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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Loews Cineplex Entertainment Corporation
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
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[LOGO OF LOEWS CINEPLEX]
May 25, 2000
To our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders, which will be held at 10:00 a.m., Thursday, June
22, 2000 at Loews 42nd Street E-Walk Theatre, 247 West 42nd
Street, New York, New York 10036.
. You will find a Notice of Meeting on the next page that
identifies two proposals for your action.
. At the meeting we will report on Loews Cineplex's fiscal
year 2000 business results and on other matters of
current interest to our stockholders.
. If you plan to attend the meeting in New York, please
check the appropriate box on your proxy card and detach
the admission ticket from your proxy card for
presentation at the meeting.
We encourage you to read this Proxy Statement and sign and
return your proxy card in the enclosed envelope as soon as
possible so that your shares will be represented at the meeting.
Sincerely,
/s/ Lawrence J. Ruisi
Lawrence J. Ruisi
President and Chief Executive Officer
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LOEWS CINEPLEX ENTERTAINMENT CORPORATION
711 FIFTH AVENUE
NEW YORK, NY 10022
----------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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<TABLE>
<S> <C>
Time............................. 10:00 a.m. on Thursday, June 22, 2000
Place............................ Loews 42nd Street E-Walk Theatre, 247 West 42nd Street,
New York, New York 10036
Proposals to Vote On............. . Re-elect the 16 members of the Board of Directors,
each for a one year term.
. Approve PricewaterhouseCoopers LLP as our
independent auditors for the 2001 fiscal year.
. Transact any other business properly brought before
the Annual Meeting.
Recommendation................... Your Board of Directors recommends a vote "for" both of
the proposals.
Who Can Vote..................... You can vote if you were a stockholder of record on May
15, 2000.
Annual Report Is Enclosed........ Our 2000 Annual Report to Stockholders, which is not a
part of the proxy soliciting material, is enclosed.
How You Can Vote................. Please vote in one of these ways:
. Use the toll-free telephone number shown on your
proxy card;
. Through the Internet following the instructions on
your proxy card; or
. Mark, sign, date and promptly return the enclosed
proxy card in the enclosed postage-paid envelope.
Any proxy may be revoked at any time prior to its
exercise at the Annual Meeting.
</TABLE>
By order of the Board of Directors,
/s/ Mindy Tucker
Mindy Tucker
Secretary
New York, New York
May 25, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Proxy Statement............................................................ 1
Annual Meeting Admission................................................. 1
Stockholders Entitled to Vote............................................ 1
Proxies.................................................................. 1
Vote by Telephone........................................................ 1
Vote through the Internet................................................ 1
Vote by Mail............................................................. 2
Voting at the Annual Meeting............................................. 2
Voting on Other Matters.................................................. 2
List of Stockholders..................................................... 2
Required Vote............................................................ 2
Multiple Copies of Annual Report to Stockholders......................... 2
Cost of Proxy Solicitation............................................... 3
Stockholder Account Maintenance.......................................... 3
Proposals to be Voted On................................................. 3
Proposal 1--Re-election of Directors....................................... 3
Board and Committee Membership........................................... 8
The Executive Committee.................................................. 8
The Audit Committee...................................................... 8
The Compensation Committee............................................... 9
The Nominating Committee................................................. 9
The Stock Option Committee............................................... 9
Compensation of Directors................................................ 9
Indemnification.......................................................... 9
Proposal 2--Approval of Auditors........................................... 10
Executive Compensation..................................................... 11
Summary Compensation Table............................................... 11
Option Grants in the Last Fiscal Year.................................... 12
Aggregate Option Exercises and Fiscal Year-End Values.................... 12
Employment Agreements.................................................... 12
Report of the Compensation and Stock Option Committees..................... 14
Overview................................................................. 14
Evaluation of Executive Performance...................................... 14
Total Compensation....................................................... 15
Salaries................................................................. 15
Bonuses.................................................................. 16
Long-Term Incentive Compensation......................................... 16
Tax Policy............................................................... 16
Compensation Committee Interlocks and Insider Participation.............. 16
Glossary................................................................. 16
Performance Graphs......................................................... 17
Related Transactions....................................................... 19
Stock Ownership............................................................ 21
Section 16(a) Beneficial Ownership Reporting Compliance.................. 23
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Stockholders Agreement..................................................... 23
The Board of Directors................................................... 23
Consent Rights........................................................... 25
Approval of Certain Combinations by Disinterested Directors.............. 26
Restrictions on Transfers of Loews Cineplex Stock........................ 26
Standstill Agreements.................................................... 26
Registration Rights...................................................... 28
Equity Purchase Rights................................................... 28
Assignments of Rights and Obligations to Transferees..................... 28
Certain Remedies......................................................... 28
Termination.............................................................. 29
Submission of Stockholder Proposals........................................ 29
</TABLE>
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Loews Cineplex Entertainment Corporation
711 Fifth Avenue
New York, New York 10022
Proxy Statement
- --------------------------------------------------------------------------------
These proxy materials are delivered in connection with the solicitation by
the Board of Directors of Loews Cineplex Entertainment Corporation ("Loews
Cineplex," "we," "us," or "our") of proxies to be voted at our 2000 Annual
Meeting of Stockholders and at any adjournment or postponement.
You are invited to attend our Annual Meeting of Stockholders on June 22,
2000, beginning at 10:00 a.m. The meeting will be held at Loews 42nd Street E-
Walk Theatre, 247 West 42nd Street, New York, New York 10036. Stockholders will
be admitted beginning at 9:00 a.m.
This Proxy Statement, proxy card and voting instructions are being mailed
starting May 25, 2000.
Annual Meeting Admission
An admission ticket, which is required for entry to the Annual Meeting, is
attached to your proxy card. If you plan to attend the meeting, please keep the
admission ticket and bring it to the meeting.
If your shares are held in the name of a bank, broker or other holder of
record and you plan to attend the meeting, you must show proof of ownership of
Loews Cineplex common stock at the door, such as a bank or brokerage account
statement.
Stockholders Entitled to Vote
Holders of record of Loews Cineplex common shares at the close of business on
May 15, 2000 are entitled to receive this notice and to vote their shares at
the Annual Meeting. Holders of Class B non-voting common shares are not
entitled to vote. As of the record date, there were 58,538,646 common shares
and 84,000 Class B non-voting common shares outstanding. Each common share is
entitled to one vote on each matter properly brought before the Annual Meeting.
Proxies
Stockholders of record may vote their proxies by telephone, through the
Internet or by mail at any time before the Annual Meeting. A toll-free
telephone number and instructions on how to vote through the Internet are
included on your proxy card. If you choose to vote by mail, a postage-paid
envelope is provided.
Proxies may be revoked at any time before they are exercised by:
. written notice to the Secretary of Loews Cineplex,
. timely delivery of a valid, later-dated proxy, or
. voting by ballot at the Annual Meeting.
Choose one of the following four voting methods to cast your vote.
Vote by Telephone
You can vote your shares by telephone by calling 1-800-840-1208. Telephone
voting is available 24 hours a day. Easy-to-follow voice prompts allow you to
vote your shares and confirm that your voting instructions have been properly
recorded. Our telephone voting procedures are designed to authenticate
stockholders by using individual control numbers. Your control number appears
on your enclosed proxy card. If you vote by telephone you can also give
instructions for us to discontinue future duplicate mailings of the Annual
Report if more than one copy was sent to your address this year. If you vote by
telephone you do not need to return your proxy card.
Vote through the Internet
You can vote your shares via the Internet at http://www.eproxy.com/lcp by
following the instructions on your proxy card. Voting via the
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Internet is available 24 hours a day. Easy to follow instructions allow you to
vote your shares and confirm that your voting instructions have been properly
recorded. If you vote via the Internet you can also give instructions for us to
discontinue future duplicate mailings of the Annual Report if more than one
copy was sent to your address this year. If you vote via the Internet you do
not need to return your proxy card.
Vote by Mail
If you choose to vote by mail, simply mark your proxy card, date and sign it,
and return it to ChaseMellon Shareholder Services, L.L.C., our primary transfer
agent, in the postage-paid envelope provided. If you wish to discontinue future
duplicate mailings of the Annual Report, check the box provided on the proxy
card.
Voting at the Annual Meeting
The method by which you vote now will in no way limit your right to vote at
the Annual Meeting if you later decide to attend in person. If your shares are
held in the name of a bank, broker or other holder of record, you must obtain a
proxy, executed in your favor, from the holder of record, to be able to vote at
the Annual Meeting.
All shares that have been properly voted, whether by telephone, Internet or
mail, and not revoked, will be voted at the Annual Meeting in accordance with
your instructions. If you sign your proxy card but do not give voting
instructions, the shares represented by that proxy will be voted as recommended
by the Board of Directors.
Voting on Other Matters
If any other matters are properly presented at the Annual Meeting for
consideration, the persons named in the enclosed form of proxy will have the
discretion to vote on those matters for you. At the date this proxy statement
went to press, we do not know of any other matter to be raised at the Annual
Meeting.
List of Stockholders
A list of stockholders entitled to vote at the Annual Meeting will be made
available at the Annual Meeting and for ten days prior to the meeting, between
the hours of 10:00 a.m. and 4:30 p.m., at our offices at 711 Fifth Avenue, New
York, New York 10022, by contacting the Secretary of Loews Cineplex.
Required Vote
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote at the Annual
Meeting is necessary to constitute a quorum. Abstentions and broker "non-votes"
are counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
A plurality of the votes cast is required for the election of directors.
Abstentions and broker "non-votes" are not counted as votes cast for purposes
of the election of directors.
The affirmative vote of a majority of the shares present or represented by
proxy at the Annual Meeting is required to approve the appointment of
PricewaterhouseCoopers LLP as our independent auditors for the 2001 fiscal
year. Since abstentions and broker "non-votes" are counted as shares present
and entitled to vote at the Annual Meeting, an abstention or broker "non-vote"
will have the same effect as a vote "AGAINST" the proposal.
Sony Pictures Entertainment Inc. and Universal Studios, Inc., who
collectively own a majority of our voting common stock, have agreed to vote for
each of our nominees to the Board of Directors and in favor of the appointment
of PricewaterhouseCoopers LLP as our independent auditors for the 2001 fiscal
year. Should they vote as agreed, election of our nominees and passage of the
proposals are assured.
Multiple Copies of Annual Report to Stockholders
Our 2000 Annual Report to Stockholders has been mailed to our stockholders.
If more than one copy of the Annual Report was sent to your address, we will
discontinue the mailing of reports on the
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accounts you select if you mark the designated box on the appropriate proxy
card(s), or follow the relevant prompts or instructions when you vote by
telephone or via the Internet. At least one account must continue to receive
the Annual Report.
Mailing of dividends, proxy materials and special notices will not be
affected by your election to discontinue future duplicate mailings of the
Annual Report. To discontinue or resume the mailing of an Annual Report to an
account, call our Stockholder Services toll-free number, 1-800-370-1163.
If you own common shares through a bank, broker or other nominee and receive
more than one Annual Report, contact the holder of record of those shares to
eliminate duplicate mailings.
Cost of Proxy Solicitation
We will pay the expenses of soliciting proxies. Proxies may be solicited on
our behalf by directors, officers or employees in person or by telephone,
electronic transmission, facsimile transmission or by telegram.
Stockholder Account Maintenance
Our primary transfer agent is ChaseMellon Shareholder Services, L.L.C. All
communications concerning accounts of stockholders of record, including address
changes, name changes, inquiries as to requirements to transfer common shares
and similar issues can be handled by calling our Stockholder Services toll-free
number, 1-800-370-1163 or by contacting ChaseMellon's web site at
www.chasemellon.com. For other information about Loews Cineplex, you can visit
our web site at www.loewscineplex.com.
Proposals to be Voted On
. Re-elect the 16 members of the Board of Directors, each for a one year term.
. Approve PricewaterhouseCoopers LLP as our independent auditors for the 2001
fiscal year.
. Transact any other business properly brought before the Annual Meeting.
A more detailed discussion of each of the proposals is set forth in the
following pages.
Proposal 1 -- Re-Election of Directors
- --------------------------------------------------------------------------------
The first proposal on the agenda for the Annual Meeting is the re-election of
16 directors to hold office until the next Annual Meeting or until their
successors are elected or appointed.
The Board of Directors currently consists of 16 directors whose terms expire
at the Annual Meeting. All of our nominees are currently serving as directors.
The persons named in the enclosed proxy intend to vote the proxy for the re-
election of each of the 16 nominees, unless you indicate on the proxy card that
your vote should be withheld from any or all of such nominees. If you are
voting by telephone, you will be instructed how to withhold your vote from some
or all of such nominees.
Loews Cineplex is party to a Stockholders Agreement with Sony Pictures,
Universal and the Charles Rosner Bronfman Discretionary Trust and related
stockholders (we refer to this trust and its related stockholders as the
"Claridge Group"). Under the Stockholders Agreement, Sony Pictures, Universal
and the Claridge Group have the right to designate six nominees, four nominees
and one nominee to the Board, respectively. The five other nominees are
designated by the Board's nominating committee. The Stockholders Agreement
requires two of these nominees to come from our top management (so called
"management directors"). The remaining three are required to be independent of
us and of Sony Pictures, Universal and the Claridge Group (so called
"independent directors").
Nominees for re-election this year are George A. Cohon, Nora Ephron, Mel
Harris, Andrew Hauptman, Ronald N. Jacobi, Allen Karp, Kenneth Lemberger, Ron
Meyer, Yuki Nozoe, Karen Randall, Lawrence J. Ruisi, Hellene Runtagh, Bedi A.
Singh, Howard Stringer, William A. Sutman and Mortimer B. Zuckerman.
3
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Each of Sony Pictures, Universal and the Claridge Group has agreed to vote
their shares to cause the nominees of Sony Pictures, Universal and the Claridge
Group and each of the independent directors and management directors designated
by the nominating committee to be elected to the Board. Since Sony Pictures,
Universal and the Claridge Group own in excess of 72% of our voting stock, the
election of these nominees is assured, if they vote as agreed.
The Board of Directors recommends a vote for the election of these nominees
as directors.
We expect each nominee for election as a director to be able to serve if
elected. If any nominee is unable to serve, proxies will be voted in favor of
the remainder of those nominated and for substitute nominees who qualify under
our Stockholders Agreement.
The principal occupation and certain other information about the nominees to
the Board are set forth on the following pages.
Name, Age and Position with Principal Occupation, Business Experience
Loews Cineplex and Directorships
George A. Cohon................63 Mr. Cohon has been Senior Chairman of the
Executive Committee of McDonald's
. Director (since May 1998) Restaurants of Canada Limited and Senior
Chairman of McDonald's in Russia since
1992. Mr. Cohon also serves as a director
of The Royal Bank of Canada and Astral
Communications Inc. Additionally,
Mr. Cohon is an officer of the Order of
Canada.
Mr. Cohon is an independent director
nominee.
Nora Ephron....................59 Ms. Ephron is a writer, director and
producer of motion pictures. Ms. Ephron's
. Director (since October 1998) directing credits include "Hanging Up",
"You've Got Mail", "This is My Life",
"Sleepless in Seattle", "Mixed Nuts" and
"Michael". Her screen-writing credits
include "Hanging Up", "You've Got Mail",
"Sleepless in Seattle", "When Harry Met
Sally. . .", "Silkwood", "Heartburn",
"Cookie", "My Blue Heaven", "This is My
Life", "Mixed Nuts" and "Michael". Ms.
Ephron has also written a number of books
including "Heartburn", "Crazy Salad" and
"Scribble, Scribble". Ms. Ephron was
formerly a journalist, beginning as a
newspaper reporter for the New York Post
and then as a magazine writer for, among
others, Esquire, the New York Times
Magazine and New York Magazine.
Ms. Ephron is an independent director
nominee.
Mel Harris.....................57 Mr. Harris has been Co-President and
Chief Operating Officer of Sony Pictures
. Director (since January 2000) since September 1999. From September 1995
through August 1999 Mr. Harris served as
a Media Consultant to Sony Pictures. From
February 1992 to August 1995, Mr. Harris
was President of Sony Pictures
Entertainment Television Group.
Mr. Harris is a nominee of Sony Pictures.
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Name, Age and Position with Principal Occupation, Business Experience
Loews Cineplex and Directorships
Andrew Hauptman................31 Mr. Hauptman has been President and Chief
Executive Officer of Andell Limited, a
. Director (since March 2000) London-based private investment company,
since 1998. From 1996 to 1998, Mr.
Hauptman served as Director of Strategic
Planning & Business Development for MCA
Holding (UK) Ltd. Mr. Hauptman also owns
Andell Entertainment, a film production
company and has been President and a
producer of feature films for that
company since 1988. Mr. Hauptman is also
a director of Koor Industries Ltd., an
Israeli-based industrial holding company
involved in telecommunications and
defense electronics.
Mr. Hauptman is a nominee of the Claridge
Group.
Ronald N. Jacobi...............52 Mr. Jacobi has been Executive Vice
President of Sony Pictures since
. Director (since May 1999) September 1997, Corporate Secretary since
February 1997 and General Counsel for the
past twelve years. In this capacity, he
oversees all legal, regulatory, labor
relations and music business matters
relating to Sony Pictures and its
businesses.
Mr. Jacobi is a nominee of Sony Pictures.
Allen Karp.....................59 Mr. Karp has served as Chairman and Chief
Executive Officer of Cineplex Odeon
. Chairman and Chief Executive Canada since May 1998. From May 1993
Officer of Cineplex Odeon until May 1998, Mr. Karp served as
Canada President and Chief Executive Officer of
. Director (since May 1998) Cineplex Odeon Corporation.
Mr. Karp is a management director
nominee.
Kenneth Lemberger..............53 Mr. Lemberger has been President of the
Columbia TriStar Motion Picture Group
. Director (since May 1998) since January 1997. From 1994 to January
1997, he was Corporate Executive Vice
President of Sony Pictures.
Mr. Lemberger is a nominee of Sony
Pictures.
Ron Meyer......................55 Mr. Meyer has been President and Chief
Operating Officer of Universal since
. Director (since May 1998) August 1, 1995. Prior to August 1995, he
served as President of Creative Artists
Agency, Inc., a talent agency that he co-
founded in 1975.
Mr. Meyer is a nominee of Universal.
5
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Name, Age and Position with Principal Occupation, Business Experience
Loews Cineplex and Directorships
Yuki Nozoe.....................49 Mr. Nozoe has been Co-President of Sony
Pictures since September 1999. From
. Director (since May 1998) October 1996 to August 1999, Mr. Nozoe
was Executive Vice President of Sony
Pictures. From February 1996 to October
1996, Mr. Nozoe served as Executive Vice
President of Sony Corporation of America.
From 1993 to February 1996, he was Senior
Vice President of Marketing for Sony
Electronics, Inc.
Mr. Nozoe is a nominee of Sony Pictures.
Karen Randall..................46 Ms. Randall has been Executive Vice
President and General Counsel of
. Director (since May 1998) Universal since March 2000. From 1996 to
February 2000, Ms. Randall served as
Senior Vice President and General Counsel
of Universal. From 1991 to February 1996,
she was Managing Partner of the Los
Angeles office of Katten Muchin & Zavis.
Ms. Randall is a nominee of Universal.
Lawrence J. Ruisi..............52 Mr. Ruisi has been President and Chief
Executive Officer of Loews Cineplex since
. President May 1998. Mr. Ruisi was President of Sony
. Chief Executive Officer Retail Entertainment Inc. from September
. Director (since May 1998) 1994 until May 1998. Mr. Ruisi also
served as Executive Vice President of
Sony Pictures from 1990 through May 1998.
In these capacities, Mr. Ruisi was
responsible for oversight of Sony
Pictures' theatrical exhibition group,
including the Loews Theatres, Star
Theatres and Magic Johnson Theatres
circuits.
Mr. Ruisi is a management director
nominee.
Hellene Runtagh................51 Ms. Runtagh has been Executive Vice
President of Universal since January
. Director (since February 1999. In this capacity, she is
1999) responsible for overseeing the activities
of the Universal Studios Operations
Group, Universal Studios Consumer
Products Group, Universal Studios
Corporate Marketing and Sponsorship and
the Spencer Gift retail operations. In
addition, she oversees Universal's
worldwide information technology and is
responsible for Seagram's global sourcing
and real estate operations, as well as a
financial shared services initiative.
From February 1997 to December 1998, she
was Senior Vice President of Universal.
Prior to that time, Ms. Runtagh spent 25
years at General Electric, where she
served as President and Chief Executive
Officer of GE Information Services.
Ms. Runtagh is a nominee of Universal.
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Name, Age and Position with Principal Occupation, Business Experience
Loews Cineplex and Directorships
Bedi A. Singh..................40 Mr. Singh has been Chief Financial
Officer and Executive Vice President of
. Director (since May 2000) Sony Pictures since July 1999. From
December 1996 to June 1999, Mr. Singh
served as Senior Vice President of
Strategic Planning and Deputy Chief
Financial Officer for Fox Filmed
Entertainment. From 1994 to 1996, Mr.
Singh served in the Office of the
Chairman of News Corporation in Los
Angeles.
Bedi A. Singh is a nominee of Sony
Pictures.
Howard Stringer................58 Mr. Stringer has served as Chairman and
Chief Executive Officer of Sony
. Director (since May 1998) Corporation of America since May 1997 and
as Chairman of Sony Pictures since May
1998. Mr. Stringer has also served as
President of Sony Corporation of America
and as a member of the Boards of
Directors of Sony Corporation of America,
Sony Pictures, Sony Electronics and Sony
Music Entertainment, Inc. since May 1997.
From March 1995 to April 1997, Mr.
Stringer was Chairman and CEO of TELE-TV,
a company formed by Bell Atlantic, Nynex
and Pacific Telesis.
Mr. Stringer is a nominee of Sony
Pictures.
William A. Sutman..............38 Mr. Sutman has served as Senior Vice
President and Chief Financial Officer of
. Director (since November Universal since August 1999. Mr. Sutman
1999) served as Chief Financial Officer of
Universal Pictures from February 1999 to
August 1999. Mr. Sutman also served as
Vice President and Controller of
Universal from February 1997 to February
1999. From June 1994 to February 1997,
Mr. Sutman served as Vice President,
Audit for Joseph E. Seagram & Sons.
Mr. Sutman is a nominee of Universal.
Mortimer B. Zuckerman..........62 Mr. Zuckerman has served as Chairman of
Boston Properties, Inc. for over five
. Director (since May 1998) years. Mr. Zuckerman is also Chairman and
Editor-in-Chief of U.S. News and World
Report, Chairman of The Atlantic Monthly,
Chairman and Co-Publisher of the New York
Daily News, Chairman of Fast Company and
Chairman of Applied Graphics
Technologies.
Mr. Zuckerman is an independent director
nominee.
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Board and Committee Membership
During the 2000 fiscal year, the Board of Directors met six times. We
currently have five standing committees. Those committees are: an executive
committee, an audit committee, a compensation committee, a nominating committee
and a stock option committee. During fiscal 2000, the executive committee met
twice, the audit committee met three times, the compensation committee met
once, the nominating committee did not meet and the stock option committee met
once. The composition of our Board committees has to satisfy the requirements
of our Stockholders Agreement with Sony Pictures, Universal and the Claridge
Group and standards set by the NYSE and applicable law. Under our Stockholders
Agreement, our nominating committee must comprise two independent directors and
one designee of each of Sony Pictures and Universal. The Stockholders Agreement
also grants Sony Pictures and Universal the right to designate members to other
Board committees in proportion to their overall representation on our Board. We
have followed this rule of proportionate representation on our committees
except in the cases of the audit committee and the stock option committee
which, to meet NYSE and applicable legal requirements, have only independent
director members. The following table indicates which current directors are on
which committees:
<TABLE>
<CAPTION>
Name Executive Audit Compensation Nominating Stock Option
------------------------- --------- ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Mr. Cohon................ X X X
Ms. Ephron............... X
Mr. Harris............... X
Mr. Hauptman............. X X
Mr. Jacobi...............
Mr. Karp.................
Mr. Lemberger............ X
Mr. Meyer................ X
Mr. Nozoe................
Ms. Randall.............. X
Mr. Ruisi................ X
Ms. Runtagh..............
Mr. Singh................ X X
Mr. Stringer............. X
Mr. Sutman............... X
Mr. Zuckerman............ X X X
</TABLE>
Ms. Ephron, Ms. Runtagh and Messrs. Lemberger, Meyer and Stringer attended
less than 75 percent of the meetings of the Board and committees on which they
served (during the period they served) during the 2000 fiscal year.
The Executive Committee
The executive committee has all powers of the Board in the management of our
business and affairs whenever the Board is not in session, except for powers
that by law are reserved for the full Board. The reserved powers include:
. recommending amendments to our certificate of incorporation,
. adopting an agreement of merger or consolidation,
. recommending to our stockholders the sale, lease or exchange of all or
substantially all of our property and assets,
. recommending to our stockholders a dissolution of Loews Cineplex or a
revocation of a dissolution, and
. amending our by-laws.
The Audit Committee
The audit committee is responsible for:
. following the principles and concepts expressed in its charter,
. reviewing the scope of the audit of our annual financial statements,
. making recommendations as to the selection and services of our independent
auditors,
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. performing such other duties relating to the financial statements as the
committee deems necessary or desirable, including reviewing our internal
auditing procedures and controls, and
. performing such other matters as the Board may assign from time to time.
The Compensation Committee
The compensation committee is responsible for:
. supervising and making recommendations with respect to employee
compensation levels and our employee benefit plans,
. approving, upon recommendation from the President and CEO or other
appropriate officer, the terms of employment of all of our officers, and
. taking such other action as the committee deems necessary or desirable in
connection with its general oversight of our compensation policies and
practices.
The Nominating Committee
The nominating committee is responsible for nominating and approving nominees
for election to the Board to fill the positions reserved for our executive
officers and independent directors.
The nominating committee will not consider nominees recommended by
stockholders, other than Sony Pictures, Universal and the Claridge Group. Under
the terms of the Stockholders Agreement, Sony Pictures, Universal and the
Claridge Group are entitled to designate for nomination six, four and one
nominees to the Board, respectively.
The nominees proposed by the Committee this year are Messrs. Ruisi and Karp
as management directors and Mr. Cohon, Ms. Ephron and Mr. Zuckerman as
independent directors.
The Stock Option Committee
The stock option committee is responsible for administering the Stock
Incentive Plan, including all matters relating to the grant, exercise or
cancellation of stock options and other awards under the Stock Incentive Plan.
Compensation of Directors
None of the directors, other than the independent directors, receive
compensation from Loews Cineplex to serve in their capacity as directors.
Annual Cash Retainer Fees. Independent directors receive an annual cash
stipend of $30,000 per year.
Meeting Fees. Independent directors also receive a fee of $1,000 for each
Board or committee meeting they attend.
Stock Compensation. On April 14, 1999, we awarded to each of our independent
directors stock options to purchase 5,000 shares of our common stock.
Indemnification
As required under our by-laws, we indemnify our directors and officers to the
fullest extent permitted by law, so that they will serve free from undue
concern that they may incur personal liability on our behalf.
9
<PAGE>
Proposal 2 -- Approval of Auditors
- --------------------------------------------------------------------------------
The second proposal on the agenda for the Annual Meeting is the approval of
the Board's appointment of PricewaterhouseCoopers LLP as our independent
auditors.
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed PricewaterhouseCoopers LLP to serve as our independent auditors for
the 2001 fiscal year, subject to the approval of our stockholders.
PricewaterhouseCoopers LLP served as Loews Cineplex's auditors during the 2000
fiscal year.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting to answer appropriate questions. They will also have the opportunity to
make a statement if they desire to do so.
The Board of Directors recommends a vote for the approval of
PricewaterhouseCoopers LLP as our independent auditors for the 2001 fiscal
year.
10
<PAGE>
EXECUTIVE COMPENSATION
The table below shows the before-tax compensation for the last three years of
our five highest paid executive officers at the end of the 2000 fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------------- ------------
Securities
Name and Principal Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation/(1)/ Options Compensation
- ------------------------ ------ -------- -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... 2000 $750,000 $397,500/(2)/ $ -- -- $ 16,920/(3)/
Chief Executive Officer 1999 $746,026/(4)/ $500,000 $ 113,671/(5)/ -- $ 21,444
and President 1998 $728,875/(4)/ $500,000/(4)/ $1,796,933/(4)//(6)/ 900,000 $ 56,313
Allen Karp/(7)/......... 2000 $407,916 $145,300 -- -- $ 2,850,996/(8)/
Chairman and Chief 1999 $572,543 $653,527/(9)/ -- -- $ 6,407
Executive
Officer of Cineplex
Odeon
Travis E. Reid.......... 2000 $461,163 $175,000 -- 40,000 $ 13,737/(10)/
President, North 1999 $441,960 $225,000 -- -- $ 16,177
American 1998 $393,026 $225,000 -- 250,000 $ 12,116
Operations
J. Edward Shugrue/(11)/. 2000 $472,028 $145,000 $ 181,607/(12)/ 36,000 $ 11,330/(13)/
President, 1999 $320,109 $200,000 $ 12,918/(14)/ -- $ 20,400
International 1998 $264,999 $150,000 -- 225,000 --
Operations
John C. McBride, Jr..... 2000 $343,738 $ 75,000 -- 24,000 $ 11,362/(16)/
Senior Vice President 1999 $339,400 $125,000 $ 95,776/(15)/ -- $ 8,555
and General Counsel 1998 $ 39,162 $ 75,000 -- 150,000 --
</TABLE>
- ----------------------
/(1)/Unless otherwise indicated, with respect to any individual named in the
above table, the aggregate amount of perquisites and other personal
benefits, securities or property was less than the lesser of $50,000 or 10%
of the annual salary and bonus reported for the named executive officer.
/(2)/Includes a cost of living adjustment of $22,500 paid to Mr. Ruisi pursuant
to the terms of his employment agreement.
/(3)/Represents various amounts paid by us to Mr. Ruisi related to the
following: $4,800 contributed to our savings plan as a matching
contribution, $7,200 contributed to our savings plan as a profit sharing
contribution and $4,920 in premiums paid by us for life insurance.
/(4)/Includes amounts paid to Mr. Ruisi as President of Sony Retail
Entertainment, a position in which Mr. Ruisi's responsibilities included
oversight and direction of the Sony theatrical exhibition group.
/(5)/Represents amounts paid to Mr. Ruisi from the Sony Corporation of America
deferred compensation plan.
/(6)/Represents amounts paid to Mr. Ruisi in connection with the termination of
his employment agreement with Sony Retail Entertainment in satisfaction of
certain outstanding incentive award obligations under the agreement.
/(7)/Mr. Karp became an employee on May 14, 1998, upon the closing of the
Loews/Cineplex Odeon combination.
/(8)/Represents amounts paid by us to Mr. Karp related to the following: $9,087
contributed to the Cineplex savings plan for Canadian employees as a
matching contribution, $21,909 in premiums paid by Cineplex for life
insurance, and $2.82 million allocated by Cineplex to a special bonus fund
under the terms of his employment agreement discussed herein under the
description of his employment agreement.
/(9)/Includes a special bonus of $500,000 paid in connection with the
Loews/Cineplex Odeon combination.
/(10)/Represents amounts paid by us to Mr. Reid related to the following: $4,800
contributed to our savings plan as a matching contribution, $7,200
contributed to our savings plan as a profit sharing contribution and $737
in premiums paid by us for life insurance.
/(11)/Mr. Shugrue became an employee on August 1, 1998. Prior to this date, an
allocation of salary and benefits was charged to Loews Cineplex by a Sony
affiliate for services rendered by Mr. Shugrue to Loews Cineplex.
/(12)/Represents $11,257 paid to Mr. Shugrue for a car allowance and $170,389
paid to Mr. Shugrue for relocation expenses.
/(13)/Represents amounts paid by us to Mr. Shugrue related to the following:
$2,010 contributed to our savings plan as a matching contribution, $7,200
contributed to our savings plan as a profit sharing contribution and
$2,120 in premiums paid by us for life insurance.
/(14)/Represents amounts paid to Mr. Shugrue under the Sony Pictures deferred
compensation plan.
11
<PAGE>
/(15)/Represents $14,836 paid to Mr. McBride under the Sony Pictures deferred
compensation plan and $80,940 paid to Mr. McBride as relocation expenses.
/(16)/Represents amounts paid by us to Mr. McBride related to the following:
$3,221 contributed to our savings plan as a matching contribution, $7,200
contributed to our savings plan as a profit sharing contribution and $941
in premiums paid by us for life insurance.
Option Grants in the Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Percent of Annual Rates of
Number of Total Stock Price
Securities Options Exercise Appreciation for
Underlying Granted or Base Option Terms/(2)/
Options in Fiscal Price per Expiration -----------------
Name Granted Year share/(1)/ Date 5% 10%
- ------------------------ ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... -- -- -- -- -- --
Allen Karp.............. -- -- -- -- -- --
Travis Reid............. 40,000 2.0% $11.14 04/14/09 $280,728 $708,504
J. Edward Shugrue....... 36,000 1.8% $11.14 04/14/09 $252,655 $637,653
John C. McBride, Jr..... 24,000 1.2% $11.14 04/14/09 $168,436 $425,102
</TABLE>
- --------
/(1)/The per share option exercise prices represent the fair market value of our
common stock as of the date of the grant. The options vest and become
exercisable at the rate of one-fifth per year over a five year period from
the date of the grant and have a term of ten years. In addition, all
options granted become exercisable upon a change of control as defined in
the Stock Incentive Plan.
/(2)/The amounts shown in these columns are calculated at the 5% and 10% rates
set by the Securities and Exchange Commission and are not intended to
forecast future appreciation of our stock price.
None of the named executive officers were granted stock appreciation rights
during the last fiscal year.
Aggregate Option Exercises and Fiscal Year-End Values
<TABLE>
<CAPTION>
Number Of Securities
Underlying Unexercised Value Of Unexercised
Options at February 29, In-The-Money Options
Shares 2000 at February 29, 2000
Acquired Value ------------------------- -------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... -- -- 600,000 300,000 -- --
Allen Karp.............. -- -- 535,900 0 -- --
Travis Reid............. -- -- 50,000 240,000 -- --
J. Edward Shugrue....... -- -- 45,000 216,000 -- --
John C. McBride, Jr..... -- -- 30,000 144,000 -- --
</TABLE>
Employment Agreements
Mr. Ruisi. Effective May 14, 1998, we entered into an employment agreement
with Mr. Ruisi for a term of five years. During his employment term, Mr. Ruisi
will serve as President and CEO of Loews Cineplex and be a director of Loews
Cineplex and Cineplex Odeon Canada. Mr. Ruisi will be paid a base salary of
$750,000 each year. He will also be eligible to participate in all of our then-
operative employee benefit plans applicable generally to our senior executives.
Moreover, Mr. Ruisi will be eligible to receive an annual bonus targeted at
$500,000 plus a specified cost of living adjustment (but in any event not less
than $250,000 plus the specified cost of living adjustment). In addition to the
initial grant of options to purchase 900,000 shares of our common stock at an
exercise price of $13.125, on April 26, 2000 we granted Mr. Ruisi options to
purchase 100,000 shares of our common stock at an exercise price of $3.625. Mr.
Ruisi will also be granted at least an additional 100,000 options on May 13 of
each of the years 2001 and 2002.
If we terminate Mr. Ruisi's employment without cause, Mr. Ruisi will receive:
. his accrued but unpaid salary and benefits and a pro rata portion of the
minimum annual bonus for the year of termination, and
12
<PAGE>
. his base salary, employee benefits and minimum annual bonus that would have
been payable during the balance of his employment term.
In addition, any options awarded before his termination will vest immediately
and continue to be exercisable in accordance with our stock incentive plan for
up to twelve months from the termination date. In all other termination events,
Mr. Ruisi will receive his accrued but unpaid salary and benefits and a pro
rata portion of the Minimum Annual Bonus for the year of termination.
Mr. Karp. We entered into an employment agreement with Mr. Karp on August 18,
1999 which superseded his previous agreement. The agreement provides for an
employment term ending on January 1, 2002. The employment term will be extended
until January 1, 2004 unless either party notifies the other that it will not
be so extended. Under the agreement, through November 1, 1999, Mr. Karp
received a base salary of $550,000 per year and a one time bonus equal to
$129,167. Throughout the remainder of its term, the agreement provides for a
base salary of $200,000 and a target annual bonus of $50,000, during which time
Mr. Karp is required to spend 60% of each work week on the business and affairs
of Loews Cineplex and Cineplex Odeon Canada.
Pursuant to the terms of the agreement, we have agreed to pay a special bonus
for past services to Mr. Karp, the present value of the principal amount of
which, discounted at a rate of 8.875%, is approximately $2.8 million. During
fiscal 2000, $425,000 of the special bonus was loaned to Mr. Karp. The
remainder of the special bonus is payable to Mr. Karp upon the termination of
his employment for any reason. Additionally, upon the termination of Mr. Karp's
employment for any reason, all of the unvested stock options held by Mr. Karp
as of the termination date will become immediately vested and remain
exercisable until the expiration of each such option.
If Mr. Karp's employment is terminated by him by reason of our failure to
materially perform our obligations under the agreement or for other actions
which would constitute constructive dismissal, we will pay Mr. Karp an amount
equal to the base salary and target bonus he would have received through the
expiration of the agreement. Additionally, if Mr. Karp's employment terminates
for any reason other than by reason of a termination by us for actions
constituting cause, we will, for the two and one-half year period following the
termination:
. continue to provide Mr. Karp and his family with the benefits he was
receiving prior to his termination of employment, and
. continue to make contributions to the Cineplex Odeon retirement savings
plan on Mr. Karp's behalf.
Travis Reid. Mr. Reid entered into an amendment to his employment contract
with us, effective May 1, 1998. His contract has a term of three years, and we
have an option to extend the contract for an additional two years. Mr. Reid's
employment agreement provides for an annual base salary of $450,000, with
annual cost of living increases at the end of years one, two and four and a
$50,000 increase at the end of year three, should we exercise our option to
extend the agreement. Mr. Reid's agreement provides for an annual bonus
targeted at $200,000, which is subject each year to the attainment of goals to
be established by the Board.
J. Edward Shugrue. Mr. Shugrue entered into an employment agreement with us
effective December 15, 1997, to serve as President, International Operations
for a term of four years. We have a one year option to extend. Mr. Shugrue's
agreement provides for an annual base salary of $450,000, with annual cost of
living increases at the end of years one, two and four and a $50,000 increase
at the end of year three. The agreement also provides an annual bonus targeted
at $200,000, which is subject each year to the attainment of goals to be
established by the Board, and reimbursement of relocation and related
transportation expenses. Pursuant to his employment agreement, we made Mr.
Shugrue a full-recourse interest-bearing loan in the principal amount of $1.25
million.
John C. McBride, Jr. Mr. McBride entered into an employment agreement with us
effective January 19, 1998 for a term of five years. Mr. McBride's agreement
provides for an annual base salary of $325,000, with annual cost of living
increases at the end of years one, two and four and a $25,000 increase at the
end of year three. The agreement also provides for an annual bonus
13
<PAGE>
targeted at between $75,000 and $125,000, which is subject each year to the
attainment of performance goals to be established by the Board.
Under the employment agreements with Messrs. Reid, Shugrue and McBride,
during their respective employment terms, they are also entitled to participate
in all employee benefit plans applicable generally to our senior executives.
They also receive car allowances. If we terminate the employment of any of
Messrs. Reid, Shugrue or McBride without cause prior to the expiration of their
respective terms, the executive will receive his base salary and his target
bonus through such date, reduced by any compensation paid or payable to him in
respect of subsequent employment for the same period.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
Overview
Loews Cineplex became a publicly traded company on May 14, 1998 when Sony
Pictures combined its Loews Theatres division with Cineplex Odeon. The
combination culminated from the shared vision of Sony Pictures, Cineplex Odeon
and Cineplex's two principal stockholders, Universal Studios and the Claridge
Group, creating the world's largest publicly traded motion picture exhibition
company in terms of revenues and cash flows.
A key element of the combination, and an important focus of the negotiations
that led up to it, was putting in place a strong management team. In order to
attract and retain strong management, Sony Pictures, then our sole stockholder,
and Cineplex Odeon, with input from Universal and the Claridge Group, retained
our current management under long-term employment contracts. These contracts
govern the terms of compensation we paid our executives in fiscal year 2000.
The Board formed the compensation committee in October 1998 to establish the
salaries and other compensation of our executive officers going forward.
The compensation committee consists of two Sony Pictures directors, one
Universal director and one Claridge director. Accordingly, the compensation
committee represents the viewpoints of the stockholders who played the largest
role in negotiating the employment contracts with the executive team. We expect
to carry the philosophy underlying these contracts forward into the future.
Our principal stockholders designed our executive compensation program to:
. retain executive officers by paying them competitively, motivate them to
contribute to our success, and reward them for their performance,
. link a substantial part of each executive officer's compensation to our
performance and the performance of the individual executive officer, and
. encourage ownership of our common stock by executive officers.
As discussed below, the program consists of, and is intended to balance,
three elements:
Salaries. We base salaries on an evaluation of individual job performance.
Bonuses. We base bonuses on an evaluation of both individual and company
performance against qualitative and quantitative measures.
Long-Term Incentive Compensation. We award long-term incentive compensation,
consisting of stock options, to ensure that incentive compensation is linked to
the long-term performance of Loews Cineplex and its common stock.
In 1999, the Board established the stock option committee to administer the
Loews Cineplex Incentive Plan. The stock option committee consists of two
independent directors and has the authority to award stock options to eligible
individuals consistent with the policies of the compensation committee
regarding long-term incentive compensation.
Evaluation of Executive Performance
We do not rely solely on predetermined formulas or a limited set of criteria
when evaluating the performance of the CEO and the other executive officers.
Instead, we consider:
. management's overall accomplishments,
. the accomplishments of the individual executives,
. our financial performance, and
. other criteria discussed below.
14
<PAGE>
During the 2000 fiscal year, management continued to effectively implement
its long-term strategies, which included:
. continuing to successfully combine the theatre operations of Loews Theatres
and Cineplex Odeon,
. continuing to successfully eliminate costs that we had targeted for
elimination following the Loews/Cineplex Odeon combination,
. standardizing information technology platforms across theatre circuits,
. minimizing interest and currency risk through effective use of hedging
strategies, and
. minimizing tax costs through domestic and international tax planning
strategies.
The compensation committee believes that the success of these strategies is
evidenced by:
. our opening, during fiscal 2000, of 15 theatres consisting of 237 screens
in North America and the completion of five screen expansions (our Metreon, E-
Walk and Kips Bay theatres have regularly ranked in the top ten of theatre box
office receipts in the country since their respective openings),
. our opening, during fiscal 2000, of 2 theatres consisting of 22 screens in
Spain,
. our closing, during fiscal 2000, of 55 older, unprofitable and obsolete
theatres consisting of 219 screens in North America,
. our development of joint ventures in Italy, Turkey and other strategic
locations,
. our continued integration of the Cineplex Odeon theatre assets and
operations with those of Loews Theatres, including general ledger and related
applications, our data reception system and our executive information system,
and
. our implementation of comprehensive domestic and international tax planning
strategies.
It is important to note that the motion picture exhibition industry is
currently going through a difficult period that places exceptional demands on
management's stewardship. Overbuilding in the industry and the continued
presence of older, obsolete and unprofitable theatres has led to overscreening
in North America. This has had the effect of decreasing operating margins at
the theatre level and creating a tightening in liquidity at the corporate
level. We believe that management will successfully navigate through these
difficult times and that it has implemented a plan that will ultimately lead to
long-term growth and opportunities for profitability.
The compensation committee also expects to consider management's responses to
the stronger competition due, in part, to the consolidation of film exhibition
companies. It is the compensation committee's opinion that, in this highly
competitive environment, management continues to effectively develop and
implement strategies that position Loews Cineplex to remain a leader in the
film exhibition industry.
Total Compensation
In negotiating arrangements currently in place, the parties established
target total compensation levels of our executives with due consideration of
compensation paid by our competitors. The total compensation package for each
executive has the three basic components indicated above and discussed in more
detail below.
While there are no established rules which bind the compensation and stock
option committees, Loews Cineplex generally sets its salary and total cash
compensation benchmarks in order to compete for and retain the best management
talent available. Because Loews Cineplex competes for executive talent with a
broad range of companies, the committees do not limit their comparison
information for compensation purposes to the companies included in the peer
group referred to in the Performance Graphs.
Salaries
Current salaries were set pursuant to individual employment agreements before
the compensation committee was established. However, the compensation committee
believes that current salaries are consistent with:
. the compensation committee's evaluation of each officer's individual job
performance, and
. an assessment of Loews Cineplex's performance.
15
<PAGE>
Mr. Ruisi's salary paid by Loews Cineplex for fiscal 2000 totaled $750,000.
For fiscal 2001, his salary will be $750,000 plus a cost of living allowance.
The 2000 salaries of the other named executive officers are shown in the
"Salary" column of the Summary Compensation Table.
Bonuses
The second element of the executive compensation program is the bonuses.
Our employment contracts with key executives provide for the payment of
targeted annual bonuses in the event that individual or company performance
criteria established by the Board are met or exceeded. In some cases, we are
also obligated to pay guaranteed minimum annual bonuses to key executives
unrelated to performance.
For fiscal 2000, a bonus of $375,000 for Mr. Ruisi was approved by the
compensation committee and confirmed by the Board. The bonuses for fiscal 2000
paid to each of the other named executive officers are shown in the "Bonus"
column of the Summary Compensation Table.
Long-Term Incentive Compensation
In fiscal 2000, Mr. Ruisi and the other executive officers were eligible to
participate in Loews Cineplex's Stock Incentive Plan, the third element of
executive compensation.
In fiscal 2000 the stock option committee granted stock options to the named
executive officers (other than Messrs. Ruisi and Karp) pursuant to the terms of
the Stock Incentive Plan.
Tax Policy
Section 162(m) of the Internal Revenue Code, limits the tax deduction
available to us to $1 million for compensation paid to our chief executive
officer and our four other most highly compensated officers who are employed by
us on the last day of the taxable year, but does not disallow a deduction in
excess of this limit for qualified "performance-based compensation," the
material terms of which are disclosed to and approved by stockholders. In
structuring and administering our compensation plans and arrangements, it is
our policy to take into account the tax deductibility of compensation,
including the impact of Section 162(m). Based on our current levels of
executive compensation and the administration of our plans and arrangements, we
do not expect that the application of Section 162(m) will result in any
material cost to the Company as a result of the non-deductibility of
compensation.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation or stock option committees is or has
been an officer or employee of Loews Cineplex. No executive officer of Loews
Cineplex currently serves on the compensation committee or any similar
committee of another public company.
Glossary
The named executive officers are the five most highly compensated executive
officers of Loews Cineplex: Messrs. Ruisi, Karp, Reid, Shugrue and McBride.
By the compensation committee:
Mr. Hauptman
Mr. Lemberger
Ms. Randall
By the stock option committee:
Mr. Cohon
Mr. Zuckerman
16
<PAGE>
PERFORMANCE GRAPHS
This graph compares our total stockholder returns (assuming reinvestment of
dividends), the Standard & Poor's 500 Composite Stock Index ("S&P 500"), and an
industry peer index compiled by us that consists of Carmike Cinemas, Inc., AMC
Entertainment, Inc. and GC Companies, Inc. (the "Peer Group"). The Peer Group
consolidation was done on a weighted average basis (market capitalization
basis, adjusted at the beginning of each year). The graph assumes $100 invested
at the per share closing price of the common stock on the New York Stock
Exchange Composite Tape on May 14, 1998, the first day our stock traded on the
exchange (upon consummation of the Loews/Cineplex Odeon combination), in Loews
Cineplex and each of the other indices.
Loews Cineplex Entertainment
Total Cumulative Shareholder Return for
22-Month Period Ending February 29, 2000
[GRAPH]
Loews Cineplex
Entertainment S&P 500 Peer Group
-------------- ------- ----------
IPO 100.00 100.00 100.00
May-98 82.34 98.55 94.24
Jun-98 68.34 102.55 96.41
Jul-98 57.00 101.46 88.07
Aug-98 42.00 86.81 73.88
Sep-98 46.34 92.37 69.25
Oct-98 56.00 99.88 71.74
Nov-98 56.34 105.93 79.41
Dec-98 54.00 112.03 89.23
Jan-99 53.33 116.71 76.15
Feb-99 50.34 113.08 72.66
Mar-99 53.00 117.61 68.95
Apr-99 67.33 122.16 79.39
May-99 51.00 119.28 74.81
Jun-99 58.00 125.89 77.48
Jul-99 52.00 121.97 71.63
Aug-99 42.34 121.36 63.16
Sep-99 42.00 118.04 60.35
Oct-99 36.34 125.51 56.05
Nov-99 34.67 128.06 50.70
Dec-99 31.33 135.60 41.89
Jan-00 25.33 128.78 45.30
Feb-00 22.00 126.35 44.74
17
<PAGE>
On March 24, 2000, a leading industry analyst at Bear Stearns announced that
GC Companies, Inc. common shares trade more on the value of its venture capital
portfolio than its theatre assets and Bear Stearns therefore was suspending
coverage of GC Companies, Inc. stock within the industry group. Consequently,
we believe that inclusion of GC Companies, Inc. in the performance graph
overstates the total return of the peer group because GC Companies, Inc.
derives a substantial portion of its cash flow and net earnings from its
financial investment activities relative to those derived from its theatre
operations. For this reason we believe GC Companies, Inc. should no longer be
considered part of the peer group for purposes of calculating the peer group
index in the performance graph. Accordingly, we have included a performance
graph to show the peer group performance excluding GC Companies, Inc.
Additionally, this graph presents total stockholder returns since the public
offering of our common stock on July 30, 1998, which increased our public float
significantly.
Loews Cineplex Entertainment
Total Cumulative Shareholder Return for
20-Month Period Ending February 29, 2000
[GRAPH]
Loews Cineplex
Entertainment S&P 500 Peer Group
-------------- ------- ----------
Jul-98 100.00 100.00 100.00
Aug-98 71.59 83.89 76.13
Sep-98 78.98 89.26 74.70
Oct-98 95.45 96.52 80.34
Nov-98 96.03 102.37 90.18
Dec-98 92.05 108.26 105.41
Jan-99 90.91 112.79 87.38
Feb-99 85.80 109.28 85.29
Mar-99 90.35 113.65 82.29
Apr-99 114.77 118.05 95.96
May-99 86.94 115.27 87.00
Jun-99 98.86 121.66 91.98
Jul-99 88.64 117.87 81.98
Aug-99 72.16 117.28 70.04
Sep-99 71.59 114.07 69.21
Oct-99 61.94 121.29 62.13
Nov-99 59.09 123.75 54.75
Dec-99 53.41 131.04 42.32
Jan-00 43.18 124.45 45.03
Feb-00 37.50 122.10 38.06
18
<PAGE>
RELATED TRANSACTIONS
Sony Pictures and Universal are major film studios and distributors. We
exhibited films distributed by Sony Pictures and Universal in the past and
expect to continue to do so in the future. We pay Sony Pictures and Universal
based on negotiated and/or contracted rates established on terms that we
believe are equivalent to an arm's-length basis. At February 29, 2000, we owed
Sony Pictures approximately $6.2 million and Universal approximately $3.8
million under film licensing agreements. We recognized approximately $38.4
million in film rental expenses relating to the exhibition of films distributed
by Sony Pictures and approximately $51.3 million in film rental expenses
relating to the exhibition of film distributed by Universal, in each case, for
the 2000 fiscal year.
Together with Sony Corporation of America, we have ongoing obligations under
the following agreements:
Trademark Agreement. Sony Corporation of America has granted Loews Cineplex a
five-year right to use the trademark "Sony" and all goodwill associated with
the mark in connection with the operation of two of our theatres, the Sony
Lincoln Square theatre in New York City and the Sony Metreon Theatre located in
Sony's Metreon entertainment/retail complex in San Francisco.
Tax Sharing and Indemnity Agreement. Sony Corporation of America is
responsible for and will indemnify us and our U.S. subsidiaries against certain
consolidated, combined and unitary federal, state, local and foreign income,
franchise and capital taxes for all taxable years ending on or prior to the
closing of our combination with Cineplex Odeon, except for taxes incurred by us
and our U.S. subsidiaries after that date arising by reason of an audit or
court proceeding. The agreement also sets forth procedures for (1) preparing
and filing consolidated combined and unitary federal and state income,
franchise and capital tax returns with respect to taxable years ending on or
prior to the combination and (2) the conduct and settlement of certain tax
audits and proceedings with respect to these taxable years. We have agreed to
indemnify and hold harmless Sony Corporation of America and Sony Pictures with
respect to certain liabilities that may arise in connection with agreements
that we assumed from them at the time of the combination.
Transition Services Agreement. Sony Corporation of America and Sony Pictures
have agreed to provide us with specified administrative services to the extent
we require such services to conduct our operations in the ordinary course of
business. They have agreed to provide these services at prices and rates, and
subject to termination, as Sony Pictures and we may agree upon. These terms
must be no less favorable to us than would be obtainable from unaffiliated
third parties.
An affiliate of Sony Corporation of America developed an entertainment/retail
complex in San Francisco. We entered into a lease to operate a 3D IMAX(R)
theatre and a state-of-the-art 15-screen multiplex theatre located in this
complex. Total occupancy related payments during fiscal year 2000 were
approximately $2.0 million.
In September 1990, Cineplex Odeon sold its interest in the Universal City
Cinema motion picture theatre facility located at the Universal City,
California retail and entertainment complex Citywalk to Universal. Universal
has retained us to manage the 18-screen theatre there on a long-term basis for
a fee of 3% of gross revenue plus 3% of net cash flow from the multiplex. For
the fiscal year ended February 29, 2000, we received approximately $576
thousand under this management agreement with Universal. During a three-year
period beginning from and after the later of (1) May 14, 2000 and (2) the
fifteenth day of the month following the first month end as of which our debt
is less than 4.75 times our consolidated EBITDA for the 12-month period then
ended, Universal can cause us to lease the Universal City Cinema for 20 years.
If Universal exercises this right, we will pay Universal, for entering into the
lease and conveying the related personal property, a cash payment equal to (1)
ten times the cash flow of the Universal City Cinema for the 12-month period
ended on the last day of the month preceding Universal's notice of exercise
minus (2) the cost of eliminating any deficiencies from the operating
requirements and standards set forth in the lease. Universal's put right will
terminate three years after it first becomes exercisable.
We also currently operate a new IMAX(R) theatre located in the 18-screen
Universal City theatre at
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Citywalk and the 20-screen Universal Cineplex theatre at Universal Studios in
Orlando, Florida.
We have entered into several transactions with affiliates of Millennium
Development, an affiliate of MDP Ventures II LLC, and negotiations are ongoing
with respect to other transactions. We lease real property in New York from an
affiliate of Millennium. Total occupancy related payments to Millennium during
fiscal year 2000 were approximately $3.1 million. In fiscal year 2000, we
entered into a lease and ancillary agreements whereby an affiliate of
Millennium will lease property in Boston, Massachusetts to one of our
subsidiaries for aggregate base lease payments of approximately $4.4 million
per year. Payments under this lease are expected to commence in fiscal year
2001. One of our subsidiaries holds a 50% general partnership interest in
Loeks-Star Partners, which owns theatres we operate in the state of Michigan.
Loeks-Star Partners and an affiliate of Millennium each hold a 50% interest in
Star Southfield Center, LLC, which leases real property in Michigan to Loeks-
Star Partners. Total occupancy related payments to Star Southfield Center, LLC
under this lease for fiscal year 2000 were approximately $3.9 million.
Pursuant to his employment agreement, we made Mr. Shugrue a full-recourse
interest bearing bridge loan in the principal amount of $1.25 million in 1999.
The loan currently bears interest at the prime rate plus 2% and is secured by
real property and a portfolio of investment securities owned by Mr. Shugrue's
family trust.
Pursuant to Mr. Karp's employment agreement, we made him an interest bearing
loan in the amount of $425,000 in 1999. The loan bears interest at the rate of
8.875% and is secured by a special bonus fund that we established pursuant to
the terms of his employment agreement. The loan, plus accrued interest, will be
paid by reducing the special bonus fund accordingly.
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<PAGE>
STOCK OWNERSHIP
The following table shows the number of Loews Cineplex common shares
beneficially owned as of May 15, 2000 by:
. each person who we know beneficially owns more than five percent of Loews
Cineplex's common shares,
. each of our directors,
. each executive officer named in the Summary Compensation Table on page 11,
and
. the directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
----------------------------
Name and Address of Beneficial Owner Number Percent
- -------------------------------------------------- ---------- -------
<S> <C> <C>
Common Stock, par value $.01 per share
5% Stockholders:
Sony Pictures Entertainment Inc................. 23,137,111/(1)/ 39.5%
550 Madison Avenue
New York, New York 10022
Universal Studios, Inc. ........................ 14,946,461/(1)//(2)/ 25.5%
100 Universal City Plaza
Universal City, CA 91608
The Claridge Group.............................. 4,300,626/(1)//(3)/ 7.4%
c/o Claridge Inc.
1170 Peel Street, 8th Floor
Montreal, Quebec H3B 4P2
MDP Ventures II LLC............................. 4,134,300/(4)/ 7.1%
c/o Millenium Partners Management LLC
1995 Broadway
New York, New York 10023
Dimensional Fund Advisors Inc. ................. 3,251,100/(5)/ 5.6%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Directors:/(6)/
George Cohon.................................... 1,900/(7)/ *
Nora Ephron..................................... 1,000/(7)/ *
Mel Harris...................................... /(8)/ --
Andrew Hauptman.................................
Ronald N. Jacobi................................ 4,230/(8)/ *
Kenneth Lemberger............................... /(8)/ --
Ron Meyer....................................... /(9)/ --
Yuki Nozoe...................................... /(8)/ --
Karen Randall................................... /(9)/ --
Hellene Runtagh................................. /(9)/ --
Bedi A. Singh................................... /(8)/ --
Howard Stringer................................. /(8)/ --
William A. Sutman............................... /(9)/ --
Mortimer B. Zuckerman........................... 2,000/(7)/ *
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Owned
-----------------------
Name and Address of Beneficial Owner Number Percent
- -------------------------------------------------------- --------- -------
<S> <C> <C>
Executive Officers:
Lawrence J. Ruisi..................................... 750,000/(10)/ 1.3%
Allen Karp............................................ 537,614/(11)/ *
Travis Reid........................................... 108,000/(12)/ *
J. Edward Shugrue..................................... 97,200/(13)/ *
John C. McBride, Jr................................... 64,800/(14)/ *
All Directors and Executive Officers
as a Group (22 persons)................................ 1,704,644 2.9%
Class B Non-Voting Common Stock, par value $.01
per share
Universal Studios, Inc. .............................. 80,000 95.2%
100 Universal City Plaza
Universal City, CA 91608
</TABLE>
- --------
* Indicates beneficial ownership or control of less than 1% of the outstanding
shares of common stock.
/(1)/All of such shares are subject to the terms of the Stockholders Agreement.
/(2)/The Seagram Company Ltd. owns an approximately 92% indirect interest in
Universal. Descendants of the late Samuel Bronfman and trusts established
for their benefit (the "Bronfman Trusts") beneficially owned, directly or
indirectly, an aggregate of 115,243,154 of Seagram shares, representing
approximately 28.6% of the then outstanding Seagram shares, and, pursuant
to two voting trust agreements, Charles R. Bronfman served as the voting
trustee for approximately 27.9% of the then outstanding Seagram shares and
a voting trustee for approximately 0.4% of the then outstanding Seagram
shares.
/(3)/Excludes 9,926 shares of common stock owned by the wife of Mr. Bronfman, as
to which beneficial ownership has been disclaimed. Members of the Claridge
Group and their holdings of voting securities are as follows:
- The Charles Rosner Bronfman Discretionary Trust: 1,918,907 shares,
- The Charles Bronfman Trust: 1,000,000 shares,
- The Charles R. Bronfman Trust: 1,000,000 shares,
- Bojil Equities Inc.: 350,309 shares with respect to which Senator E. Leo
Kolber exercises voting control, but disclaims beneficial ownership, and
- The Phyllis Lambert Foundation: 31,410 shares.
Charles Rosner Bronfman may be deemed to share beneficial ownership of the
shares held by the three trusts listed above.
/(4)/Based on a Schedule 13G filed by MDP Ventures II LLC ("MDP Ventures"),
Millenium Development Partners II LLC ("Millenium Development") and
Christopher M. Jeffries ("CMJ") with the Securities and Exchange Commission
on February 14, 2000. MDP Ventures is the holder of record with respect to
4,134,300 shares of Common Stock. Millennium Development, as the managing
member of MDP Ventures, has the power to vote and the power to dispose of
the Common Stock held by MDP Ventures. CMJ, as the holder of a majority of
the limited liability company interests of Millennium Development, has the
power to manage Millennium Development and therefore has the sole power to
vote and the sole power to dispose of the Common Stock held by MDP
Ventures. The reporting parties do not have shared power to vote or direct
the vote, or shared power to dispose or to direct the disposition of the
Common Stock.
/(5)/Based on a Schedule 13G filed by Dimensional Fund Advisors Inc. with the
Securities and Exchange Commission on February 3, 2000.
/(6)/Excludes management directors Messrs. Ruisi and Karp, who are included
below under Executive Officers.
/(7)/Includes options to acquire shares of our common stock granted to each
independent director on April 14, 1999, 1,000 of which are currently
exercisable.
/(8)/Excludes 23,137,111 shares of common stock owned by Sony Pictures. Messrs.
Harris, Jacobi, Lemberger, Nozoe, Singh and Stringer, officers of Sony
Pictures or its affiliates, disclaim beneficial ownership of all Loews
Cineplex shares owned by Sony Pictures.
/(9)/Excludes 14,946,461 shares of common stock and 80,000 shares of Class B
common stock owned by Universal. Messrs. Meyer and Sutman, Ms. Randall and
Ms. Runtagh, officers of Universal or its affiliates, disclaim beneficial
ownership of all Loews Cineplex shares owned by Universal.
/(10)/Includes 700,000 options currently exercisable.
/(11)/Includes 1,714 shares of common stock which are beneficially owned by the
Allen and Sharon Karp Trust, as to which Mr. Karp disclaims beneficial
ownership, and 535,900 shares of common stock which relate to options
currently exercisable.
/(12)/Represents 108,000 options currently exercisable.
/(13)/Represents 97,200 options currently exercisable.
/(14)/Represents 64,800 options currently exercisable.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file reports of holdings and transactions in our
shares with the SEC and the New York Stock Exchange. Based on our records and
other information, we believe that during the 2000 fiscal year our directors
and executive officers and 10% shareholders met all applicable SEC filing
requirements, except for Mr. Sutman, who was late in filing his initial
statements of beneficial ownership on Form 3 and Mr. Shugrue, who was late in
filing his statement of changes in beneficial ownership on Form 4 for June
1999.
STOCKHOLDERS AGREEMENT
The following is a brief summary of our Stockholders Agreement with Sony
Pictures, Universal and the Claridge Group.
The Board of Directors
The Stockholders Agreement requires us to have a 16-member Board of
Directors. Two of these members must be the most senior executives of Loews
Cineplex. At least three others must be independent directors. The current
management directors are Lawrence J. Ruisi, who is our President and Chief
Executive Officer, and Allen Karp, who is Chairman and Chief Executive Officer
of Cineplex Odeon Corporation. As long as Mr. Karp is an executive officer of
Loews Cineplex or an affiliate, the Agreement says that he must be one of the
management directors.
An "independent director" is any director who:
. is free from any relationship that, in the opinion of the nominating
committee, would interfere with the exercise of independent judgment as a
director,
. is not an affiliate of Loews Cineplex, Sony Pictures, Universal or the
Claridge Group or a current or former officer of Loews Cineplex, Sony Pictures
or Universal or any of their respective subsidiaries,
. does not 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 Loews Cineplex, Sony Pictures, Universal or the Claridge Group
or any of their respective subsidiaries, and
. does not represent, and is not a member of the immediate family of, a
person who does not satisfy the requirements of the foregoing four categories.
Sony Pictures, Universal and the Claridge Group are entitled to designate for
nomination for election to our Board, the number of directors that generally
corresponds to the percentage of our voting shares they each own, as follows:
<TABLE>
<CAPTION>
Number of
Applicable Percentage Directors
- ---------------------------------------------------------------------- ---------
<S> <C>
Greater than 6.25% and less than 9.375%............................... 1
Greater than 9.375% and less than 15.625%............................. 2
Greater than 15.625% and less than 21.875%............................ 3
Greater than 21.875% and less than 28.125%............................ 4
Greater than 28.125% and less than 34.375%............................ 5
Greater than 34.375% and less than 40.625%............................ 6
Greater than 40.625% and less than 46.875%............................ 7
Greater than 46.875% and less than 53.125%............................ 8
Greater than 53.125% and less than 59.375%............................ 9
Greater than 59.375% and less than 65.625%............................ 10
Greater than 65.625% and less than 71.875%............................ 11
Greater than 71.875% and less than 78.125%............................ 12
Greater than 78.125% and less than 84.375%............................ 13
84.375% and greater................................................... 14
</TABLE>
As described below, Sony Pictures and Universal must consent to our issuance
of voting shares above specified thresholds. If we issue shares below these
thresholds at a time when their consent would be required for an issuance above
the thresholds, we do not include the new shares in calculating these
percentages. The Stockholders Agreement refers to these percentages as the
"applicable percentage" and they are used to define the rights of Sony
Pictures, Universal and the Claridge Group in a number of important areas.
The following additional limitations and exceptions apply to the general rule
of proportionality in Board representation:
. until May 14, 2003, the Claridge Group is entitled to designate one
director if it owns more than 3.5% of our common stock, and, after May 14,
2003, if it owns more than 5%,
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<PAGE>
. if Sony Pictures, Universal and the Claridge Group would together be
entitled to designate more than 14 directors, each of the thresholds on the
chart will be increased by the smallest percentage that would result in their
being entitled to 14 directors; and
. until May 15, 2002, no stockholder is entitled to designate more than eight
directors. This cap ends, however, if a stockholder would be entitled to
designate more than eight directors on the basis of its "adjusted applicable
percentage" ownership of our voting shares. In calculating this percentage, the
agreement generally lets a stockholder count the shares it owned at the closing
of the combination, shares acquired from each other and their permitted
transferees, shares acquired through their exercise of the equity purchase
rights described later on and shares acquired through stock splits and the
like. It does not let them count shares acquired in the market, in privately
negotiated purchases from third parties or by direct purchases from us except
through the exercise of equity purchase rights.
Sony Pictures, Universal and the Claridge Group also agreed among themselves
that:
. none of them will be entitled to designate more than six directors.
However, this cap also ends if one of the stockholders could designate a
majority of the directors on the basis of its "adjusted applicable percentage".
In addition, this cap increases from six directors to seven if the "applicable
percentage" of one of the stockholders exceeds 45% on or after May 14, 2001.
. at any time that either Sony Pictures or Universal's "applicable
percentage" equals or exceeds 40.625% and the six-director cap applies, the
other has agreed that one of its Board designees will be an independent
director so long as its "applicable percentage" equals or exceeds 21.875%.
If Sony Pictures, Universal and the Claridge Group collectively can designate
13 or more directors, at least one of the individuals designated by each of
Sony Pictures and Universal will be an independent director, unless one of them
is only entitled to designate one director. In this case, two of the designees
of the other must be independent.
We and the other parties to the Stockholders Agreement have agreed that,
except for the stockholder designees and the management directors, everyone
else that we nominate to our Board will be independent, unless the sitting
independent directors waive this requirement.
Sony Pictures, Universal and the Claridge Group have agreed to vote their
voting shares to cause each of their designees and each of the independent
directors and management directors designated by the nominating committee to be
elected to the Board. We have also agreed to use our best efforts to cause the
election of these designees and nominees.
At each Board election, the nominating committee is charged with designating
the management directors and the independent directors and determining whether
prospective nominees as management directors and independent directors meet the
criteria for these positions. The Stockholders Agreement requires the
nominating committee to comprise four directors, consisting of two independent
directors designated by a majority of the independent directors, one designee
of Sony Pictures and one designee of Universal. The nominating committee does
not consider nominees recommended by other stockholders.
The Stockholders Agreement requires each committee of the Board to include a
number of Sony Pictures directors and Universal directors proportionate to the
numbers of their designees then serving on the whole Board. The Stockholders
Agreement contains other provisions relating to committees and various
provisions relating to the procedures, including meetings and agendas, and the
powers of the Board.
Sony Pictures, Universal and the Claridge Group have each agreed that they
will not without the prior written consent of both Sony Pictures and Universal:
. seek the election or removal of any director, except as contemplated in the
Stockholders Agreement,
. subject any shares of common stock to any arrangement with respect to the
voting of such shares,
. subject to certain exceptions, engage in any "solicitation" within the
meaning of Rule 14a-11 under the Exchange Act of proxies or
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<PAGE>
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
. form a "group" with respect to any shares of common stock within the
meaning of Section 13(d)(3) of the Exchange Act, other than a group consisting
of other parties to the Stockholders Agreement, any of their affiliates and
permitted transferees.
Consent Rights
So long as either Sony Pictures or Universal has an "applicable percentage"
of at least 17.86%, it will have the right to consent to specified actions by
us and our subsidiaries, including:
. voluntary bankruptcy filings by us or any "significant subsidiary",
. acquisitions and dispositions meeting specified tests of materiality,
. with limited exceptions, engaging in any business other than the
exhibition of films,
. transactions with Sony Pictures 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,
. changing the number of directors comprising the entire Board,
. issuing any voting shares or their equivalents exceeding specified
thresholds,
. paying cash dividends or making any other cash distributions on any shares
of our capital stock or securities convertible into, or exchangeable or
exercisable for, our capital stock exceeding specified thresholds,
. incurring any debt in excess of specified amounts, with specified
exceptions,
. hiring, or renewing the employment contract of, either of our two most
senior executive officers,
. entering into any arrangement with any holder of voting shares in the
holder's capacity as a holder which subjects actions taken by us or any of our
subsidiaries to the prior approval of any person,
. entering into certain discriminatory stockholder arrangements, including
any stockholders rights plan, and
. amending our by-laws by action of the Board.
Sony Pictures and Universal have additional consent rights if we fail to meet
specified budgeted financial targets, including the right to approve:
. a new five-year strategic business plan,
. making capital expenditures exceeding specified thresholds,
. incurring any debt in excess of specified amounts,
. incurring liens to secure unsecured debt, and
. issuing any of our capital stock.
Some of these consent rights have exceptions.
Any dispute between us and either Sony Pictures or Universal relating to
these consent rights must be submitted to arbitration by an independent
arbitrator. Pending resolution of the dispute, which generally must be resolved
within ten business days of its submission, we may not take the action which is
the subject of the dispute.
Moreover, Sony Pictures, Universal and the Claridge Group have each agreed to
vote their shares or cause their designees to the Board to vote, at the request
of Sony Pictures or Universal, against any action of the Board or stockholders,
related to any:
. merger,
. voluntary liquidation, dissolution or winding up of Loews Cineplex,
. amendment or restatement of our certificate of incorporation, or
. amendment or repeal of any provision of Loews Cineplex's by-laws.
These rights apply only if Sony Pictures' or Universal's "applicable
percentage" equals or exceeds 17.86% at the time of the request.
So long as Sony Pictures' or Universal's "applicable percentage" equals or
exceeds 17.86%,
25
<PAGE>
our certificate of incorporation provides that effecting a merger or
dissolution, amending our certificate of incorporation or amending or repealing
our by-laws by action of the stockholders will require the affirmative vote or
written consent of the holders of at least 80% of the outstanding shares of
common stock, unless the action is approved by at least 14 members of the
Board. If 14 members of the Board approve the matter, a majority vote, or with
respect to a merger a 66 2/3% vote, will be required. However, this exception
to the 80% vote requirement does not apply to by-law amendments.
Finally, so long as Sony Pictures' or Universal's "applicable percentage"
equals or exceeds 17.86%, neither Sony Pictures, nor Universal, nor the
Claridge Group will vote in favor of, consent in writing to, or take any other
action to effect an amendment or repeal of these 66 2/3% vote provisions of our
certificate of incorporation.
Approval of Certain Combinations by Disinterested Directors
If Sony Pictures' or Universal's "applicable percentage" equals or exceeds
17.86%, they will not enter into any contract with us, nor will we otherwise
engage in any transaction with them involving more than $1,000,000 per calendar
year, unless this transaction is approved by a majority of the disinterested
directors following disclosure of material facts to the directors. This
approval requirement does not apply to transactions in the ordinary course of
our business, including film booking arrangements.
Restrictions on Transfers of Loews Cineplex Stock
The Stockholders Agreement includes the following restrictions on transfers
by Sony Pictures and Universal:
Rights to Participate in Sales for All Loews Cineplex Stockholders Including
Public Stockholders. Neither Sony Pictures nor Universal may transfer,
individually or collectively, an aggregate of more than 50% of our outstanding
voting shares to a third party transferee unless each of our stockholders has
the right to participate in such transfer on the same basis as Sony Pictures or
Universal. This right does not apply if Sony Pictures or Universal exercises
its right of first refusal to purchase the shares to be transferred.
Rights to Participate in Sales for Universal and the Claridge Group. Sony
Pictures may not transfer more than 50% of our shares initially owned by it to
any person, other than a permitted transferee, unless Universal and the
Claridge Group each has the right to participate in this transfer on the same
basis as Sony Pictures.
Right of First Refusal of Sony Pictures and Universal. Sony Pictures and
Universal have given each other reciprocal rights of first refusal in
connection with
. any transfer in one or more series of related privately negotiated
transactions or a public offering if (1) 5% or more of the then outstanding
voting shares are subject to the transfer, (2) any transferee would, following
this transfer, beneficially own 5% or more of the outstanding voting shares or
(3) in the case of any transfer by Sony Pictures or any of its affiliates, Sony
Pictures' "applicable percentage" exceeds 25%,
. any transfer pursuant to a bona fide third party tender offer or exchange
offer,
. any transfer to us or any of our subsidiaries, and
. any transfer in a brokers' transaction within the meaning of Section 4(4)
of the Securities Act.
No right of first refusal applies to any transfer between Sony Pictures or
Universal and any of their respective permitted transferees.
Standstill Agreements
Each of Sony Pictures, Universal and the Claridge Group has agreed not to,
and to cause its affiliates not to, acquire, directly or indirectly, the
beneficial ownership of any additional voting shares, except for:
. acquisitions of up to an aggregate of 5% of the outstanding voting shares
during any twelve-month period, subject to specific price restrictions, and
. acquisitions in privately negotiated transactions from five or fewer
persons pursuant to offers not made generally to holders of voting shares
26
<PAGE>
and pursuant to which the value of any consideration paid does not exceed 115%
of the "market price" as determined in accordance with regulations under the
Securities Act (Ontario).
These exceptions are not available to a stockholder whose "applicable
percentage" would equal or exceed 25% after the acquisition if, as a result of
the acquisition, the public stockholders would beneficially own less than 20%
of the outstanding voting shares.
There are the following additional exceptions for acquisitions:
. from Sony Pictures, Universal or the Claridge Group,
. pursuant to the exercise of the equity purchase rights described below,
. on terms and conditions approved by the independent directors,
. pursuant to a tender or exchange offer made in accordance with applicable
law,
. to restore Sony Pictures', Universal's or the Claridge Group's
"applicable percentage" following a dilutive issuance of voting shares, and
. acquisitions of shares of common stock upon the conversion of the shares
of Class B Non-Voting Common Stock.
Sony Pictures, Universal and the Claridge Group have agreed that, in the case
of any permitted acquisition that would constitute a "Rule 13e-3 transaction"
as defined in Rule 13e-3 under the Exchange Act, prior to the consummation of
this transaction:
. a nationally recognized investment bank shall have delivered an opinion
to our Board that the transaction is fair from a financial point of view to our
stockholders, other than the stockholder initiating the acquisition,
. a majority of the independent directors shall have approved the
transaction, and
. if our public stockholders beneficially own more than 20% of our voting
shares, and if stockholder approval is required under Delaware law or our
certificate of incorporation, a majority of the shares of common stock held by
the public stockholders shall have been voted in favor of the transaction.
The standstill restrictions terminate on the earlier of (1) May 14, 2004, and
(2) any time after May 14, 2002 if the Claridge Group ceases to have the right
to designate a director, or upon the occurrence of:
. a good faith tender or exchange offer to acquire more than 20% of our
voting shares made by any person, except that these restrictions shall not
terminate for a stockholder who makes or induces the tender or exchange offer.
Additionally, the restrictions will be reinstated if the offer is withdrawn or
expires without being consummated,
. the "applicable percentage" of Sony Pictures, Universal or the Claridge
Group equaling or exceeding 80%, or, in the case of Universal, 33 1/3% at any
time Universal beneficially owns more voting shares than any other holder,
. with respect to any particular stockholder, its "applicable percentage"
being less than 15% of our voting shares, except that the restrictions will be
reinstated if its percentage ownership equals or exceeds 15% of our voting
shares within one year after falling below this threshold,
. any person (other than Sony Pictures, Universal and the Claridge Group or
a permitted transferee) beneficially owning more than 20% of the voting shares,
not counting voting shares acquired from Sony Pictures, Universal or the
Claridge Group, a permitted transferee or Loews Cineplex, or
. the public stockholders beneficially owning more than 66 2/3% of our
voting shares.
Sony Pictures and Universal have agreed with each other and the Claridge
Group has agreed with each of them that none of them nor any of their
affiliates will acquire, directly or indirectly, the beneficial ownership of
any of our voting shares
. if immediately prior to the acquisition its "applicable percentage"
exceeds 50%, not counting voting shares acquired from one another or permitted
transferees, or
. if, as a result of the acquisition, (1) it would beneficially own more
than 50% of our voting shares, not counting voting shares acquired
27
<PAGE>
from one another or permitted transferees, or (2) the public stockholders would
beneficially own less than 20% of our voting shares.
These last restrictions do not apply if, upon consummation of such
acquisition, the acquiror's "applicable percentage" would be less than 25%.
These restrictions do not prohibit the acquisition of shares of common stock
upon the conversion of shares of Class B non-voting common stock.
These restrictions will terminate if:
. the "applicable percentage" of either Sony Pictures or Universal is less
than 10%. However, the restrictions will be reinstated if the applicable
percentage equals or exceeds 10% within one year after falling below this
threshold.
. any person makes a good faith tender or exchange offer to acquire more
than 15% of our outstanding voting shares, except that these restrictions will
not terminate for a stockholder who makes or induces the tender or exchange
offer or is acting in concert with the person making the offer. Additionally,
the restrictions will be reinstated if the offer is withdrawn or expires
without being consummated.
. any person (other than Sony Pictures, Universal or the Claridge Group or
a permitted transferee) beneficially owns more than 15% of our voting shares,
not counting shares acquired from Sony Pictures, Universal or the Claridge
Group or a permitted transferee, but only if the sum of the "applicable
percentages" of Sony Pictures and Universal is less than 45%.
Registration Rights
The Stockholders Agreement gives Sony Pictures, Universal and the Claridge
Group demand and piggyback registration rights with respect to the registration
under the Securities Act of shares of common stock owned by them. Sony
Pictures, Universal and the Claridge Group are each able to demand registration
under the Securities Act of shares of common stock owned by them, subject to
specific limitations. In no event will Loews Cineplex be required to effect, in
the case of each of Sony Pictures and Universal, more than four registrations
on demand, in the case of the Claridge Group, more than one registration on
demand, and in the aggregate, more than nine registrations on demand.
Sony Pictures, Universal and the Claridge Group also have piggyback
registration rights to include shares of common stock owned by them in any
registration statement filed by us with respect to our common stock, subject to
specific exceptions.
Equity Purchase Rights
Sony Pictures and Universal have equity purchase rights if we propose to
issue or sell any voting shares in a transaction for which they have rights.
Subject to applicable rules of any stock exchange on which our common stock is
then listed, their rights will entitle them to acquire from us a portion of the
securities that we propose to issue or sell in proportion to their respective
"applicable percentages", prior to giving effect to the proposed issuance or
sale. They may exercise their rights in whole or in part.
Assignments of Rights and Obligations to Transferees
Permitted transferees of Sony Pictures, Universal and the Claridge Group will
be subject to the terms and conditions of the Stockholders Agreement. In some
circumstances, third party transferees will have the right to designate
directors. They may also be entitled to registration rights. Third party
transferees will not receive the tag-along rights, rights of first refusal or
equity purchase rights described above. In addition, the consent rights of Sony
Pictures and Universal may not be assigned to third parties.
Certain Remedies
If either Sony Pictures or Universal has a good faith belief that we or
another party to the Stockholders Agreement is likely to breach, or has
breached, in any material respect, its obligations under the agreement, it may
deliver notice of its belief to us and/or the breaching stockholder. When we
receive this notice and until the dispute is resolved, neither we nor any other
party to the Agreement may take any action that would facilitate the breach. If
we receive this notice, we have agreed we will take reasonable actions to
prevent the breach, if it has not yet occurred, or to minimize any adverse
consequences to the aggrieved stockholder. Our operations may be interrupted or
delayed pending such resolution.
28
<PAGE>
In addition, if Sony Pictures or we breach in any material respect any of our
obligations to Universal under the Stockholders Agreement, Sony Pictures and we
must, at the request of Universal, use our best efforts to amend our
certificate of incorporation to authorize a new class of common stock to be
issued by us to Universal and its permitted transferees in exchange for the
common stock held by them. This new class would be identical in all respects to
the common stock, except that it would entitle Universal to proportionate
representation on the Board on the same basis that Universal is entitled to
representation under the Stockholders Agreement. Universal's consent rights
would also be incorporated in this new class, and Sony Pictures and Universal
would cease to have consent rights under the Stockholders Agreement. Such new
class of common stock, if issued, would be convertible into shares of common
stock on a one-for-one basis at any time at the discretion of the holder.
Termination
Except as otherwise described in the Stockholders Agreement, the rights and
obligations of a stockholder under the Stockholders Agreement terminates when
its "applicable percentage" is less than 6.25% or, in the case of the Claridge
Group, 3.5% until May 14, 2003 and 5% after that date. The rights do not end,
however, if the decrease results from our issuance of additional voting shares.
SUBMISSION OF STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in Loews
Cineplex's proxy statement for the fiscal year 2001 Annual Meeting, the
proposal must be received at our offices no later than January 25, 2001.
Securities and Exchange Commission rules contain standards as to what
stockholder proposals we must include in a proxy statement.
Any stockholder proposal to be considered at next year's meeting but not
included in the proxy statement must be in writing and received at our offices
no later than April 10, 2001.
* * * * *
Whether or not you plan to attend the Annual Meeting, please vote by
telephone or Internet or mark, sign, date and promptly return the enclosed
proxy card in the enclosed postage-paid envelope. The toll-free number to vote
by telephone is at no cost to you.
By order of the Board of Directors,
/s/ Mindy Tucker
Mindy Tucker
Secretary
May 25, 2000
29
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
The undersigned hereby appoints Lawrence J. Ruisi, John C. McBride, Jr. and
Mindy Tucker as proxies, with power to act without the other and with power of
substitution and hereby authorizes them to represent and vote, as designated on
the other side, all the shares of stock of Loews Cineplex Entertainment
Corporation standing in the name of the undersigned, with all the powers which
the undersigned would possess if present at the Annual Meeting of Stockholders
of Loews Cineplex Entertainment Corporation to be held on June 22, 2000 or any
adjournment thereof. This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned. If no direction is made, this proxy
will be voted "for" proposals 1 and 2, and in the discretion of the proxy holder
as to any other matter that may come before the Annual Meeting of Stockholders
of Loews Cineplex Entertainment Corporation or any adjournments thereof, except
with respect to broker non-votes.
(Continued, and to be marked, dated and signed, on the other side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
Admission Ticket
Loews Cineplex
Entertainment
Corporation
Annual Meeting of
Stockholders
Loews 42nd Street
E-Walk Theatre
247 West 42nd Street
New York, New York 10036
June 22, 2000
10:00 a.m. EDT
Admit One
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Vote by Internet at the following Internet address:
http://www.eproxy.com/LCP
or
--
2. Call toll free 1-800-840-1208 on a touch-tone telephone.
or
--
3. By mail - by promptly returning your completed and signed proxy card in the
enclosed envelope.
<PAGE>
When OK to Print -- Remove ALL Red Items
Please mark
your votes as
- ------------------------------------------------------ indicated in [X]
NO TEXT PRINTING IN THIS AREA this example
- ------------------------------------------------------
The Board of Directors recommends FOR WITHHELD
a vote FOR items 1 and 2. FOR ALL
ITEM 1 [_] [_]
Re-election of Directors
11. Lawrence J. Ruisi
01. George A. Cohon 06. Allen Karp 12. Hellene Runtagh
02. Nora Ephron 07. Kenneth Lemberger 13. Bedi A. Singh
03. Mel Harris 08. Ron Meyer 14. Howard Stringer
04. Andrew Hauptman 09. Yuki Nozoe 15. William A. Sutman
05. Ronald N. Jacobi 10. Karen Randall 16. Mortimer B. Zuckerman
WITHHELD FOR: (write that nominee's name in the space provided below)
FOR AGAINST ABSTAIN
ITEM 2 Approval of Auditors [_] [_] [_]
- --------------------------------------------------------------------------------
I plan to attend the meeting [_]
- --------------------------------------------------------------------------------
--IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET, PLEASE READ THE
INSTRUCTIONS BELOW--
- --------------------------------------------------------------------------------
NO TEXT PRINT IN THIS
ADDRESS AREA
Signature _______________ Signature _______________ Date: _______________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
[GRAPHIC] YOUR VOTE IS IMPORTANT! [GRAPHIC]
YOU CAN VOTE IN ONE OF THREE WAYS:
Your telephone or Internet vote authorizes the named proxies to
vote your shares in the same manner as if you marked, signed and
returned your proxy card.
- --------------------------------------------------------------------------------
VOTE BY INTERNET
24 hours a day, 7 days a week
Follow the instructions at the following Internet
address:http://www.eproxy.com/LCP
- --------------------------------------------------------------------------------
or
- --------------------------------------------------------------------------------
VOTE BY PHONE
HAVE YOUR PROXY CARD IN HAND.
Call toll-free 1-800-840-1208 on a touch tone
telephone 24 hours a day, 7 days a week.
There is NO CHARGE to you for this call.
You will be asked to enter your 11-digit Control Number, which is
located in the box in the lower right hand corner of this form.
Follow the recorded instructions.
- --------------------------------------------------------------------------------
or
- --------------------------------------------------------------------------------
VOTE BY PROXY CARD
Mark, sign and date your proxy card and return
promptly in the enclosed envelope.
- --------------------------------------------------------------------------------
NOTE: If you voted by Internet or telephone, THERE IS NO NEED TO MAIL BACK your
proxy card.
THANK YOU FOR VOTING.
