (ii) if requested by the
Initiating Holder, obtain acceleration of the effective date of the registration
statement relating to such registration.
(d) The rights of Holders of Registrable Securities to request Demand
Registrations pursuant to Section 5.1(a) are subject to the following
limitations: (i) the Company shall not be obligated to effect a Demand
Registration within six months after the effective date of any other
registration of equity securities by the Company (other than pursuant to a
registration on Form S-4 or Form S-8 or any successor or similar form that is
then in effect) which was not effected on Form S-3 (or any successor or similar
short-form registration statement), provided, however, that this clause (i)
shall not be applicable with respect to any Registrable Securities beneficially
owned by any Holder if in connection with a Piggyback Registration such Holder
requested during such six month period to have such Registrable Securities
included in
Page 55 of 78
<PAGE>
such Piggyback Registration and Registrable Securities with a Current Market
Value exceeding $25,000,000 (valued at the time of such request) were not
included pursuant to Section 5.2(d), (ii) in no event shall the Company be
required to effect, in the case of SPE, more than four Demand Registrations, in
the case of USI, more than four Demand Registrations, and, in the case of the
Claridge Group, more than one Demand Registration, (iii) the Company shall not
be obligated to effect a Demand Registration by either SPE or USI if a Demand
Registration initiated by either SPE or USI shall have been effected in the
preceding 12 months, and (iv) the Company shall not be obligated to effect a
Demand Registration the reasonably anticipated aggregate price to the public of
which would not exceed $25,000,000. Upon assignment by a Stockholder of the
right to initiate a Demand Registration to a Third Party Transferee in
accordance with Section 4.5(b)(iv), such Stockholder shall cease to have the
right to initiate such Demand Registration and the number of Demand
Registrations to which such Stockholder shall be entitled as set forth in the
preceding sentence shall be reduced accordingly. In no event shall the Company
be required to effect more than nine Demand Registrations pursuant to this
Agreement.
(e) The Company shall select the registration statement form for any
registration pursuant to this Section, provided, that if any registration
requested pursuant to this Section which is proposed by the Company to be
effected by the filing of a registration statement on Form S-3 (or any successor
or similar short-form registration statement) shall be in connection with an
underwritten public offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form of registration
statement is of material importance to the success of such proposed offering,
then such registration shall be effected on such other form.
(f) A registration requested pursuant to this Section 5.1 will not be
deemed to have been effected unless it has become effective, provided that if,
within 180 days after it has become effective, the offering of Registrable
Securities pursuant to such registration is subject to any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court, such registration will be deemed not to have been effected.
(g) If a requested registration pursuant to this Section involves an
underwritten offering, the Company shall have the right to select in good faith
the investment banker or bankers and managers to administer the offering;
provided, however, that such investment banker or bankers and managers shall be
reasonably satisfactory to the Initiating Holder. The Initiating Holder shall
notify the Company if such Holder objects to any investment banker or manager
selected by the Company pursuant to this Section 5.1(g) within 10 Business Days
after the Company has notified such Holder of such selection.
(h) If the managing underwriter of any underwritten offering shall advise
the Holders participating in a Demand Registration that the Registrable
Securities covered by the registration statement cannot be sold in such offering
within a price range acceptable to the Initiating Holder, then the Initiating
Holder shall have the right to notify the Company that it has determined that
the registration statement be abandoned or withdrawn, in which event the Company
shall abandon or withdraw, such registration statement. If a requested
registration pursuant to this Section 5.1 involves an underwritten offering and
the managing underwriter advises the Company that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number which
can be sold in such offering within a price range acceptable to the Initiating
Holder, the Company will include in such registration only the Registrable
Securities requested to be included in such registration pursuant to this
Section 5.1 In the event that the number of Registrable Securities requested to
be included in such registration exceeds the number which, in the opinion of
such managing underwriter, can be sold in such offering within a price range
acceptable to the Initiating Holder, the Company shall include in such
registration the number of Registrable Securities proposed to be sold by the
Initiating Holder and, to the extent the managing underwriter believes that
additional Registrable Securities can be sold in such offering within such price
range, the number of Registrable Securities proposed to be sold by the Other
Holders, allocated pro rata among the Other Holders on the basis of the relative
number of shares of Registrable Securities requested to be registered pursuant
to clause (ii) of Section 5.1(b) by each such Holder. In the event that the
number of Registrable Securities requested by all Holders to be included in such
registration is less than the number which, in the opinion of the managing
underwriter, can be sold, the Company may include in such registration a number
of securities that the Company proposes to sell up to the number of securities
that, in the opinion of the underwriter, can be sold in such offering within a
price range acceptable to the Initiating Holder.
Page 56 of 78
<PAGE>
(i) If the Company at any time grants to any other holders of Voting Shares
(or securities that are convertible, exchangeable or exercisable into Voting
Shares) any rights to request the Company to effect the registration under the
Securities Act of any such Voting Shares (or any such securities) on terms more
favorable to such holders than the terms set forth in this Section 5.1, then the
Holders shall be entitled to such more favorable rights and benefits.
SECTION 5.2. Piggyback Registrations. (a) If, at any time following the
Equity Offering, the Company proposes or is required to register any of its
equity securities under the Securities Act (other than pursuant to (i)
registrations on such form or similar form(s) solely for registration of
securities in connection with an employee benefit plan or dividend reinvestment
plan or a merger, consolidation or acquisition or (ii) a Demand Registration
pursuant to Section 5.1) on a registration statement on Form S-1, Form S-2 or
Form S-3 (or an equivalent general registration form then in effect), whether or
not for its own account, the Company shall give prompt written notice of its
intention to do so to each of the Holders of record of Registrable Securities.
Upon the written request of any Holder, made within 15 days following the
receipt of any such written notice (which request shall specify the maximum
number of Registrable Securities intended to be disposed of by such Holder and
the intended method of distribution thereof), the Company shall use its best
efforts to cause all such Registrable Securities, the Holders of which have so
requested the registration thereof, to be registered under the Securities Act
(with the securities that the Company at the time proposes to register) to
permit the sale or other disposition by such Holders (in accordance with the
intended method of distribution thereof) of the Registrable Securities to be so
registered (such registration, a "Piggyback Registration"). There is no
limitation on the number of Piggyback Registrations pursuant to the preceding
sentence that the Company is obligated to effect. No registration effected under
this Section 5.2(a) shall relieve the Company of its obligations to effect
Demand Registrations.
(b) If, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such abandoned
registration, without prejudice, however, to the rights of Holders under Section
5.1, and (ii) in the case of a determination to delay such registration of its
equity securities, shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities.
(c) Any Holder shall have the right to withdraw its request for inclusion
of its Registrable Securities in any registration statement pursuant to this
Section 5.2 by giving written notice to the Company of its request to withdraw;
provided, however, that (i) such request must be made in writing prior to the
earlier of the execution of the underwriting agreement or the execution of the
custody agreement with respect to such registration and (ii) such withdrawal
shall be irrevocable and, after making such withdrawal, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such withdrawal was made.
(d) If the managing underwriter of any underwritten offering shall inform
the Company by letter of its belief that the number of Registrable Securities
requested to be included in a registration under this Section 5.2 would
materially adversely affect such offering, then the Company will include in such
registration, first, the securities proposed by the Company to be sold for its
own account, second, the Registrable Securities and all other securities of the
Company to be included in such registration to the extent of the number and
type, if any, that the Company is so advised can be sold in (or during the time
of) such offering, pro rata among the Holders on the basis of the relative
number of shares of Registrable Securities requested to be registered pursuant
to Section 5.2(a) by each such Holder and, third, pro rata among the holders of
any other securities of the Company with respect to which the holders thereof
are entitled to and desire "Piggy-back" or similar registration rights.
SECTION 5.3 Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities Act
as provided in this Agreement. the Company shall, as expeditiously as possible:
Page 57 of 78
<PAGE>
(a) prepare and file with the Commission a registration statement on an
appropriate registration form of the Commission for the disposition of such
Registrable Securities in accordance with the intended method of disposition
thereof, which form (i) shall be selected by the Company and (ii) shall, in the
case of a shelf registration, be available for the sale of the Registrable
Securities by the selling Holders thereof and such registration statement shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and the Company shall use its best efforts to cause such
registration statement to become effective (provided, however, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, or comparable statements under securities or "blue sky" laws of any
jurisdiction, the Company will furnish to counsel for the Holders participating
in the planned offering (selected by the Initiating Holder, in the case of a
Demand Registration, or the Requisite Percentage of Participating Holders, in
the case of a Piggyback Registration) and the underwriters, if any, copies of
all such documents proposed to be filed (including all exhibits thereto), which
documents will be subject to the reasonable review and, in the case of a
registration pursuant to Section 5. 1, reasonable comment of such counsel, and
the Company shall not file any registration statement or amendment thereto or
any prospectus or supplement thereto pursuant to Section 5.1 to which the
Holders of a majority of the Registrable Securities covered by such registration
statement or the underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period as any seller of Registrable
Securities pursuant to such registration statement shall request and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement until the earlier of (i) such
time as all such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the Holder or Holders thereof set forth
in such registration statement and (ii) the expiration of 180 days from the date
such registration statement first becomes effective:
(c) furnish, without charge, to each seller of such Registrable Securities
and each underwriter, if any, of the securities covered by such registration
statement such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits), and the prospectus
included in such registration statement (including each preliminary prospectus
and summary prospectus), in conformity with the requirements of the Securities
Act, such documents incorporated by reference in such registration statement,
and such other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(d) use its best efforts to register or qualify all Registrable Securities
covered by such registration statement under such other securities or "blue sky"
laws of such jurisdictions as any sellers of Registrable Securities or any
managing underwriter, if any, shall reasonably request, and do any and all other
acts and things that may be necessary or advisable to enable such sellers or
underwriter, if any, to consummate the disposition of the Registrable Securities
in such jurisdictions, except that in no event shall the Company be required to
qualify generally to do business as a foreign corporation in any jurisdiction
where it would not, but for the requirements of this paragraph (d), be required
to be so qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(e) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions in
favor of underwriters and other persons in addition to, or in substitution for,
the provisions of Section 5.8 hereof, and take such other actions as the
Initiating Holder, in the case of a Demand Registration, or the Requisite
Percentage of Participating Holders, in the case of a Piggyback Registration, or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities (i) a signed
counterpart, addressed to such seller, of any opinion of counsel for the
Company, dated the date of the closing under the underwriting agreement with
respect to such offering, in customary form and in form and scope reasonably
satisfactory to the underwriter and
Page 58 of 78
<PAGE>
its counsel, and (ii) a signed counterpart, if requested by such Seller,
addressed to it, of any "cold comfort" letter signed by the independent public
accountants in customary form and covering matters of the type customarily
covered by "cold comfort" letters (provided that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement, unless such a "cold comfort" letter or letters are provided to the
Company or other selling holders in connection with such registration);
(g) immediately notify each Holder selling Registrable Securities covered
by such registration statement and each managing underwriter, if any: (i) when
the registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or state securities authority for
amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the securities or
"blue sky" laws of any jurisdiction or the initiation of any proceeding for such
purpose; (v) of the existence of any fact of which the Company becomes aware
that results in the registration statement, the prospectus related thereto or
any document incorporated therein by reference containing an untrue statement of
a material fact or omitting to state a material fact required to be stated
therein or necessary to make any statement therein not misleading; and (vi) if
at any time the representations and warranties contemplated by Section 5.8 below
cease to be true and correct in all material respects; and, if the notification
relates to an event described in clause (v), the Company shall promptly prepare
and furnish to each such seller and each underwriter, if any, a reasonable
number of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading;
(h) use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable after the effective date of the registration
statement (and in any event within 16 months thereafter), an earnings statement
(which need not be audited) covering the period of at least 12 consecutive
months beginning with the first day of the Company's first calendar quarter
after the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and the
rules and regulations thereunder;
(i) use its best efforts to cause all such Registrable Securities covered
by such registration statement to be listed on each securities exchange or
quotation system on which similar securities issued by the Company are then
listed or quoted (if any), and provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such registration
statement;
(j) enter into such customary agreements (including, if applicable, an
underwriting agreement) and take such other actions as the Initiating Holder, in
the case of a Demand Registration, or the Requisite Percentage of Participating
Holders, in the case of a Piggyback Registration, shall reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities,
(k) deliver promptly to the Holder and counsel for the selling Holders
participating in the offering and each underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or auditors
and any memoranda relating to discussions with the Commission or its staff with
respect to the registration statement, other than those portions of any such
memoranda that contain information subject to attorney-client privilege with
respect to the Company, and, upon receipt of such confidentiality agreements as
the Company may reasonably request, make reasonably available for inspection by
any seller of such Registrable Securities covered by such registration
statement, by any underwriter, if any, participating in any disposition to be
effected pursuant to such registration statement and by any attorney, accountant
or other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers, directors
and employees to supply all
Page 59 of 78
<PAGE>
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(l) use reasonable efforts to prevent the issuance of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of the registration statement;
(n) make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into account the needs
of the Company's businesses and the requirements of the marketing process) in
the marketing of Registrable Securities in any underwritten offering:
(o) promptly prior to the filing of any document that is to be incorporated
by reference into the registration statement or the prospectus (after the
initial filing of such registration statement), provide copies of such document
to counsel for the selling Holders and to each managing underwriter, if any, and
make the Company's representatives reasonably available for discussion of such
document and make such changes in such document concerning the selling holders
prior to the filing thereof as counsel for such selling holders or underwriters
may reasonably request;
(p) furnish to each Holder participating in the offering and the managing
underwriter, without charge, at least one signed copy of the registration
statement and any post-effective amendments thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(q) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.;
(r) use reasonable efforts to make available the executive officers of the
Company to participate with the Holders of Registrable Securities and any
underwriters in any "road shows" or other selling efforts that may be reasonably
requested by the selling Holders in connection with the methods of distribution
for the Registrable Securities;
(s) cooperate with the selling Holders of Registrable Securities and the
managing underwriter, if any, to facilitate the timely preparation and delivery
of certificates not bearing any restrictive legends representing the Registrable
Securities to be sold, and cause such Registrable Securities to be issued in
such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an Underwritten offering, in accordance with the
instructions of the selling Holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities;
(t) in the case of a registration under Canadian securities laws, take such
reasonable actions as may be necessary to facilitate the sale of Registrable
Securities on a public basis in Canada, including making any necessary filings
with Canadian securities authorities or any Canadian stock exchange on which the
Registrable Securities are listed; and
(u) take all such other reasonable actions as are necessary or advisable in
order to expedite or facilitate the disposition of such Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 5.3 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
or by the Commission in connection therewith, Provided that such information
shall be used only in connection with such registration. Each Holder of
Registrable Securities agrees that upon receipt of any notice from the Company
of the happening of any event of the kind described in
Page 60 of 78
<PAGE>
clause (v) of paragraph (g) of this Section 5.3, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(g) of this Section 5.3 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period mentioned in
paragraph (b) of this Section 5.3 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (g) of this Section 5.3. If any
such registration statement or comparable statement under "blue sky" laws refers
to any Holder by name or otherwise as the Holder of any securities of the
Company, then such Holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to such Holder and the
Company, to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such Holder will assist in meeting any future financial requirements of the
Company or (ii) in the event that such reference to such Holder by name or
otherwise is not in the judgment of the Company, as advised by counsel, required
by the Securities Act or any similar federal statute or any state "blue sky" or
securities law then in force, the deletion of the reference to such Holder.
SECTION 5.4 Registration Expenses. (a) Each Holder of Registrable
Securities (together with the Company if the Company participates in a
registration) participating in any registration pursuant to Section 5.1 shall
pay its pro rata share of Expenses related to such registration on the basis of
the number of Registrable Securities included in such registration by such
Holder (including the Company, if applicable) relative to the number of
securities included in such registration by all holders (including the Company,
if applicable, and any other holders including securities in the registration
pursuant to an agreement with the Company other than this Agreement), other than
Expenses directly attributable to a particular Holder, which shall be borne by
such Holder, provided that the Company shall bear all expenses of the initial
registration effected pursuant to Section 5.1 upon the request of each of SPE,
USI and the Claridge Group.
(b) Each Holder of Registrable Securities participating in any registration
initiated by the Company pursuant to Section 5.2 shall pay its pro rata share of
Expenses (other than Company Expenses which shall be borne by the Company)
related to such registration on the basis of the number of Registrable
Securities included in such registration by such Holder relative to the number
of securities included in such registration by all holders (excluding the
Company and including any holders including securities in the registration
pursuant to an agreement with the Company other than this Agreement), other than
Expenses directly attributable to a particular Holder which shall be borne by
such Holder.
(c) Notwithstanding the foregoing, (i) the provisions of this Section 5.4
shall be deemed amended to the extent necessary to cause these expense
provisions to comply with the "blue sky" laws of each state in which the
offering is made, (ii) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (iii) the Company shall, in the case of all
registrations under this Article V, be responsible for all its internal expenses
(including all salaries and expenses of its officers and employees performing
legal or accounting duties).
SECTION 5.5 Limitations on Sale or Distribution of Other Securities. (a) To
the extent requested in writing by a managing underwriter, if any, of any,
registration effected pursuant to Section 5.1, each Holder of Registrable
Securities agrees not to Transfer, including any sale pursuant to Rule 144 under
the Securities Act, any Common Stock (other than as part of such underwritten
public offering) during the time period reasonably requested by the managing
underwriter, not to exceed 90 days (and the Company hereby also agrees (except
that the Company may effect any sale or distribution of any such securities
pursuant to a registration on Form S-4 (if reasonably acceptable to such
managing underwriter) or Form S-8, or any successor or similar form that is then
in effect or upon the conversion, exchange or exercise of any then outstanding
Page 61 of 78
<PAGE>
Common Stock Equivalent) to use its reasonable best efforts to cause each holder
of any equity security or any security convertible into or exchangeable or
exercisable for any equity security of the Company purchased from the Company at
any time other than in a public offering so to agree). Each managing underwriter
shall be entitled to rely on the agreements of each Holder of Registrable
Securities set forth in this Section 5.5(a) and shall be a third party
beneficiary of the provisions of this Section 5.5(a).
(b) The Company hereby agrees that, if it shall previously have received a
request for registration pursuant to Section 5.1, and if such previous
registration shall not have been withdrawn or abandoned, the Company shall not
Transfer any Common Stock (other than as part of such underwritten public
offering, a registration on Form S-4 or Form S-8 or any successor or similar
form that is then in effect or upon the conversion, exchange or exercise of any
then outstanding Common Stock Equivalent), until a period of 90 days shall have
elapsed from the effective date of such previous registration; and the Company
shall so provide in any registration rights agreements hereafter entered into
with respect to any of its securities.
SECTION 5.6 Company's Right to Postpone Registration. The Company shall be
entitled to postpone for a reasonable period of time (but not exceeding 120
days) the filing of any registration statement otherwise required to be prepared
and filed by it pursuant to this Agreement if the Company concludes that such
registration and offering would materially adversely affect any financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its Affiliates or would require premature disclosure
thereof and the Company promptly gives the Holders of Registrable Securities
requesting registration thereof pursuant to Section 5.1 written notice of such
delay. If the Company shall so postpone the filing of a registration statement,
such Holders of Registrable Securities requesting registration thereof pursuant
to Section 5.1 shall have the right to withdraw the request for registration by
giving written notice to the Company within 30 days after receipt of the notice
of postponement and, in the event of such withdrawal, such request shall not be
counted for purposes of the requests for registration to which Holders of
Registrable Securities are entitled pursuant to Section 5.1 hereof.
SECTION 5.7. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
SECTION 5.8. Indemnification. (a) In the event of any registration of any
securities of the Company under the Securities Act pursuant to this Article V,
the Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, each seller of any Registrable Securities covered by
such registration statement, its directors, officers, affiliates, employees,
stockholders, members and general and limited partners (and the directors,
officers, affiliates. employees, stockholders, members and general and limited
partners thereof), each other Person who participates as an underwriter in the
offering or sale of such securities, each officer, director, employee,
stockholder, member or general and limited partner of such underwriter, and each
other Person, if any, who controls such seller or any such underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, against any and all losses, claims, damages or liabilities, joint or
several, actions or proceedings (whether commenced or threatened) in respect
thereof ("Claims") and expenses (including reasonable fees of counsel and any
amounts paid in any settlement effected with the Company's consent, which
consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such Claims or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under the
Securities Act, together with the documents incorporated by reference therein or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary, final or summary prospectus or any amendment or
supplement thereto, together with the documents incorporated by reference
therein, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company shall not be liable to any such
indemnified party in any such case to the extent such Claim or expense arises
out of or is based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact made in such
registration statement or amendment thereof or supplement thereto or in any such
prospectus or any preliminary, final or summary prospectus in reliance upon and
in conformity
Page 62 of 78
<PAGE>
with written information furnished to the Company by or on behalf of such
indemnified party specifically for use therein. Such indemnity and reimbursement
of expenses shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party and shall survive
the Transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 5.1 or 5.2 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 5.1 or 5.2, any underwriter) shall, severally and not jointly, indemnify
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 5.8) to the extent permitted by law the Company,
its officers and directors, each Person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
Persons with respect to any untrue statement or alleged untrue statement of any
material fact in, or omission or alleged omission of any material fact from,
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or underwriter specifically for
use therein and reimburse such indemnified party for any legal or other expenses
reasonably incurred in connection with investigating or defending any such Claim
as such expenses are incurred; provided, however, that the aggregate amount that
any such Holder shall be required to pay pursuant to this Section 5.8(b) and
Sections 5.8(c) and 5.9 shall in no case be greater than the amount of the net
proceeds received by such person upon the sale of the Registrable Securities
pursuant to the registration statement giving rise to such Claim. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the Transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the preceding paragraphs
(a) and (b) of this Section 5.8 (with appropriate modifications) shall be given
by the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under any state
securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement shall
notify promptly the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 5.8, but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying Party of its obligations
under the preceding paragraphs of this Section 5.8, except to the extent the
indemnifying party is materially prejudiced thereby, and shall not relieve the
indemnifying party from any liability that it may have to any indemnified party
otherwise than under this Article V. In case any action or proceeding is brought
against an indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, unless in the reasonable opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof jointly with any other indemnifying party, similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that if (i) the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within 20 days after receiving notice from such
indemnified party that the indemnified party believes it has failed to do so,
(ii) such indemnified party who is a defendant in any action or proceeding that
is also brought against the indemnifying party reasonably shall have concluded
that there may be one or more legal defenses available to such indemnified party
that are not available to the indemnifying party; or (iii) representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the indemnified party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all indemnified parties in each
jurisdiction who shall be approved by the Requisite Percentage of Participating
Holders in the registration in respect of which such indemnification is sought),
and the indemnifying party shall be liable for any expenses therefor. No
in-
Page 63 of 78
<PAGE>
demnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (x) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (y) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) The indemnity agreements contained herein shall be in addition to any
other rights to indemnification or contribution that any indemnified party may
have pursuant to law or contract and shall remain operative and in full force
and effect regardless of any investigation made or omitted by or on behalf of
any indemnified party and shall survive the Transfer of the Registrable
Securities by any such party.
(f) The indemnification and contribution required by this Section 5.8 and
Section 5.9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 5.9 Contribution. (a) If for any reason the indemnity provided for
in Section 5.8 is unavailable or is insufficient to hold harmless an indemnified
party under Sections 5.8(a), (b) or (c), then each indemnifying party and the
Company (i) as between the Company and the holders of Registrable Securities
covered by a registration statement, on the one hand, and the underwriters, on
the other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and such holders, on the one hand, and the underwriters,
on the other, from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and such holders, on the one hand, and of the underwriters,
on the other, in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations, and (ii) as between the Company, on the one hand, and
each holder of Registrable Securities covered by a registration statement, on
the other, in such proportion as is appropriate to reflect the relative fault of
the Company and of each such holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The relative
benefits received by the Company and such holders, on the one hand, and the
underwriters, on the other, shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and such holders bear to
the total underwriting discounts and commissions received by the underwriters.
The relative fault of the Company and such holders, on the one hand, and of the
underwriters, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and such holders or by the underwriters. The relative
fault of the Company, on the one hand, and of each such holder, on the other,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by
such party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(b) The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 5.9
were determined by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the next preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.9. no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public exceeds the amount of any damages that such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no holder of Registrable Securities shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such holder were offered to the
public exceeds the amount of any damages that such holder has otherwise been
required to pay by reason of such untrue or alleged
Page 64 of 78
<PAGE>
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Stockholder's obligation to contribute
pursuant to this Section 5.9 is several in the proportion that the proceeds of
the offering received by such Stockholder bears to the total proceeds of the
offering received by all the Stockholders and not joint.
SECTION 5.10 Underwritten Offerings. (a) If requested by the underwriters
for any underwritten offering by the Holders pursuant to a registration
requested under Section 5.1, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement shall
be satisfactory in form and substance to the Initiating Holder and shall contain
such representations and warranties by, and such other agreements on the part
of, the Company and such other terms as are generally included in the standard
underwriting agreement of such underwriters, including indemnities and
contribution agreements. Any Holder participating in the offering shall be a
party to such underwriting agreement and may, at its option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such Holder and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such Holder. Such
underwriting agreement shall also contain such representations and warranties by
the participating Holders as are customary in agreements of that type.
(b) In the case of a registration pursuant to Section 5.2 hereof, if the
Company shall have determined to enter into an underwriting agreement in
connection therewith, all of the Holders' Registrable Securities to be included
in such registration shall be subject to such underwriting agreement. Any Holder
participating in such registration may, at its option, require that any, or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such Holder and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such Holder. Such
underwriting agreement shall also contain such representations and warranties by
the participating Holders as are customary in agreements of that type.
SECTION 5.11 Rule 144. The Company covenants and agrees that (i) so long as
it remains subject to the reporting provisions of the Exchange Act, it will
timely file the reports required to be filed by it under the Securities Act or
the Exchange Act (including, but not limited to, the reports under Sections 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
under the Securities Act), and (ii) it will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (x) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (y) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 5.12 Article V Termination. The rights and obligations of a
Stockholder and its Permitted Transferees under this Article V shall terminate
upon such Stockholder's Applicable Percentage equalling less than 3.5%, provided
that in the event that a Stockholder's Applicable Percentage shall be less than
3.5% as a result of the issuance of additional Voting Shares by the Company,
such Stockholder shall be so advised by the Company by written notice and the
provisions of this Article V shall continue to bind and enure to the benefit of
such Stockholder for a period of 180 days following such Stockholder's receipt
of such notice and will continue to bind and enure to the benefit of such
Stockholder thereafter in the event that such Stockholder (and/or its Permitted
Transferees) acquires, during such 180-day period, a sufficient number of Voting
Shares such that its Applicable Percentage equals or exceeds 3.5%.
Page 65 of 78
<PAGE>
ARTICLE VI
STANDSTILL
SECTION 6.1 Standstill with the Company. (a) Each of SPE and USI and each
member of the Claridge Group covenants and agrees with the Company and with each
of SPE and USI that such Stockholder shall not, and shall cause its Affiliates
not to, acquire, directly or indirectly, the beneficial ownership of any
additional Voting Shares (except by way of stock dividends, stock
reclassifications or other distributions or offerings made available to holders
of Voting Shares generally), except for:
(i) subject to the provisions at the end of clause (ii) below,
acquisitions of a number of Voting Shares representing up to an aggregate
of 5% of the Company's outstanding Voting Shares in open market purchases
or in privately-negotiated transactions during any rolling 12-month period
(measuring the outstanding Voting Shares as of the first day of such
period), Provided that any such acquisition in a privately-negotiated
transaction shall not be at a price in excess of 3% of the closing price of
such Voting Shares on the principal exchange or market on which such
security may be listed or trade on the trading day immediately preceding
the date on which a binding agreement is entered into regarding such
acquisition and, in the event a closing price is unavailable, such price
shall not be in excess of Fair Market Value;
(ii) 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)), provided, however, that no
acquisition shall be permitted pursuant to clause (i) or (ii) if, as a
result of such acquisition, the Public Stockholders would beneficially own
less than 20% of the outstanding Voting Shares, provided, further, that the
foregoing proviso shall not be applicable to USI or any of its Affiliates,
SPE or any of its Affiliates or the members of the Claridge Group if, upon
consummation of such acquisition, such Stockholder's Applicable Percentage
would be less than 25%.
(iii) acquisitions from SPE, USI, members of the Claridge Group and
their respective Permitted Transferees;
(iv) acquisitions from the Company pursuant to Section 7.1 or on terms
and conditions approved by a Determination of the Independent Directors;
(v) acquisitions pursuant to a tender offer or exchange offer made in
accordance with applicable law;
(vi) if the Company shall have issued or sold Voting Shares (other
than pursuant to the Equity Offering) to any Person other than such
Stockholder or a Permitted Transferee thereof without effecting a pro rata
issuance of Voting Shares to such Stockholder or a Permitted Transferee
thereof (calculated based on such Stockholder's Applicable Percentage at
the time of such issuance or sale), acquisitions (whether pursuant to
Section 7.1 or otherwise) of an aggregate number of Voting Shares equal to
the number of Voting Shares that would result in such Stockholder having
the same Applicable Percentage as such Stockholder would have had if the
Company had not issued or sold such Voting Shares; or
(vii) acquisitions of Common Stock upon the conversion of Non-Voting
Common Stock.
(b) Notwithstanding anything to the contrary contained in Section 6.1(a),
in the case of any acquisition permitted pursuant to Section 6.1(a) 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
Board that such transaction is fair from a financial point of view to the
stockholders of the Company, other than the applicable Stockholder, (y) a
majority of the Independent Directors shall have approved the transaction and
(z) if the Public Stockholders beneficially own more than 20% of the Voting
Shares and if approval of stockholders of the Company is required by the
Page 66 of 78
<PAGE>
DGCL or the Certificate, a majority of the shares of Common Stock held by such
holders shall have been voted in favor of the transaction.
(c) The restrictions of Section 6.1(a) and 6.1(b) shall 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 Director pursuant to Section 2.1, or upon the
occurrence of:
(i) a bona fide tender or exchange offer to acquire more than 20% of
the Voting Shares having been made by any Person (except that such
restrictions shall not terminate as to any Stockholder if such tender or
exchange offer is made by such Stockholder or any of its Affiliates or by
any Person acting in concert with such Stockholder or any of its Affiliates
or is induced by such Stockholder or any of its Affiliates), provided that
if such offer is withdrawn or expires without being consummated, Section
6.1 (a) and 6.1(b) shall be reinstated (but no such reinstatement shall
prohibit any Stockholder from thereafter purchasing Voting Shares pursuant
to a contract entered into prior to the withdrawal or expiration of such
tender offer or exchange offer or pursuant to a tender offer or exchange
offer commenced by a Stockholder prior to such time);
(ii) the Applicable Percentage of SPE, USI or the Claridge Group
equaling or exceeding 80%, provided that, in the case of USI, such
percentage shall be 33 1/3% at any time USI and its Affiliates beneficially
own more Voting Shares than any other holder of Common Stock;
(iii) with respect to any Stockholder, such Stockholder's Applicable
Percentage being less than 15% (provided that such restrictions shall be
reinstated if such Stockholder's Applicable Percentage equals or exceeds
15% within one year thereafter);
(iv) any Person (other than a Stockholder or a Permitted Transferee)
beneficially owning more than 20% of the Voting Shares, excluding from the
Voting Shares beneficially owned by such Person Voting Shares acquired from
a Stockholder, a Permitted Transferee or the Company; or
(v) the Public Stockholders beneficially owning more than 66 2/3% of
the Voting Shares.
(d) Notwithstanding anything to the contrary herein, if a Stockholder who
would otherwise be in violation of Section 6.1(a) has violated such Section
inadvertently, and after becoming aware of such violation such Stockholder
divests as promptly as practicable a sufficient number of Voting Shares so that
such Stockholder would no longer be in violation of such Section, then such
Stockholder shall not be deemed to have been in violation of Section 6.1(a) for
any purposes of this Agreement.
(e) Notwithstanding anything to the contrary, herein, the provisions of
Section 6.1(a) shall not be applicable to any member of the Claridge Group so
long as the Applicable Percentage of the Claridge Group is less than 15%
(provided that an acquisition by any member of the Claridge Group shall be
subject to the restriction of Section 6.1(a) if such acquisition would result in
the Applicable Percentage of the Claridge Group equalling or exceeding 15%).
SECTION 6.2 Standstill among the Stockholders. (a) Each of SPE and USI
covenants and agrees with the other and each member of the Claridge Group
covenants and agrees with each of SPE and USI that neither such Stockholder nor
any of its Affiliates will acquire, directly or indirectly, the beneficial
ownership of any Voting Shares if immediately prior to such acquisition such
Stockholder's Applicable Percentage exceeds 50%, excluding Voting Shares
acquired from another Stockholder or its Permitted Transferees, or if, as a
result of such acquisition, (i) such Stockholder and its Affiliates would
beneficially own an aggregate of more than 50% of the Voting Shares, excluding
Voting Shares acquired from another Stockholder or its Permitted Transferees, or
(ii) the Public Stockholders would beneficially own less than 20% of the
outstanding Voting Shares; provided, however, that this clause (ii) shall not be
applicable to USI or any of its Affiliates, or SPE or any of its Affiliates or
the members of the Claridge Group and their respective Affiliates, if, upon
consummation of such acquisition, such Stockholder's Applicable Percentage would
be less than 25%. Notwithstanding the foregoing, the provisions of this Section
6.2(a) shall not prohibit the acquisition of Common Stock upon the conversion of
Non-Voting Common Stock.
Page 67 of 78
<PAGE>
(b) The restrictions of Section 6.2(a) shall terminate if:
(i) the Applicable Percentage of either SPE or USI 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);
(ii) 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, Section
6.2(a) shall be reinstated (but no such reinstatement shall prohibit any
Stockholder from thereafter purchasing Voting Shares pursuant to a contract
entered into prior to the withdrawal or expiration of such tender Offer or
exchange offer or pursuant to a tender offer or exchange offer commenced by
a Stockholder prior to such time); or
(iii) 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 USI is less than 45%.
(c) Notwithstanding anything to the contrary herein, if a Stockholder who
would otherwise be in violation of Section 6.2(a) has violated such Section
inadvertently, and after becoming aware of such violation such Stockholder
divests as promptly as practicable a sufficient number of Voting Shares so that
such Stockholder would no longer be in violation of such Section, then such
Stockholder shall not be deemed to have been in violation of Section 6.2(a) for
any purposes of this Agreement.
(d) Notwithstanding anything to the contrary herein, the provisions of
Section 6.2(a) shall not be applicable to any member of the Claridge Group so
long as the Applicable Percentage of the Claridge Group is less than 10%
(provided that an acquisition by any member of the Claridge Group shall be
subject to the restrictions of Section 6.2(a) if such acquisition would result
in the Applicable Percentage of the Claridge Group equalling or exceeding 10%).
ARTICLE VII
EQUITY PURCHASE RIGHTS
SECTION 7.1 Equity Purchase Rights. (a) If the Company proposes to issue or
sell any Voting Shares pursuant to a transaction in respect of which SPE or USI
shall have the right to consent pursuant to clause (vii) of Section 3.1(a) (any
such Stockholder. an "Offeree"), each Offeree shall have the right, exercisable
in whole or in part and subject to the applicable rules of any stock exchange on
which the Common Stock shall then be listed, to acquire from the Company a
portion of the Voting Shares proposed to be issued or sold to Persons other than
such Offeree or any of its Affiliates (the "Issuance Shares") up to an amount
equal to the number or other amount of the Issuance Shares multiplied by such
Offeree's then Applicable Percentage, prior to giving effect to the consummation
of the proposed issuance or sale and any acquisition by an Offeree pursuant to
this Section 7.1(a) (with respect to each Offeree, the number or amount of
Voting Shares which such Offeree may purchase pursuant to this Section 7.1(a)
shall be referred to as such Offeree's "Offered Shares"). Notwithstanding
anything to the contrary contained in this Section 7.1(a), in the event that SPE
and its Permitted Transferees beneficially own Non-Voting Common Stock and
Common Stock, SPE's Offered Shares will be allocated between Non-Voting Common
Stock and Common Stock in the same proportion.
(b) The Company shall give written notice of a proposed issuance or sale
described in Section 7.1(a) to each Offeree within two Business Days following
any meeting of the Board of Directors at which any such issuance or sale is
approved. Such notice (the "Issuance Notice") shall set forth the material terms
and conditions of such proposed transaction, including the name of any proposed
purchaser(s) or the proposed manner of disposition, in the case of a public
offering, the number or amount and description of the Issuance Shares and,
except in the case of a public offering, the proposed purchase price per share,
including a description of any non-cash considera-
Page 68 of 78
<PAGE>
tion sufficiently detailed to permit valuation thereof. Such notice shall also
set forth the number of Offered Shares for all Stockholders and shall be
accompanied by any written offer from the prospective purchaser to purchase such
Voting Shares, if available and permitted pursuant to the terms thereof. The
Issuance Notice shall be received by each Offeree at least 20 days prior to the
proposed issuance or sale.
(c) At any time during the 20-day period following an Offeree's receipt of
an Issuance Notice, each Offeree shall have the right to irrevocably elect to
purchase up to the number of such Offeree's Offered Shares at the purchase price
set forth in the Issuance Notice (or if such price includes property other than
cash, the equivalent in cash of such price) and upon the other terms and
conditions specified in the Issuance Notice by delivering a written notice to
the Company. Except as provided in the following sentence, such purchase(s)
shall be consummated concurrently with the consummation of the issuance or sale
described in the Issuance Notice. The closing of any purchase by an Offeree may
be extended beyond the closing of the transaction described in the Issuance
Notice to the extent necessary to obtain required governmental approvals and
other required approvals and the Company and the Offeree shall use their
respective best efforts to obtain such approvals.
(d) If the Offeree(s) do not elect pursuant to Section 7.1(c) to purchase
Offered Shares, the Company shall be free to complete the proposed issuance or
sale described in the Issuance Notice on terms no less favorable to the Company
than those set forth in the Issuance Notice, provided that (x) such issuance or
sale is closed within 90 days after the latest of the expiration of the 20-day
period described in Section 7.1(c) or, in the case of a public offering, within
20 days of the declaration by the Commission of the effectiveness of the
applicable registration statement filed by the Company, (y) the price at which
the Voting Shares are transferred must be equal to or higher than the purchase
price described in the Issuance Notice (except in the case of a public offering,
in which case the price at which the Voting Shares are sold (before deducting
underwriting discounts and commissions) shall be equal to at least 90% of such
price) and (z) subject to Section 7.1(f), the amount of securities to be issued
or sold by the Company may be reduced. Such periods within which such issuance
or sale must be closed shall be extended to the extent necessary to obtain
required governmental approvals and other required approvals and the Company
shall use its best efforts to obtain such approvals.
(e) If (i) the consideration specified in the Issuance Notice consists of,
or includes, consideration other than cash or a publicly traded security for
which a closing market price is published for each Business Day, or (ii) any
property other than Voting Shares is proposed to be transferred by the Company
in connection with the transaction to which the Issuance Notice relates, then
the price payable by the Offerees under this Section 7.1 shall be the
Determination of the Independent Directors of the Fair Market Value of the
consideration per share or other amount in the case of clause (i) and the
Determination of the Independent Directors of the Fair Market Value of the
consideration per share or other amount determined to be properly allocable to
the Voting Shares in the case of clause (ii). Notwithstanding anything to the
contrary contained in this Section 7.1, the time periods applicable to an
election by the Offerees to purchase the Offered Shares set forth in Section
7.1(c) shall not be deemed to commence until the Determination of the
Independent Directors under this Section 7.1(e) has been made. The Company
agrees to use its best efforts to cause the Determination of the Independent
Directors under this Section 7.1(e) to be made as promptly as practicable but in
no event later than ten Business Days after delivery by the Company of the
Issuance Notice.
(f) To the extent that, after an Offeree's election to acquire Voting
Shares pursuant to its purchase right under this Section 7.1, the number of
Issuance Shares shall be reduced (whether at the discretion of the Company or
otherwise), then the number of shares or other amount of Voting Shares that such
Offeree has the right to acquire under this Section 7.1 shall be reduced pro
rata and such Offeree's election shall be deemed to have been its irrevocable
commitment to purchase such reduced number of shares or other amount of such
Voting Shares.
(g) Notwithstanding anything to the contrary contained in this Section 7.1,
an Offeree shall not be entitled to purchase any securities pursuant to this
Section 7.1 (i) unless and until the Company actually issues or sells the
securities that gave rise to the Offeree's purchase fight under this Section 7.1
(and the Company may in its sole discretion elect at any time to abandon any
such issuance or sale) or (ii) in connection with any pro rata stock split,
stock dividend or other combination or reclassification of any Capital Stock of
the Company.
Page 69 of 78
<PAGE>
(h) Notwithstanding anything to the contrary contained in this Section 7.1,
upon any purchase of Voting Shares by an Offeree pursuant to this Section 7.1 on
a later date than the issuance or sale of securities described in the issuance
Notice (x) the purchase price shall be adjusted by subtracting therefrom the
Fair Market Value (as established by a Determination of the Independent
Directors) of any dividend or distribution received in respect of such Voting
Shares after the date of such issuance and prior to the purchase by such Offeree
hereunder, (y) the purchase price and number of shares or amount to be purchased
shall be adjusted to reflect any stock split, stock dividend, or other
combination or reclassification of the Company's Capital Stock during such time
and (z) such Offeree shall be entitled to exercise any rights to purchase
additional Voting Shares available to all holders of Voting Shares
proportionately that it would have been entitled to exercise if it had been the
owner of the Voting Shares purchased by such Offeree hereunder on the record
date for the distribution of such rights.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Conflicting Agreements. Each Stockholder and the Company
represents and warrants that such party has not granted and is not a party to
any proxy, voting trust or other agreement that is inconsistent with or
conflicts with any provision of this Agreement.
SECTION 8.2 Duration of Agreement. Except as otherwise provided in this
Agreement, the rights and obligations of a Stockholder and its Permitted
Transferees under this Agreement shall terminate upon such Stockholder's
Applicable Percentage equalling less than 6.25% (or, in the case of the members
of the Claridge Group, 3.5% until the five-year anniversary of the Closing and
5% thereafter), provided that in the event that a Stockholder's Applicable
Percentage shall be less than 6.25% (or, in the case of the members of the
Claridge Group, 3.5% until the five-year anniversary of the Closing and 5%
thereafter) as a result of the issuance of additional Voting Shares by the
Company, such Stockholder shall be so advised by the Company by written notice
following any required recalculation of the number of such Stockholder's
designees pursuant to Section 2.1(e) or Section 2.1(g), and the Agreement shall
continue to bind and enure to the benefit of such Stockholder for a period of
180 days following such Stockholder's receipt of such notice and will continue
to bind and enure to the benefit of such Stockholder thereafter in the event
that such Stockholder (and/or its Permitted Transferees) acquires, during such
180-day period, a sufficient number of Voting Shares such that its Applicable
Percentage equals or exceeds the applicable percentage set forth above.
SECTION 8.3 Best Efforts. Each of SPE and USI covenant and agree with the
other to use its best efforts to cause the Company to fulfill the Company's
obligations under Article II and Article III of this Agreement. If either SPE or
USI fails to use its best efforts to cause the Company to fulfill in any
material respect any of the Company's obligations under Article II or Article
III, such Stockholder shall immediately cease to have any rights under the
provisions of such Articles, provided, however, that if such failure is
reasonably capable of being cured, such Stockholder shall retain its rights
under such provisions if such failure is cured within 30 days after such
Stockholder has received written notice of such failure.
SECTION 8.4 Ownership Information. (a) For purposes of this Agreement, a
Stockholder, in determining the amount of outstanding Voting Shares, may rely
upon information set forth in the most recent quarterly or annual report, and
any current report subsequent thereto, filed by the Company with the Commission,
unless the Company shall have updated such information by delivery of notice to
all Stockholders.
(b) Upon the reasonable request of the Company or any Stockholder, each
Stockholder shall deliver to the Company and each other Stockholder a notice
specifying the amount of each class of Voting Shares then beneficially owned by
such Stockholder, its Permitted Transferees and its Affiliates. The Company and
the other Stockholders shall be entitled to rely on the most recently delivered
such notice for all purposes of this Agreement, unless such Stockholder shall
have updated such information by delivery of a subsequent notice (including a
notice delivered pursuant to Section 4.6).
Page 70 of 78
<PAGE>
SECTION 8.5 Further Assurances. At any time or from time to time after the
date hereof, the parties agree to cooperate with each other, and at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
SECTION 8.6 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or any Stockholder unless such modification,
amendment or waiver is approved in writing by the Company and each Stockholder
whose rights or obligations hereunder are affected by such modification,
amendment or waiver, provided that (i) the Company shall not agree to any of the
foregoing without the prior written consent of SPE and USI and (ii) unless
approved by a Determination of the Independent Directors, the Company shall not
agree to any amendment, modification or waiver of any provision contained in
Section 2.1 (other than Section 2.1(c) and 2.1(k)), Sections 2.6 and 2.7,
clauses (v) and (vi) of Section 3.1(a), Sections 3.3, 3.4, 4.1, 4.2, 4.5(b), 6.1
and 8.2 or this Section 8.6. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
SECTION 8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
SECTION 8.8 Entire Agreement. Except as otherwise expressly set forth
herein, this document and the other documents dated the date hereof embody the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, that may
have related to the subject matter hereof in any way. Without limiting the
generality of the foregoing, to the extent that any of the terms hereof are
inconsistent with the rights or obligations of any Stockholder under any other
agreement with the Company, the terms of this Agreement shall govern.
SECTION 8.9 Successors and Assigns. Except as provided in Section 4.5,
neither this Agreement nor any of the rights or obligations under this Agreement
shall be assigned, in whole or in part (except by operation of law pursuant to a
merger whose purpose is not to avoid the provisions of this Agreement), by any
party without the prior written consent of the other parties hereto. Subject to
the foregoing, this Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
SECTION 8.10 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
SECTION 8.11 Remedies. (a) Each party hereto acknowledges that money
damages would not be an adequate remedy in the event that any of the covenants
or agreements in this Agreement are not performed in accordance with its terms,
and it is therefore agreed that, subject to the provisions of Section 3.3, in
addition to and without limiting any other remedy or right it may have, the
non-breaching party will have the right to an injunction, temporary restraining
order or other equitable relief in any court of competent jurisdiction enjoining
any such breach and enforcing specifically the terms and provisions hereof.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
Page 71 of 78
<PAGE>
(c) In the event that either SPE or USI (the "Aggrieved Stockholder") has a
good faith belief that any other Stockholder or the Company is likely to breach
in any material respect or has breached in any material respect any of its
obligations under Sections 2.1, 2.4, 2.5, 2.6, 2.7, 3.1, 3.2 or 3.5 or Article
VI of this Agreement, upon notice of such belief from the Aggrieved Stockholder,
such Stockholder and/or the Company, as the case may be, agrees to immediately
cease taking any action to the extent such Aggrieved Stockholder believes in
good faith that such action breaches or would breach any of the foregoing
provisions of this Agreement in any material respect. Upon receipt of notice of
the Aggrieved Stockholder's belief and until the dispute is resolved, the
Company and each of the Stockholders agree not to take any action that would
facilitate any such breach and to 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 parties agree that the
Aggrieved Stockholder shall have the right to a temporary restraining order from
any court of competent jurisdiction enjoining any such breach or potential
breach (or otherwise preserving the status quo) pending decision as to whether
the Aggrieved Stockholder's belief is correct by, at the Aggrieved Stockholder's
election, the court or the Arbitrator. If the Aggrieved Stockholder seeks a
judicial determination of such dispute, the parties agree that the court should
schedule a hearing to resolve the dispute on one day's notice. If the court or
the Arbitrator, as applicable, shall determine that there is a breach or
potential breach, the parties agree that the court or the Arbitrator, as
applicable, should impose a remedy that would put the Aggrieved Stockholder in
the same position it would have been in had there been no such dispute. If any
dispute under this Section has been previously determined by a court or the
Arbitrator adversely against any party, in connection with any subsequent
dispute that is determined by a court or an Arbitrator adversely against such
party, such party shall bear all costs and expenses of the Arbitrator or the
court, as the case may be, in connection with such subsequent dispute.
(d) In the event that SPE or the Company shall breach in any material
respect any of their respective obligations to USI under this Agreement, at the
request of USI, SPE and the Company shall use their respective best efforts to
amend the Certificate as soon as practicable, including calling a special
meeting of stockholders or soliciting written consents from stockholders, so as
to authorize a class of common stock of the Company which would be issued by the
Company to USI and its Permitted Transferees on a one-for-one basis in exchange
for all the Shares then beneficially owned by them. Such class of common stock
would be identical in all respects to the existing Common Stock, except that (i)
the consent rights contained in Article III would be incorporated in such class
and SPE and USI would cease to have any consent rights under this Agreement,
(ii) such class would entitle the holders thereof to proportionate Board
representation on the same basis that USI is entitled to Board representation
pursuant to Article II and (iii) shares of such class could be converted from
time to time at the holder's election into Common Stock on a share-for-share
basis. In addition, USI and its Affiliates will have the right to convert any
Common Stock from time to time into shares of such class on a share-for-share
basis.
SECTION 8.12 Notices. Any notice, request, claim, demand or other
communication under this Agreement shall be in writing, shall be either
personally delivered or sent by reputable overnight courier service (charges
prepaid) to the address for such Person set forth below or such other address as
the recipient party has specified by prior written notice to the other parties
hereto and shall be deemed to have been given hereunder when delivered
personally or one day after deposit with a reputable overnight courier service.
If to the Company:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: John C. McBride, Jr.
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: David Golay
Page 72 of 78
<PAGE>
If to SPE:
Sony Pictures Entertainment
10202 West Washington Boulevard
Culver City, CA 90232
Attention: Ronald N. Jacobi
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: Morton A. Pierce
If to USI:
Universal Studios, Inc.
100 Universal City Plaza
Universal City, CA 91608
Attention: Brian C. Mulligan
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Attention: John G. Finley
If to the Trust:
Charles Rosner Bronfman Family Trust
c/o Claridge Inc.
1170 Peel Street, 8th Floor
Montreal, Quebec, Canada H3B 4P2
Attention: Robert Rabinovitch
with a copy to:
Goodman Phillips & Vineberg
1501 McGill College Avenue, 26th Floor
Montreal, Quebec, Canada H3A 3N9
Attention: Michael D. Vineberg
SECTION 8.13. Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflicts of law. Except as
provided in Section 3.3, each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the non-exclusive jurisdiction of the
courts of the State of New York and of the United States of America, in each
case located in the County of New York, for any action, proceeding or
investigation in any court or before any governmental authority ("Litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby and further agrees that service of any process, summons, notice or
document by U.S. or Canadian registered mail to its respective address set forth
in this Agreement shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of New York or the United States of America,
in each case located in the County of New York, and hereby unconditionally
waives and agrees not to plead or claim in any such court that any such
Litigation brought in any such court has been brought in an inconvenient forum.
Each of the parties irrevocably and unconditionally waives, to the fullest
extent permitted by applicable law, any and all rights to trial by jury in
connection with any Litigation arising out of or relating to this Agreement or
the transactions contemplated hereby.
Page 73 of 78
<PAGE>
SECTION 8.14 Legends. (a) Upon original issuance thereof, and until such
time as the same is no longer required hereunder or under the applicable
requirements of the Securities Act or applicable state securities or "blue sky"
laws, any certificate issued representing any Shares held by a Stock-holder or
any Permitted Transferee (including all certificates issued upon Transfer
(including to any Third Party Transferee who has entered into an agreement
contemplated by Section 4.5(c)) or in exchange thereof or in substitution
therefor) shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
AGREEMENTS AND RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 30, 1997 AMONG SONY
PICTURES ENTERTAINMENT, INC., UNIVERSAL STUDIOS, INC., CHARLES ROSNER
BRONFMAN FAMILY TRUST, THE OTHER STOCKHOLDERS PARTY THERETO AND LTM
HOLDINGS, INC. (THE "COMPANY"), COPIES OF WHICH AGREEMENT ARE ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) The certificates representing the Shares (including any certificate
issued upon Transfer (including to any Third Party Transferee who has entered
into an agreement contemplated by Section 4.5(c)) or in exchange thereof or in
substitution therefor) shall also bear any legend required under any applicable
state securities or "blue sky" laws.
(c) The Company may make a notation on its records or give instructions to
any transfer agents or registrars for the Voting Shares in order to implement
the restrictions on Transfer set forth in Article IV.
(d) In connection with any Transfer of Voting Shares, the transferor shall
provide the Company with such customary certificates, opinions and other
documents as the Company may reasonably request to assure that such Transfer
complies fully with applicable securities and other laws.
(e) The Company shall not incur any liability for any delay in recognizing
any Transfer of Voting Shares if the Company in good faith reasonably believes
that such Transfer may have been or would be in violation in any material
respect of the provisions of the Securities Act, applicable state securities or
"blue sky" laws, or this Agreement.
(f) After such time as any of the legends described by this Section 8.14
are no longer required on any certificate or certificates representing the
Voting Shares, upon the request of any Stockholder, the Company will cause such
Stockholder's certificate or certificates to be exchanged for a certificate or
certificates that do not bear such legend.
SECTION 8.15 Interpretation. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
SECTION 8.16 Agents for Stockholders. (a) The Trust shall act as the sole
agent for each member of the Claridge Group and its Permitted Transferees (if
any) and shall be authorized to exercise all rights of the members of the
Claridge Group and such Permitted Transferees hereunder except that the
designation of Claridge Directors shall be effected by such party as may be
designed in writing at any time or from time to time by the members of the
Claridge Group. The Trust shall have sole power and authority to take any action
on behalf of the members of the Claridge Group and such Permitted Transferees
pursuant to this Agreement, including delivering any notice or granting any
waiver or consent hereunder and the other parties hereto shall be entitled to
rely on any action taken by the Trust as being taken on behalf of all members of
the Claridge Group and Permitted Transferees. The rights of the members of the
Claridge Group and such Permitted Transferees under this Agreement shall be
exercised only by the Trust on behalf of such members and such Permitted
Transferees and no such members or Permitted Transferees shall be separately
entitled to exercise any such rights. Any notice required to be delivered
hereunder to any such member or Permitted Transferee shall be delivered to the
Trust.
(b) SPE shall act as the sole agent for each of its Permitted Transferees
(if any) and shall be authorized to exercise all rights of such Permitted
Trans-
Page 74 of 78
<PAGE>
ferees hereunder. SPE shall have sole power and authority to take any action on
behalf of its Permitted Transferees pursuant to this Agreement, including
delivering any, notice or granting any waiver or consent hereunder, and the
other parties hereto shall be entitled to rely on any action taken by SPE as
being taken on behalf of such Permitted Transferees. The rights of such
Permitted Transferees under this Agreement shall be exercised only by SPE on
behalf of such Permitted Transferees and no such Permitted Transferees shall be
separately entitled to exercise any such rights. Any notice required to be
delivered hereunder to any such Permitted Transferee shall be delivered to SPE.
(c) USI shall act as the sole agent for each of its Permitted Transferees
(if any) and shall be authorized to exercise all rights of such Permitted
Transferees hereunder. USI shall have sole power and authority to take any
action on behalf of its Permitted Transferees pursuant to this Agreement,
including delivering any notice or granting any waiver or consent hereunder, and
the other parties hereto shall be entitled to rely on any action taken by USI as
being taken on behalf of such Permitted Transferees. The rights of such
Permitted Transferees under this Agreement shall be exercised only by USI on
behalf of such Permitted Transferees and no such Permitted Transferees shall be
separately entitled to exercise any such rights. Any notice required to be
delivered hereunder to any such Permitted Transferee shall be delivered to USI.
SECTION 8.17 Additional Agreement. The Company agrees to comply with the
provisions set forth in Exhibit C relating to the use of sound systems in
theaters.
SECTION 8.18 Effectiveness. This Agreement shall become effective upon
consummation of the Transaction and prior thereto shall be of no force or
effect, provided that the provisions of Section 3.3(d) shall be effective as of
the date of their Agreement. If the Master Agreement shall be terminated in
accordance with its terms, this Agreement shall automatically be deemed to have
been terminated and shall thereafter be of no force or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first written above.
LTM HOLDINGS, INC.
By: /s/ John C. Mcbride, Jr.
Name: John C. McBride, Jr.
Title: Senior Vice President
and General Counsel
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 C. Mulligan
Name: Brian C. Mulligan
Title: Senior Vice President
Page 75 of 78
<PAGE>
CHARLES ROSNER BRONFMAN FAMILY TRUST
By: /s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By: /s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
CHARLES R. BRONFMAN
BY: /s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By: /s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
E. LEO KOLBER
By: /s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By: /s/Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
ARNOLD M. LUDWICK
By: /s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By: /s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
PHYLLIS LAMBERT FOUNDATION
By: /s/ ROBERT RABINOVITCH
Name: Robert Rabinovitch
Title: Authorized Representative
Page 76 of 78
<PAGE>
By: /s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
3096475 CANADA INC.
By: /s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By: /s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
Page 77 of 78
<PAGE>
SCHEDULE I
Applicable Percentage Number of Directors
- --------------------- -------------------
equals or exceeds 6.25% and less than 9.375% 1
equals or exceeds 9.375% and less than 15.625% 2
equals or exceeds 15.625% and less than 21.875% 3
equals or exceeds 21.875% and less than 28.125% 4
equals or exceeds 28.125% and less than 34.375% 5
equals or exceeds 34.375% and less than 40.625% 6
equals or exceeds 40.625% and less than 46.875% 7
equals or exceeds 46.875% and less than 53.125% 8
equals or exceeds 53.125% and less than 59.375% 9
equals or exceeds 59.375% and less than 65.625% 10
equals or exceeds 65.625% and less than 71.875% 11
equals or exceeds 71.875% and less than 78.125% 12
equals or exceeds 78.125% and less than 84.375% 13
84.375% and greater 14
