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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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Form 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 29, 2000 Commission file number 001-14099
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction 13-3386485
of incorporation or organization) (I.R.S. Employer Identification No.)
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711 Fifth Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
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(212) 833-6200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class: Name of each exchange on which registered:
Common Stock, par value $.01 per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the Registrant's voting stock held by non-
affiliates of the Registrant was $40,327,677 as of May 10, 2000.
The number of shares of common stock, $.01 par value per share, outstanding
on May 10, 2000 was 58,538,646. The number of shares of Class B non-voting
common stock, $.01 par value per share, outstanding on May 10, 2000 was 84,000
shares.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the Fiscal 2000 Annual Report to Shareholders..... Parts II and IV
Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders................................................. Part III
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LOEWS CINEPLEX ENTERTAINMENT CORPORATION
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
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ITEM 1. BUSINESS................................................... 4
Fiscal 2000 Highlights............................................. 4
Our U.S. Partners.................................................. 5
Key Business Strategies............................................ 5
Operating Strategy............................................. 5
Expansion Strategy and Portfolio Management.................... 7
Theatre Operations................................................. 10
Competition........................................................ 11
Current Exhibition Industry Environment............................ 12
Segment Information................................................ 13
Seasonality........................................................ 13
Government Regulation.............................................. 13
Employees.......................................................... 13
Cautionary Notice Regarding Forward Looking Statements............. 13
Factors That May Affect Future Performance......................... 14
ITEM 2. PROPERTIES................................................. 14
ITEM 3. LEGAL PROCEEDINGS.......................................... 15
Antitrust Proceedings.............................................. 15
Environmental Proceedings.......................................... 15
Six West Retail Acquisition, Inc................................... 16
ADA Litigation..................................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 16
EXECUTIVE OFFICERS OF LOEWS CINEPLEX............................... 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 19
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA......................... 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 19
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.. 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................ 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........ 19
ITEM 11. EXECUTIVE COMPENSATION.................................... 19
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PART III--(continued)
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.......................................................... 21
SIGNATURES................................................................ 23
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PART I
ITEM 1. BUSINESS
Loews Cineplex Entertainment Corporation ("Loews Cineplex," "we", "us" or
"our") is one of the world's largest publicly traded theatre exhibition
companies in terms of revenues and operating cash flow.
Loews Cineplex was formed by the combination, completed on May 14, 1998, of
the Loews Theatres exhibition business of Sony Pictures Entertainment Inc.
("SPE"), a wholly owned subsidiary of Sony Corporation of America ("SCA"), and
Cineplex Odeon Corporation ("Cineplex Odeon"), another major motion picture
exhibitor with operations predominantly in the U.S. and Canada (the
"Combination"). Loews Cineplex was the first commercial motion picture
exhibitor in the U.S., perhaps the world, with operations beginning in 1904,
when Marcus Loew set up a "nickelodeon" in a rented room above a penny arcade
store in Cincinnati, Ohio. Our theatre circuits have grown over the years
through internal development and acquisitions. Today, we operate theatres under
the Loews, Sony and Cineplex Odeon names. Our partnerships and joint ventures
operate theatres under the Star, Magic Johnson and Yelmo Cineplex names.
Our principal stockholders include SPE, Universal Studios, Inc.
("Universal") and The Charles Rosner Bronfman Discretionary Trust and related
stockholders (the "Claridge Group"), which own 39.5%, 25.5% and 7.4%,
respectively, of our capital stock and collectively own approximately 72.5% of
our capital stock and 72.4% of our voting common stock.
LTM Holdings, Inc., our predecessor, was incorporated under the laws of the
State of Delaware in 1986. Our principal offices are located at 711 Fifth
Avenue, New York, New York 10022, and our telephone number is (212) 833-6200.
Our Internet home page is:
www.loewscineplex.com.
You can learn more about us by visiting our website.
Fiscal 2000 Highlights (all amounts in thousands of U.S. dollars unless
otherwise noted)
For the fiscal year ended February 29, 2000, we had $930,423 in revenues,
generated $144,435 of Modified EBITDA (earnings before interest, taxes,
depreciation and amortization and gains/losses on sale/disposals of theatres),
and had a net loss of $51,390. On a combined basis (including 100% of the
operations of our joint ventures and partnerships) we had $1,047,146 in Total
Revenues and $165,590 in Total EBITDA (earnings before interest, taxes,
depreciation and amortization and gains/losses on sale/disposals of theatres
including 100% of the operations of our joint ventures and partnerships).
Additionally, our Attributable EBITDA (Total EBITDA net of partners' share of
Total EBITDA) was $154,274. Approximately 70% of these revenues came from box
office receipts and 30% from concession sales and other revenues. Based on
publicly available data, our share of the total industry box office receipts in
North America during fiscal 2000 was approximately 9.5% (including 100% of the
operations of our joint ventures and partnerships).
As of February 29, 2000, we owned, operated or had an interest in 2,926
screens at 385 locations. Of these, 2,777 screens were located in 22 U.S.
states, the District of Columbia and six Canadian provinces. Our screens
represent approximately 7.5% of all exhibition screens in North America. Our
screens are mainly concentrated in densely populated urban and suburban areas,
with a strong presence in metropolitan New York, Boston, Chicago, Baltimore,
Dallas, Houston, Detroit, Los Angeles, Seattle, Washington, D.C., Toronto,
Montreal and Vancouver. Approximately 74% of our U.S. theatres are located in
the 10 largest areas of dominant influence (ADI) in the U.S., and 81% of our
Canadian theatres are located in the top 10 ADIs in Canada. ADIs are television
markets, defined by A.C. Nielsen Company/EDI--an international media research
firm, that are used as benchmarks by certain entertainment marketers. ADI
markets generally contain concentrations of substantial populations. The
exhibition industry uses ADI as an important media measure since there is a
correlation between television and movie viewing audiences.
Our exhibition assets include a 50% interest in 130 screens in 15 locations
in Spain through a joint
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venture established on June 10, 1998 with Yelmo Films S.A., a leading local
Spanish exhibitor. We will continue to build additional theatres in Spain
through this joint venture. Additionally, we have established an initial
presence in both Hungary and Austria; we operate a six-screen theatre in
Hungary and an eight-screen theatre in Vienna, Austria.
We also hold a 50% interest in a joint venture in Italy, entered into on
March 13, 1999, with Aurelio De Laurentiis' Filmauro Srl., a leading producer,
distributor and exhibitor of motion pictures in Italy. The new venture, known
as De Laurentiis Cineplex Srl., plans to develop multiplexes in regions
throughout Italy.
On May 19, 1999, we announced that we entered into a 50/50 joint venture in
Turkey with Transturk Holdings A.S. to develop, construct and operate movie
theatres throughout Turkey, Romania and the Turkic Republics of the CIS. The
new venture, to be known as Odeon Cineplex, plans to develop several multiplex
theatres in addition to the 5-screen Profilo Theatre and the 10-screen Migros
Theatre (which includes an IMAX(R) theatre) already in operation in Istanbul
and Ankara, respectively.
Our U.S. Partners
Loews Cineplex holds a 50% partnership interest in each of Star Theatres
and Magic Johnson Theatres. As of February 29, 2000, these partnerships held
interests in and operated 13 locations with a total of 186 screens. The Star
theatre locations are concentrated in the metropolitan Detroit, Michigan area.
The Magic Johnson theatres are located in densely populated urban areas with
predominantly minority populations.
Key Business Strategies
Our goals are:
. to be the leading theatrical exhibitor in densely populated metropolitan
centers in North America;
. to expand into selected international markets through joint ventures, new
theatre construction and acquisitions; and
. to maintain our reputation as a preferred exhibitor for distributors and
theatre-going patrons.
We have developed a number of successful operating and expansion strategies
designed to achieve these goals and place us at the forefront of our industry.
Operating Strategy
The fundamentals underlying our operating strategy are as follows:
. actively managing and improving our portfolio;
. providing a high level of customer service;
. aggressively controlling operating costs;
. closely monitoring and managing operations on a daily basis;
. increasing efficiency through the integration of highly flexible state-
of-the-art information systems into our theatre operations; and
. seeking ancillary revenue streams.
Key elements of our operating strategy include:
Continue to Realize Cost Savings and Operating Efficiencies. During fiscal
years 1999 and 2000, we realized a significant portion of the anticipated
annual cost savings and operating efficiencies (estimated at approximately $30
million) as a result of the Combination by applying Loews Theatres' operating
practices and revenue generating programs throughout our combined chain of
theatres, eliminating unnecessary overhead and capitalizing on the benefits of
a larger number of theatres. These cost savings and operating efficiencies
represent ongoing annual savings to be realized by us each year.
Apply Proven Operating Practices. During fiscal year 2000, we continued
implementing our operating strategies which include:
. expanded concession offerings;
. implementing employee training and incentive programs which encourage
"upselling";
. effective showtime scheduling to reduce congestion in the lobby and
concession area enabling us to more efficiently service our patrons;
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. improved customer service; and
. more efficient concession stand designs.
Capitalize on Larger Presence in the Market. We believe we can improve
operations by realizing cost savings through eliminating unnecessary overhead
and by spreading the remaining overhead costs over a larger theatre group. We
also anticipate that we will realize additional benefits created by a larger
presence in the market. These benefits include:
. volume purchase discounts;
. receiving more favorable terms from vendors and service suppliers; and
. entering into revenue generating contracts on a circuit-wide basis.
We expect additional improvements through more efficient film programming
and scheduling, enabling us to exhibit motion pictures for the maximum play
time by matching the size of the auditorium with rapidly changing audience
demands.
Focus on Customer Service. Our goal is to be the industry leader in customer
service. We want to provide a high level of customer service and convenience,
positioning us as the "theatre of choice" for movie-going patrons. We have
developed a proven customer service program focused on increasing patronage and
generating customer loyalty by improving the overall movie-going experience.
This program includes:
. optimizing the scheduling of showtimes to lessen congestion at our
theatres;
. offering more frequent showtimes of popular films; and
. guaranteeing "next-in-line" service to improve ticket and concession
sales.
We also train our employees to improve service and sales techniques thereby
increasing overall concession sales. By serving customers more quickly, we
believe that we can increase our concession revenues per patron. To encourage
increased patronage, we have established new concession programs, provided a
wider selection of concession items and enhanced promotions and merchandising
activities. We have also established box office admission discount programs,
including bargain matinees, group admissions, and senior citizen and children
discounts. In addition, our Passport Ticket Program provides for the purchase
of admission tickets at a discount.
Maintain State-of-the-Art Information Systems. In the three years before the
Combination, we upgraded our point-of-sale system at the Loews Theatres circuit
and invested in state-of-the-art computer technology at our theater box offices
and concession stands. These investments enabled us to increase productivity
and manage operating costs more efficiently. Additionally, during the current
fiscal year, we substantially completed the integration of the Cineplex Odeon
Canadian operating systems including general ledger and related applications,
our data receipt system and our executive information system. As a result, we
have now substantially completed integrating all North American Cineplex Odeon
theatre operations into our system.
We use touch screen selling stations at our box offices and concession
stands to provide quicker service, resulting in higher customer turnover and
improved productivity. This system has shortened transaction processing times
and provides "real time" information to the home office regarding attendance
levels, box office receipts, concession sales and employee productivity at each
location, as well as better inventory management and control.
With immediate access to this information, we can make daily adjustments to
staffing levels and inventories in order to maximize productivity and overall
profitability. This is especially important during critical operating periods
such as weekends and holidays. We have also made significant investments in
technology to integrate and enhance features within our major reporting
systems.
Expand Other Revenues. We are continually seeking other potential revenue
opportunities in addition to box office and concession revenues. We believe we
can be an attractive medium for advertising and joint marketing and promotion
efforts, due to our offering access to mass audiences. In fiscal 2000, we had
approximately 135 million patrons, with highly attractive demographics. We
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maintain screen advertising programs in all of our theatres with local and
national advertisers. For example, with our broad demographic audience, we
have been able to sign a long-term deal to advertise on our U.S. screens,
estimated to be worth in excess of $60 million. Additionally, during fiscal
year 2000, we entered into a 3 year deal in Spain (through our Yelmo Cineplex
joint venture) with an outside third party whereby we receive compensation for
on-screen advertising based upon actual attendance levels. We expect Yelmo
Cineplex will receive approximately $10 million over the term of this
contract. We are continuing to explore additional advertising and marketing
programs with other world class consumer product companies in North America
and internationally.
We have also generated additional revenue through the leasing of our
theatres for motion picture premieres and screenings, corporate events and
private parties. Some of our theatres have earned reputations as the
"preferred" theatres for these events given their locations in key urban
markets as well as their upscale settings.
On March 8, 2000, we announced that we and five other major movie theatre
companies intend to launch an internet movie portal. This new company will
offer remote ticketing services, showtimes, reviews and movie trailers for the
movie-going public. We also expect this new company will aggressively pursue
emerging technologies such as wireless and in-home ticket printing. We are an
equity holder in this new company, sharing in the revenues generated by this
new company as well as any appreciation of our equity.
Motivate Key Employees. We have adopted a broad-based stock incentive plan
which is designed to link compensation of management with stockholder return.
During fiscal year 2000, we granted options in our common stock to
approximately 900 of our employees. Additionally, during fiscal year 2001 the
stock option committee of the Board of Directors approved an additional grant
of 340,000 options to our employees.
We provide additional incentives to our theatre staff employees by paying
commissions for concession productivity over certain target levels. We also
offer benefits such as college tuition assistance designed to attract quality
employees, reduce employee turnover and increase operating efficiencies.
Expansion Strategy and Portfolio Management
A key component of our business strategy is pursuing significant expansion
and upgrades of our theatres including the following elements:
. develop or acquire additional theatres in the North American and select
international markets;
. expand the number of screens at certain existing theatre locations; and
. significantly upgrade and modernize existing theatres where appropriate.
. Upgrade and Expand in North America. During the five years prior to the
Combination, Loews Theaters implemented a major theater reconfiguration and
expansion program, which we have extended to Cineplex Odeon following the
Combination. The essence of the reconfiguration and expansion program is to
build/acquire new modern state-of-the-art multi-screen theatres, expand and/or
renovate existing theatres where appropriate and close/dispose of old, obsolete
and/or unprofitable theatres. This program has increased screens per location
from 5.4 at the end of fiscal year 1994 to 7.4 at the end of fiscal year 1998.
An integral component of our growth plan is our new build theatre program.
Overall, our new build theatres have been very successful, generating
significant cash flow and a very healthy return on investment. To illustrate,
key historical highlights of our new build theatre performance, for theatres
opened during fiscal years 1990-1998 (excluding Cineplex Odeon and joint
ventures), are as follows:
. we opened 358 screens at 32 locations at a capital cost of $272.1
million. First year ROI of 17.6%--current ROI of 22.4%;
. through the end of fiscal 1999, 90% of the $272.1 million capital
investment had been recouped from operating cash flow generated by these
theatres; and
. current overall attendance and operating cash flow levels reflect growth
of approximately 7.7% and 27.6%, respectively, in comparison to the first
full fiscal year of operations.
In conjunction with this expansion program, we adopted a prototype design
for new theatre construction. This prototype has between 16 and 18 screens,
depending on the location, with oversized
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screens, stadium seating, rocking chair seats, state-of-the-art digital sound
systems and spacious lobbies. The prototype incorporates state-of-the-art sales
technology, and the design, location and size of concession stands in the
prototype allow us to operate more efficiently. We believe larger multiscreen
theatres are more efficient to operate and provide for greater operating
margins and better use of assets. The greater number of screens per theatre
provides more effective leverage of fixed costs and staffing levels over a
larger revenue base. Multi-screen facilities also allow us to present a variety
of films with more frequent showtimes to the movie-going public.
The quality of our new theatres and their location in major metropolitan
locations position them among the top grossing theatres in the U.S. Currently
we operate seven theatres which are consistently among the top twenty-five
highest grossing theatres in the U.S. according to A.C. Nielsen Company/EDI:
. the 13-screen flagship Sony Theatres Lincoln Square in New York City,
home of the first commercial 3-D IMAX(R) theatre in the United States;
. the 16-screen Metreon theatre in San Francisco, home of the first
commercial 3-D IMAX(R) theatre in San Francisco, California;
. the 13-screen E-Walk theatre located in the heart of the rejuvenated
Times Square in New York City;
. the 20-screen Star Theatre in Southfield, Michigan;
. the 15-screen Kips Bay theatre in New York City;
. the 18-screen Universal City at Citywalk, a retail and entertainment
complex in Universal City, California; and
. the 21-screen Palisades Center theatre in West Nyack, New York.
The following table indicates the number of theatre locations and screens
and changes in each as a result of our upgrading and reconfiguration program
and the addition of the Cineplex Odeon circuit to the Loews Theatres circuit
during the five fiscal years ended February 29, 2000. These figures include
screens and locations operated by Star, Magic Johnson and Yelmo Cineplex.
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Fiscal Year ended February
28 or 29,
-------------------------------- Five Year
1996 1997 1998 1999 2000 Total
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Screens
Beginning of year.................... 1,030 950 959 1,035 2,881 1,030
New builds......................... 36 44 92 168 237 577
Expansions......................... 3 22 12 15 5 57
J.V. investments--international.... -- -- -- 113 22 135
Combination........................ -- -- -- 1,723 -- 1,723
Dispositions....................... (119) (57) (28) (173) (219) (596)
----- --- ----- ----- ----- -----
Year end............................. 950 959 1,035 2,881 2,926 2,926
===== === ===== ===== ===== =====
Locations
Beginning of year.................... 180 154 143 139 423 180
New builds......................... 3 4 6 12 15 40
J.V. investments--international.... -- -- -- 14 2 16
Combination........................ -- -- -- 312 -- 312
Dispositions....................... (29) (15) (10) (54) (55) (163)
----- --- ----- ----- ----- -----
Year end............................. 154 143 139 423 385 385
===== === ===== ===== ===== =====
Average screens per location......... 6.2 6.7 7.4 6.8 7.6
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Since the Combination, we have pursued the sale of certain theatres in New
York City and Chicago that were subject to approval by the Department of
Justice ("DOJ"), in accordance with the terms of an agreement reached with the
DOJ to permit the Combination. As a result, during the fourth quarter of fiscal
1999, we sold to Cablevision Systems Corporation 33 screens in 12 theatres in
New York City, in accordance with the DOJ order, and an additional 14 screens
in 4 theatres in the suburban New York area for aggregate cash proceeds of
$87.5 million. Approximately $87.2 million of these proceeds was utilized to
pay down our Senior Revolving Credit Facility.
Under the agreement with the DOJ, we were also required to sell 49 screens
at 11 theatre locations in Chicago. On April 7, 1999, we completed the sale of
30 screens at 8 of these theatre locations to a third party. This transaction
was not significant to our operating results or financial position. A portion
of these proceeds was utilized to pay down our Senior Revolving Credit
Facility. Additionally, under the agreement with the DOJ, we are required to
sell the remaining 19 screens at 3 theatre locations in Chicago. No sale of
these locations has occurred and, pursuant to the original agreement with the
DOJ, a trustee has been appointed to effect the sale of these locations.
Finally, we continue to close or dispose of certain overlapping theatre
locations and underperforming theatres, including older, obsolete theatres that
contribute only minimally to cash flow from operations or are operating at a
loss. We have targeted a significant number of screens for disposition or
closing. While in the aggregate these theatres generate significant revenues,
we believe that the disposition or closure of these screens will actually
improve our operating cash flow on an ongoing basis. Contractual obligations
related to most of these theatre closings have been provided for as part of the
cost of acquisition in connection with the Combination.
We believe we have a significant opportunity to improve our competitive
position in many of our existing markets, as well as to selectively enter new
markets in North America that are currently underserved. Our goal in this
expansion effort is to develop a modern portfolio of multiplex and megaplex
theatre properties which offer customers an exceptional movie-going experience.
We are also implementing a program to upgrade certain existing theatres with
stadium seating.
. Expand Internationally. According to the Baskerville Communications
Corporation, the international share of total worldwide box office receipts rose
from 43% in 1983 to 63% in 1998. International box office figures are expected
to rise by 41% between 1998 and 2007. We believe that the international market
offers significant growth opportunities to motion picture exhibitors,
particularly through the replication of the multiplexing process currently
underway in the domestic arena. Much of the world is underscreened and
underserved by poor quality theatres. According to Baskerville Communications
Corporation, there were approximately 8,400 people per screen in the U.S. in
1998, compared to an average of approximately 26,500 people per screen in Europe
and approximately 69,000 people per screen in Latin America. In the U.S., the
average person visits a theatre approximately 5.2 times per year, compared to
2.1 times per year in Europe and only 0.6 times per year in Latin America. The
international market has upside potential in that small increases in attendance
rates and increased average ticket prices have a dramatic impact in expanding
box office receipts.
In June 1998, we formed the Loews Cineplex International division to
develop, construct and operate theatres outside of the U.S. We are currently
considering expansion opportunities in selected areas throughout the world that
we believe are underscreened and underserved. We have initially targeted
selected markets in Western Europe based on the favorable economy, ease of
doing business and availability of attractive partners. We intend to identify
local partners in targeted international markets with whom management can
pursue joint venture opportunities that capitalize on our development and
operating expertise and access to capital, and that take advantage of the local
partners' established presence and significant local expertise. For the year
ended February 29, 2000, our international operations, which primarily
represents equity income of our joint ventures, represent less than 1% of our
revenues.
On June 10, 1998, Loews Cineplex and Yelmo Films formed Yelmo Cineplex, a
50/50 joint venture, to develop, construct and operate movie
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theatres throughout Spain. Yelmo Films is Spain's second largest film
exhibition company and its leading builder of state-of-the-art multiplex
theatres. Yelmo Cineplex currently owns and operates 130 screens at 15 theatre
locations in high-density population areas in Madrid, Catalunya and Galicia.
This includes two theatres opened during fiscal year 2000 aggregating 22
screens: the Madrid Sur theatre comprising 9 screens and the Gijon theatre
comprising 13 screens. Under the terms of the agreement, Yelmo Films
contributed its existing theatre assets to the joint venture. We are
contributing cash equal to the agreed value of the assets net of debt on an
"as-needed" basis, primarily to fund the construction of new multiplexes.
Additionally, our joint venture in Spain is negotiating a revolving credit
facility with a group of banks in the amount of 100 million Euros which it
expects to have in place by the second quarter of fiscal year 2001. The
proceeds of this facility will be used to fund new theatre construction
activity and operations in Spain. Yelmo Cineplex expects to add approximately
14 new theatre locations and approximately 190 screens to its existing assets
in the next several years. These locations and screens include 6 theatre
locations with 75 screens currently under development and commitments for 3
additional theatre locations aggregating 46 screens. The Spanish film
exhibition market has experienced strong growth recently, with a 38% increase
in box office receipts between 1995 and 1998. In addition to the anticipated
increases in box office and concession revenues through the expansion of the
Yelmo Cineplex theatre circuit, we are continually seeking other potential
revenue opportunities in Spain. To illustrate, during fiscal year 2000 we
entered into a three-year deal with an outside third party whereby we receive
compensation for on-screen advertising based upon actual attendance levels. We
expect Yelmo Cineplex will receive approximately $10 million over the term of
this contract.
On March 13, 1999, we entered into a 50/50 joint venture in Italy with
Aurelio De Laurentiis' Filmauro Srl., a leading producer, distributor and
exhibitor of motion pictures in Italy. The new venture, known as De Laurentiis
Cineplex Srl., plans to develop multiplexes in regions throughout Italy.
On May 19, 1999, we announced that we entered into a 50/50 joint venture in
Turkey with Transturk Holdings A.S. to develop, construct and operate movie
theatres throughout Turkey, Romania and the Turkic Republics of the CIS. The
new venture, to be known as Odeon Cineplex, plans to develop several multiplex
theatres in addition to the 5-screen Profilo Theatre and the 10-screen Migros
Theatre (which includes the IMAX theatre) already in operation in Istanbul and
Ankara, respectively.
We also operate a six-screen theatre in Hungary and an eight-screen theatre
in Vienna, Austria. We are currently evaluating several other specific
international expansion opportunities in Western and Eastern Europe, Latin
America and Asia.
. Pursue Acquisitions and Joint Ventures. We are continually seeking
opportunities to acquire theatres with locations that complement our existing
locations and provide the opportunity to improve operations through significant
cost savings realized through economies of scale.
Theatre Operations
Nearly all of our screens are located in multiscreen theatres. Our theatres
averaged 7.6 screens as of February 29, 2000. We intend to increase this ratio
through the construction of larger multiplex or megaplex theatres, by expanding
certain existing theatres and by closing smaller theatres. Multiplex theatres
enable us to present a variety of films appealing to several segments of the
movie-going public, while serving patrons from common facilities (i.e., box
office, concession areas, restrooms and lobbies). This strategy improves
attendance, enables us to operate more efficiently and uses more of our theatre
capacity, all of which enhance revenues and profitability.
We rely upon advertising and movie schedules in newspapers as well as on our
website to inform our patrons of film selections and show times. We also
exhibit previews of coming attractions and films presently playing on other
screens.
Additionally, in the future we expect to provide a comprehensive offering of
remote ticketing services, showtimes, reviews and movie trailers through an
internet movie portal company that we are developing with five other major
movie theatre companies.
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<PAGE>
Competition
The U.S. motion picture exhibition industry is generally fragmented, with
nine large companies owning or operating a majority of screens. The following
table presents the nine largest exhibition companies in North America by box
office revenue, screens and theatres according to the most recent publicly
available information:
<TABLE>
<CAPTION>
Box Office
Company Revenues Screens Theatres
- --------------------------------------------------- ---------- ------- --------
(millions)
<S> <C> <C> <C>
Loews Cineplex(1).................................. $729.3 2,926 385
Regal/Act III...................................... 690.5 4,413 430
AMC Entertainment.................................. 662.2 2,735 233
Cinemark Cinemas................................... 441.4 2,576 248
United Artists Theatres............................ 433.1 2,018 283
Carmike Cinemas.................................... 336.0 2,848 458
GC Companies....................................... 255.8 1,052 138
Hoyts Cinemas Corp. ............................... N/A 977 124
National Amusements................................ N/A 1,114 110
</TABLE>
- --------
(1) Includes 100% of our partnerships.
In 1999, U.S. motion picture attendance was approximately 1.47 billion
which was relatively consistent with the prior year, and box office revenues
exceeded $7.49 billion, an 8% increase over 1998. The average ticket price for
1999 was $5.10, an increase of 8% over 1998.
Exhibitors' primary revenues are derived from box office sales of tickets
and sales of concession products. Box office revenues are directly related to:
. attendance, which is driven by the quality of the movie-going experience,
including the comfort, cleanliness and convenience of the location of
theatres,
. the content and quality of film product distributed by major motion
picture and independent film studios,
. the ticket price,
. the quality of projection and sound presentation, and
. the level of customer service.
Exhibitors sell concessions, which consist of food and beverages, at stands
in the theatres, and the revenues they generate are largely dependent on
attendance levels, theatre staffing, training and the type and quality of
products offered.
Exhibitors' primary operating costs include:
. film costs for licensing rights paid to motion picture distributors,
. costs of concession products and related supplies and services,
. labor,
. occupancy costs, including theatre rents and real estate taxes, and
. advertising.
. Relationship Between Motion Picture Production and Distribution and Motion
Picture Exhibition. The motion picture exhibition and the motion picture
production and distribution industries are closely related. Motion picture
theatres are the primary initial distribution channel for new motion picture
releases. Theatrical success of a motion picture is often the most important
factor in establishing its value in cable television, pay-per-view,
videocassette and other markets. At the same time, the ultimate success of an
exhibitor's box office depends on the quality, quantity, availability and
acceptance by movie-going patrons of the motion picture produced by production
companies and licensed to the motion picture exhibitors by distribution
companies.
A few major movie studios and their distribution operations dominate the
motion picture production and distribution industry in the U.S. These include:
. Columbia and TriStar, both owned by Sony,
. Universal, which is approximately 92% owned by Seagram,
. The Walt Disney Company,
. Warner Bros., which is owned by Time-Warner Inc.,
. Paramount Pictures, which is owned by Viacom Inc.,
. Twentieth Century-Fox, which is owned by News Corporation Ltd.,
. Metro-Goldwyn-Mayer Inc., and
. Dreamworks.
11
<PAGE>
Based on box office receipts, these studios account for approximately 90% of
the motion pictures exhibited in the U.S.
. Film Licensing. In order to secure motion pictures, exhibitors must engage
in negotiations with film distributors for licensing rights of first run feature
motion pictures. Exhibitors and distributors conduct negotiations on a film-by-
film and theatre-by-theatre basis. Film exhibition licenses typically specify
rental fees based upon gross receipts or on theatre admissions. Under gross
receipts arrangements, the distributor receives a specified percentage of box
office receipts, with the percentage declining over the term of the run. Based
upon a theatre admissions formula, the distributor receives a specified
percentage of the excess of box office receipts over an agreed upon house
operating expense.
If there are multiple exhibitors in a film zone, a distributor may require
the exhibitors in a zone to bid for a film or may allocate its films among
them. When films are allocated, a distributor will choose which exhibitor is
offered a film and the exhibitor will negotiate film rental terms directly with
the distributor. Over the past several years, distributors have predominantly
favored the allocation over the bidding process to license their films.
It is also important to note that the distribution of film product in Canada
is based on historical relationships that result in the two major exhibitors
(us and Famous Players) playing product from specific suppliers. As a result,
there can be large fluctuations from year-to-year in box office revenue
performance based on the strength of a particular studio's film product. Even
though this situation has changed moderately over the last two years, the
traditional relationships still hold in most of the major markets. One of the
challenges faced by us is to balance existing relationships with distributors
in order to receive the broadest mix of film product for our theatres in
Canada.
Current Exhibition Industry Environment
During the past five years, the annual North American theatre attendance
level has experienced a gradual increase from 1 billion to over 1.4 billion
patrons and a steady increase in ticket prices driving the industry-wide box
office from $5.0 billion in 1990 to over $7.5 billion in 1999. The types of
theatres generating this increase have changed dramatically as there has been a
shift in movie-going from the older, smaller theatres to newly constructed
larger, state-of-the-art facilities. As a result, the U.S. exhibition industry
is currently experiencing a new wave of dramatic changes with the advent of
megaplex theatres and shifts in distribution patterns, leading to consolidation
in the industry. These changes are creating increased competition, increased
challenges and increased opportunities as exhibitors seek to increase market
share in vulnerable markets. Due to their ability to play virtually all
releases, megaplex theatres have had a significant impact in locations where
they have opened. We are an active participant in this market. Our optimal
megaplex theatre size is approximately 16 to 18 screens, which gives us the
ability to play all important releases and the flexibility to offer multiple
show times for releases in the greatest demand. Unfortunately, the industry
screen growth related to the megaplex build-out has been irrational at times,
focused on growth in revenues and screens as opposed to cash flow, and has not
been accompanied by the disposal or closure of older, obsolete screens. The
significant decay of older theatres and the underperformance of many new builds
have put pressure on industry-wide operating results, operating margins,
certain covenant requirements under bank facilities and the market price of our
and other exhibitors' stock. The future success of the industry will be
dependent on higher quality new builds, the availability of capital to fund
expansion, and the aggressive disposition of older, obsolete theatres.
In addition, distributors have changed release patterns over the past
several years, opening films with significant box office potential on an
increasing number of screens and reducing the "zones of exclusivity" previously
held by distributors. The number of screens for a wide film release has
increased significantly, and while major film releases may have the same number
of play dates, the run has been compressed onto a larger number of screens in a
shorter period of time. The pressure on distributors to make a significant
impact in the opening weekend for certain films has led to distributors'
willingness to play films on screens in closer proximity to maximize initial
box office results which are at high film rent terms to the exhibitor. This
quick "burn off" of film has resulted in an industry-wide increase in film cost
over the past several years. As previously mentioned, it is
12
<PAGE>
important that the number of older, obsolete industry-wide screens be reduced
significantly to relieve some of the current pressure being experienced related
to film terms.
Despite these negative developments, we believe that our new build program
will continue to provide attractive opportunities for us and will be the
primary driver of our continued future growth. Our growth plan is predicated
upon a "measured approach" based upon moderate expansion on a fiscally
responsible basis. We are very cautious and deliberate in selecting our new
build properties; our goal is to build highly profitable modern theatres that
will "withstand the test of time". As previously mentioned in the "Upgrade and
Expand in North America" section, we have a strong track record in terms of our
historical new build theatre locations exemplified by the strong performance of
these theatres. We also recognize that our ability to maintain our new build
program depends on the availability of satisfactory financing which in turn is
followed by our ability to achieve satisfactory levels of cash flow. While we
strongly believe in our new build program, we also recognize that there needs
to exist a corresponding shift in the industry as older, smaller theatres are
disposed of or closed. As a result, we have targeted in the past and continue
to target a significant number of screens for disposition or closure.
Segment Information
See Note 12 to our Consolidated Financial Statements included in the 2000
Annual Report to Stockholders which is incorporated by reference.
Seasonality
The release of motion pictures is often seasonal, with a disproportionate
number of major motion picture releases taking place during the summer and
holiday seasons. This may cause significant changes, from quarter to quarter,
in our attendance levels, theatre staffing levels and reported results. We
expect this industry-wide trend to continue.
Government Regulation
In the United States, federal and state antitrust laws in large part
regulate the distribution of motion pictures. These laws have been the subject
of numerous antitrust cases. The most significant of these cases is U.S. v.
Paramount Pictures Inc., et al., which was affirmed by the U.S. Supreme Court
in 1950. The decision from the Paramount case binds most major film
distributors and requires the distributors to offer and license their films to
exhibitors on a film-by-film and theatre-by-theatre basis. Consequently, we
cannot be assured of a supply of motion pictures by entering into long-term
arrangements with major distributors. Instead, we must compete and negotiate
for licenses on a film-by-film and theatre-by-theatre basis.
Motion picture exhibitors are also subject to certain U.S. and Canadian
federal, state, provincial and local laws governing such matters as
construction, renovation and operation of their theatres, employee wages and
working conditions, and health and sanitation regulations. We believe all of
our theatres are in compliance with these requirements. We are also subject to
the evolving laws and increased public attention on the accessibility of our
theatres to persons with physical disabilities.
Employees
As of February 29, 2000, we employed approximately 16,300 employees,
including approximately 2,000 full-time and 14,300 part-time employees. Our
employment levels are generally directly related to seasonal changes in
business activity. We are a party to collective bargaining agreements with 35
unions, of which approximately 1,700 employees are members. We believe that our
employee relations are generally good.
Cautionary Notice Regarding Forward Looking Statements
This Annual Report on Form 10-K includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
included in this Annual Report on Form 10-K, other than statements of
historical facts, may constitute forward-looking statements. Although we
believe that the expectations reflected in such forward looking statements are
reasonable, we cannot be assured that the expectations will prove to be
correct. Important factors that could cause results
13
<PAGE>
to differ materially from our expectations are disclosed below. All forward-
looking statements are expressly qualified in their entirety by these
cautionary statements.
Factors That May Affect Future Performance
In addition to other factors and matters previously mentioned, in our view,
the following items could cause results to differ materially from those
discussed in forward-looking statements:
. the effect of economic conditions on a national, regional or
international basis;
. competitive pressures in the motion picture exhibition industry;
. the financial resources of, and films available to, us and our
competitors;
. changes in laws and regulations, including changes in environmental and
disabilities laws and changes in accounting standards;
. our high debt levels, which may reduce our operating flexibility, may
impair our ability to obtain financing and may make us more vulnerable in
a downturn;
. our ability to execute successfully our foreign expansion plans;
. the interests of our two major shareholders, Sony Pictures and Universal,
each of which produces and distributes motion pictures; and
. opportunities that may be presented to and pursued by us.
See the Liquidity and Capital Resources section and the Outlook section
included in the Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing on pages 48 to 52 of our 2000 Annual Report to
Stockholders, which is incorporated by reference in this Annual Report on Form
10-K.
ITEM 2. PROPERTIES
At February 29, 2000, Loews Cineplex, including Star, Magic Johnson and
Yelmo Cineplex theatres, operated or had interests in 2,926 screens in 385
theatres, of which 35 theatres were owned by us, 346 theatres were leased and 4
theatres were subject to management arrangements. Our leases are entered into
on a long-term basis. The lease terms generally range from 20 to 40 years and
contain various renewal options, generally in intervals of 5 to 10 years.
Theatre leases provide for the payment of a fixed annual rent and, sometimes, a
percentage of box office receipts or total theatre revenue. The following
tables show the locations of our screens at February 29, 2000, including our
partnerships' theatres.
<TABLE>
<CAPTION>
United States
- --------------------------------------------------------------------------------
State Screens Locations
- -------------------------------------------------------------- ------- ---------
<S> <C> <C>
Arizona....................................................... 33 4
California.................................................... 79 8
Connecticut................................................... 40 4
District of Columbia.......................................... 30 9
Florida....................................................... 27 2
Georgia....................................................... 12 1
Idaho......................................................... 20 4
Illinois...................................................... 320 45
Indiana....................................................... 51 5
Kentucky...................................................... 9 2
Maryland...................................................... 134 19
Massachusetts................................................. 93 10
Michigan...................................................... 135 9
Minnesota..................................................... 15 3
New Hampshire................................................. 12 2
New Jersey.................................................... 206 20
New York...................................................... 282 41
Ohio.......................................................... 32 2
Pennsylvania.................................................. 27 2
Texas......................................................... 169 18
Utah.......................................................... 62 11
Virginia...................................................... 41 6
Washington.................................................... 120 18
----- ---
Total....................................................... 1,949 245
===== ===
</TABLE>
<TABLE>
<CAPTION>
Canada
- --------------------------------------------------------------------------------
Province Screens Locations
- -------------------------------------------------------------- ------- ---------
<S> <C> <C>
Alberta....................................................... 129 17
British Columbia.............................................. 67 11
Manitoba...................................................... 13 3
Ontario....................................................... 391 56
Quebec........................................................ 201 31
Saskatchewan.................................................. 27 4
--- ---
Total....................................................... 828 122
=== ===
</TABLE>
<TABLE>
<CAPTION>
International
- --------------------------------------------------------------------------------
Country Screens Locations
- -------------------------------------------------------------- ------- ---------
<S> <C> <C>
Spain......................................................... 130 15
Austria....................................................... 8 1
Hungary....................................................... 6 1
Turkey........................................................ 5 1
----- ---
Total....................................................... 149 18
----- ---
Grand Total................................................. 2,926 385
===== ===
</TABLE>
14
<PAGE>
Under the partnership agreement governing the operation of the Star Theatres
circuit, we are responsible for film booking arrangements. Our joint venture
partner manages the theatres under an operating agreement. The partnership
agreement also has provisions governing the transfer of partnership interests
between the partners and to unaffiliated third parties.
Under the partnership agreement governing the operation of the Magic Johnson
Theatres circuit, we are responsible for film booking arrangements and
management of the theatres. This agreement also has provisions governing the
transfer of partnership interests between the partners and to unaffiliated
third parties.
ITEM 3. LEGAL PROCEEDINGS
We are involved in routine litigation and legal proceedings in the ordinary
course of our business relating to personal injury claims, employment matters
and contractual disputes. Except for those noted below, we do not have any
litigation or proceedings that we believe will have a material adverse effect
on us, individually or in the aggregate.
Antitrust Proceedings
On April 16, 1998, the United States of America, the State of New York, by
and through its Attorney General, Dennis C. Vacco, and the State of Illinois,
by and through its Attorney General, Jim Ryan, on one hand, and us, Sony
Corporation of America, Cineplex Odeon and Seagram Co. Ltd., on the other hand,
entered into, and the Southern District of New York ordered, a Stipulation &
Order setting forth a proposed Final Judgment relating to alleged federal
antitrust violations in New York and Illinois stemming from the Loews/Cineplex
combination. This Stipulation & Order followed the filing of a complaint on the
same day relating to these alleged violations. Under the terms of the
agreement, we were required to divest certain theatres in New York and Chicago.
Since the Combination, we pursued the sale of certain theatres in New York
City and Chicago that were subject to approval by the Department of Justice
("DOJ"), in accordance with the terms of an agreement reached to permit the
merger of Loews Theatres with Cineplex Odeon. As a result, during the fourth
quarter of fiscal 1999, we sold to Cablevision Systems Corporation 33 screens
in 12 theatres in New York City, in accordance with the DOJ order, and an
additional 14 screens in 4 theatres in the suburban New York area for aggregate
cash proceeds of $87.5 million. Approximately $87.2 million of these proceeds
was used to pay down our Senior Revolving Credit Facility.
Under the agreement with the DOJ, we were also required to sell 49 screens
at 11 theatre locations in Chicago. On April 7, 1999, we completed the sale of
30 screens at 8 of these theatre locations to a third party. This transaction
was not significant to our operating results or financial position. A portion
of these proceeds was utilized to pay down our Senior Revolving Credit
Facility. Additionally, under the agreement with the DOJ, we are required to
sell the remaining 19 screens at 3 theatre locations in Chicago. No sale of
these locations has occurred and, pursuant to the original agreement with the
DOJ, a trustee has been appointed to effect the sale of these locations.
Environmental Proceedings
We own, manage and/or operate theatres and other properties that are subject
to certain U.S. and Canadian federal, state and local laws and regulations
relating to environmental protection and human health and safety, including
those governing the investigation and remediation of contamination resulting
from past or present releases of hazardous substances. Some of these laws and
regulations may impose joint and several liability on statutory classes of
persons for the costs of investigation or remediation of contamination,
regardless of fault or the legality of the original disposal. These persons
include the present or former owner or operator of a contaminated property and
companies that generated or disposed of hazardous substances found at the
property.
One of our leased drive-in theatres and one formerly leased drive-in
theatre, both in the State of Illinois, are located on properties on which
third parties disposed of, or may have disposed of, substantial quantities of
construction debris, auto shredder residue and other debris. Such material may
contain hazardous substances. One of these
15
<PAGE>
properties is the subject of an action, filed in August 1998 in the Circuit
Court of Cook County, Illinois by the Illinois Attorney General's office
seeking civil penalties and various forms of equitable relief, including the
removal of all wastes allegedly present at the property, soil and groundwater
testing and remediation, if necessary. Our range of probable liability with
respect to this action cannot be reasonably estimated at this time due to
several unknown factors, including the scope of contamination at the theatre
property, the likelihood of any particular remedial action being required, the
allocation of liability, if any, to other responsible parties, and the ability
of such parties to satisfy their share of such liability. We will continue to
evaluate future information and developments with respect to conditions at the
theatre property and will periodically reassess any liability accordingly.
Based on the foregoing, there can be no assurance that our liability, if any,
in connection with this action will not be material.
Six West Retail Acquisition, Inc.
On July 24, 1997, Six West Retail Acquisition, Inc., a real estate
development company, initiated a lawsuit against us and some of our affiliates
in the U.S. District Court for the Southern District of New York, seeking
injunctive relief and unspecified monetary damages. Six West alleges that we
have violated federal antitrust laws by engaging in block booking agreements
and monopolizing the motion picture exhibition market in New York City. Six
West owns or leases the Paris and New York Twin theatres in Manhattan. The
Paris theatre was managed by one of our subsidiaries under an oral management
agreement that has been terminated. The New York Twin theatre is managed by one
of our subsidiaries under a written management agreement. Six West also alleges
that we violated our contractual and fiduciary responsibilities in managing the
two theatres. On December 3, 1997, Six West filed an amended complaint
asserting similar claims with respect to the Festival Theatre which was
operated by one of our subsidiaries until it was closed in 1994. All of the
defendants moved to dismiss the amended complaint by motion dated January 8,
1998. The court decided both motions in a memorandum opinion and order dated
March 8, 2000. The court granted defendants' motion to dismiss the contract
claims against the individual non-corporate defendants and a portion of one
claim against Loews. The court denied the motion with respect to the remainder
of the amended complaint and the non-Loews corporate defendants. Discovery in
the action is still in progress. We believe that Six West's claims are without
merit and intend to oppose them vigorously.
ADA Litigation
The Department of Justice, in coordination with the New York City Commission
on Human Rights, is currently investigating Cineplex Odeon's theatres in New
York City with respect to its compliance with the ADA and the New York City
Human Rights Law. The Department of Justice has alleged that its investigation
has identified numerous violations of the ADA. We have opposed, and will
continue to vigorously oppose the allegations and claims of the Department of
Justice with respect to the compliance of these theatres under the ADA.
However, we cannot guarantee that the remediation costs relating to the ADA
will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
<PAGE>
EXECUTIVE OFFICERS OF LOEWS CINEPLEX
The following executive officers of Loews Cineplex hold the offices
indicated until their successors are chosen and qualified.
<TABLE>
<CAPTION>
Position, Principal Occupation,
Name, Age and Position with Loews Cineplex Business Experience and Directorships
------------------------------------------ -------------------------------------
<C> <S>
Lawrence J. Ruisi................................ 52 Mr. Ruisi has been President and Chief Executive
.President Officer of Loews Cineplex since May 1998. Mr.
.Chief Executive Officer Ruisi was President of Sony Retail Entertainment
.Director Inc. from September 1994 until May 1998. Mr. Ruisi
since May 1998 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.
Allen Karp....................................... 59 Mr. Karp has served as Chairman and Chief
.Chairman and CEO of Executive Officer of Cineplex Odeon Canada since
Cineplex Odeon Canada May 1998. From May 1993 until May 1998, Mr. Karp
.Director served as President and Chief Executive Officer of
since May 1998 Cineplex Odeon Corporation.
Travis Reid...................................... 46 Mr. Reid served as President of Loews Theatres
.President, North from October 1996 until May 1998 and, for the
American Operations preceding year, served as Executive Vice
since May 1998 President-Film Buying of Loews Theatres. As
Executive Vice President of Loews Theatres, Mr.
Reid was involved in all aspects of the circuit's
strategic planning, corporate development and
expansion. For the three years prior to 1995, Mr.
Reid served as Senior Vice President of Film.
Prior to joining Loews Theatres in 1991, Mr. Reid
served as Vice President of Film for General
Cinema's Midwestern, Southwestern and Western
regions.
J. Edward Shugrue................................ 50 Mr. Shugrue has served as President of Loews
.President, Cineplex International since June 1998. From 1996
Loews Cineplex International until June 1998, Mr. Shugrue served as a senior
since June 1998 corporate executive of Sony Pictures' Corporate
Development Group where he was responsible for
identifying and developing growth opportunities
for Sony Pictures in international markets. From
1987 to 1996, Mr. Shugrue served as President of
Columbia TriStar Film Distributors International,
the international theatrical arm of Sony Pictures.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Position, Principal Occupation,
Name, Age and Position with Loews Cineplex Business Experience and Directorships
------------------------------------------ -------------------------------------
<C> <S>
John J. Walker................................... 47 Mr. Walker served as Senior Vice President and
.Senior Vice President, Chief Financial Officer of Loews Theatres, from
Chief Financial Officer 1990 until May 1998. From 1988 to 1990, Mr. Walker
.Treasurer served as Vice President-Controller of Loews
since May 1998 Theatres. Mr. Walker is responsible for overseeing
all aspects of financial reporting, budgeting,
internal auditing, management information systems,
treasury, risk management and insurance.
Mr. Walker is a certified public accountant and is
a member of the American Institute of Certified
Public Accountants and the New York State Society
of Certified Public Accountants.
John C. McBride, Jr. ............................ 44 Mr. McBride served as Senior Vice President, Legal
.Senior Vice President, Affairs of Sony Pictures, from 1996 to 1998. From
General Counsel 1992 to 1996, Mr. McBride served as Vice
since May 1998 President, Legal Affairs of Sony Pictures. From
1990 to 1992, Mr. McBride served as Assistant
General Counsel of Sony Pictures.
Joseph Sparacio.................................. 40 Mr. Sparacio served as Vice President of Finance
.Vice President, Finance and Controller of Loews Theatres, from 1994 to May
and Controller 1998. From 1990 to 1994, Mr. Sparacio served as
since May 1998 Controller of Loews Theatres. Prior to joining
Loews Theatres, Mr. Sparacio spent eight years
with the New York City office of the independent
accounting firm of Ernst & Young where he was a
Senior Manager of Audit. Mr. Sparacio is a
certified public accountant and is a member of the
American Institute of Certified Public Accountants
and the New York State Society of Certified Public
Accountants.
Mindy Tucker..................................... 40 Ms. Tucker served as Senior Vice President of
.Corporate Vice President, Development and Planning for Sony Retail
Strategic Planning Entertainment, from 1996 to May 1998. From 1994 to
.Secretary 1996, Ms. Tucker served as Vice President of
since May 1998 Business Development for Sony Retail
Entertainment. From 1992 to 1994, Ms. Tucker
served as Vice President of Corporate Strategy and
Planning of Sony Pictures.
</TABLE>
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the New York and Toronto Stock Exchanges. As
of May 10, 2000 there were approximately 10,500 holders of record of our Common
Stock. Additional information required by this item is incorporated by
reference from page 73 of the 2000 Annual Report to Stockholders.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data and selected key operating statistics
for the five years ended February 29, 2000, which appear on pages 43 to 45 of
the 2000 Annual Report to Stockholders, is incorporated by reference in this
Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three years ended February 29, 2000, which appear on pages
46 to 53 of the 2000 Annual Report to Stockholders, is incorporated by
reference in this Form 10-K Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Loews Cineplex has limited exposure to financial market risks, including
changes in interest rates, movement in foreign currency exchange rates and
other relevant market prices.
An increase or decrease in interest rates would affect interest costs
relating to our variable rate senior credit facilities. However, a portion of
these facilities are hedged through interest rate swap agreements. At February
29, 2000, the amount outstanding under our senior credit facility was $530
million and the notional amount of our interest rate hedges was $250 million.
These amounts approximate fair value. The senior credit facility has a five
year term with interest priced at the bank base rate or LIBOR, at our option.
The weighted average interest rate as of February 29, 2000 was 7.48%.
Generally, there is no required amortization of this credit facility prior to
maturity. Our swaps have terms of four years.
We are exposed to market risk arising from changes in foreign currency
exchange rates as a result of international operations. See Item 7--
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 46 to 53 of the 2000 Annual Report to
Stockholders, incorporated by reference in this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Loews Cineplex together with the
report thereon of PricewaterhouseCoopers LLP dated May 1, 2000, appearing on
pages 54 to 72 of the 2000 Annual Report to Stockholders are incorporated by
reference in this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of Loews Cineplex is contained in, and
incorporated by reference from, our Proxy Statement for the 2000 Annual Meeting
of Stockholders. The balance of the response to this item is contained in the
discussion entitled Executive Officers of Loews Cineplex in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information about executive compensation is incorporated by reference from
the discussion under the heading Executive Compensation in our Proxy Statement
for the 2000 Annual Meeting of Stockholders.
19
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information about security ownership of certain beneficial owners and
management is incorporated by reference from the discussion under the headings
Stock Ownership and Stockholders Agreement in our Proxy Statement for the 2000
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information about certain relationships and transactions with related
parties is incorporated by reference from the discussion under the headings
Related Transactions and Stockholders Agreement in our Proxy Statement for the
2000 Annual Meeting of Stockholders.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)The following documents are filed as part of this report:
(1)Financial Statements
<TABLE>
<CAPTION>
Page(s) in Annual Report*
-------------------------
<S> <C>
Consolidated Balance Sheet at February 29, 2000 and
February 28, 1999................................. 54
Consolidated Statement of Operations for the years
ended February 28 or 29, 2000, 1999 and 1998...... 55
Consolidated Statement of Changes in Stockholders'
Equity for the years ended February 28 or 29,
2000, 1999 and 1998............................... 56
Consolidated Statement of Cash Flows for the years
ended February 28 or 29, 2000, 1999 and 1998...... 57
Notes to Consolidated Financial Statements......... 58 to 71
Report of Independent Accountants.................. 72
</TABLE>
(2)Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedules.
For each of the three years in the period ended February 29, 2000
II. Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
--------
*Incorporated by reference from the indicated pages of the 2000 Annual
Report to Stockholders.
(3)Exhibits:
<TABLE>
<C> <S>
2.1(1) Amended and Restated Master Agreement among Sony Pictures Entertainment Inc., Registrant and
Cineplex Odeon Corporation dated as of September 30, 1997.
2.2(2) Amending Agreement dated May 14, 1998.
2.3(1) Subscription Agreement by and between Registrant and Universal Studios, Inc. dated as of September
30, 1997.
2.4(1) Plan of Arrangement.
3.1(2) Amended and Restated Certificate of Incorporation of Registrant.
3.2(3) Amended and Restated By-laws of Registrant.
10.1(1) Amended and Restated Stockholders Agreement among Registrant, Sony Pictures Entertainment Inc.,
Universal Studios, Inc., The Charles Rosner Bronfman Family Trust and Other Parties thereto dated as
of September 30, 1997.
10.2(2) Tax Sharing and Indemnity Agreement, dated May 14, 1998, by and among Registrant and Sony
Corporation of America.
10.3(2) Sony Trademark Agreement, dated May 14, 1998, by and among Registrant and Sony Corporation of
America.
10.4(2) Transition Services Agreement, dated May 14, 1998, among Registrant, Sony Corporation of America and
Sony Pictures Entertainment, Inc.
10.5(2) Sony Entertainment Center Lease made as of May 9, 1997 between SRE San Francisco Retail Inc. and
Loews California Theatres Inc. (portions of such exhibit have been filed separately with the SEC
under an application for confidential treatment pursuant to Rule 83 of the SEC Rules on
Organization, Conduct and Ethics, and Information and Regulation (17 CFR (S) 200.83)).
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
10.6(2) Sony YBG Entertainment Center Tenant Work Agreement.
10.7(1) Form of Director Indemnification Agreement.
10.8(1) Loews Cineplex Entertainment Corporation Amended and Restated 1997 Stock Incentive Plan.
10.9(2) Credit Agreement, dated as of May 14, 1998, among Registrant, as Borrower, the lenders listed
therein, as Lenders, Bankers Trust Company, as Administrative Agent and Co-Syndication Agent, and
Bank of America NT&SA, The Bank of New York and Credit Suisse First Boston, as Co-Syndication
Agents.
10.9.1(6) First Amendment to Credit Agreement, dated as of February 29, 2000.
10.10(4) Indenture, dated as of August 5, 1998, by and among Registrant and Bankers Trust Company, as
Trustee.
10.11(2) Agreement between Registrant and Lawrence J. Ruisi, dated April 30, 1998.
10.13(5) Agreement between Cineplex Odeon Corporation and Allen Karp, dated August 18, 1999.
10.15(6) Agreement between Registrant and Seymour H. Smith, dated November 1, 1999.
10.16(6) Agreement between Registrant and Travis Reid, dated May 1, 1998.
10.17(1) Agreement between Registrant and Joseph Sparacio, dated August 20, 1994, including Term Extension
Letter dated March 5, 1997.
10.18(1) Agreement between Registrant and John J. Walker, dated June 1, 1993, including Term Extension Letter
dated March 5, 1997.
10.19(6) Agreement between Registrant and John C. McBride, Jr., dated January 19, 1998.
10.20(6) Agreement between Registrant and Mindy Tucker, dated December 15, 1997.
10.21(3) Letter Agreement between Registrant and J. Edward Shugrue, dated December 15, 1997.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule (for SEC use only)
99 Financial Statement Schedule
</TABLE>
--------
(1) Incorporated by reference from Loews Cineplex's Registration Statement
on Form S-4 filed on February 13, 1998, Commission file number 333-
46313.
(2) Incorporated by reference from Loews Cineplex's Annual Report on Form
10-K for the fiscal year ended February 28, 1998, as amended,
Commission file number 1-14099.
(3) Incorporated by reference from Loews Cineplex's Registration Statement
on Form S-1 filed on June 15, 1998, as amended, Commission file number
333-56897.
(4) Incorporated by reference from Loews Cineplex's Registration Statement
on Form S-4 filed on October 13, 1998, Commission file number 333-
64883.
(5) Incorporated by reference from Loews Cineplex's Quarterly Report on
Form 10-Q for the period ended August 31, 1999, Commission file number
1-14099.
(6) Filed herewith.
(b) Form 8-K: No reports on Form 8-K were filed by Registrant during the
quarter ended February 29, 2000.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LOEWS CINEPLEX ENTERTAINMENT
CORPORATION (Registrant)
Dated: May 25, 2000
/s/ John C. McBride, Jr.
-------------------------------------
John C. McBride, Jr.
Senior Vice President and General
Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lawrence J. Ruisi President, Chief May 25, 2000
___________________________________________ Executive Officer and
Lawrence J. Ruisi Director (Principal
Executive Officer)
/s/ John J. Walker Senior Vice President, May 25, 2000
___________________________________________ Chief Financial Officer
John J. Walker and Treasurer
(Principal Financial
Officer)
/s/ Joseph Sparacio Vice President, Finance May 25, 2000
___________________________________________ and Controller
Joseph Sparacio (Principal Accounting
Officer)
/s/ George A. Cohon Director May 25, 2000
___________________________________________
George A. Cohon
/s/ Nora Ephron Director May 25, 2000
___________________________________________
Nora Ephron
/s/ Mel Harris Director May 25, 2000
___________________________________________
Mel Harris
/s/ Andrew Hauptman Director May 25, 2000
___________________________________________
Andrew Hauptman
/s/ Ronald N. Jacobi Director May 25, 2000
___________________________________________
Ronald N. Jacobi
/s/ Allen Karp Director May 25, 2000
___________________________________________
Allen Karp
/s/ Kenneth Lemberger Director May 25, 2000
___________________________________________
Kenneth Lemberger
/s/ Ron Meyer Director May 25, 2000
___________________________________________
Ron Meyer
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Yuki Nozoe Director May 25, 2000
___________________________________________
Yuki Nozoe
/s/ Karen Randall Director May 25, 2000
___________________________________________
Karen Randall
/s/ Hellene Runtagh Director May 25, 2000
___________________________________________
Hellene Runtagh
/s/ Bedi A. Singh Director May 25, 2000
___________________________________________
Bedi A. Singh
/s/ Howard Stringer Director May 25, 2000
___________________________________________
Howard Stringer
/s/ William A. Sutman Director May 25, 2000
___________________________________________
William A. Sutman
/s/ Mortimer B. Zuckerman Director May 25, 2000
___________________________________________
Mortimer B. Zuckerman
</TABLE>
24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth Selected Historical Financial Data for Loews
Cineplex Entertainment Corporation ("we", "us" and "our") for the five fiscal
years ended February 29, 2000 and has been derived from our annual consolidated
financial statements. The Selected Historical Financial Data and Selected Key
Operating Statistics should be read in conjunction with the separate
consolidated financial statements and notes thereto of Loews Cineplex
Entertainment Corporation and our "Management's Discussion and Analysis of
Financial Condition and Results of Operations", which are included elsewhere in
this annual report. Further, the Selected Historical Financial Data includes the
financial results of Cineplex Odeon Corporation ("Cineplex Odeon") for the
period from May 15, 1998 to February 29, 2000. Cineplex Odeon became our
subsidiary on May 14, 1998.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-----------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Box Office $ 647,774 $ 587,078 $ 296,933 $ 273,498 $ 264,585
Concession 243,511 228,332 104,009 90,643 84,358
Other 39,138 35,750 12,568 11,204 10,153
----------- ----------- ----------- ----------- -----------
Total Operating Revenue 930,423 851,160 413,510 375,345 359,096
----------- ----------- ----------- ----------- -----------
Theatre operations and other expenses
(including concession costs) 732,957 654,503 307,568 282,480 277,375
General and administrative 53,031 47,882 28,917 21,447 20,282
Depreciation and amortization 113,047 90,720 52,307 44,576 41,273
Loss on sale/disposals of theatres 8,388 4,532 7,787 9,951 7,249
Interest expense 72,728 57,216 14,319 14,776 15,376
Income tax expense 1,662 2,187 2,751 2,295 309
----------- ----------- ----------- ----------- -----------
Net loss $ (51,390) $ (5,880) $ (139) $ (180) $ (2,768)
=========== =========== =========== =========== ===========
Loss per common share:
basic and diluted $ (.88) $ (.12) $ (.01) $ (.01) $ (.14)
Weighted average shares and
equivalent outstanding(A):
Basic 58,622,646 47,834,541 20,472,807 20,472,807 20,472,807
Diluted 58,622,646 47,834,541 20,472,807 20,472,807 20,472,807
BALANCE SHEET DATA (AT PERIOD END):
Cash, equivalents and investments $ 31,735 $ 48,174 $ 9,064 $ 2,160 $ 2,390
Property, equipment and leaseholds $ 1,218,334 $ 1,119,977 $ 609,152 $ 613,692 $ 602,435
Total assets $ 1,907,389 $ 1,806,201 $ 728,551 $ 721,372 $ 715,810
Total long-term obligations (including
debt) $ 1,074,736 $ 943,811 $ 336,526 $ 339,206 $ 333,268
Total liabilities $ 1,288,587 $ 1,140,905 $ 404,040 $ 396,722 $ 390,980
Stockholders' equity $ 618,802 $ 665,296 $ 324,511 $ 324,650 $ 324,830
CASH FLOW STATEMENT DATA:
Cash flow provided by operating
activities $ 57,097 $ 82,711 $ 64,185 $ 47,976 $ 46,326
</TABLE>
(A) Restated in all periods presented to reflect impact of a stock dividend
declared on February 5, 1998.
43
<PAGE>
Selected Key Operating Statistics
The table below sets forth unaudited Selected Key Operating Statistics for us as
of and for each of the periods indicated. Management views these statistics as
key financial measures and believes that certain investors find them useful in
analyzing companies in the motion picture exhibition industry. No one measure is
more meaningful than another and our management uses these measures collectively
to assess operating performance. In order to arrive at a more meaningful
presentation of financial operating data related to our productivity and
performance, except as otherwise noted, all amounts below include 100% of the
operating results of the Loeks-Star Theatres ("LST"), the Magic Johnson Theatres
("MJT") and the Yelmo Cineplex de Espana ("Yelmo") partnerships in which we have
a 50% interest. Further, the Selected Key Operating Statistics include data for
Cineplex Odeon for the period from May 15, 1998 to February 29, 2000. Cineplex
Odeon became our subsidiary on May 14, 1998.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-----------------------------
(UNAUDITED)
2000 1999 1998 1997 1996
---------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT LOCATIONS, SCREENS AND PER PATRON DATA)
<S> <C> <C> <C> <C> <C>
CASH FLOW STATEMENT DATA(1):
Net cash provided by operating activities $ 57,097 $ 82,711 $ 64,185 $ 47,976 $ 46,326
Net cash used in investing activities $ (218,503) $ (91,741) $ (51,439) $ (53,254) $ (34,690)
Net cash provided/(used) by financing
activities $ 144,967 $ 48,140 $ (5,842) $ 5,048 $ (14,005)
Capital Expenditures (included in investing
activities noted above) $ 185,350 $ 147,198 $ 42,431 $ 60,920 $ 51,987
OPERATING DATA:
Locations operated at period end 385 423 139 143 154
Screens operated at period end 2,926 2,881 1,035 959 950
Screens per location 7.6 6.8 7.4 6.7 6.2
Attendance 135,281 126,605 58,387 53,133 53,544
Total revenues $1,047,146 $ 947,401 $ 480,437 $ 421,613 $ 400,412
Revenues per screen(2) $ 359.60 $ 389.84 $ 464.19 $ 439.64 $ 421.49
Revenues per location(2) $ 2,579.18 $2,554.45 $3,456.38 $2,948.34 $2,600.08
EBITDA(3) $ 136,047 $ 144,243 $ 69,238 $ 61,467 $ 54,190
Total EBITDA(4) $ 165,590 $ 163,166 $ 86,643 $ 78,273 $ 68,177
Partners' share of Total EBITDA $ 11,316 $ 8,538 $ 6,339 $ 4,853 $ 4,800
Attributable EBITDA(4) $ 154,274 $ 154,628 $ 80,304 $ 73,420 $ 63,377
Total EBITDA per screen(2) $ 56.86 $ 67.12 $ 83.71 $ 81.62 $ 71.77
Total EBITDA per location(2) $ 407.86 $ 439.80 $ 623.33 $ 547.36 $ 442.71
Total EBITDA per patron $ 1.22 $ 1.29 $ 1.48 $ 1.47 $ 1.27
Box Office revenue per patron $ 5.39 $ 5.18 $ 5.91 $ 5.79 $ 5.52
Concession revenue per patron $ 2.05 $ 2.03 $ 2.14 $ 1.98 $ 1.82
Concession margin 84.1% 84.4% 84.5% 82.8% 80.9%
Ratio of Total EBITDA to Total Revenue 15.8% 17.2% 18.0% 18.6% 17.0%
</TABLE>
(1) Cash flow statement data includes cash flows from long-term investments in
the partnerships to the extent of our equity interests.
(2) All per screen and location ratios are calculated based upon screens and
locations as of period end and include the LST, MJT and Yelmo partnerships,
except for fiscal years 1999 and 2000 which are calculated using a weighted
average number of screens and locations. The use of weighted average
amounts in fiscal years 1999 and 2000 is due to the inclusion of the
operations of Cineplex Odeon for the period subsequent to May 14, 1998 and
the significant number of theatre disposals and newly opened theatres in
each of these periods. Use of weighted average number of screens and
locations for the remaining historical data would not result in
substantially different data in comparison to the information presented.
(3) EBITDA consists of earnings before interest, income taxes, depreciation and
amortization, including equity earnings from investments in the LST, MJT
and Yelmo partnerships. EBITDA should not be construed as an alternative to
measuring operating results or cash flows under U.S. GAAP. In addition,
the EBITDA measure presented herein may not be comparable to similarly
titled measures reported by other companies.
44
<PAGE>
(4) Total EBITDA consists of EBITDA plus gains/losses on sale/disposals of
theatres and 100% of the operating results of our partnerships. We believe
that Total EBITDA is an important measure, in addition to cash flow from
operations and EBITDA, in viewing our overall liquidity and borrowing
capacity.
A reconciliation of EBITDA to Modified EBITDA, Total EBITDA and Attributable
EBITDA follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-----------------------------
(UNAUDITED)
2000 1999 1998 1997 1996
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA (as defined above) $136,047 $144,243 $69,238 $61,467 $54,190
ADD: Loss on sale/disposals of
theatres 8,388 4,532 7,787 9,951 7,249
-------- -------- ------- ------- -------
Modified EBITDA, including
equity earnings 144,435 148,775 77,025 71,418 61,439
LESS: Equity earnings included
in EBITDA 1,477 2,685 3,060 2,851 2,862
ADD: EBITDA from partnerships 22,632 17,076 12,678 9,706 9,600
-------- -------- ------- ------- -------
Total EBITDA 165,590 163,166 86,643 78,273 68,177
LESS: Partners' share of Total EBITDA 11,316 8,538 6,339 4,853 4,800
-------- -------- ------- ------- -------
Attributable EBITDA $154,274 $154,628 $80,304 $73,420 $63,377
======== ======== ======= ======= =======
</TABLE>
45
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The following discussion of the Loews Cineplex Entertainment Corporation ("we",
"us" and "our") financial condition and operating results should be read in
conjunction with our Selected Historical Financial Data and our audited
consolidated financial statements for the three years ended February 29, 2000.
The information presented below includes the results of Cineplex Odeon
Corporation ("Cineplex Odeon"), which became our wholly owned subsidiary as of
May 14, 1998 (the "Combination"), for the period from May 15, 1998 through
February 29, 2000 and does not include any results prior to that time unless
otherwise noted. Where noted, pro forma results compare results for the nine
months ended February 28, 1999 to the nine months ended February 28, 1998 for
Cineplex Odeon. In addition, where noted, for a more meaningful comparison, we
have referred to the operating performance of theatres we were required to sell,
pursuant to an agreement with the Department of Justice (herein referred to as
the "DOJ theatres"), as a result of the Combination.
This discussion incorporates operating results of partnerships in which we have
an interest to the extent of our equity share as required by the equity method
of accounting, except as otherwise noted.
Results of Operations
FISCAL YEAR ENDED FEBRUARY 29, 2000 COMPARED TO FISCAL YEAR ENDED FEBRUARY 28,
1999
Operating Revenues of approximately $930.4 million for the fiscal year ended
February 29, 2000 were $79.3 million higher than the comparable period of the
prior year. Operating revenues are generated primarily from box office revenues
and concession sales. Box office revenues for the fiscal year ended February
29, 2000 of approximately $647.8 million were $60.7 million higher, and
concession revenues of approximately $243.5 million were $15.2 million higher in
comparison to the fiscal year ended February 28, 1999. These increases in
operating revenues were due primarily to the inclusion of the Cineplex Odeon
theatre operating results for the full twelve month period in the current year
as compared to inclusion from the date of the Combination in the prior year
(partially offset by the reduction in operating revenues related to the sale of
the DOJ theatres), additional revenue from new theatre openings and improvements
in admission revenue per patron. Excluding the impact of the Cineplex Odeon
operations, our operating revenues increased by $50.8 million, or 12.0%, due
primarily to additional revenue from new theatre openings and improvements in
admission revenue per patron of $.23. These increases, which aggregated $86.6
million, were partially offset by other reductions in operating revenues, which
aggregated $35.8 million, including the effect of theatre dispositions and a
decline in attendance levels at some of our older locations.
Operating Costs of approximately $733.0 million for the fiscal year ended
February 29, 2000 were approximately $78.5 million higher than for the fiscal
year ended February 28, 1999, due primarily to the inclusion of the operating
results for the Cineplex Odeon theatres for the full twelve month period in the
current year as compared to inclusion from the date of the Combination in the
prior year (partially offset by the reduction in operating costs related to the
sale of the DOJ theatres), increased costs related to the aforementioned
increase in operating revenues and incremental occupancy costs attributable to
new theatre openings. Excluding the impact of the Cineplex Odeon operations, our
operating costs increased $38.5 million, or 12.3%, due primarily to the increase
in operating revenues mentioned above and an increase in film costs resulting
from higher than normal film rent terms for the period primarily associated with
the strong performance of Star Wars - Episode I: The Phantom Menace (circuit-
wide impact estimated at $6.2 million). These increases, which aggregated $67.3
million, were partially offset by lower costs, including the impact of theatre
dispositions and attendance declines at some of our older locations, aggregating
$28.8 million.
General and Administrative Costs of approximately $53.0 million for the fiscal
year ended February 29, 2000 were $5.1 million higher than for the fiscal year
ended February 28, 1999, due primarily to the inclusion of the operating results
for the Cineplex Odeon theatres for the entire period in the current year as
compared to inclusion from the date of the Combination in the prior year (net of
cost savings realized as a result of the Combination), normal inflationary
increases and the additional costs related to the continued development of our
international operations.
46
<PAGE>
Depreciation and Amortization Costs of approximately $113.0 million for the
fiscal year ended February 29, 2000 were $22.3 million higher than for the
fiscal year ended February 28, 1999, due primarily to the inclusion of the
operating results for the Cineplex Odeon theatres for the full twelve month
period in the current year as compared to inclusion from the date of the
Combination in the prior year, incremental depreciation related to investments
in new theatres which commenced operations and incremental goodwill amortization
resulting from the Combination recorded for a full twelve month period in the
current year in comparison to a partial period in the prior year. The
aforementioned increases were partially offset by the effect of theatre
dispositions.
Loss on Sale/Disposals of Theatres of approximately $8.4 million for the fiscal
year ended February 29, 2000 was $3.9 million higher than for the fiscal year
ended February 28, 1999, due primarily to the timing, nature and characteristics
of theatre dispositions. During fiscal year 2000, we disposed of 55 theatre
locations comprising 219 screens, which primarily were older, obsolete theatres
which generated marginal or negative cash flows. We will continue to
aggressively dispose of theatres that are underperforming or non-strategic. See
the Liquidity and Capital Resources section for additional information.
Interest Expense of approximately $72.7 million for the fiscal year ended
February 29, 2000 was $15.5 million higher than for the fiscal year ended
February 28, 1999, due primarily to higher borrowings relating to the
Combination (including debt amounts assumed from Cineplex Odeon) and the impact
of additional borrowings under our Senior Revolving Credit Facility to fund
investments in theatres and joint ventures coupled with the impact of an
increase in the variable borrowing rate relating to our Senior Revolving Credit
Facility. See the Liquidity and Capital Resources section for additional
information.
Attributable EBITDA for the fiscal year ended February 29, 2000 of $154.3
million was $300 thousand lower in comparison to the fiscal year ended February
28, 1999, due primarily to the aforementioned lower attendance levels
experienced at some of our older locations, the higher than normal film rental
costs as previously discussed, the impact of theatre dispositions including the
DOJ theatres and the additional general and administrative costs relative to the
enhancement of our international operations. These decreases were partially
offset by other increases in Attributable EBITDA including the impact of new
theatre openings and higher admissions revenue per patron. Excluding the prior
year impact of the DOJ theatres, Attributable EBITDA for the year ended February
29, 2000 increased $5.5 million or 3.7% over the prior year. Attributable
EBITDA (earnings before interest, taxes, depreciation and amortization,
gains/losses on asset disposal or sales, and equity earnings included in EBITDA
plus EBITDA from partnerships, net of partners' share) is a measure that
management uses to evaluate our financial performance. Attributable EBITDA
measures the amount of cash that we have available for investment or other uses
and is used by us as a measure of performance. Attributable EBITDA is primarily
a management tool and only one measure of financial performance to be considered
by the investment community. Attributable EBITDA is not an alternative to
measuring operating results or cash flow under U.S. GAAP. In addition, the
Attributable EBITDA measure presented herein may not be comparable to similarly
titled measures reported by other companies.
FISCAL YEAR ENDED FEBRUARY 28, 1999 COMPARED TO FISCAL YEAR ENDED FEBRUARY 28,
1998
Operating Revenues of approximately $851.2 million for the fiscal year ended
February 28, 1999 were $437.7 million higher than the comparable period of the
prior year. Operating revenues are generated primarily from box office revenues
and concession sales. Box office revenues for the fiscal year ended February
28, 1999 of approximately $587.1 million were $290.1 million higher, and
concession revenues of approximately $228.3 million were $124.3 million higher
in comparison to the fiscal year ended February 28, 1998. These increases in
operating revenues were due primarily to the inclusion of the Cineplex Odeon
theatre operating results for the period from May 15, 1998 to February 28, 1999,
additional revenue from new theatre openings and improvements in concession
revenue per patron, which were enhanced as a result of operating efficiencies
realized from the Combination. Excluding the impact of the Cineplex Odeon
operations, our operating revenues increased by $8.2 million, or 2%, due
primarily to new theatre openings, increases in box office revenue per patron of
$.06 and productivity improvements resulting in an increase in concession
revenue per patron of $.11. The operating revenues generated for the twelve
months ended February 28, 1999 included Cineplex Odeon operating revenues of
approximately $427.0 million for the period May 15, 1998 to February 28, 1999.
The operating revenues of $427.0 million generated by Cineplex Odeon include
operating efficiencies realized from the continuation of our concession programs
implemented throughout the Cineplex Odeon circuit, which resulted in a pro forma
increase in concession revenue per patron for the nine months of approximately
$.13 (excluding the effect of foreign currency fluctuations) over pro forma
prior year levels.
47
<PAGE>
Operating Costs of approximately $654.5 million for the fiscal year ended
February 28, 1999 were approximately $346.9 million higher than for the fiscal
year ended February 28, 1998, due primarily to the inclusion of the operating
results for the Cineplex Odeon theatres, increased costs related to the
aforementioned increase in operating revenues, and higher occupancy costs
attributable to new theatre openings. Excluding the impact of the Cineplex
Odeon operations, our operating costs increased $3.4 million, or 1%, due
primarily to the increase in operating revenues mentioned above. Cineplex Odeon
operating costs for the period May 15, 1998 to February 28, 1999 were $342.2
million. The operating cost level experienced by Cineplex Odeon for the period
reflects cost savings and operating efficiencies, primarily in concession
operations and theatre operating expenses, resulting from the Combination. On a
pro forma basis, for the nine months, the Cineplex Odeon concession margin
improved 3.4%, from 80.4% in fiscal year 1998 to 83.8% in fiscal year 1999.
General and Administrative Costs of approximately $47.9 million for the fiscal
year ended February 28, 1999 were $19.0 million higher than for the fiscal year
ended February 28, 1998, due primarily to the inclusion of the operating results
for the Cineplex Odeon theatres for the period May 15, 1998 to February 28, 1999
(net of cost savings realized as a result of the Combination), merit increases
and the additional costs relative to the continued development of our
international operations.
Depreciation and Amortization Costs of approximately $90.7 million for the
fiscal year ended February 28, 1999 were $38.4 million higher than for the
fiscal year ended February 28, 1998, due primarily to the inclusion of the
operating results for the Cineplex Odeon theatres for the period May 15, 1998 to
February 28, 1999, incremental depreciation related to investments in new
theatres which commenced operations and the amortization of goodwill recorded as
a result of the Combination. Depreciation and amortization costs included
adjustments necessary to reflect the allocation of purchase price to the fair
value of Cineplex Odeon assets acquired and liabilities assumed as part of the
Combination.
Loss on Sale/Disposals of Theatres of approximately $4.5 million for the fiscal
year ended February 28, 1999 was $3.3 million lower than for the fiscal year
ended February 28, 1998, due primarily to the timing, nature and characteristics
of theatre dispositions. During fiscal year 1999, we disposed of 54 theatre
locations comprising 173 screens including certain Cineplex Odeon theatres
acquired in the Combination.
Interest Expense of approximately $57.2 million for the fiscal year ended
February 28, 1999 was $42.9 million higher than for the fiscal year ended
February 28, 1998, due primarily to higher borrowings relating to the
Combination (including debt amounts assumed from Cineplex Odeon) and the impact
of additional borrowings under our Senior Revolving Credit Facility to fund
investments in theatres and joint ventures. See the Liquidity and Capital
Resources section for additional information.
Attributable EBITDA for the fiscal year ended February 28, 1999 of $154.6
million increased $74.3 million in comparison to the fiscal year ended February
28, 1998, due primarily to the inclusion of the operating results for the
Cineplex Odeon theatres for the period from May 15, 1998 to February 28, 1999
(partially offset by the impact of the sale of the DOJ theatres), the increase
in concession revenues per patron, cost savings and operating efficiencies as a
result of the integration of the Cineplex Odeon operations and the impact of
newly opened theatres previously discussed.
Liquidity and Capital Resources
Cash flow provided by operating activities for the year ended February 29, 2000
was approximately $57.1 million, which was approximately $25.6 million lower
than for the year ended February 28, 1999. This decrease is due primarily to
the lower level of cash flow generated from operations and additional interest
expense in comparison to the prior year. See discussion of operating results
previously presented in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations". We derive substantially all of our
revenues from cash collected at the box office and through concession sales.
Generally, this provides us with working capital operating float, which is
consistent with the industry, since cash revenues are generally collected in
advance of the payment of related expenses. Although we have a working capital
deficit, this deficiency has not adversely impacted our ability to meet our
obligations when they become due primarily because of the availability of funds
through our Senior Revolving Credit Facility and the working capital operating
float previously mentioned.
48
<PAGE>
We have experienced, and expect to continue to realize, successful operating
results as a result of investments in theatres (including new builds,
reconfigurations of existing theatres, and the closing of obsolete, unprofitable
or non-competitive theatres). We expect to continue to increase revenues and
cash flows as a result of reconfiguration of the circuit and from the additional
future investment in North American and international exhibition. In addition,
we continue to realize cost savings and operational efficiencies as a result of
the Combination.
We are continually seeking other potential revenue opportunities in addition to
box office and concession revenues. For example, in May 2000, with our broad
demographic audience, we have been able to sign a long-term deal to advertise on
our U.S. screens, estimated to be worth in excess of $60 million.
We continue to close or dispose of certain overlapping theatre locations and
underperforming theatres, including older, obsolete theatres which contribute
only marginally to cash flow or operate at a cash flow loss. Contractual
obligations relating primarily to unfavorable lease terms or contractual buyouts
for certain theatres have been provided for as part of the cost of the merger
transaction.
At February 29, 2000, we had capital spending commitments aggregating
approximately $428.9 million anticipated to be funded over the next three year
period for the future development and construction of 44 theatre properties
comprising 643 screens. At February 29, 2000, our debt balance includes
approximately $145.2 million of capital spending on theatre projects in various
stages of development including theatres which opened during the latter part of
the current fiscal year. In the opinion of management, these capital commitments
and working capital requirements will be funded by free cash flow (recurring
annual earnings before depreciation, amortization and non-cash charges such as
loss on sale/disposals of theatres) generated from operations and by our capital
structure. Additionally, our joint venture in Spain is negotiating a revolving
credit facility with a group of banks in the amount of 100 million Euros which
it expects to have in place by the second quarter of fiscal year 2001. The
proceeds of this facility will be used to fund new theatre construction activity
and operations in Spain. Alternative sources of financing for these capital
commitments and working capital requirements, which we are considering, include
traditional sale-leaseback transactions, developer financed build-to-suit
properties and international lines of credit. The paragraphs below present a
summary of the significant capital transactions (debt and equity) that have been
completed in connection with and subsequent to the Combination.
In connection with the Combination, we entered into a $1 Billion Senior
Revolving Credit Facility with Bankers Trust Company, as administrative agent.
The Senior Revolving Credit Facility, together with an $84.5 million equity
contribution provided by Universal Studios, Inc. ("Universal"), replaced the
Sony Corporation of America ("SCA") Credit Facility and Cineplex Odeon's
existing credit facility, funded cash paid to Sony Pictures Entertainment Inc.
("SPE") and/or its affiliates upon closing of the Combination, and provides
ongoing financing to us to fund working capital requirements and theatre
expansion in North America and internationally. This Senior Revolving Credit
Facility is comprised of two tranches, a $750 million senior secured revolving
credit facility, secured by substantially all of our assets and the assets of
our domestic subsidiaries, and a $250 million uncommitted facility. The Senior
Revolving Credit Facility bears interest at a rate of either the current prime
rate as offered by Bankers Trust Company or an Adjusted Eurodollar rate (as
defined in the credit agreement) plus an applicable margin based on our Leverage
Ratio (as defined in the credit agreement). Our borrowings under the Senior
Revolving Credit Facility at February 29, 2000 totaled $530 million.
We continue to believe that our new theatre building strategy is an important
part of our strategic plan (see Outlook section below). Our new build strategy
will continue to require significant amounts of capital which we anticipate
funding through a combination of cash flow from operations and from financing
activities. On February 24, 2000, our bank group agreed to a first amendment of
the Senior Revolving Credit Facility. Under terms of the first amendment, the
banks agreed to modify the Maximum Consolidated Leverage Ratio, the Maximum
Total Leverage Ratio and the Minimum Debt Service Coverage Ratio, as defined in
the agreement, for a period of 18 months. These ratios basically address our
ability to access funds under the credit facility as it relates to the Leverage
Ratios and Debt Service Ratio. Following the effectiveness of the amendment, we
anticipate that these new covenant levels will help us to access funds under the
credit facility and support our new theatre building strategy.
In connection with the Combination, we made payments totaling approximately $417
million to SPE and its affiliates representing (i) a cash payment to satisfy all
intercompany indebtedness to affiliates of SCA as of the closing date ($296
million), (ii) a cash payment equal to the fair value of certain transferred
assets ($18 million), and (iii) the payment of a dividend to a subsidiary of SPE
($103 million). The first payment was made on May 14, 1998, and the final
payment, which was as a result of post-closing audit procedures completed during
the third quarter of fiscal 1999, was made on November 17, 1998.
49
<PAGE>
As a result of the Combination, Plitt Theatres, Inc. ("Plitt"), Cineplex Odeon's
U.S. theatre group, became our wholly owned subsidiary. Plitt had outstanding
$200 million aggregate principal amount of 10 7/8% Senior Subordinated Notes due
2004 (the "Plitt Notes"). The Combination triggered a "change of control" under
provisions of the indenture under which the Plitt Notes were issued (the "Plitt
Indenture"). Accordingly, on June 15, 1998, Plitt commenced an offer to
purchase any and all of the Plitt Notes which it completed on August 4, 1998,
with holders of approximately 97% of the outstanding Plitt Notes tendering.
Payment for the tendered Plitt Notes was made during fiscal year 1999 in the
amount of $215.9 million, or 109.261% of the outstanding principal amount of the
Plitt Notes, plus accrued and unpaid interest. On May 13, 1999, we called the
remaining 3% of the outstanding Plitt Notes. Payment for the called Plitt Notes
was made on June 15, 1999 in the amount of $2.5 million, which included the
premium paid to noteholders as well as the accrued and unpaid interest.
On August 5, 1998, we sold to the public in an underwritten offering 10 million
shares of Common Stock at a public offering price of $11.00 per share. Net
proceeds of approximately $103.0 million were used primarily to repay our
borrowings under the Senior Revolving Credit Facility. Upon consummation of the
equity offering, our Class A Non-Voting Common Stock held by SPE automatically
converted into an equal number of shares of Common Stock and 3,255,212
additional shares of Common Stock were issued to Universal for no consideration
under anti-dilution provisions of the Company's subscription agreement with
Universal.
On August 5, 1998, we issued $300 million of 8 7/8% Senior Subordinated Notes
due 2008 to qualified institutional buyers in reliance on Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"). Net proceeds of
$288.6 million were used primarily to repay the Plitt Notes and borrowings under
the Senior Revolving Credit Facility. Subsequently, on November 19, 1998, we
completed an offering to exchange $300 million aggregate principal amount of our
8 7/8% Senior Subordinated Notes Due 2008, which were registered under the
Securities Act for a like principal amount of our privately placed 8 7/8% Senior
Subordinated Notes Due 2008.
In August 1998, we entered into interest rate swap agreements for a period of
four years to hedge a portion of the Senior Revolving Credit Facility variable
interest rate risk. As a result of these agreements we have fixed a LIBOR rate
of 5.775% per annum (plus the applicable margin) on a notional amount of $250
million of indebtedness. Each swap has a quarterly reset date for settlements.
We have accounted for these swaps as interest rate hedges.
Since the Combination, we pursued the sale of certain theatres in New York City
and Chicago that were subject to approval by the Department of Justice ("DOJ"),
in accordance with the terms of an agreement reached to permit the Combination.
As a result, during the fourth quarter of fiscal 1999, we sold to Cablevision
Systems Corporation 33 screens in 12 theatres in New York City, in accordance
with the DOJ order, and an additional 14 screens in 4 theatres in the suburban
New York area for aggregate cash proceeds of $87.5 million. Approximately $87.2
million of these proceeds was utilized to pay down our Senior Revolving Credit
Facility.
Pursuant to the agreement with the DOJ, we were also required to sell 49 screens
at 11 theatre locations in Chicago. On April 7, 1999, we completed the sale of
30 screens at 8 of these theatre locations to a third party. This transaction
was not significant to our operating results or financial position. A portion
of these proceeds was utilized to pay down our Senior Revolving Credit Facility.
Additionally, under the agreement with the DOJ, we are required to sell the
remaining 19 screens at 3 theatre locations in Chicago. No sale of these
locations has occurred and, pursuant to the original agreement with the DOJ, a
trustee has been appointed to effect the sale of these locations.
Although we continue to realize net operating losses ("NOL") for income tax
purposes, we continue to be subject to levels of minimum state and local income
and capital taxes in North America which are not offset by our NOLs.
Additionally, all of our goodwill arising from the Combination will be non-
deductible in determining future income tax expense in the United States.
However, we believe that any additional tax calculated on the add-back of
goodwill amortization will be substantially offset by our NOL carryforward from
prior years.
Outlook
Our growth plan is predicated upon moderate expansion. New theatre investments
in North America and internationally are evaluated in detail prior to commitment
with emphasis placed upon the quality and longevity of the cash flow
contribution and return on investment. The underlying fundamentals of our plan
include: (i) adding new theatres annually in North America which we expect
should generate average ROIs in excess of 20%, (ii) closing obsolete and
underperforming theatres and (iii) continuing to pursue international expansion.
50
<PAGE>
During fiscal years 1990 - 1998, we opened 358 screens at 32 locations
(excluding Cineplex Odeon and joint ventures) at a capital cost of $272.1
million. These theatres currently generate an average return of 22.4% and over
90% of our capital investment in these theatres has already been recouped from
the cash flow of these theatres. Moreover, the quality of our theatres and
their location in major metropolitan locations position these theatres among the
top grossing theatres in the U.S. According to A.C. Nielsen Company/EDI, we
operate some of the top grossing theatres in the U.S. including (i) the 13-
screen flagship Sony Theatres Lincoln Square in New York City, home of the first
commercial 3-D IMAX(R) theatre in the United States; (ii) the 18-screen
Universal City at Citywalk, a retail and entertainment complex in Universal
City, California; and (iii) the 20-screen Star Theatres in Southfield, Michigan.
During the current fiscal year we opened three locations in major urban markets
which have consistently ranked in the top 15 grossing theatres in the U.S. from
their dates of opening. They include the 16-screen Metreon/IMAX theatre in
California and the 15-screen Kips Bay and the 13-screen E-Walk theatres in
Manhattan.
We continue to believe that the new build theatre strategy and our growth
internationally are the fuel for growing our cash flow and profitability in the
long term. Accordingly, we hope to be able to continue to invest in new
theatres. Funding these investments is expected to come from a combination of
the Senior Revolving Credit Facility, cash flow from operations, international
credit markets (primarily to fund our foreign joint ventures) and the
monetization of certain existing theatre properties through sale-leaseback
transactions.
Although our Senior Revolving Credit Facility has a term through August 2003, we
will seek to commence negotiations with our Senior Revolving Credit Facility
bank group during the next 12 - 18 months, or sooner if necessary, to either
extend the terms of the existing agreement or negotiate a new facility subject
to prevailing market conditions. There can, of course, be no assurance that we
will be able to do so successfully. Among other things, a continued industry
downturn, a decline in the expected returns from our new build program, our
inability to successfully dispose of underperforming theatres, or significant
changes in the credit markets, will adversely effect our ability to renegotiate
our Senior Revolving Credit Facility on satisfactory terms. In addition, these
same risk factors could impede our ability to comply with the covenant
requirements, as currently amended, which would also adversely effect our
ability to renegotiate our facility. If we cannot so refinance our Senior
Revolving Credit Facility, we would have to seek additional capital through
other sources, including asset securitizations or equity offerings. Equity
offerings could be potentially dilutive to our existing shareholders. In
addition, if we are unable to obtain favorable financings at the levels we seek,
we would have to significantly reduce our capital spending plans, which will
have a negative impact on our growth and performance. Finally, pending the
renegotiation of our Senior Revolving Credit Facility, unsatisfactory operating
performance in the near term may require that we seek further relaxation of
certain covenants or implementation of other capital raising transactions (such
as asset sale-leasebacks) to fund our capital investment plans. Any inability to
successfully negotiate interim adjustments to our covenants or otherwise
implement alternative capital transactions would have a material adverse effect
on our performance and may result in a deferral or reduction of our new build
plans.
Effect of Inflation and Foreign Currency
Inflation and foreign currency fluctuations have not had a material effect on
our operations.
Risk Management
The overall objective of our financial risk management program is to seek to
mitigate any potential negative earnings effects from changes in foreign
exchange and interest rates arising in our business activities. We manage these
financial exposures through operational means and by using various financial
instruments. These practices may change as economic conditions change. Under
certain market conditions, interest rate swap contracts and forward currency
exchange contracts are used to adjust these interest and currency sensitive
liabilities.
New Accounting Pronouncements
On June 23, 1999, the Financial Accounting Standards Board decided to defer the
effective date of Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activity". As a result of
this deferral, SFAS No. 133 will be effective for all of our fiscal quarters
beginning March 1, 2001. This statement standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, by requiring that we recognize those items as assets or
liabilities in our statement of financial position and measure them at fair
value. We expect to adopt this standard when required and do not believe that
it will have a significant impact on our operating results or financial
position.
51
<PAGE>
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements". SAB No. 101 expresses the views
of the SEC staff in applying generally accepted accounting principles to certain
revenue recognition issues. We are currently evaluating the impact, if any, of
SAB No. 101 on our financial position or results of operations.
Litigation Matters
From time to time, we are involved in routine litigation and legal proceedings
in the ordinary course of business, such as personal injury claims, employment
matters and contractual disputes. We believe that the ultimate disposition of
these matters, to the extent not previously provided for, will not have a
material impact on our operating results or financial position. Certain
litigation and legal proceedings are discussed in footnote 14 of our
consolidated financial statements for the fiscal year ended February 29, 2000.
52
<PAGE>
Theatre Portfolio Changes
The following table indicates the number of theatre locations and screens, and
changes to our theatre circuit configuration as a result of our theatre
reconfiguration program (including screens and locations relating to all of our
joint ventures) for the twelve months ended February 29, 2000:
North
America International Total
------- ------------- -----
Locations
- ---------
Beginning Balance 408 15 423
New builds 14 1 15
J.V. Investments - International - 2 2
Dispositions (55) - (55)
----- --- -----
Ending Balance 367 18 385
===== === =====
Screens
- -------
Beginning Balance 2,762 119 2,881
New builds/expansions 234 8 242
J.V. Investments - International - 22 22
Dispositions (219) - (219)
----- --- -----
Ending Balance 2,777 149 2,926
===== === =====
As a result of our theatre reconfiguration program the average screens per
location has grown from 6.8 screens per location at March 1, 1999 to 7.6 screens
per location at February 29, 2000. During the twelve month period ended
February 29, 2000 we opened 15 new theatre locations aggregating 237 screens; in
the United States: the Woodridge 18 and the Woodfield 20 in Illinois, the Kips
Bay 15 and the E-Walk 13 in Manhattan, the Richmond Mall 20 and the Randall Park
12 in Ohio, the Plainville 20 in Connecticut, the North Versailles 20 in
Pennsylvania, the Universal Citywalk 20 in Florida, the Metreon/IMAX 16 in
California and the Great Lakes Crossing 25 in Michigan; in Canada: the Grande
(Barrie) 12 and the Niagara Square 10 in Ontario and the Aberdeen Mall 8 in
Kamloops; in Austria we opened the Auhof Center in Vienna comprising 8 screens.
We also expanded one existing theatre location adding five screens.
During fiscal year 2000, we further developed the existing circuit in Spain
called Yelmo Cineplex de Espana. This joint venture opened 2 theatres
aggregating 22 screens during the twelve month period ended February 29, 2000:
the Madrid Sur comprising 9 screens and the Gijon comprising 13 screens.
Additionally, for the twelve months ended February 29, 2000 we disposed
of/closed 55 theatre locations comprising 219 screens.
Forward Looking Statements
This annual report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, each as amended. All statements included in this annual report,
other than statements of historical facts, may constitute forward-looking
statements. Although we believe that the expectations reflected in such forward
looking statements are reasonable, we cannot be assured that the expectations
will prove to be correct.
53
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
FEBRUARY 28 or 29,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,735 $ 48,174
Accounts receivable 17,288 28,590
Inventories 5,148 4,462
Prepaid expenses and other current assets 6,057 4,041
---------- ----------
TOTAL CURRENT ASSETS 60,228 85,267
PROPERTY, EQUIPMENT AND LEASEHOLDS, NET 1,218,334 1,119,977
OTHER ASSETS
Investments in and advances to partnerships 75,932 47,794
Goodwill, net of accumulated amortization of $42,280 and $28,740 493,390 498,549
Other intangible assets, net of accumulated amortization of $5,768
and $4,367 22,704 19,558
Deferred charges and other assets 36,801 35,056
---------- ----------
TOTAL ASSETS $1,907,389 $1,806,201
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 201,077 $ 175,943
Deferred revenue 8,625 17,241
Current maturities of long-term debt and other obligations 1,409 1,173
Current portion of capital leases 2,740 2,737
---------- ----------
TOTAL CURRENT LIABILITIES 213,851 197,094
LONG-TERM DEBT AND OTHER OBLIGATIONS 839,029 690,301
LONG-TERM CAPITAL LEASE OBLIGATIONS 59,217 61,997
ACCRUED PENSION AND POST RETIREMENT BENEFITS 8,325 9,570
OTHER LIABILITIES 168,165 181,943
---------- ----------
TOTAL LIABILITIES 1,288,587 1,140,905
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 14)
STOCKHOLDERS' EQUITY
Common stock ($.01 par value, 300,000,000 shares authorized;
58,538,646 shares issued and outstanding in 2000 and 1999) 586 586
Common stock-Class B non-voting ($.01 par value, 10,000,000 shares
authorized; 84,000 shares issued and outstanding in 2000 and 1999) 1 1
Accumulated other comprehensive income (167) (5,063)
Additional paid-in capital 671,707 671,707
Retained deficit (53,325) (1,935)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 618,802 665,296
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,907,389 $1,806,201
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
54
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FEBRUARY 28 or 29,
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Box office $ 647,774 $ 587,078 $ 296,933
Concession 243,511 228,332 104,009
Other 39,138 35,750 12,568
----------- ----------- -----------
930,423 851,160 413,510
----------- ----------- -----------
EXPENSES
Theatre operations and other expenses 694,712 618,946 291,421
Cost of concessions 38,245 35,557 16,147
General and administrative 53,031 47,882 28,917
Depreciation and amortization 113,047 90,720 52,307
Loss on sale/disposals of theatres 8,388 4,532 7,787
----------- ----------- -----------
907,423 797,637 396,579
----------- ----------- -----------
INCOME FROM OPERATIONS 23,000 53,523 16,931
INTEREST EXPENSE 72,728 57,216 14,319
----------- ----------- -----------
(LOSS)/INCOME BEFORE INCOME TAXES (49,728) (3,693) 2,612
INCOME TAX EXPENSE 1,662 2,187 2,751
----------- ----------- -----------
NET LOSS $ (51,390) $ (5,880) $ (139)
=========== =========== ===========
Weighted Average Shares Outstanding--basic 58,622,646 47,834,541 20,472,807
=========== =========== ===========
Weighted Average Shares Outstanding--diluted 58,622,646 47,834,541 20,472,807
=========== =========== ===========
Loss per Share--basic and diluted $ (.88) $ (.12) $ (.01)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
55
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
Class A Class B Accumulated
Non- Non- Other Additional Retained Total
voting voting Comprehensive Paid-in Earnings Stockholders'
Shares Amount Shares Amount Shares Amount Income Capital /(Deficit) Equity
---------- ------- ----------- ------- ------ ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 1, 1997 973 $ 195 - $ - - $ - $ - $299,082 $ 25,373 $ 324,650
Stock dividend 19,269,348 (2) 1,202,486 12 - - - 195 (205) -
Comprehensive Income:
Net loss for the fiscal
year ended February 28,
1998 - - - - - - - - (139) (139)
---------
Comprehensive Income - - - - - - - - - (139)
- --------------------------- ---------- ------ ---------- ------ ------ ------ ----------- --------- --------- ---------
Balance at March 1, 1998 19,270,321 193 1,202,486 12 - - - 299,277 25,029 324,511
Exchange of existing
Cineplex Odeon shares
in conjunction with
the Combination 17,699,914 177 - - 84,000 1 - 266,579 - 266,757
Issuance of shares to
Universal under a
subscription agreement 4,426,607 44 - - - - - 84,456 - 84,500
Issuance of shares to SCA
affiliates for Star
Theatres
and S&J Theatres 2,664,304 27 - - - - - (27) - -
Exercise of Stock Options 19,802 - - - - - - 366 - 366
Dividend to SCA affiliates - - - - - - - (81,536) (21,084) (102,620)
Issuance of shares in
Public Offering, net
of costs and expenses 10,000,000 100 - - - - - 102,625 - 102,725
Automatic conversion of
SCA's Class A
non-voting shares
to common shares 1,202,486 12 (1,202,486) (12) - - - - - -
Issuance of shares to
Universal under an
anti-dilution agreement 3,255,212 33 - - - - - (33) - -
Comprehensive Income:
Foreign currency
translation adjustment - - - - - - (4,407) - - (4,407)
Unrealized loss on
marketable securities - - - - - - (656) - - (656)
Net loss for the fiscal
year ended
February 28, 1999 (5,880) (5,880)
---------
Comprehensive Income - - - - - - - - - (10,943)
- --------------------------- ---------- ------ ---------- ------ ------ ------ ----------- --------- --------- ---------
Balance at March 1, 1999 58,538,646 586 - - 84,000 1 (5,063) 671,707 (1,935) 665,296
Comprehensive Income:
Foreign currency
translation adjustment - - - - - - 4,988 - - 4,988
Unrealized loss on
marketable securities - - - - - - (92) - - (92)
Net loss for the fiscal
year ended
February 29, 2000 - - - - - - - - (51,390) (51,390)
---------
Comprehensive Income - - - - - - - - - (46,494)
- --------------------------- ---------- ------ ---------- ------ ------ ------ ----------- --------- --------- ---------
Balance at February 29,
2000 58,538,646 $ 586 - $ - 84,000 $ 1 $ (167) $ 671,707 $ (53,325) $ 618,802
========== ====== ========== ====== ====== ====== =========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
56
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FEBRUARY 28 or 29,
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (51,390) $ (5,880) $ (139)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 113,047 90,720 52,307
Loss on sale/disposals of theatres 8,388 4,532 7,787
Equity earnings from long-term investments, net of distributions
received 3,042 1,506 887
Changes in operating assets and liabilities:
Increase in due to SCA affiliates - - 2,487
Decrease in deferred income taxes - - (3,812)
Decrease/(increase) in accounts receivable 404 5,292 (1,042)
Increase/(decrease) in accounts payable and accrued expenses 9,555 (6,559) 7,249
Increase in other operating assets and liabilities, net (25,949) (6,900) (1,539)
--------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 57,097 82,711 64,185
--------- --------- --------
INVESTING ACTIVITIES
Proceeds from sale of assets 3,880 98,192 -
Investment in/advances to partnerships, net of repayments (31,180) (17,537) (9,008)
Merger related costs (5,853) (25,198) -
Capital expenditures (185,350) (147,198) (42,431)
--------- --------- --------
NET CASH USED IN INVESTING ACTIVITIES (218,503) (91,741) (51,439)
--------- --------- --------
FINANCING ACTIVITIES
Repayment of debt due to SCA affiliate - (299,487) (5,333)
Proceeds from senior credit facility, net of repayments and
deferred financing fees 151,025 224,044 -
Repayment of long-term debt (3,758) (34,644) (509)
Repayment of Plitt Theatre, Inc. notes (2,300) (215,907) -
Proceeds of senior subordinated note offering, net of deferred financing fees - 289,263 -
Proceeds from issuance of common stock, net of offering expenses - 102,991 -
Proceeds from issuance of common stock to Universal upon Combination - 84,500 -
Dividend paid to SCA affiliate in Combination - (102,620) -
--------- --------- --------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 144,967 48,140 (5,842)
--------- --------- --------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (16,439) 39,110 6,904
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 48,174 9,064 2,160
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31,735 $ 48,174 $ 9,064
========= ========= ========
Supplemental Cash Flow Information:
Income taxes paid, net of refunds received $ 1,735 $ 3,229 $ 1,934
========= ========= =========
Interest paid (including nil, $6,942 and $14,638 paid to SCA affiliates) $ 70,716 $ 54,583 $ 15,823
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
57
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
NOTE 1 - ORGANIZATION AND BUSINESS
- -----------------------------------
Loews Cineplex Entertainment Corporation ("LCP" or the "Company"), is a major
motion picture theatre exhibition company with operations in North America and
Europe. The Company operates under the Loews Theatres, Sony Theatres, Cineplex
Odeon Theatres, Star Theatres, Magic Johnson Theatres and Yelmo Cineplex
Theatres marquees. As of February 29, 2000, LCP owns, or has interests in, and
operates 2,926 screens at 385 theatres in 22 states, the District of Columbia, 6
Canadian provinces, Spain, Hungary, Turkey and Austria. The Company's principal
markets include New York, Boston, Chicago, Baltimore, Dallas, Houston, Detroit,
Los Angeles, Seattle and Washington D.C. in the U.S., Toronto, Montreal and
Vancouver in Canada, and Madrid, Spain. The Company holds a 50% partnership
interest in each of the Yelmo Cineplex de Espana ("Yelmo"), Loeks-Star Theatres
("LST") and Magic Johnson Theatres ("MJT") partnerships. Yelmo, LST and MJT hold
interests in and operate 28 locations, comprising a total of 316 screens.
Screens and locations for the partnerships are included in the Company amounts
referred to above.
Business Combination
On May 14, 1998, pursuant to the Amended and Restated Master Agreement (the
"Master Agreement") dated September 30, 1997, LCP (formerly known as LTM
Holdings, Inc.) and Cineplex Odeon Corporation ("Cineplex Odeon"), another major
motion picture exhibitor with operations in the U.S. and Canada, combined (the
"Combination"). As called for in the Master Agreement, the outstanding common
shares of Cineplex Odeon were exchanged for LCP shares on a ten for one basis.
Universal Studios, Inc. ("Universal"), a major shareholder of Cineplex Odeon,
contributed cash of $84.5 million to the Company in exchange for additional
shares of stock in the Company. Sony Pictures Entertainment Inc. ("SPE") and its
affiliates received a cash payment of approximately $417 million representing
(i) a cash payment to satisfy all intercompany indebtedness to affiliates of
Sony Corporation of America ("SCA") as of the closing date, (ii) a cash payment
equal to the fair value of certain transferred assets, and (iii) the payment of
a dividend to a subsidiary of SPE. The consolidated financial statements include
the operating results of Cineplex Odeon following the date of Combination (May
14, 1998).
At the closing of the Combination, the Company issued 7,264,642 shares of Common
Stock and 80,000 shares of Class B Non-Voting Common Stock to Universal,
4,324,003 shares of Common Stock and 4,000 shares of Class B Non-Voting Common
Stock to the Charles Rosner Bronfman Family Trust and certain related
shareholders (the "Claridge Group") and 6,111,269 shares of common stock to the
other shareholders of record of Cineplex Odeon, for an aggregate value of
approximately $266.6 million, in exchange for the outstanding shares of Cineplex
Odeon and its wholly-owned subsidiary, Plitt Theatres, Inc. ("Plitt"). In
addition, the Company issued 4,426,607 shares of common stock to Universal for
consideration of $84.5 million as required under a subscription agreement, and
2,664,304 shares of Common Stock to SPE in connection with the transfer by SPE
of its interest in Star Theatres of Michigan, Inc. ("Star") and S&J Theatres,
Inc. ("S&J") to the Company.
On August 5, 1998, the Company sold to the public pursuant to a registered
public offering 10 million shares of Common Stock. Upon consummation of this
offering, the Company's Class A Non-Voting Common Stock held by SPE
automatically converted into an equal number of shares of Common Stock, and
3,255,212 additional shares of Common Stock were issued to Universal for no
consideration under anti-dilution provisions of the Company's subscription
agreement with Universal. As a result of the public offering, SPE, Universal and
the Claridge Group own 39.5%, 25.5% and 7.4%, respectively, of the Company's
common stock.
The Combination has been accounted for under the purchase method of accounting,
and, accordingly, the cost to acquire Cineplex Odeon has been allocated to the
assets acquired and liabilities assumed of Cineplex Odeon based on their
respective fair values, with the excess purchase price allocated to goodwill.
The Company arranged for an independent valuation and other studies required to
determine the fair value of the assets acquired and liabilities assumed. These
valuations and studies were completed during the first quarter of fiscal 2000.
58
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
Since the Combination, the Company pursued the sale of certain theatres in New
York City and Chicago that were subject to approval by the Department of Justice
("DOJ"), in accordance with the terms of an agreement reached to permit the
Combination. As a result, during the fourth quarter of fiscal 1999, the Company
sold to Cablevision Systems Corporation 33 screens in 12 theatres in New York
City, in accordance with the DOJ order, and an additional 14 screens in 4
theatres in the suburban New York area, for aggregate cash proceeds of $87.5
million. Approximately $87.2 million of these proceeds was utilized to pay down
the Company's Senior Revolving Credit Facility.
Under the agreement with the DOJ, the Company was also required to sell 49
screens at 11 theatres in Chicago. On April 7, 1999, the Company completed the
sale of 30 screens at 8 of these theatre locations to a third party. This
transaction was not significant to the Company's operating results or financial
position. A portion of these proceeds was utilized to pay down the Senior
Revolving Credit Facility. Additionally, under the agreement with the DOJ, the
Company is required to sell the remaining 19 screens at 3 theatre locations in
Chicago. No sale of these locations has occurred and, pursuant to the original
agreement with the DOJ, a trustee has been appointed to effect the sale of these
locations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Basis of Presentation and Consolidation: The consolidated financial statements
include the accounts of Loews Cineplex Entertainment Corporation and its wholly-
owned subsidiaries. As part of the Combination, SPE and its affiliates have
transferred their interest in S&J, which owned a 50% interest in MJT, and Star,
which indirectly owned a 50% interest in LST, and certain other exhibition
assets to subsidiaries of the Company. As these transfers were among parties
under common control, the Company has included the assets, liabilities and
results of operations of S&J and Star in the financial statements for all
periods included herein on an as if pooled basis. Majority owned companies are
consolidated and 50% or less owned investments in which the Company has
significant influence are accounted for under the equity method of accounting.
Significant intercompany accounts and transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenues and Expenses: Substantially all revenues are recognized when admission
and concession sales are received at the theatres. Other revenues include the
Company's equity earnings from long-term investments. Film rental costs are
recorded, as revenue is earned, based upon the terms of the respective film
license arrangements. Advertising costs are expensed as incurred.
Cash and Cash Equivalents: The Company considers all operating funds held in
financial institutions, cash held by the theatres and all highly liquid
investments with original maturities of three months or less when purchased to
be cash equivalents.
Inventories: Inventories of concession products are stated at the lower of cost
or market. Cost is determined by the first-in, first-out method.
Long-term Investments In/Advances to Partnerships: Investments in partnerships
are recorded under the equity method of accounting. Under the equity method the
cost of the investment is adjusted to reflect the Company's proportionate share
of the partnerships' operating results. Advances to partners represent advances
to respective partnerships, in which LCP has interests, for working capital and
other capital requirements.
Deferred Charges and Other Assets: Deferred charges and other assets consist
principally of debt issuance costs, long term receivables and marketable equity
securities. All marketable equity securities are designated as available for
sale and are reported at the lower of cost or market, with unrealized gains and
losses included in stockholders' equity, net of applicable taxes. Unrealized
losses that are other than temporary are recognized in earnings. Amortization of
debt issuance costs is calculated on a straight-line basis over the terms of the
underlying loan agreements (life of approximately five to ten years) and is
included as a component of interest expense.
59
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
Fair Value of Financial Instruments: Cash, accounts receivable, accounts
payable, accrued liabilities and notes payable are reflected in the financial
statements at carrying value which approximates fair value. Long-term debt
principally consists of obligations which carry floating interest rates that
approximate current market rates.
Property, Equipment and Leaseholds: Property, equipment and leaseholds are
stated at historical cost less accumulated depreciation and amortization. The
Company has acquired the rights to use certain theatre facilities under
previously existing operating leases from other motion picture exhibitors.
Purchase values assigned to these theatre lease rights acquired are capitalized
and amortized over future periods.
Depreciation and amortization are provided on the straight-line basis over the
following useful lives:
Buildings 30-40 years
Equipment 5-10 years
Leasehold Improvements Life of lease but not in excess of useful
lives or 40 years
Theatre Lease Rights Life of lease but not in excess of useful
lives or 40 years
Interest costs during the period of development and construction of new theatre
properties are capitalized as part of the historical cost of the asset. Interest
capitalized during the fiscal years ended February 28 or 29, 2000, 1999 and 1998
was $3,323, $2,422 and $741, respectively.
Goodwill and Other Intangible Assets: Goodwill, which represents the excess of
the purchase price over the fair values of net assets acquired, is amortized
using the straight-line method over 40 years. Other intangible assets, including
management agreements and tradenames, are amortized over their estimated useful
lives which range from 5 to 40 years. Management continuously assesses the
recoverability of the net unamortized goodwill and other intangibles by
determining whether the amortization of these balances over the remaining life
can be recovered through projected future undiscounted income from operations.
Amortization expense charged to operations amounted to $13,540, $10,751 and
$1,789 for goodwill and $1,401, $1,202 and $335 for other intangible assets for
the years ended February 28 or 29, 2000, 1999 and 1998, respectively.
Long-Lived Assets: Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of", requires the recoverability of the carrying value of long-lived
assets to be evaluated when changes occur in historical operating results,
future projections and economic and competitive factors, among others. The
Company continuously assesses the recoverability of its long-lived assets in
accordance with SFAS No. 121, by determining whether the carrying value of these
balances over the remaining life can be recovered through undiscounted projected
future cash flows primarily on a theatre-by-theatre basis. In making its
assessment, the Company also considers the useful lives of its assets, the
competitive landscape in which those assets operate, the introduction of new
technologies within the industry and decay factors (attendance erosion) in
theatre attendance. Based upon these measures, management has determined that
the carrying value of its long-lived assets is recoverable and fairly stated.
Stock Based Compensation: As permitted under SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company elected to account for its stock based
compensation plans under the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. The Company has complied with the disclosure requirements of
SFAS No. 123 (see Note 13 to these Consolidated Financial Statements).
Income Taxes: Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement
carrying amounts, less applicable allowances, of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
60
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
Foreign Currency Translation: The effect of translating foreign currency
financial statements into U.S. dollars is included in the accumulated other
comprehensive income account in stockholders' equity. Gains and losses on
foreign currency transactions are not significant to operations and have been
included in operating expenses. Under certain market conditions and as of the
date of these financial statements, forward currency contracts are used to
manage changes in foreign exchange rates. These forward currency contracts are
accounted for as hedges of contractual foreign currency commitments.
Earnings per Share: SFAS No. 128, "Earnings Per Share", establishes standards
for computing and presenting earnings per share ("EPS") which applies to
entities with publicly held common stock or potential common stock. The Company
calculates EPS in accordance with SFAS No. 128 which states that basic EPS is
computed by dividing net income/(loss) by the weighted average number of common
shares outstanding for the period, and diluted EPS is computed similarly to
basic EPS while giving effect to the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. However, pursuant to SFAS No. 128, the computation of
diluted EPS shall not assume conversion or exercise of securities that would
have an antidilutive effect on earnings per share. Since including potential
common shares in the diluted per share computation always results in an
antidilutive per share amount when an entity has a net loss, we have therefore
not calculated diluted EPS for each of the three years ended February 29, 2000
as presented in the Consolidated Statement of Operations.
New Accounting Pronouncements:
On June 23, 1999, the Financial Accounting Standards Board decided to defer the
effective date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity". As a result of this deferral, SFAS No. 133 will be effective
for all of our fiscal quarters beginning March 1, 2001. This statement
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that we
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. The Company expects to adopt this
standard when required and does not believe that it will have a significant
impact on its operating results or financial position.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements". SAB No. 101 expresses the views
of the SEC staff in applying generally accepted accounting principles to certain
revenue recognition issues. The Company is currently evaluating the impact, if
any, of SAB No. 101 on its financial position or its results of operations.
NOTE 3 - ACCOUNTS RECEIVABLE
- ----------------------------
As of February 29, 2000, accounts receivable of $17.3 million consists of trade
receivables of $9.9 million, receivables related to construction advances of
$4.0 million and other receivables of $3.4 million. As of February 28, 1999,
accounts receivable of $28.6 million consists of trade receivables of $9.6
million, receivables related to construction advances of $11.5 million and other
receivables of $7.5 million.
NOTE 4 - PROPERTY, EQUIPMENT AND LEASEHOLDS
- -------------------------------------------
Property, equipment and leaseholds consists of:
FEBRUARY 28 or 29,
2000 1999
---------- ----------
Land $ 85,274 $ 72,360
Buildings 474,386 372,797
Equipment 301,010 239,655
Leasehold Improvements 204,496 206,001
Theatre Lease Rights 449,254 478,841
Construction in Progress 73,148 82,363
---------- ----------
TOTAL PROPERTY, EQUIPMENT AND LEASEHOLDS 1,587,568 1,452,017
Less: Accumulated Depreciation and Amortization 369,234 332,040
---------- ----------
$1,218,334 $1,119,977
========== ==========
61
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
The cost of property and equipment under capital leases amounted to $59.5
million and $34.2 million, with accumulated depreciation of $10.1 million and
$5.8 million as of February 29, 2000 and February 28, 1999, respectively.
Depreciation expense of property and equipment under capital leases is included
in depreciation and amortization expense in the Consolidated Statement of
Operations.
The Company continues to review the assets and related intangibles of its motion
picture theatres for impairment in accordance with the provisions of SFAS No.
121. As a result of this process, the Company has recognized a provision for
asset impairment of $5.5 million, $4.8 million and $4.4 million for the years
ended February 29, 2000, February 28, 1999, and February 28, 1998, respectively,
which is included in depreciation and amortization expense in the Consolidated
Statement of Operations.
NOTE 5 - LONG-TERM INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
- --------------------------------------------------------------
The Company's long-term investments consist of a 50% interest in LST which
operated 9 theatres with 135 screens, MJT which operated 4 theatres with 51
screens, and Yelmo which operated 15 theatres with 130 screens at February 29,
2000. The Company accounts for these investments following the equity method of
accounting.
The Company's carrying value of its investment in LST was approximately $13.5
million and $13.4 million, its investment in MJT was approximately $19.1 million
and $16.0 million, and its investment in Yelmo was $43.3 million and $18.5
million, at February 29, 2000 and February 28, 1999, respectively. The
investments were in the form of equity, interest bearing notes and working
capital advances.
The Company's equity share of earnings in LST, MJT and Yelmo for the fiscal
years ended February 28 or 29, 2000, 1999 and 1998 was approximately $1.5
million, $2.7 million and $2.9 million, respectively.
The following table presents condensed financial information for the LST, MJT
and Yelmo partnerships on a combined basis:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 or 29,
2000 1999 1998
-------- ------- -------
<S> <C> <C> <C>
Box Office $ 81,531 $68,410 $48,036
Concessions/Other 37,209 30,606 22,461
-------- ------- -------
Total Revenues 118,740 99,016 70,497
Total Operating Costs 91,319 78,289 55,768
General and Administrative Costs 4,789 3,651 2,051
-------- ------- -------
22,632 17,076 12,678
Depreciation and Amortization 10,351 6,905 5,459
-------- ------- -------
Income from Operations $ 12,281 $10,171 $ 7,219
======== ======= =======
Net Income $ 2,954 $ 5,370 $ 6,120
======== ======= =======
</TABLE>
62
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- -----------------------------------------------
Accounts payable and accrued expenses consist of:
FEBRUARY 28 OR 29,
2000 1999
-------- --------
Accounts payable -- trade $ 96,783 $ 74,065
Accrued occupancy 19,452 19,634
Other accrued expenses 84,842 82,244
-------- --------
$201,077 $175,943
======== ========
At February 29, 2000 and February 28, 1999, other accrued expenses include $21.5
million and $28.1 million, respectively, of contractual obligations and other
liabilities related to the Combination. Additionally, approximately $104.5
million and $123.3 million of contractual obligations related to the Combination
are included in Other Long-term Liabilities at February 28 or 29, 2000 and 1999,
respectively. These contractual obligations relate to unfavorable above market
lease obligations or contractual buyouts for certain theatres identified in the
Cineplex Odeon circuit at the time of the acquisition and were included in the
acquisition cost of the Combination.
NOTE 7 - LONG-TERM DEBT AND OTHER OBLIGATIONS
- ----------------------------------------------
Long-term debt and other obligations consist of:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
2000 1999
-------- --------
<S> <C> <C>
Senior Revolving Credit Facility due 2003 - average interest rate of 7.48%
and 6.42% at February 29, 2000 and February 28, 1999, respectively $530,000 $378,000
Senior Subordinated Notes with interest at 8.875% due 2008, net of
original issue discount 297,940 297,695
Plitt Theatres, Inc. Notes with interest at 10.875% due 2004 - 2,300
Mortgages payable - non-recourse, payable from 1998 through 2008
Interest rates from 8.5% to 11.5% 12,498 13,479
-------- --------
840,438 691,474
Less: Current maturities 1,409 1,173
-------- --------
$839,029 $690,301
======== ========
</TABLE>
Annual maturities of obligations under long-term debt for the next five fiscal
years and thereafter are set forth as follows:
YEAR ENDING FEBRUARY 28 or 29, DEBT
- ----------------------------- ----
2001 $ 1,409
2002 4,611
2003 530,264
2004 228
2005 252
Thereafter 303,674
--------
$840,438
========
On May 14, 1998, in connection with the Combination, the Company entered into a
$1 Billion Senior Revolving Credit Facility with Bankers Trust Company, as
administrative agent. The Senior Revolving Credit Facility has been used to
repay all intercompany amounts due to SCA and affiliates and has replaced
Cineplex Odeon's existing credit facility. This Senior Revolving Credit Facility
is comprised of a $750 million senior secured revolving credit facility, secured
by substantially all of the assets of LCP and its U.S.
63
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
subsidiaries, and a $250 million uncommitted facility. The Senior Revolving
Credit Facility bears interest at a rate of either the current prime rate as
offered by Bankers Trust Company or an Adjusted Eurodollar rate plus an
applicable margin based on the Company's Leverage Ratio (as defined). The Senior
Revolving Credit Facility includes various financial covenants, including: (i)
limitations on indebtedness, (ii) limitations on dividends and other payment
restrictions, (iii) limitations on asset sales, (iv) limitations on transactions
with affiliates, (v) limitations on the issuance and sale of capital stock of
subsidiaries, (vi) limitations on lines of business, (vii) limitations on
merger, consolidation or sale of assets and (viii) certain reporting
requirements. An annual commitment fee of 0.25% on unused amounts is payable
under the Senior Revolving Credit Facility. On February 24, 2000, the Company's
bank group agreed to a first amendment of the Senior Revolving Credit Facility.
Under terms of the first amendment, the banks agreed to modify the Maximum
Consolidated Leverage Ratio, the Maximum Total Leverage Ratio and the Minimum
Debt Service Coverage Ratio, as defined in the agreement, for a period of 18
months.
On August 5, 1998, the Company issued $300 million of 8 7/8% Senior Subordinated
Notes due 2008. These notes include various financial covenants substantially
similar to those of the Senior Revolving Credit Facility.
On August 18, 1998, the Company entered into interest rate swap agreements, with
an aggregate notional amount of $250 million. Under these swap agreements the
Company receives a floating rate of interest based on three month LIBOR, which
resets quarterly, and the Company pays a fixed rate of interest, each quarter,
for the terms of the respective agreements. The terms of these agreements are
for a period of four years and the weighted average fixed rate the Company pays
is 5.775%. The Company has entered into these agreements solely to hedge its
interest rate risk under its floating rate bank debt. These interest rate swaps
are entered into for hedging purposes and as such are designated and effective
as a hedge against the risk of increased interest rates. The differential
between the amounts paid and received is recorded as an adjustment to interest.
For the year ended February 29, 2000, these interest rate swaps did not have a
material impact on the Company's operating results or financial position.
NOTE 8 - LEASES
- -----------------
The Company conducts a significant part of its operations in leased premises.
Leases generally provide for minimum rentals plus percentage rentals based upon
sales volume and also require the tenant to pay a portion of real estate taxes
and other property operating expenses. Lease terms generally range from 20 to
40 years and contain various renewal options, generally in intervals of 5 to 10
years.
Future minimum rental commitments at February 29, 2000 under the above mentioned
operating and capital leases, having an initial or remaining non-cancelable
lease term of one or more years are set forth as follows:
OPERATING CAPITAL
YEAR ENDING FEBRUARY 28 or 29, LEASES LEASES
- ---------------------------------------- ---------- --------
2001 $ 119,702 $ 8,067
2002 116,660 7,890
2003 116,033 7,691
2004 114,116 7,622
2005 111,163 7,446
Thereafter 1,178,728 75,701
---------- --------
Total Minimum Rentals $1,756,402 114,417
==========
Less Amount Representing Interest 52,460
--------
Present Value of Net Minimum Rentals $ 61,957
========
Minimum rental expense related to operating leases was $102,888, $74,610 and
$31,368 for the years ended February 28 or 29, 2000, 1999 and 1998,
respectively. Percentage rental expense for those same periods was $7,521,
$7,265 and $3,449, respectively.
64
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
NOTE 9 - EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
- ---------------------------------------------------
The Company accrues amounts ranging from 17% to 23% of gross salaries in the
U.S. and 10% of gross salaries in Canada for fringe benefits (i.e., Medical,
Dental, FICA and Savings Plan Contributions), which approximates actual costs
incurred.
Profit Sharing and Savings Plan
The Company has a defined contribution Profit Sharing and Savings Plan ("Savings
Plan") for substantially all eligible salaried employees in the United States
and Canada under which the Company contributes by matching 50% of the employee
contribution up to a maximum of 6% of the statutory limit of eligible
compensation. A participant may elect to contribute up to an additional 10% of
eligible compensation (subject to the statutory limit), however this amount is
not eligible for matching contributions by the Company. The Savings Plan also
provides for special profit sharing contributions, the annual amount of which is
determined at the discretion of the Company. The expense recorded by the Company
related to contributions to the Savings Plan aggregated $2,377, $1,922 and
$1,670 for the years ended February 28 or 29, 2000, 1999, and 1998,
respectively.
Employee Health and Welfare and Other Post-retirement Benefits
The Company provides health and welfare benefits and post-retirement benefits to
eligible executives and employees in the United States and Canada. The Company
has accrued post-retirement benefits of $3,640 and $3,846 at February 29, 2000
and February 28, 1999, respectively, and recognized an annual cost of nil, $162
and $339 for the years ended February 28 or 29, 2000, 1999, and 1998,
respectively. The cost and accrued benefit obligations are calculated using a
discount rate of 8% and 7% for the years ended February 29, 2000 and February
28, 1999, respectively, and a health care trend rate of 5% for fiscal years 1999
and 2000.
Pension Plans
As a result of the Combination, the Company acquired the U.S. and Canadian
pension plans previously administered by Cineplex Odeon.
Cineplex Odeon had a defined benefit pension plan covering all full-time
employees in the United States which provides benefits based on years of service
and the employees' compensation for certain periods during the last years of
employment. During the prior fiscal year, the Company decided to freeze benefits
under this plan and convert the plan to a cash balance plan. This plan was
restructured as of January 1, 1999 and all eligible employees previously covered
under the plan became eligible to participate in the Company's Savings Plan. The
fair value of the pension plan assets acquired and the projected benefit
obligations assumed as a result of the Combination were $6,679 and $12,779,
respectively. As of February 28 or 29, 2000 and 1999, the pension fund assets
were $7,256 and $7,276, respectively, the projected benefits obligations were
$11,137 and $13,000, respectively, and the Company had accrued pension costs of
$4,661 and $5,724, respectively, associated with this plan. Additionally, the
Company has recognized an annual cost of $402 and nil for the year ended
February 29, 2000 and February 28, 1999, respectively. The cost and accrued
benefit obligations associated with the pension plan were calculated utilizing a
discount rate of 8% and 7% for the years ended February 29, 2000 and February
28, 1999, respectively, and a long-term rate of return of 8.5% for fiscal years
1999 and 2000.
The Company has a pension plan covering substantially all full-time Canadian
employees. Prior to January 1, 1993 this plan was a defined benefit plan, and
effective on that date it was converted to a defined contribution plan. At the
date of conversion, benefits under the defined benefit plan were frozen. The
actuarial estimate for the plan covering Canadian employees indicate a surplus
of pension fund assets over accrued benefits of approximately $1,538 and $1,485
as of February 29, 2000 and February 28, 1999. The cost and accrued benefit
obligations associated with the pension plan were calculated utilizing a
discount rate of 7% and a long-term rate of return of 7% for fiscal years 1999
and 2000.
Other Plans
Various employees are covered by union sponsored pension plans. The
contributions are determined in accordance with provisions of negotiated labor
contracts. Under these agreements, benefit expenses aggregated $1,790, $1,731
and $1,204 for the years ended February 28 or 29, 2000, 1999 and 1998,
respectively.
65
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
The Company also has a non-funded deferred compensation plan for certain
employees. As of February 29, 2000 and February 28, 1999, liabilities under this
plan were $496 and $99, respectively.
NOTE 10 - RELATED PARTY TRANSACTIONS
- ------------------------------------
The Company has exhibited films distributed by SPE in the past, and expects to
continue to do so in the future. Payments are based on negotiated and/or
contracted rates established on terms that management believes are on an arm's-
length basis. At February 29, 2000 and February 28, 1999, the Company owed SPE
and affiliates $6,186 and $1,950, respectively, under film licensing agreements.
The Company has recognized film rental expenses relating to the exhibition of
films distributed by SPE in the amount of $38,449, $33,799 and $30,399, for the
years ended February 28 or 29, 2000, 1999 and 1998, respectively. Additionally,
the Company leases a theatre property from an affiliate of SCA. Total occupancy
related payments during fiscal year 2000 were $1,967.
The Company has exhibited films distributed by Universal in the past, and
expects to continue to do so in the future. Payments are based on negotiated
and/or contracted rates established on terms that management believes are on an
arm's-length basis. At February 29, 2000 and February 28, 1999, the Company owed
Universal $5,221 and $1,814, respectively, under film licensing agreements. The
Company has recognized film rental expenses relating to the exhibition of films
distributed by Universal in the amount of $51,266 and $20,222 for the years
ended February 28 or 29, 2000 and 1999, respectively.
At February 28, 1998, the Company had debt due to SCA affiliates totaling $296.3
million. This amount was comprised of a promissory note and working capital
advances. The debt due to SCA affiliates carried interest at an intercompany
interest rate determined by SCA (5.9% at February 28, 1998) and was due October
31, 1998. This amount was repaid in conjunction with the closing of the
Combination on May 14, 1998. Interest expense incurred on the "Debt due to SCA
Affiliates" was nil, $6,942 and $14,638 for the years ended February 28 or 29,
2000, 1999 and 1998, respectively.
In addition to the above related party transactions, SCA and LCP provided
certain services to one another, primarily relating to activities prior to the
Combination. SCA affiliates provided certain services relating to the following
activities: Insurance and risk management services, including excess liability,
workman's compensation and officers and directors coverage among others,
benefits administration and payroll processing, and tax processing services. LCP
provided certain services to SCA affiliates relating to the following
activities: Finance, Administrative and MIS support. The net amount charged to
the Company for these services amounted to $143, $610 and $570 for the years
ended February 28 or 29, 2000, 1999 and 1998, respectively. For the years ended
February 28 or 29, 2000, 1999 and 1998, the Company was also charged by a SCA
affiliate for certain administrative related services in the amounts of nil,
$115 and $1,835, respectively. The Company believes the costs of the above
mentioned services are commensurate with that which would be charged by third
parties for similar services.
NOTE 11 - INCOME TAXES
- -----------------------
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". This statement applies to an asset and liability approach that requires
the recognition of deferred tax assets and liabilities with respect to the
expected future tax consequences of events that have been recognized in the
consolidated financial statements and tax returns.
For periods prior to the closing of the Combination, the Company filed a
consolidated tax return with SCA for federal income tax purposes and combined
tax returns with SCA in certain state and local jurisdictions. However, for
financial reporting purposes, the Company calculated federal, state and local
income taxes as if it filed its returns on a stand-alone basis. Any state or
local income tax liability resulting from separately filed income tax returns by
the Company was recorded as state and local income taxes payable. For the period
after the closing of the Combination and all future periods, the Company will
file a consolidated tax return for federal income tax purposes, and appropriate
state and local tax returns, independent of SCA.
66
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
The provision for income taxes consists of the following:
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
2000 1999 1998
------------ ------------ ------------
Current tax expense/(benefit)
U.S. Federal $ - $ - $ 4,013
State and Local 593 (1,321) 2,551
Foreign 1,069 618 -
------ ------- -------
Total Current 1,662 (703) 6,564
Deferred tax expense/(benefit)
U.S. Federal - 1,929 (2,744)
State and Local - 961 (1,069)
------ ------- -------
Total tax provision $1,662 $ 2,187 $ 2,751
====== ======= =======
Reconciliation of the provision for income taxes to the statutory federal income
tax rate follows:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
2000 % 1999 % 1998 %
-------------------- --------------- -------------
<S> <C> <C> <C>
(Benefit)/provision on pre-tax (loss)/income at statutory
federal income tax rate $(17,405) (35.0) $(1,293) (35.0) $ 914 35.0
(Benefit)/provision for state and local taxes (net of federal income
tax benefit) 385 0.8 (234) (6.3) 963 36.9
Change in valuation allowance 13,205 26.6 (1,000) (27.1) - -
Impact of foreign operations (primarily minimum/capital taxes) 1,069 2.1 618 16.7 - -
Other non-deductible expenses (primarily amortization
of goodwill and other intangible assets) 4,408 8.9 4,096 110.9 874 33.5
-------- ----- ------- ----- ------ -----
$ 1,662 3.4 $ 2,187 59.2 $2,751 105.4
======== ===== ======= ===== ====== =====
</TABLE>
Significant components of the deferred tax assets and liabilities follow:
FEBRUARY 29, FEBRUARY 28,
2000 1999
------------ ------------
Net deferred tax assets:
Net operating loss carryforwards $ 211,860 $ 206,038
Contractual obligations 47,119 56,642
Book/tax fixed asset basis differences 25,588 27,687
Loss on sale/disposals of theatres 15,110 20,143
Other 15,150 16,676
--------- ---------
314,827 327,186
Less: Valuation allowance (296,854) (308,379)
--------- ---------
Total net deferred tax assets 17,973 18,807
Net deferred tax liabilities:
Depreciation and Amortization 17,973 18,807
--------- ---------
Total net deferred tax liabilities 17,973 18,807
--------- ---------
Net Deferred Tax Liability $ - $ -
========= =========
The valuation allowance of $296.9 million as of February 29, 2000 represents a
provision for the uncertainty as to the realization of deferred tax assets,
including temporary differences associated with certain contractual obligations,
book/tax fixed asset basis differences and net operating loss ("NOL")
carryforwards. The Company has concluded that based upon expected future
results, it cannot be reasonably assured that the deferred tax asset balance
will be realized. During the current year, the valuation allowance for deferred
tax assets decreased by approximately $11.5 million. This decrease was primarily
due to expiration of NOL's of $24.7 million at February 29, 2000 partially
offset by the generation of NOL's relating to a book taxable loss of $13.2
million. For tax purposes, NOL's of approximately $493 million, expiring between
the years 2001 and 2019, are available to offset future
67
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
taxable income. A portion of the U.S. NOL carryforwards, in the amount of $267.7
million, is subject to certain limitations and restrictions under the Internal
Revenue Code of 1986, as amended.
No provisions have been made for foreign withholding taxes or United States
income taxes associated with the cumulative undistributed earnings of foreign
subsidiaries as of February 29, 2000, as these earnings are expected to be
reinvested in working capital and other business needs indefinitely. A
determination of the amount of unrecognized deferred tax liability with respect
to such earnings is not practicable. Moreover, any additional taxes payable on
these earnings if remitted, would be substantially offset by U.S. tax credits
for foreign taxes already paid.
NOTE 12 - SEGMENT AND GEOGRAPHIC DATA
- -------------------------------------
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". This statement requires that the
internal organization that is used by management for making operating decisions
and assessing performance be the source of the Company's reportable segments.
SFAS No. 131 also requires disclosure about products and services, geographic
areas and major customers. The adoption of SFAS No. 131 did not affect results
of operations or financial position.
The Company is engaged in one line of business, motion picture exhibition. The
following table presents summarized financial information about the Company by
geographic area. There were no material amounts of sales or transfers among
geographic areas.
<TABLE>
<CAPTION>
UNITED INT.'L/
STATES CANADA OTHER CONSOLIDATED
---------- --------- -------- ------------
<S> <C> <C> <C> <C>
February 29, 2000
Box office revenue $ 525,698 $119,847 $ 2,229 $ 647,774
Concessions $ 191,749 $ 51,088 $ 674 $ 243,511
Total operating revenue $ 744,773 $180,272 $ 5,378 $ 930,423
Income/(loss) from operations $ 28,140 $ (834) $(4,306) $ 23,000
Total assets $1,487,981 $362,998 $56,410 $1,907,389
Capital expenditures $ 149,158 $ 28,778 $ 7,414 $ 185,350
Depreciation and
amortization expense $ 91,861 $ 20,586 $ 600 $ 113,047
February 28, 1999
Box office revenue $ 489,980 $ 95,895 $ 1,203 $ 587,078
Concessions $ 186,336 $ 41,586 $ 410 $ 228,332
Total operating revenue $ 703,532 $145,148 $ 2,480 $ 851,160
Income/(loss) from operations $ 45,817 $ 9,512 $(1,806) $ 53,523
Total assets $1,444,547 $339,773 $21,881 $1,806,201
Capital expenditures $ 113,978 $ 33,220 $ - $ 147,198
Depreciation and
amortization expense $ 79,744 $ 10,851 $ 125 $ 90,720
February 28, 1998
Box office revenue $ 296,933 $ - $ - $ 296,933
Concessions $ 104,009 $ - $ - $ 104,009
Total operating revenue $ 413,510 $ - $ - $ 413,510
Income/(loss) from operations $ 16,931 $ - $ - $ 16,931
Total assets $ 728,551 $ - $ - $ 728,551
Capital expenditures $ 42,431 $ - $ - $ 42,431
Depreciation and
amortization expense $ 52,307 $ - $ - $ 52,307
</TABLE>
No single customer accounts for more than 10% of total revenues for each of the
three years ended February 29, 2000.
68
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
NOTE 13 - STOCK OPTION PLANS
- ----------------------------
During fiscal 1998, the Company created the 1997 Stock Incentive Plan ("the
Plan") providing for the granting of options to employees, officers, directors,
consultants, and advisors of the Company or an affiliate. The Plan is
administered by a committee of the Board of Directors (the "Committee"). The
Plan provides for the grants or awards of incentive and non-qualified stock
options, stock appreciation and dividend equivalent rights, restricted stock,
performance units and performance shares. During December 1997, the Company
granted non-qualified stock options to certain key employees. During April 1999,
the Company granted 1,991,472 additional non-qualified stock options to 900 of
its employees. Under the Plan, the Company has a total of 5,862,265 shares
available for the grant of awards. As of February 29, 2000, an aggregate of
5,152,560 shares were outstanding with 709,705 available for future grant.
During April 2000, the Committee approved a grant of 340,000 of these non-
qualified stock options to the Company's employees. These options granted, in
addition to the 369,705 options available for future grant, could potentially
dilute future earnings per share. Except in the case of 500,000 options granted,
which vested immediately, the options generally vest and become exercisable
ratably over a five year period, commencing on the first anniversary of the
closing date of the Combination, but in any event, will be fully vested and
exercisable as of the fifth anniversary of the date of grant. The options
generally expire ten years after grant.
Cineplex Odeon had a stock option plan in place prior to the Combination.
Following the Combination, the Cineplex Odeon options were converted to 1.2
million options in LCP shares at an exchange ratio of 10 for 1 and the
historical option prices were converted by a factor of 10 times. The Cineplex
Odeon options denominated in Canadian dollars have been converted utilizing the
exchange rate in effect on the date of conversion. The conversion costs relating
to the Cineplex Odeon options were not material.
The following table summarizes information about the stock options outstanding
at February 29, 2000 and February 28, 1999 (per share amounts are in whole
dollars):
<TABLE>
2000 1999
---- ----
Number of Weighted Average Number of Weighted Average
Shares Exercise Price Shares Exercise Price
------ ---------------- ------ --------------
<S> <C> <C> <C> <C>
Shares under option:
Outstanding at beginning of year 3,336,553 $ 13.059 2,170,000 $ 13.125
Granted 1,991,472 $ 11.140 -- $ --
Cineplex Odeon Options Converted -- $ -- 1,223,843 $ 12.939
Exercised -- $ -- (19,802) $ 12.910
Forfeited/Expired (175,465) $ 11.201 (37,488) $ 13.063
----------------------------- ------------------------------
Outstanding at end of year 5,152,560 $ 12.381 3,336,553 $ 13.059
Options exercisable at year-end 2,033,511 $ 12.994 1,626,016 $ 13.000
Weighted average fair value of
options granted/converted $ 4.35 $ 8.24
</TABLE>
The Company applies APB No. 25 and related interpretations in accounting for the
Plan. For purposes of the disclosure below, compensation costs for the Plan
have been determined based upon the fair value at the date of grant for awards
under the Plan, consistent with the methodology under SFAS No. 123, utilizing
the Black-Scholes option pricing model based on the following assumptions:
2000 1999
----- -----
Expected life (years) 5 2.58
Expected volatility 34.27% 33.98%
Expected dividend yield -- --
Risk free interest rate 5.13% 5.61%
69
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands of U.S. dollars, except as otherwise noted)
The Company's net loss and loss per share for the years ended February 29, 2000
and February 28, 1999 are presented in the pro forma amounts indicated below:
2000 1999 1998
---- ---- ----
Net loss As reported ($51,390) ($5,880) ($139)
======== ======= =======
Pro forma ($53,102) ($7,323) ($1,555)
======== ======= =======
Loss per share-basic As reported ($0.88) ($0.12) ($0.01)
======== ======= =======
Pro forma ($0.91) ($0.15) ($0.08)
======== ======= =======
Loss per share-diluted As reported ($0.88) ($0.12) ($0.01)
======== ======= =======
Pro forma ($0.91) ($0.15) ($0.08)
======== ======= =======
70
<PAGE>
NOTE 14 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
Commitments
The Company has entered into commitments for the future development and
construction of theatre properties aggregating approximately $428.9 million
(including letters of credit of approximately $15.5 million) anticipated to be
funded over the next three year period. The Company has also guaranteed an
additional $35.4 million related to obligations under lease agreements entered
into by MJT. The Company is of the opinion that MJT will be able to perform its
obligations and that no payment will be required and no losses will be incurred
under these guarantees.
ADA Litigation
The Department of Justice, in coordination with the New York City Commission on
Human Rights, is currently investigating Cineplex Odeon's theatres in New York
City with respect to its compliance with the Americans with Disabilities Act
("ADA") and the New York City Human Rights Law. The Department of Justice has
alleged that its investigation had identified numerous violations of the ADA.
The Company has opposed, and will continue to vigorously oppose the allegations
and claims of the Department of Justice with respect to the compliance of these
theatres under the ADA. However, the Company cannot guarantee that the
remediation costs relating to the ADA will not be material.
Environmental Litigation
One of the Company's leased drive-in theatres and one formerly leased drive-in
theatre, both in the State of Illinois, are located on properties on which
certain third parties disposed of, or may have disposed of, substantial
quantities of construction debris, auto shredder residue and other debris. Such
material may contain hazardous substances. One of these properties is the
subject of an action, filed in August 1998 in the circuit court of Cook County,
Illinois by the Illinois Attorney General's office seeking civil penalties and
various forms of equitable relief, including the removal of all wastes allegedly
present at the property, soil and ground water testing and remediation, if
necessary. The Company's range of probable liability with respect to this
action cannot be reasonably estimated at this time due to several unknown
factors, including the scope of contamination at the theatre property, the
likelihood of any particular remedial action being required, the allocation of
liability, if any, to other responsible parties, and the ability of such parties
to satisfy their share of such liability. The Company will continue to evaluate
future information and developments with respect to conditions at the theatre
property and will periodically reassess any liability accordingly. Based on the
foregoing, there can be no assurance that the Company's liability, if any, in
connection with this action will not be material.
Other
Other than the lawsuits noted above, the Company is a defendant in various
lawsuits arising in the ordinary course of business and is involved in certain
environmental matters. From time to time the Company is involved in disputes
with landlords, contractors and other third parties. It is the opinion of
management that any liability to the Company which may arise as a result of
these matters will not have a material adverse effect on its operating results
and financial position.
71
<PAGE>
REPORTS OF MANAGEMENT AND INDEPENDENT ACCOUNTANTS
REPORT OF MANAGEMENT
TO THE SHAREHOLDERS OF LOEWS CINEPLEX ENTERTAINMENT CORPORATION
The accompanying consolidated financial statements of Loews Cineplex
Entertainment Corporation and its subsidiaries have been prepared by management,
who are responsible for the integrity and objectivity of these statements. The
statements have been prepared in conformity with generally accepted accounting
principles and include amounts based on management's best estimates and
judgments.
Management has established and maintains a system of internal control designed
to provide reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented or are detected within a
timely period. The system of internal control includes widely communicated
statements of policies and business practices which are designed to require all
employees to maintain high ethical standards in the conduct of Company affairs.
The internal controls are augmented by policies and procedures that provide for
appropriate delegation of authority and division of responsibility and by a
program of internal audit with management follow-up.
The Audit Committee of the Board of Directors, composed entirely of outside
directors, meets periodically with the Company's independent accountants,
management and internal auditors to review accounting, auditing, internal
accounting controls and financial reporting matters. The independent
accountants and the internal auditors have free access to this committee.
May 1, 2000
<TABLE>
<S> <C> <C>
/s/ Lawrence J. Ruisi /s/ John J. Walker /s/ Joseph Sparacio
___________________________________ ____________________________________ ____________________________________
Lawrence J. Ruisi John J. Walker Joseph Sparacio
President & Chief Executive Officer Senior Vice President Vice President, Finance & Controller
Chief Financial Officer & Treasurer
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Loews Cineplex Entertainment
Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Loews Cineplex Entertainment Corporation and its subsidiaries (the "Company") at
February 29, 2000 and February 28, 1999, and the results of their operations and
their cash flows for each of the three years in the period ended February 29,
2000, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
May 1, 2000
72
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
SELECTED QUARTERLY DATA (UNAUDITED)(1)
(all dollar amounts in thousands of U.S. dollars, except per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER/(2)/ TOTAL
--------- -------- --------- ------------- --------
<S> <C> <C> <C> <C> <C>
February 29, 2000
Revenue $201,784 $303,292 $209,250 $216,097 $930,423
(Loss)/Income from operations $ (5,155) $ 34,291 $ (6,320) $ 184 $ 23,000
Net (loss)/income $(21,879) $ 15,863 $(23,838) $(21,536) $(51,390)
(Loss)/Earnings per share - basic and diluted $ (.37) $ .27 $ (.41) $ (.37) $ (.88)
Stock prices - New York Stock Exchange (US$)
High $ 12.88 $ 10.94 $ 8.38 $ 6.50 $ 12.88
Low $ 9.13 $ 7.94 $ 6.19 $ 4.13 $ 4.13
Stock prices - Toronto Stock Exchange (CDN$)
High $ 18.50 $ 16.05 $ 12.50 $ 9.40 $ 18.50
Low $ 13.60 $ 11.75 $ 9.00 $ 5.95 $ 5.95
February 28, 1999 (3)
Revenue $117,814 $297,459 $211,414 $224,473 $851,160
Income from operations $ 5,244 $ 33,184 $ 233 $ 14,862 $ 53,523
Net (loss)/income $ (743) $ 8,274 $(12,106) $ (1,305) $ (5,880)
(Loss)/Earnings per share - basic and diluted $ (.03) $ .17 $ (.21) $ (.02) $ (.12)
Stock prices - New York Stock Exchange (US$)
High $ 19.00 $ 15.50 $ 10.69 $ 10.88 $ 19.00
Low $ 15.44 $ 7.88 $ 7.50 $ 8.63 $ 7.50
Stock prices - Toronto Stock Exchange (CDN$)
High $ 27.95 $ 22.80 $ 16.55 $ 16.70 $ 27.95
Low $ 22.70 $ 12.90 $ 11.50 $ 12.45 $ 11.50
</TABLE>
Earnings per share is computed independently for each of the quarters presented.
Therefore, the sum of the quarterly earnings per share do not necessarily equal
the total for the year.
Notes:
(1) The Company's business is seasonal with a substantial portion of its
revenues being derived during the summer months and holiday season.
(2) Depreciation and amortization costs include adjustments necessary to
reflect the allocation of purchase price to the fair value of Cineplex
Odeon assets acquired and liabilities assumed as part of the Combination.
This allocation of value was substantially completed during the fourth
quarter of fiscal year 1999 and was completed during the first quarter of
the current fiscal year. As a result, adjustments of approximately $3.2
million to reduce previous preliminary estimates of depreciation and
amortization expense were recorded in the fourth quarter of fiscal year
1999.
(3) Results for the fiscal year ended February 28, 1999 include the operating
results for Cineplex Odeon for the period May 15, 1998 through February 28,
1999. Cineplex Odeon became a subsidiary of the Company on May 14, 1998.
73
<PAGE>
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors
of Loews Cineplex Entertainment Corporation:
Our audits of the consolidated financial statements referred to in our
report dated May 1, 2000 appearing in the 2000 Annual Report to Shareholders of
Loews Cineplex Entertainment Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the financial statement schedules listed
in Item 14(a)(2) of this Form 10-K. In our opinion, these financial statement
schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
May 1, 2000
<PAGE>
SCHEDULE II
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
Additions
Balance at (Charged to Deductions Balance at
Beginning Costs and and Other End of
of Period Expenses) Charges Period
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended February 29, 2000
Reserve for net book value of
property, equipment and
leaseholds...................... $7,309 $5,534 $12,706 $ 137
Reserve for other costs.......... $4,044 $ 0 $ 2,256 $1,788
Year Ended February 28, 1999
Reserve for net book value of
property, equipment and
leaseholds...................... $5,999 $4,800 $ 3,490 $7,309
Reserve for other costs.......... $3,797 $1,050 $ 803 $4,044
Year Ended February 28, 1998
Reserve for net book value of
property, equipment and
leaseholds...................... $3,979 $4,409 $ 2,389 $5,999
Reserve for other costs.......... $ 0 $4,656 $ 859 $3,797
</TABLE>
<PAGE>
EXHIBIT 10.9.1
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of February 29, 2000 and entered into by and among LOEWS CINEPLEX
ENTERTAINMENT CORPORATION, a Delaware corporation ("Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "Lender" and collectively as "Lenders"), BANKERS TRUST COMPANY
("BTCo"), as administrative agent for Lenders (in such capacity, "Administrative
Agent") and as a Co-Syndication Agent, BANK OF AMERICA, N.A., as a Co-
Syndication Agent, THE BANK OF NEW YORK, as a Co-Syndication Agent and CREDIT
SUISSE FIRST BOSTON, as a Co-Syndication Agent, and is made with reference to
that certain Credit Agreement dated as of May 14, 1998 (the "Credit Agreement"),
by and among Company, Lenders, Administrative Agent and Co-Syndication Agents.
The Credit Agreement as amended by this Amendment is referred to herein as the
"Amended Agreement." Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to
make certain amendments as set forth below.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Section 1: Provisions Relating to Defined Terms
A. Subsection 1.1 of the Credit Agreement is hereby amended by
adding thereto the following definition, which shall be inserted immediately
following the definition of "Financial Plan":
"First Amendment Effective Date" means the date on which that certain
First Amendment to Credit Agreement by and among Company, the Lenders
listed on the signature pages thereof, BTCo, Bank of America, N.A., The
Bank of New York and Credit Suisse First Boston amending the Agreement
becomes effective.
<PAGE>
B. The definition of "Subsidiary Pledge Agreement" is hereby amended
by deleting therefrom the word "or" following the phrase "each Subsidiary
Guarantor on the Closing Date" and inserting the word "and" in substitution
therefor.
C. The definition of "Subsidiary Security Agreement" is hereby
amended by deleting therefrom the word "or" following the phrase "each
Subsidiary Guarantor on the Closing Date" and inserting the word "and" in
substitution therefor.
D. The definition of "Subsidiary Trademark Security Agreement" is
hereby amended by deleting therefrom the word "or" following the phrase "each
Subsidiary Guarantor on the Closing Date" and inserting the word "and" in
substitution therefor.
1.2 Amendments to Section 2: Amounts and Terms of Commitments and
-------------------------------------------------------------
Loans
- -----
A. Subsection 2.1A of the Credit Agreement is hereby amended by
deleting therefrom the phrase "Tranche A" following the words "shall expire on
the" in the third to last sentence of clause (i) thereof.
B. Subsection 2.1B of the Credit Agreement is hereby amended by
deleting the phrase "Total Utilization of Tranche A Revolving Loans" from clause
(vi) of the fourth sentence thereof and substituting the following: "Total
Utilization of Tranche A Revolving Loan Commitments".
C. Subsection 2.2A of the Credit Agreement is hereby amended by
replacing the Applicable Margin percentage "1.75%" with the Applicable Margin
percentage "2.125%" in the chart in subsection (b) thereof.
1.3 Amendments to Section 7: Company's Negative Covenants
------------------------------------------------------
A. Subsection 7.6A of the Credit Agreement is hereby amended by
deleting the chart included in such subsection and replacing such chart in its
entirety with the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Period Maximum Total Leverage Ratio
--------------------------------------------------------------------------------
<S> <C>
Closing Date - First Amendment 5.25:1.00
Effective Date
--------------------------------------------------------------------------------
First Amendment Effective Date - 6.25:1.00
August 31, 2001
--------------------------------------------------------------------------------
September 1, 2001 - February 28, 4.60:1.00
2002
--------------------------------------------------------------------------------
March 1, 2002 and thereafter 4.25:1.00
--------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
B. Subsection 7.6B of the Credit Agreement is hereby amended by
deleting the chart included in such subsection and replacing such chart in its
entirety with the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Period Maximum Consolidated
Leverage Ratio
--------------------------------------------------------------------------------
<S> <C>
Closing Date - First Amendment 5.00:1.00
Effective Date
--------------------------------------------------------------------------------
First Amendment Effective Date - 5.85:1.00
August 31, 2001
--------------------------------------------------------------------------------
September 1, 2001 - February 28, 4.25:1.00
2002
--------------------------------------------------------------------------------
March 1, 2002 and thereafter 3.75:1.00
--------------------------------------------------------------------------------
</TABLE>
C. Subsection 7.6C of the Credit Agreement is hereby amended by
deleting the chart included in such subsection and replacing such chart in its
entirety with the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Period Minimum Debt Service Coverage Ratio
--------------------------------------------------------------------------------
<S> <C>
Closing Date - First Amendment 1.35:1.00
Effective Date
--------------------------------------------------------------------------------
First Amendment Effective Date - 1.30:1.00
February 28, 2001
--------------------------------------------------------------------------------
March 1, 2001 - August 31, 2001 1.35:1.00
--------------------------------------------------------------------------------
September 1, 2001 - February 28, 1.40:1.00
2002
--------------------------------------------------------------------------------
March 1, 2002 and thereafter 1.45:1.00
--------------------------------------------------------------------------------
</TABLE>
Section 2. CONDITIONS TO EFFECTIVENESS
2.1 General
-------
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the conditions precedent (the date of satisfaction of
such conditions being referred to herein as the "First Amendment Effective
Date") set forth in this Section 2.
2.2 Deliveries by Company
---------------------
A. Company shall deliver to Lenders (or to Administrative Agent for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following, each, unless otherwise noted, dated the
First Amendment Effective Date:
3
<PAGE>
(i) an Officers' Certificate, in form and substance satisfactory to
Administrative Agent, to the effect that the representations and warranties
in Section 5 of the Credit Agreement are true, correct and complete in all
material respects on and as of the First Amendment Effective Date to the
same extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that
such representations and warranties were true, correct and complete in all
material respects on and as of such earlier date) and that Company shall
have performed in all material respects all agreements and satisfied all
conditions which the Credit Agreement provides shall be performed or
satisfied by it on or before the First Amendment Effective Date;
(ii) executed copies of this Amendment; and
(iii) such other documents as Administrative Agent shall reasonably
request.
2.3 Completion of Proceedings
-------------------------
On or before the First Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Administrative Agent and such
counsel, and Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may
reasonably request.
2.4 Fees.
----
Company shall have paid to Administrative Agent, for distribution to
those Lenders who have executed and delivered this Amendment on or before
February 22, 2000 (the "Consenting Lenders"), an amendment fee equal to 0.125%
of the aggregate Commitments of the Consenting Lenders. As soon as practicable
following the First Amendment Effective Date, the Administrative Agent shall
distribute to each Consenting Lender an amount determined by multiplying (a) the
-----------
total amount of such amendment fee by (b) a fraction the numerator of which is
the Commitment of that Consenting Lender and the denominator of which is the
aggregate Commitments of the Consenting Lenders.
Section 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties
------------------------------
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. Company has all requisite corporate power and authority to enter
into this Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Amended Agreement.
4
<PAGE>
B. The execution and delivery by Company of this Amendment and the
performance by Company of the Amended Agreement have been duly authorized by all
necessary corporate action on the part of Company.
C. The execution and delivery by Company of this Amendment and the
performance by Company of the Amended Agreement do not and will not (i) violate
any provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the constating documents of Company or any
of its Subsidiaries or any order, judgment or decree of any court or other
agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of Company or any of
its Subsidiaries, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Company or any of its Subsidiaries,
or (iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. The execution and delivery by Company of this Amendment and the
performance by Company of the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.
E. This Amendment and the Amended Agreement have been duly executed
and delivered by Company and are the legally valid and binding obligations of
Company, enforceable against Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
F. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
G. No event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
Section 4. MISCELLANEOUS
-------------
4.1 Reference to and Effect on the Credit Agreement and the Other
Loan Documents
A. On and after the First Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to the "Credit
5
<PAGE>
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Amended Agreement.
B. Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed.
C. The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of any Agent or any
Lender under, the Credit Agreement or any of the other Loan Documents.
4.2 Fees and Expenses
-----------------
Company acknowledges that all costs, fees and expenses as described in
subsection 10.2 of the Credit Agreement incurred by Administrative Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Company.
4.3 Headings
--------
Section and subsection headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
4.4 Applicable Law
--------------
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
4.5 Counterparts; Effectiveness
---------------------------
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment (other than the provisions of Section 1 hereof, the
effectiveness of which is governed by Section 2 hereof) shall become effective
upon the execution of a counterpart hereof by Company and Requisite Lenders and
an acknowledgment hereof by each of the Subsidiary Guarantors and each of
Company's other Subsidiaries and receipt by Company and Administrative Agent of
written or telephonic notification of such execution and authorization of
delivery thereof.
6
<PAGE>
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By: /s/ JOHN J. WALKER
__________________________________________
Name: John J. Walker
Title: Senior Vice President and
Chief Financial Officer
LENDERS:
BANKERS TRUST COMPANY,
as Administrative Agent, Co-Syndication Agent and
as a Lender
By: /s/ G. ANDREW KEITH
__________________________________________
Name: G. Andrew Keith
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as a Co-Syndication Agent and as a Lender
By: /s/ KRISTEN LEPRI
__________________________________________
Name: Kristen Lepri
Title: Associate
By: /s/ JOEL GLODOWSKI
__________________________________________
Name: Joel Glodowski
Title: Managing Director
BANK OF AMERICA, N.A.,
as a Co-Syndication Agent and as a Lender
By: /s/ SEAN W. CASSIDY
__________________________________________
Name: Sean W. Cassidy
Title: Vice President
S-1
<PAGE>
THE BANK OF NEW YORK,
as a Co-Syndication Agent and as a Lender
By: /s/ GEOFFREY C. BROOKS
__________________________________________
Name: Geoffrey C. Brooks
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ TOM HELSENFELD
__________________________________________
Name: Tom Helsenfeld
Title: GVP
THE BANK OF NOVA SCOTIA
By: /s/ VINCENT J. FITZGERALD, JR.
__________________________________________
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
THE BANK OF TOKYO MITSUBISHI TRUST
By: /s/ EMILE ELNEMS
__________________________________________
Name: Emile Elnems
Title: Vice President
BARCLAYS BANK PLC
By: /s/ ANDREW M. WYNN
__________________________________________
Name: Andrew M. Wynn
Title: Managing Director
CREDIET INDUSTRIEL ET COMMERCIAL
By: /s/ ANTHONY ROCK
__________________________________________
Name: Anthony Rock
Title: Vice President
By: /s/ MARCUS EDWARD
__________________________________________
Name: Marcus Edward
Title: Vice President
S-2
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ DANIEL GUEVARA
__________________________________________
Name: Daniel Guevara
Title: Assistant Vice President
ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG
By: /s/ DAVID MANHEIM
__________________________________________
Name: David Manheim
Title: Assistant Vice President
FLEET NATIONAL BANK
By: /s/ MANUEL BURGUENO
__________________________________________
Name: Manuel Burgueno
Title: Vice President
THE FUJI BANK, LIMITED - NEW YORK BRANCH
By: /s/ JOHN D. DOYLE
__________________________________________
Name: John D. Doyle
Title: Vice President and Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ ALLISON KING
__________________________________________
Name: Allison King
Title:
S-3
<PAGE>
RIGGS BANK, N.A.
By: /s/ DOUGLAS KLAMFOTH
__________________________________________
Name: Douglas Klamfoth
Title:
SUMMIT BANK
By: /s/ RICHARD BANNING
__________________________________________
Name: Richard Banning
Title: Vice President
THE MITSUBISHI TRUST AND BANKING CORPORATION
By: /s/ BEATRICE E. KOSSODO
__________________________________________
Name: Beatrice E. Kossodo
Title: Senior Vice President
BANK LEUMI USA
By: /s/ JOUNG HEE HONG
__________________________________________
Name: Joung Hee Hong
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ W. JEROME McDERMOTT
__________________________________________
Name: W. Jerome McDermott
Title: Duly Authorized Signatory
S-4
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ KAREN L. KOOMAN
__________________________________________
Name: Karen L. Kooman
Title: Assistant Vice President
STB DELAWARE FUNDING TRUST I
By: /s/ DONALD C. HARGADON
__________________________________________
Name: Donald C. Hargadon
Title: Assistant Vice President
NATEXIS BANQUE -- BFCE
By: /s/ PEYMAN PARHAMI
__________________________________________
Name: Peyman Parhami
Title: Assistant Vice President
By: /s/ IAIN A. WHYTE
__________________________________________
Name: Iain A. Whyte
Title: Vice President and Group Manager
Corporate Finance
S-5
<PAGE>
ACKNOWLEDGMENT OF
FIRST AMENDMENT TO CREDIT AGREEMENT
Each of the undersigned, as (i) a Guarantor under that certain
Subsidiary Guaranty dated as of May 14, 1998, with an additional counterpart
thereof executed by certain of the undersigned on February 28, 2000 (the
"Guaranty") in favor of Bankers Trust Company ("BTCo") as agent for the benefit
of Lenders (as defined therein), any Interest Rate Exchangers (as defined
therein), and, subject to subsection 3.12 thereof, for the benefit of the other
Beneficiaries (as defined therein), (ii) a Grantor under that certain Subsidiary
Security Agreement dated as of May 14, 1998, with an additional counterpart
thereof executed by certain of the undersigned on February 28, 2000 (the
"Security Agreement") in favor of BTCo as agent for the benefit of Lenders (as
defined therein) and any Interest Rate Exchangers (as defined therein), (iii) a
Pledgor under that certain Subsidiary Pledge Agreement dated as of May 14, 1998,
with an additional counterpart thereof executed by certain of the undersigned on
February 28, 2000 (the "Pledge Agreement") in favor of BTCo as agent for the
benefit of Lenders (as defined therein) and any Interest Rate Exchangers (as
defined therein) and (iv) a Grantor under that certain Subsidiary Trademark
Security Agreement dated as of May 14, 1998, with an additional counterpart
thereof executed by certain of the undersigned on February 28, 2000 (the
"Trademark Security Agreement") in favor of BTCo as agent for the benefit of the
Lenders (as defined therein) and any Interest Rate Exchangers (as defined
therein), hereby acknowledges that it has read this First Amendment to Credit
Agreement (this "Agreement") and consents to the terms thereof and further
hereby confirms and agrees that, notwithstanding the effectiveness of this
Agreement, the obligations of the undersigned under the Guaranty, the Security
Agreement, the Pledge Agreement and the Trademark Security Agreement shall not
be impaired or affected and each of the Guaranty, the Security Agreement, the
Pledge Agreement and the Trademark Security Agreement is, and shall continue to
be, in full force and effect and is hereby confirmed and ratified in all
respects.
71ST & 3RD AVE. CORP.
ANDY CANDY CO., INC.
BEAVER VALLEY CINEMAS, INC.
BERKELEY CINEMA CORP.
BRICK PLAZA CINEMAS, INC.
BRICKTOWN PICTURE CORP.
CAMPUS CINEMAS, INC.
CASTLE THEATRE CORP.
CINNAMINSON THEATRE CORP.
CINE WEST, INC.
CINEMA DEVELOPMENT CORPORATION
CINEMA INVESTMENTS, INC.
CINEMA 275 EAST, INC.
CIRCLE TWIN CINEMA CORP.
CITYPLACE CINEMAS, INC.
COLLEGE THEATRE CORP.
COLORADO CINEMAS, INC.
Acknowledgement-1
<PAGE>
CONTINENT CINEMAS, INC.
CRESCENT ADVERTISING CORPORATION
CRESTWOOD CINEMAS, INC.
CROFTON QUAD CORPORATION
D.H. GARFIELD ADVERTISING AGENCY, INC.
DISTRICT AMUSEMENT CORPORATION
DOWNSTATE THEATRE CORPORATION
EAST WINDSOR PICTURE CORP.
EATONTOWN THEATRE CORP.
ETON AMUSEMENT CORPORATION
FALL RIVER CINEMA, INC.
FLAT WOODS THEATER CORPORATION
FORTY-SECOND STREET CINEMAS, INC.
FOUNTAIN CINEMAS, INC.
FREEHOLD CINEMA CENTER, INC.
FREEHOLD PICTURE CORP.
GERARD THEATRE CORPORATION
H&M CINEMA CORPORATION
HAWTHORNE AMUSEMENT CORPORATION
HINSDALE AMUSEMENT CORPORATION
I-75 THEATRES, INC.
J-TOWN CINEMAS, INC.
KIPS BAY CINEMAS, INC.
LANCE THEATRE CORPORATION
LEXINGTON MALL CINEMAS CORPORATION
LEXINGTON NORTH PARK CINEMAS, INC.
LEXINGTON SOUTH PARK CINEMAS, INC.
LIBERTY TREE CINEMA CORP.
LOEWS 34TH ST. SHOWPLACE CINEMAS, INC.
LOEWS AKRON CINEMAS, INC.
LOEWS ARLINGTON CINEMAS, INC.
LOEWS ARLINGTON WEST CINEMAS, INC.
LOEWS ASTOR PLAZA, INC.
LOEWS BALTIMORE CINEMAS, INC.
LOEWS BAY TERRACE CINEMAS, INC.
LOEWS BEREA CINEMAS, INC.
LOEWS BOULEVARD CINEMAS, INC.
LOEWS BRISTOL CINEMAS, INC.
LOEWS BROADWAY CINEMAS, INC.
LOEWS BROOKFIELD CINEMAS, INC.
LOEWS BURLINGTON CINEMAS, INC.
LOEWS CALIFORNIA THEATRES, INC.
LOEWS CEDAR CINEMAS, INC.
LOEWS CENTERPARK CINEMAS, INC.
LOEWS CENTURY MALL CINEMAS, INC.
LOEWS CHERI CINEMAS, INC.
Acknowledgement-2
<PAGE>
LOEWS CHERRY TREE MALL CINEMAS, INC.
LOEWS CHICAGO CINEMAS, INC.
LOEWS CHISHOLM PLACE CINEMAS, INC.
LOEWS CINEMAS ADVERTISING, INC.
LOEWS CLARKSVILLE CINEMAS, INC.
LOEWS CONNECTICUT CINEMAS, INC.
LOEWS CORAL SPRING CINEMAS, INC.
LOEWS CRYSTAL RUN CINEMAS, INC.
LOEWS DEAUVILLE GULF CINEMAS, INC.
LOEWS DEAUVILLE KINGWOOD CINEMAS, INC.
LOEWS DEAUVILLE NORTH CINEMAS, INC.
LOEWS DEAUVILLE SOUTHWEST CINEMAS, INC.
LOEWS DEWITT CINEMAS, INC.
LOEWS EAST VILLAGE CINEMAS, INC.
LOEWS EAST HANOVER CINEMAS, INC.
LOEWS ELMWOOD CINEMAS, INC.
LOEWS EXHIBITION RIDE INC.
LOEWS FINE ARTS CINEMAS, INC.
LOEWS FORT WORTH CINEMAS, INC.
LOEWS FREEHOLD MALL CINEMAS, INC.
LOEWS FRESH POND CINEMAS, INC.
LOEWS FRONT STREET CINEMAS, INC.
LOEWS FUQUA PARK CINEMAS, INC.
LOEWS GREECE CINEMAS, INC.
LOEWS GREENWICH CINEMAS, INC.
LOEWS GREENWOOD CINEMAS, INC.
LOEWS HARMON COVE CINEMAS, INC.
LOEWS-HARTZ MUSIC MAKERS THEATRES, INC.
LOEWS HOLIDAY CINEMAS, INC.
LOEWS HOUSTON CINEMAS, INC.
LOEWS I-45 CINEMAS, INC.
LOEWS INDIANA CINEMAS, INC.
LOEWS KENTUCKY CINEMAS, INC.
LOEWS LAFAYETTE CINEMAS, INC.
LOEWS LEVITTOWN CINEMAS, INC.
LOEWS LINCOLN PLAZA CINEMAS, INC.
LOEWS LINCOLN THEATRE HOLDING CORP.
LOEWS LOUISVILLE CINEMAS, INC.
LOEWS MEADOWLAND CINEMAS, INC.
LOEWS MEADOWLAND CINEMAS 8, INC.
LOEWS MEMORIAL CITY CINEMAS, INC.
LOEWS MERRILLVILLE CINEMAS, INC.
LOEWS MOHAWK MALL CINEMAS, INC.
LOEWS MONROE CINEMA, INC.
LOEWS MONTGOMERY CINEMAS, INC.
LOEWS MOUNTAINSIDE CINEMAS, INC.
Acknowledgement-3
<PAGE>
LOEWS NEW JERSEY CINEMAS, INC.
LOEWS NEWARK CINEMAS, INC.
LOEWS NORGATE CINEMAS, INC.
LOEWS NORWALK CINEMAS, INC.
LOEWS OPERATIONAL RIDE THEATERS INC.
LOEWS ORLAND PARK CINEMAS, INC.
LOEWS ORPHEUM CINEMAS, INC.
LOEWS PALISADES CENTER CINEMAS, INC.
LOEWS PARADISE CINEMAS, INC.
LOEWS PARK CENTRAL CINEMAS, INC.
LOEWS PEMBROKE PINES CINEMAS, INC.
LOEWS PENTAGON CITY CINEMAS, INC.
LOEWS PIPER'S THEATRES, INC.
LOEWS PITTSFORD CINEMAS, INC.
LOEWS POCONO CINEMAS, INC.
LOEWS POST CINEMAS, INC.
LOEWS PRESTON PARK CINEMAS, INC.
LOEWS RICHMOND MALL CINEMAS, INC.
LOEWS RIDGEFELD PARK CINEMAS, INC.
LOEWS ROLLING MEADOWS CINEMAS, INC.
LOEWS ROOSEVELT FIELD CINEMAS, INC.
LOEWS SAKS CINEMAS, INC.
LOEWS SHOWBOAT CINEMAS, INC.
LOEWS SOUTH SHORE CINEMAS, INC.
LOEWS SOUTHLAND CINEMAS, INC.
LOEWS STONYBROOK CINEMAS, INC.
LOEWS THEATRE MANAGEMENT CORP.
LOEWS THEATRES CLEARING CORP.
LOEWS TOMS RIVER CINEMAS, INC.
LOEWS TOWNE CINEMAS, INC.
LOEWS TRYLON THEATRE, INC.
LOEWS USA CINEMAS INC.
LOEWS VESTAL CINEMAS, INC.
LOEWS WASHINGTON CINEMAS, INC.
LOEWS WEST CINEMAS, INC.
LOEWS WEST LONG BRANCH CINEMAS, INC.
LOEWS WESTERVILLE CINEMAS, INC.
LOEWS WESTGATE CINEMAS, INC.
LOEWS WESTPORT CINEMAS, INC.
LOEWS WILLISTON CINEMAS, INC.
LOEWS WORLDGATE CINEMAS, INC.
LOEWS YORKTOWN CINEMAS, INC.
LTM NEW YORK, INC.
MALL PICTURE CORP.
MASSACHUSETTS CINEMA CORP.
MICKEY AMUSEMENTS, INC.
Acknowledgement-4
<PAGE>
MID-STATES THEATRES, INC.
MIDCIN INC.
MIDDLEBROOK THEATRE CORPORATION
MIDSTATE THEATRE CORP.
MIDTOWN CINEMA, INC.
MINNESOTA CINEMAS, INC.
MONTCLAIR CINEMAS, INC.
MOVIEHOUSE CINEMAS, INC.
MUSIC MAKERS THEATRES, INC.
NEW BRUNSWICK CINEMAS, INC.
NICKELODEON BOSTON, INC.
NORTHERN NEW ENGLAND THEATRES, INC.
NUTMEG THEATRE CIRCUIT, INC.
OXMOOR CINEMAS, INC.
PARAMAY PICTURE CORP.
PARKCHESTER AMUSEMENT CORPORATION
PARSIPPANY THEATRE CORP.
PLAINVILLE CINEMAS, INC.
PLAZA CINEMAS, INC.
POLI-NEW ENGLAND THEATRES, INC.
PUTNAM THEATRICAL CORPORATION
QUAD CINEMA CORP.
RACELAND CINEMAS, INC.
RED BANK THEATRE CORPORATION
ROCHESTER HILLS STAR THEATRES, INC.
S&J THEATRES INC.
SACK THEATRES, INC.
SALEM MALL THEATRE, INC.
STAR THEATRES, INC.
STAR THEATRES OF MICHIGAN, INC.
STROUD MALL CINEMAS, INC.
SYCAMORE THEATRE, INC.
TALENT BOOKING AGENCY, INC.
TAYLOR STAR THEATRES, INC.
THEATRE HOLDINGS, INC.
THI HOLDINGS, INC.
TIMES THEATRES CORPORATION
TOMS RIVER THEATRE CORP.
TOWNE CENTER CINEMAS, INC.
TRI-COUNTY CINEMAS, INC.
TRI-SON SUPPLY CORP.
TRIANGLE THEATRE CORP.
U.S.A. CINEMAS, INC.
VILLAGE CINEMAS, INC.
WEBSTER CHICAGO CINEMAS, INC.
WESTCHESTER CINEMAS, INC.
Acknowledgement-5
<PAGE>
WESTLAND CINEMAS, INC.
WHITE MARSH CINEMAS, INC.
WOODRIDGE CINEMAS, INC.
C.O.H. ENTERTAINMENT, INC.
CINEPLEX ODEON FILMS, INC.
CINEPLEX ODEON FILMS INTERNATIONAL, INC.
PLITT SOUTHERN THEATRES, INC.
PLITT THEATRES, INC.
RKO CENTURY WARNER THEATRES, INC.
SEDGWICK MUSIC COMPANY
THE WALTER READE ORGANIZATION, INC.
ILLINOIS CINEMAS, INC.
METHUEN CINEMAS, INC.
NORTH STAR CINEMAS, INC.
ROSEMONT CINEMAS, INC.
WOODFIELD CINEMAS, INC.
LOEWS CITYWALK THEATRE CORPORATION
BOSTON CINEMAS, INC.
SOUTH HOLLAND CINEMAS, INC.
LTM TURKISH HOLDINGS, INC.
SPRINGFIELD CINEMAS, INC.
SKOKIE CINEMAS, INC.
SEATTLE CINEMAS, INC.
LONG ISLAND CINEMAS, INC.
By: /s/ JOHN J. WALKER
_____________________________________
Name: John J. Walker
Title: Senior Vice President and
Chief Financial Officer
of each of the foregoing
DOWNTOWN BOSTON CINEMAS, LLC
LOEWS PLAINVILLE CINEMAS, LLC
LOEWS NORTH VERSAILLES CINEMAS, LLC
RICHMOND MALL CINEMAS, LLC
LEWISVILLE CINEMAS, LLC
METHUEN CINEMAS, LLC
OHIO CINEMAS, LLC
SPRINGFIELD CINEMAS, LLC
By: Plitt Theatres, Inc., sole member of each of the
foregoing
By: /s/ JOHN J. WALKER
____________________________________
Name: John J. Walker
Title: Senior Vice President and
Chief Financial Officer
Acknowledgement-6
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT (this "Agreement"), dated as of November 1, 1999, between LOEWS
CINEPLEX ENTERTAINMENT CORPORATION, a Delaware corporation which maintains
offices at 711 Fifth Avenue, New York, New York 10022 (the "Company"), and
Seymour H. Smith ("Employee"), residing at 140-10/84/th Drive, Jamaica, New York
11435.
WHEREAS, Employee was a party to an employment agreement, dated as of May
1, 1990, amended as of November 14, 1991, March 9, 1993, May 10, 1995 and April
11, 1996 (the "Former Agreement"), with Loews Theatre Management Corp. ("LTMC"),
now a wholly-owned subsidiary of the Company, that expired pursuant to its terms
on April 30, 1998;
WHEREAS, Employee continues to be employed by LTMC, generally upon the
terms and conditions set forth in the Former Agreement; and
WHEREAS, the Company desires to directly enlist the services and employment
of Employee and Employee is willing to enter such relationship directly with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee
------------------
hereby accepts employment, on the terms and subject to the conditions
hereinafter set forth, for a term (the "Employment Period") commencing on
November 1, 1999 and continuing until October 31, 2000.
2. DUTIES AND PRIVILEGES. During the Employment Period, Employee shall
---------------------
serve as Senior Vice President and Deputy General Counsel of the Company and be
responsible to and report to the General Counsel of the Company or such other
executive as may be designated by the Chief Executive Officer of the Company
(the person to whom Employee reports being hereafter referred to as the
"Supervisory Officer"). During the Employment Period, Employee shall have such
authority and perform such duties which are consistent with Employee's title and
position as Senior Vice President and Deputy General Counsel of the Company as
the Supervisory Officer may from time to time prescribe; devote Employee's
entire business time, ability and energy exclusively to the performance of
Employee's duties hereunder (except that Employee may participate in charitable
and industry activities that do not interfere with his duties hereunder); and
use Employee's best efforts to advance the interests and businesses of the
Company, and its divisions and subsidiaries. Employee's principal office shall
be located at the Company's offices in the New York metropolitan area.
<PAGE>
3. COMPENSATION.
------------
(a) The Company shall pay to Employee a base salary at the rate of
$381,629 per year during the Employment Period, increased effective as of
November 1, 2000 to reflect the increase (if any) in the cost of living during
the previous year based upon the Consumer Price Index for the New York-New
Jersey Metropolitan area, as reported by the Bureau of Labor Statistics of the
United States Department of Labor.
(b) During the Employment Period, Employee shall be eligible to
participate in all then operative employee benefit plans of the Company which
are applicable generally to the Company's senior executives ("Employee Benefit
Plans"), subject to the respective terms and conditions of such Employee Benefit
Plans. Notwithstanding the foregoing, Employee shall be entitled to no less
than four weeks paid vacation each year during the Employment Period. Nothing
contained in this Agreement shall obligate the Company to adopt or implement any
Employee Benefit Plan, or prevent or limit the Company from making any blanket
amendments, changes or modifications of the eligibility requirements or any
other provisions of, or terminating, any Employee Benefit Plan at any time
(whether during or after the Employment Period), and Employee's participation in
or entitlement under any such Employee Benefit Plan shall at all times be
subject in all respects thereto. To the extent permitted by law and provided
for by the applicable Employee Benefit Plan, Employee shall be entitled to prior
service credit for his years of service with any group of which the Company (or
its predecessor) was a member in respect of any medical or retirement Employee
Benefit Plan for which years of service are generally applicable.
(c) Employee shall be eligible to receive a bonus each year during
the Employment Period, the amount and timing of such bonus to be determined by
the Company. However, there is no representation by the Company that any bonus
will be paid.
(d) To facilitate Employee's performance of Employee's duties
hereunder, the Company shall make available to Employee, during the Employment
Period, either a leased automobile or car allowance, each in accordance with the
Company's automobile policy as from time to time in effect.
4. EXPIRATION OF TERM AND TERMINATION.
----------------------------------
(a) Employee's employment by the Company and this Agreement shall
automatically expire and terminate on the Expiration Date unless sooner
terminated pursuant to the provisions of this Section 4.
-2-
<PAGE>
(b) Employee's employment by the Company and this Agreement shall
automatically terminate upon Employee's death.
(c) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after Employee has been unable to perform
the services or duties required of Employee in connection with Employee's
employment by the Company as a result of physical or mental disability (or
disabilities) which has (or have) continued for a period of twelve (12)
consecutive weeks, or for a period of sixteen (16) weeks in the aggregate,
during any twelve (12) month period.
(d) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after the occurrence of any of the
following events or contingencies (any such termination being deemed to be a
termination "for cause"):
(i) Employee materially breaches, materially repudiates or
otherwise materially fails to comply with or perform any of the terms of this
Agreement, any duties of Employee in connection with Employee's employment by
the Company or any of the Company's policies or procedures, or deliberately
interferes with the material compliance by any other employee of the Company
with any of the foregoing and such action (if correctable) is not materially
corrected within 30 days after notice from the Company;
(ii) The conviction by Employee of a felony or the pleading by
Employee of no contest (or similar plea) to any felony (other than a crime for
which vicarious liability is imposed upon Employee solely by reason of
Employee's position with the Company, and not by reason of Employee's conduct);
(iii) Any act or omission by Employee constituting fraud, gross
negligence or willful misconduct in connection with Employee's employment by the
Company and, if correctable, is not corrected within 30 days after notice from
the Company; or
(iv) Any other act, omission, event or condition constituting
cause for the discharge of an employee under the laws of New York which, if
correctable, is not corrected within 30 days after notice from the Company.
(e) The Company shall have no obligation to renew or extend the
Employment Period. Neither (i) the expiration of the Employment Period, nor
(ii) the failure or refusal of the Company to renew or extend the Employment
Period, this Agreement, or Employee's employment by the Company upon the
Expiration Date, nor (iii) the termination of this Agreement by the Company
pursuant to any provision of this Section 4 (except Section 4(g)), shall be
deemed to constitute a termination of Employee's employment by the Company
"without cause" for the purpose of triggering any rights of
-3-
<PAGE>
or causes of action by Employee.
(f) If this Agreement, the Employment Period or Employee's employment
by the Company is terminated or expires pursuant to any provision of this
Section 4 (other than Section 4(g)), or is terminated by Employee by reason
other than Employer's material breach of this Agreement, Employee's right to
receive salary or other compensation from the Company and all other rights and
entitlements of Employee pursuant to this Agreement or as an employee of the
Company shall forthwith cease and terminate, and the Company shall have no
liability or obligation whatsoever to Employee, except that:
(i) The Company shall be obligated to pay to Employee not
later than the effective date of such termination all unpaid salary, car
allowance (if any), vacation and reimbursable expenses which shall have accrued
as of the effective date of such termination; and
(ii) The terms and conditions of applicable Employee Benefit
Plans, if any, shall control Employee's entitlement, if any, to receive benefits
thereunder.
(g) The Company shall have the unilateral right, at any time, without
notice, in the Company's sole and absolute discretion, to terminate Employee's
employment by the Company, without cause, and for any reason or for no reason
(the Company's "Termination Rights"). If the Company materially reduces the
duties or responsibilities of the Employee hereunder, or otherwise materially
breaches this Agreement, such action shall be deemed an exercise by the Company
of its Termination Rights. The Company's Termination Rights are not limited or
restricted by, and shall supersede, any policy of the Company requiring or
favoring continued employment of its employees during satisfactory performance,
any seniority system or any procedure governing the manner in which the
Company's discretion is to be exercised. No exercise by the Company of its
Termination Rights shall, under any circumstances, be deemed to constitute (i) a
breach by the Company of any term of this Agreement, express or implied
(including without limitation a breach of any implied covenant of good faith and
fair dealing), (ii) a wrongful discharge of Employee or a wrongful termination
of Employee's employment by the Company, (iii) a wrongful deprivation by the
Company of Employee's corporate office (or authority, opportunities or other
benefits relating thereto) or (iv) the breach by the Company of any other duty
or obligation, express or implied, which the Company may owe to Employee
pursuant to any principle or provision of law (whether contract or tort);
provided, however, that notwithstanding the foregoing, a breach by the Company
of its payment obligations pursuant to this Section 4(g) shall be deemed to be a
breach of this Agreement. If the Company elects to terminate Employee's
employment or is deemed to exercise its Termination Rights pursuant to this
Section 4(g) prior to the Expiration Date, the Company shall have no obligation
or liability to Employee pursuant to this Agreement, or otherwise, except to pay
to Employee until the Expiration Date the salary and benefits (in each case as
if this Agreement had not been terminated) as
-4-
<PAGE>
provided in Sections 3(a) and (b) hereof (excluding car allowance). If the
Company elects to terminate Employee's employment or is deemed to exercise its
Termination Rights pursuant to this Section 4(g) prior to the Expiration Date,
Employee shall have no obligation to mitigate. However, it is agreed that if
Employee receives employment income (whether direct or indirect salary,
compensation or otherwise) from subsequent employment (including self-
employment) after such termination and on or before the Expiration Date, such
employment income shall be set off against any payments to be made to Employee
by the Company in connection with its exercise or deemed exercise of its
Termination Rights.
(h) Immediately upon any termination of Employee's employment
hereunder or of this Agreement (whether or not pursuant to this Section 4),
Employee shall return to the Company all property of the Company heretofore
provided to Employee by the Company, or otherwise in the custody, possession or
control of Employee (including, without limitation, the "Confidential Materials"
described in Paragraph 6(b) of Exhibit A attached hereto). Notwithstanding any
provision of this Agreement to the contrary, no termination of this Agreement or
of Employee's employment for any reason whatsoever shall in any manner operate
to terminate, limit or otherwise affect the Company's ownership of any of the
rights, properties or privileges granted to the Company hereunder.
5. STANDARD TERMS. Attached as Exhibit A hereto and deemed a part hereof
--------------
are the Company's Standard Terms and Conditions of Employment Agreement, all of
which terms are binding on the parties hereto and incorporated herein. For
convenience, provisions of this Agreement shall be referred to as "Sections" and
provisions of the Standard Terms shall be referred as "Paragraphs". In the case
of any conflict between the terms of this Agreement and the terms of Exhibit A
hereto, the terms of this Agreement shall govern.
6. SUPERSEDING AGREEMENT. This Agreement, including Exhibit A hereto,
---------------------
shall constitute the full and entire understanding of the parties hereto with
respect to the subject matter hereof and shall supersede any prior agreements,
written or oral, between Employee and the Company and/or its affiliates with
respect thereto, including the Former Agreement, which shall be null and void.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed on their behalf as of the date first above written.
/s/ SEYMOUR H. SMITH
__________________________________
Seymour H. Smith
-5-
<PAGE>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By: /s/ JOHN C. MCBRIDE, JR.
__________________________________
Name: John C. McBride, Jr.
Title: Senior Vice President and General Counsel
-6-
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
-----------------------------
OF EMPLOYMENT AGREEMENT
-----------------------
1. Definitions. All capitalized terms used herein shall have the meanings
-----------
ascribed to them in the Agreement attached hereto. The following words, terms
and phrases (and variations thereof) used herein shall have the following
meanings:
(a) An "Affiliate," of a party means a Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, such party.
(b) "Intellectual Property" means any and all intellectual, artistic,
literary, dramatic or musical rights, works or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, characters, plots, themes, dialogue, stories, scripts,
treatments, outlines, submissions, ideas, concepts, packages, compositions,
artwork and logos, and all audio, visual or audio-visual works of every kind and
in every stage of development, production and completion, and all rights to
distribute, advertise, promote, exhibit or otherwise exploit any of the
foregoing by any means, media or processes now known or hereafter devised.
(c) "Media Business" means all Persons engaging in any of the
following: (i) the creation, production, distribution, exhibition or other
exploitation of theatrical motion pictures, television programs, sound
recordings or other visual, audio or audio-visual works or recordings of any
kind; (ii) television (including pay, free, over-the-air, cable and satellite)
or radio broadcasting; (iii) book, newspaper or periodical publishing; (iv)
music publishing; (v) "merchandising" (as that term is generally understood in
the entertainment industry); or (vi) advertising.
(d) "Person" means any individual, corporation, trust, estate,
partnership, joint venture, company, association, league, group, governmental
agency or other entity of any kind or nature.
A-1
<PAGE>
2. Compensation.
------------
(a) Employee's salary shall be payable in equal installments (not
less frequently than monthly) in accordance with the Company's customary payroll
practices. No additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of any hours worked on Saturdays,
Sundays, holidays or otherwise. All compensation payable to Employee hereunder
(whether in the form of salary, benefits or otherwise) shall be subject to all
applicable laws, statutes, governmental regulations or orders, the terms of all
applicable Employee Benefit Plans and the terms of all agreements between or
binding upon the Company and Employee requiring the deduction or withholding of
any amounts from such payments, and the Company shall have the right to make
such deductions and withholdings in accordance with the Company's interpretation
thereof in the Company's sole judgment.
(b) Subject to Section 3(b) of the Agreement, Employee shall be
eligible to participate in fringe benefits, if any, maintained by the Company
for employees generally on the same basis as comparable employees of the
Company.
(c) Subject to the requirements of Employee's position and corporate
office, Employee shall be entitled to annual vacations in accordance with the
Company's vacation policy in effect from time to time.
(d) The Company recognizes that, in connection with Employee's
performance of Employee's duties and obligations hereunder, Employee will incur
certain ordinary and necessary expenses of a business character. The Company
shall pay Employee for such business expenses on the presentation of itemized
statements of such expenses, provided their extent and nature are approved in
accordance with the policies and procedures of the Company.
3. Right to Insure. The Company shall have the right to secure, in its
---------------
own name or otherwise and at its own expense, life, health, accident or other
insurance covering or otherwise insuring Employee, and Employee shall have no
right, title or interest in or to any such insurance or any of the proceeds or
benefits thereof. Employee shall fully assist and cooperate with the Company in
procuring any such insurance, including without limitation by submitting to such
examinations, and by signing such applications and other instruments, as may
reasonably be required by any insurance carrier to which application is made by
the Company for any such insurance.
4. Employment Exclusive. Employee shall not perform services for any
--------------------
Person other than the Company during the Employment Period without the prior
written consent of the Company and will not during the Employment Period engage
in any
A-2
<PAGE>
activity which would interfere with the performance of Employee's services
hereunder, or become financially interested in or associated with, directly or
indirectly, any Media Business.
5. Interest in Other Corporations. Notwithstanding anything to the
------------------------------
contrary contained in Paragraph 4 hereof, Employee may own up to one percent
(1%) of any class of any Person's outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934 or otherwise publicly traded, provided that the holdings of
Employee of any such security of a Media Business or any Person which does
business with the Company or its Affiliates do not represent more than 10% of
the aggregate of Employee's investment portfolio at any time.
6. Ownership of Proceeds of Employment; Confidentiality of Information;
--------------------------------------------------------------------
Etc.
---
(a) The Company shall be the sole and exclusive owner throughout the
universe in perpetuity of all of the results and proceeds of Employee's
services, work and labor during the Employment Period in connection with
Employee's employment by the Company, including without limitation all
Intellectual Property which Employee may develop, create, write or otherwise
produce during the Employment Period, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Employee's services, work
and labor during the Employment Period shall be deemed to be works-made-for-hire
for the Company within the meaning of the copyright laws of the United States
and the Company shall be deemed to be the sole author thereof in all territories
and for all purposes.
(b) All information, documents, notes, memoranda and Intellectual
Property of any kind received, compiled, produced or otherwise made available to
Employee during or in connection with Employee's employment by the Company
relating in any way to the business of the Company or of any of its Affiliates
and which has not been made available or confirmed to the public by the Company
("Confidential Materials") shall be the sole and exclusive property of the
Company and shall in perpetuity (both during and after Employee's employment by
the Company) be maintained in utmost confidence by Employee and held by Employee
in trust for the benefit of the Company. Employee shall not during the
Employment Period or at any time thereafter directly or indirectly release or
disclose to any other Person any Confidential Materials, except with the prior
written consent of the Company and in furtherance of the Company's business or
as required by law.
(c) Employee shall not, and shall not authorize or assist any other
A-3
<PAGE>
Person to, directly or indirectly, at any time during the Employment Period or
for a period of twelve (12) months thereafter, without the Company's consent,
solicit, entice, persuade or induce any Person to terminate or refrain from
extending or renewing (on the same or different terms) such Person's employment
by, or contractual or business relationship with, the Company or any of its
Affiliates.
(d) The Company shall have the right to use the Employee's name,
approved biography (such approval not to be unreasonably withheld), and likeness
in connection with its business, including in advertising its products and
services, and may grant this right to others, but not for use as an endorsement.
7. Warranties and Covenants. Employee warrants, represents and covenants
------------------------
to the Company as follows:
(a) Employee is free to enter into this Agreement and to perform the
services contemplated hereunder.
(b) Employee is not currently (and will not, to the best knowledge
and ability of Employee, at any time during the Employment Period be) subject to
any agreement, understanding, obligation, claim, litigation, condition or
disability which could adversely affect Employee's performance of any of
Employee's obligations hereunder or the Company's complete ownership and
enjoyment of all of the rights, powers and privileges granted to the Company
hereunder.
(c) No Intellectual Property written, composed, created or submitted
by Employee at any time during Employee's employment by the Company shall, to
the best of Employee's knowledge, violate the rights of privacy or publicity,
constitute a libel or slander or infringe upon the copyright, literary,
personal, private, civil, property or other rights of any Person.
8. Employment after Term. Employee's employment by the Company may be
---------------------
continued beyond the Expiration Date by the express consent of both parties
(which consent each party shall have the right to grant or withhold in its sole
and absolute discretion). In the event of any such continuation of Employee's
employment by the Company beyond the Expiration Date, the relationship between
the Company and Employee shall be that of employment-at-will which may be
terminated by either the Company or Employee at any time upon ten (10) days'
written notice, with or without cause, for any reason or for no reason, and
without liability of any nature. Employee's employment by the Company, if any,
after the Expiration Date shall be governed by all of the terms and conditions
of this Agreement not inconsistent with the at-will nature of such employment.
A-4
<PAGE>
9. Immigration. In accordance with the Immigration Reform and Control Act
-----------
of 1986 and the regulations adopted thereunder (8 CFR, Parts 109 and 274a), the
obligations of the Company under this Agreement are subject to and conditioned
upon Employee verifying and delivering to the Company, within three (3) business
days of Employee's first date of employment, the Form I-9 prescribed by the
Immigration and Naturalization Service, and presenting to the officer of the
Company designated therefor the original documentation required under such
regulations to establish (i) the identity of Employee and (ii) that Employee is
lawfully authorized to work in the United States. If Employee is unable to
provide the documents required within the aforesaid three (3) business-day
period, Employee must (i) present to such designated officer within said three
(3) business days a receipt for the application for the documents prescribed and
(ii) the original documents required within twenty-one (21) days of Employee's
first date of employment. If Employee fails to verify and deliver the Form I-9
and present the required original documents within the stated time period, this
Agreement and Employee's employment hereunder shall cease and terminate as if
this Agreement had never been entered into and neither party shall have any
further right, duty or obligation to the other under this Agreement.
10. Equitable Relief. Employee acknowledges that the services to be
----------------
rendered by Employee under this Agreement, and the rights and privileges granted
by Employee to the Company hereunder, are of a special, unique, extraordinary
and intellectual character which gives them a peculiar and special value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law, and a breach by Employee of any of the provisions hereof will
cause the Company great and irreparable injury. Employee acknowledges that the
Company shall, therefore, be entitled, in addition to any other remedies which
it may have under this Agreement or at law, to receive injunctive and other
equitable relief (including without limitation specific performance) to enforce
any of the rights and privileges of the Company or any of the covenants or
obligations of Employee hereunder. Nothing contained herein, and no exercise by
the Company of any right or remedy, shall be construed as a waiver by the
Company of any other rights or remedies which the Company may have. In the
event that any court or tribunal shall at any time hereafter hold any covenants
or restrictions contained in this Agreement to be unenforceable or unreasonable
as to the scope, territory or period of time specified therein, such court shall
have the power, and is specifically requested by Employee and the Company, to
declare or determine the scope, territory or period of time which it deems to be
reasonable or enforceable and to enforce the restrictions contained therein to
such extent.
11. Governing Law, Legal Proceedings and Remedies.
---------------------------------------------
A-5
<PAGE>
(a) The substantive laws (as distinguished from the choice of law
rules) of the State of New York shall govern (i) the validity and interpretation
of this Agreement, (ii) the performance by the parties hereto of their
respective duties and obligations hereunder and (iii) all other causes of action
(whether sounding in contract or in tort) arising out of or relating in any
fashion to Employee's employment by the Company or the termination of such
employment.
(b) Any and all actions, suits or legal proceedings of any nature
(whether sounding in contract or in tort) arising out of or relating to this
Agreement, to the employment of Employee by the Company or to the termination of
such employment shall be initiated and maintained only in a state or federal
court located in the City and County of New York, State of New York, which shall
be the exclusive forum for, and shall have sole and exclusive jurisdiction over
the subject matter of, all such proceedings. The Company and Employee each
hereby submit and subject themselves irrevocably to the personal jurisdiction of
such New York State and federal courts.
12. Notices. All notices, requests, demands or other communications in
-------
connection with this Agreement shall be in writing and shall be deemed to have
been duly given if delivered in person, by telegram, by telecopier to the
applicable telecopier number listed below, or by United States mail, postage
prepaid, certified or registered, with return receipt requested, or otherwise
actually delivered:
If to Employee, to him at the address listed on page 1 of this Agreement.
If to the Company, to it at:
711 Fifth Avenue
New York, New York 10022
Attention: Chief Executive Officer
with a copy at the same address,
Attention: Chief Financial Officer
or such other addresses as Employee or the Company shall have designated by
written notice to the other party hereto. Any such notice, demand or other
communication shall be deemed to have been given on the date actually delivered
(or, in the case of telecopier, on the date actually sent by telecopier) or upon
the expiration of three (3) days after the date mailed, as the case may be.
13. Service as Expert Witness. Employee acknowledges that during the
-------------------------
A-6
<PAGE>
Employment Period Employee will have access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Employee
agrees that Employee shall not at any time either during or after the term of
this Agreement serve as an "expert witness" or in any similar capacity in any
litigation or other proceeding to which the Company or any of its Affiliates or
subsidiaries is a party without the prior written consent of the Company or such
affiliate or subsidiary, as the case may be.
14. Miscellaneous.
-------------
(a) This Agreement and the exhibits hereto contain a complete
statement of all of the arrangements between the parties with respect to
Employee's employment by the Company, supersede all existing agreements between
them concerning Employee's employment and cannot be changed or terminated
orally. No provision of this Agreement shall be interpreted against any party
because that party or its legal representative drafted the provision. There are
no warranties, representations or covenants, oral or written, express or
implied, except as expressly set forth herein. Employee acknowledges that
Employee does not rely and has not relied upon any representation or statement
made by the Company or any of its representatives relating to the subject matter
of this Agreement except as set forth herein.
(b) If any provision of this Agreement or any portion thereof is
declared by any court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, the remainder of such provision, and all of the
remaining provisions of this Agreement, shall continue in full force and effect
and no provision shall be deemed dependent on any other provision unless so
expressed herein.
(c) The failure of a party to insist on strict adherence to any term
of this Agreement shall not be considered a waiver of, or deprive that party of
the right thereafter to insist on strict adherence to, that term or any other
term of this Agreement.
(d) The headings in this Agreement (including the exhibits hereto)
are solely for convenience of reference and shall not affect its interpretation.
(e) The relationship between Employee and the Company is exclusively
that of employer and employee, and the Company's obligations to Employee
hereunder are exclusively contractual in nature.
(f) Employee shall, at the request of the Company, execute and
deliver to the Company all such documents as the Company may from time to time
deem necessary or desirable to evidence, protect, enforce or defend its right,
title and interest in or to any Confidential Materials, Intellectual Property or
other items described in
A-7
<PAGE>
Paragraph 6 hereof. If Employee shall fail or refuse to execute or deliver to
the Company any such document upon request, the Company shall have, and is
granted, the power and authority to execute the same in Employee's name, as
Employee's attorney-in-fact, which power is coupled with an interest and
irrevocable.
(g) The Company may assign this Agreement, Employee's services
hereunder or any of the Company's interests herein (i) to any Person which is a
party to a merger or consolidation with the Company, (ii) to any Affiliate of
the Company or (iii) to any Person acquiring substantially all of the assets of
the Company or the unit of the Company for which Employee is rendering services;
and, provided that any such assignee assumes the Company's obligations under
this Agreement, the Company shall thereupon be relieved of any and all liability
hereunder. Employee shall not have the right to assign this Agreement or to
delegate any duties imposed upon Employee under this Agreement without the
written consent of the Company, and any such purported assignment or delegation
shall be void ab initio.
-- ------
* * * * * * * * * * * * * * * * * * * * *
A-8
<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT (this "Agreement"), dated as of May 1, 1998, between LOEWS
CINEPLEX ENTERTAINMENT CORPORATION, a Delaware corporation formerly known as LTM
Holdings, Inc., which maintains offices at 711 Fifth Avenue, New York, New York
10022 (the "Company"), and Travis Reid ("Employee"), residing at 8 Old Stone
Church Road, Upper Saddle River, New Jersey 07458.
WHEREAS, Employee is presently a party to an employment agreement, dated
October 21, 1995 (the "Former Agreement") with Sony Theatre Management Corp., a
wholly owned subsidiary of the Company; and
WHEREAS, the Company desires to directly enlist the services and employment
of Employee and Employee is willing to enter such relationship directly with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. TERM OF EMPLOYMENT.
------------------
(a) The Company hereby employs Employee, and Employee hereby accepts
employment, on the terms and subject to the conditions hereinafter set forth,
for a term (the "Employment Period") commencing on May 1, 1998, and continuing
until April 30, 2001 or, if the term of this Agreement is extended pursuant to
Section 1(b) hereof, until April 30, 2003 (the "Expiration Date").
(b) The Company shall have the right, exercisable upon written notice
given to Employee on or before January 31, 2001, to extend the Employment
Period, all in accordance with and subject to the terms and conditions hereof,
for an additional two-year period commencing on May 1, 2001 and continuing until
April 30, 2003.
2. DUTIES AND PRIVILEGES. During the Employment Period, Employee shall
---------------------
serve as President, U.S. Operations, of the Company and be responsible to and
report to the Chief Executive Officer of the Company (the "CEO") or to such
other executive as may be designated by the CEO (the person to whom Employee
reports being hereafter referred to as the "Supervisory Officer"). During the
Employment Period, Employee shall have such authority and perform such duties
which are consistent with Employee's title and position as President, U.S.
Operations, of the Company as the Supervisory Officer, may from time to time
prescribe; devote Employee's entire business time, ability and energy
exclusively to the performance of Employee's duties hereunder (except that
Employee may participate in charitable and industry activities that do not
interfere with his duties hereunder); and use Employee's best efforts to advance
the
<PAGE>
interests and businesses of the Company, and its divisions and subsidiaries.
Employee's principal office shall be located at the Company's offices in the New
York metropolitan area.
3. COMPENSATION.
------------
(a) The Company shall pay to Employee a base salary at the rate of
$450,000 per year during the Employment Period; provided, however, that (i)
effective as of each May 1 during the Employment Period (commencing with May 1,
1999), the annual rate of salary payable to Employee pursuant to this Section
3(a) shall be increased to reflect the increase (if any) in the cost of living
during the previous calendar year based upon the Consumer Price Index for the
New York-New Jersey Metropolitan area, as reported by the Bureau of Labor
Statistics of the United States Department of Labor (in any event, such increase
shall not be less than 3%), and (ii) effective as of May 1, 2001, if the Company
exercises the Extension Option pursuant to Section 1(b) hereof, the annual base
salary then payable to Employee pursuant to this Section 3(a) shall be increased
by $50,000.
(b) During the Employment Period, Employee shall be eligible to
participate in all then operative employee benefit plans of the Company which
are applicable generally to the Company's senior executives ("Employee Benefit
Plans"), subject to the respective terms and conditions of such Employee Benefit
Plans. Notwithstanding the foregoing, Employee shall be entitled to no less than
four weeks paid vacation each year during the Employment Period. Nothing
contained in this Agreement shall obligate the Company to adopt or implement any
Employee Benefit Plan, or prevent or limit the Company from making any blanket
amendments, changes or modifications of the eligibility requirements or any
other provisions of, or terminating, any Employee Benefit Plan at any time
(whether during or after the Employment Period), and Employee's participation in
or entitlement under any such Employee Benefit Plan shall at all times be
subject in all respects thereto. To the extent permitted by law and provided for
by the applicable Employee Benefit Plan, Employee shall be entitled to prior
service credit for his years of service with any group of which the Company (or
its predecessor) was a member in respect of any medical or retirement Employee
Benefit Plan for which years of service are generally applicable.
(c) During the Employment Period, Employee shall be eligible to
receive an annual bonus (the "Annual Bonus"), the amount of which will be
targeted at $200,000. The amount and payment of the Annual Bonus shall be based
on the attainment of specified performance goals to be developed by the
Company's Board of Directors each year.
(d) To facilitate Employee's performance of Employee's duties
-2-
<PAGE>
hereunder, the Company shall make available to Employee, during the Employment
Period, either a leased automobile or car allowance, each in accordance with the
Company's automobile policy as from time to time in effect. In the event
Employee elects to lease an automobile, the Company shall also pay for and
provide parking for Employee near the Company's New York office. In the event
Employee elects a car allowance, the Company shall not pay for or provide any
parking for Employee.
4. EXPIRATION OF TERM AND TERMINATION.
----------------------------------
(a) Employee's employment by the Company and this Agreement shall
automatically expire and terminate on the Expiration Date unless sooner
terminated pursuant to the provisions of this Section 4.
(b) Employee's employment by the Company and this Agreement shall
automatically terminate upon Employee's death.
(c) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after Employee has been unable to perform
the services or duties required of Employee in connection with Employee's
employment by the Company as a result of physical or mental disability (or
disabilities) which has (or have) continued for a period of twelve (12)
consecutive weeks, or for a period of sixteen (16) weeks in the aggregate,
during any twelve (12) month period.
(d) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after the occurrence of any of the
following events or contingencies (any such termination being deemed to be a
termination "for cause"):
(i) Employee materially breaches, materially repudiates or
otherwise materially fails to comply with or perform any of the terms of this
Agreement, any duties of Employee in connection with Employee's employment by
the Company or any of the Company's policies or procedures, or deliberately
interferes with the material compliance by any other employee of the Company
with any of the foregoing and such action (if correctable) is not materially
corrected within 30 days after notice from the Company;
(ii) The conviction by Employee of a felony or the pleading by
Employee of no contest (or similar plea) to any felony (other than a crime for
which vicarious liability is imposed upon Employee solely by reason of
Employee's position with the Company, and not by reason of Employee's conduct);
(iii) Any act or omission by Employee constituting fraud, gross
negligence or willful misconduct in connection with Employee's employment by the
Company and, if correctable, is not corrected within 30 days after notice from
the
-3-
<PAGE>
Company; or
(iv) Any other act, omission, event or condition constituting
cause for the discharge of an employee under the laws of New York which, if
correctable, is not corrected within 30 days after notice from the Company.
(e) The Company shall have no obligation to renew or extend the
Employment Period. Neither (i) the expiration of the Employment Period, nor (ii)
the failure or refusal of the Company to renew or extend the Employment Period,
this Agreement, or Employee's employment by the Company upon the Expiration
Date, nor (iii) the termination of this Agreement by the Company pursuant to any
provision of this Section 4 (except Section 4(g)), shall be deemed to constitute
a termination of Employee's employment by the Company "without cause" for the
purpose of triggering any rights of or causes of action by Employee.
(f) If this Agreement, the Employment Period or Employee's employment
by the Company is terminated or expires pursuant to any provision of this
Section 4 (other than Section 4(g)), or is terminated by Employee by reason
other than Employer's material breach of this Agreement, Employee's right to
receive salary or other compensation from the Company and all other rights and
entitlements of Employee pursuant to this Agreement or as an employee of the
Company shall forthwith cease and terminate, and the Company shall have no
liability or obligation whatsoever to Employee, except that:
(i) The Company shall be obligated to pay to Employee (x) not
later than the effective date of such termination all unpaid salary, car
allowance (if any), vacation and reimbursable expenses which shall have accrued
as of the effective date of such termination and (y) as soon as practicable
after the end of the fiscal year in which the termination occurs, a pro rata
portion of the Annual Bonus for the portion of such fiscal year through the
effective date of such termination; and
(ii) The terms and conditions of applicable Employee Benefit
Plans, if any, shall control Employee's entitlement, if any, to receive benefits
thereunder.
(g) The Company shall have the unilateral right, at any time, without
notice, in the Company's sole and absolute discretion, to terminate Employee's
employment by the Company, without cause, and for any reason or for no reason
(the Company's "Termination Rights"). If the Company materially reduces the
duties or responsibilities of the Employee hereunder, or otherwise materially
breaches this Agreement, such action shall be deemed an exercise by the Company
of its Termination Rights. The Company's Termination Rights are not limited or
restricted by, and shall supersede, any policy of the Company requiring or
favoring continued employment of its employees during satisfactory performance,
any seniority system or any procedure governing the manner in which the
Company's discretion is to be exercised. No exercise
-4-
<PAGE>
by the Company of its Termination Rights shall, under any circumstances, be
deemed to constitute (i) a breach by the Company of any term of this Agreement,
express or implied (including without limitation a breach of any implied
covenant of good faith and fair dealing), (ii) a wrongful discharge of Employee
or a wrongful termination of Employee's employment by the Company, (iii) a
wrongful deprivation by the Company of Employee's corporate office (or
authority, opportunities or other benefits relating thereto) or (iv) the breach
by the Company of any other duty or obligation, express or implied, which the
Company may owe to Employee pursuant to any principle or provision of law
(whether contract or tort); provided, however, that notwithstanding the
foregoing, a breach by the Company of its payment obligations pursuant to this
Section 4(g) shall be deemed to be a breach of this Agreement. If the Company
elects to terminate Employee's employment or is deemed to exercise its
Termination Rights pursuant to this Section 4(g) prior to the Expiration Date,
the Company shall have no obligation or liability to Employee pursuant to this
Agreement, or otherwise, except to pay to Employee until the Expiration Date (x)
the salary and benefits (in each case as if this Agreement had not been
terminated) as provided in Sections 3(a) and (b) hereof (excluding car allowance
or parking benefits), and (y) an annual bonus amount equal to the target bonus
for the year in which such termination occurs, or if no such target has been set
for the year, the most recent Annual Bonus actually paid or payable to the
Employee (pro-rated for the portion of a fiscal year ending on the Expiration
Date); provided, however, that in no event will the aggregate amount payable
-------- -------
pursuant to this clause (y) be less than the amount that would be payable
pursuant to Section 3(d), if Employee's date of termination was immediately
prior to the Expiration Date. If the Company elects to terminate Employee's
employment or is deemed to exercise its Termination Rights pursuant to this
Section 4(g) prior to the Expiration Date, Employee shall have no obligation to
mitigate. However, it is agreed that if Employee receives employment income
(whether direct or indirect salary, compensation or otherwise) from subsequent
employment (including self-employment) after such termination and on or before
the Expiration Date, such employment income shall be set off against any
payments to be made to Employee by the Company in connection with its exercise
or deemed exercise of its Termination Rights.
(h) Immediately upon any termination of Employee's employment
hereunder or of this Agreement (whether or not pursuant to this Section 4),
Employee shall return to the Company all property of the Company heretofore
provided to Employee by the Company, or otherwise in the custody, possession or
control of Employee (including, without limitation, the "Confidential Materials"
described in Paragraph 6(b) of Exhibit A attached hereto). Notwithstanding any
provision of this Agreement to the contrary, no termination of this Agreement or
of Employee's employment for any reason whatsoever shall in any manner operate
to terminate, limit or otherwise affect the Company's ownership of any of the
rights, properties or privileges granted to the Company hereunder.
5. STANDARD TERMS. Attached as Exhibit A hereto and deemed a part
--------------
-5-
<PAGE>
hereof are the Company's Standard Terms and Conditions of Employment Agreement,
all of which terms are binding on the parties hereto and incorporated herein.
For convenience, provisions of this Agreement shall be referred to as "Sections"
and provisions of the Standard Terms shall be referred as "Paragraphs". In the
case of any conflict between the terms of this Agreement and the terms of
Exhibit A hereto, the terms of this Agreement shall govern.
6. SUPERSEDING AGREEMENT. This Agreement, including Exhibit A hereto,
---------------------
shall constitute the full and entire understanding of the parties hereto with
respect to the subject matter hereof and shall supersede any prior agreements,
written or oral, between Employee and the Company and/or its affiliates with
respect thereto, including the Former Agreement, which shall be null and void.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed on their behalf as of the date first above written.
/s/ TRAVIS REID
___________________________
Travis Reid
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By: /s/ LAWRENCE J. RUISI
__________________________________
Name: Lawrence J. Ruisi
Title: President and Chief Executive Officer
-6-
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
-----------------------------
OF EMPLOYMENT AGREEMENT
-----------------------
1. Definitions. All capitalized terms used herein shall have the meanings
------------
ascribed to them in the Agreement attached hereto. The following words, terms
and phrases (and variations thereof) used herein shall have the following
meanings:
(a) An "Affiliate," of a party means a Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, such party.
(b) "Intellectual Property" means any and all intellectual, artistic,
literary, dramatic or musical rights, works or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, characters, plots, themes, dialogue, stories, scripts,
treatments, outlines, submissions, ideas, concepts, packages, compositions,
artwork and logos, and all audio, visual or audio-visual works of every kind and
in every stage of development, production and completion, and all rights to
distribute, advertise, promote, exhibit or otherwise exploit any of the
foregoing by any means, media or processes now known or hereafter devised.
(c) "Media Business" means all Persons engaging in any of the
following: (i) the creation, production, distribution, exhibition or other
exploitation of theatrical motion pictures, television programs, sound
recordings or other visual, audio or audio-visual works or recordings of any
kind; (ii) television (including pay, free, over-the-air, cable and satellite)
or radio broadcasting; (iii) book, newspaper or periodical publishing; (iv)
music publishing; (v) "merchandising" (as that term is generally understood in
the entertainment industry); or (vi) advertising.
(d) "Person" means any individual, corporation, trust, estate,
partnership, joint venture, company, association, league, group, governmental
agency or other entity of any kind or nature.
2. Compensation.
------------
(a) Employee's salary shall be payable in equal installments (not
less frequently than monthly) in accordance with the Company's customary payroll
practices. No additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of any hours worked on Saturdays,
Sundays, holidays or
A-1
<PAGE>
otherwise. All compensation payable to Employee hereunder (whether in the form
of salary, benefits or otherwise) shall be subject to all applicable laws,
statutes, governmental regulations or orders, the terms of all applicable
Employee Benefit Plans and the terms of all agreements between or binding upon
the Company and Employee requiring the deduction or withholding of any amounts
from such payments, and the Company shall have the right to make such deductions
and withholdings in accordance with the Company's interpretation thereof in the
Company's sole judgment.
(b) Subject to Section 3(b) of the Agreement, Employee shall be
eligible to participate in fringe benefits, if any, maintained by the Company
for employees generally on the same basis as comparable employees of the
Company.
(c) Subject to the requirements of Employee's position and corporate
office, Employee shall be entitled to annual vacations in accordance with the
Company's vacation policy in effect from time to time.
(d) The Company recognizes that, in connection with Employee's
performance of Employee's duties and obligations hereunder, Employee will incur
certain ordinary and necessary expenses of a business character. The Company
shall pay Employee for such business expenses on the presentation of itemized
statements of such expenses, provided their extent and nature are approved in
accordance with the policies and procedures of the Company.
3. Right to Insure. The Company shall have the right to secure, in its
---------------
own name or otherwise and at its own expense, life, health, accident or other
insurance covering or otherwise insuring Employee, and Employee shall have no
right, title or interest in or to any such insurance or any of the proceeds or
benefits thereof. Employee shall fully assist and cooperate with the Company in
procuring any such insurance, including without limitation by submitting to such
examinations, and by signing such applications and other instruments, as may
reasonably be required by any insurance carrier to which application is made by
the Company for any such insurance.
4. Employment Exclusive. Employee shall not perform services for any
--------------------
Person other than the Company during the Employment Period without the prior
written consent of the Company and will not during the Employment Period engage
in any activity which would interfere with the performance of Employee's
services hereunder, or become financially interested in or associated with,
directly or indirectly, any Media Business.
5. Interest in Other Corporations. Notwithstanding anything to the
------------------------------
contrary contained in Paragraph 4 hereof, Employee may own up to one percent
(1%) of any class of any Person's outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934 or
A-2
<PAGE>
otherwise publicly traded, provided that the holdings of Employee of any such
security of a Media Business or any Person which does business with the Company
or its Affiliates do not represent more than 10% of the aggregate of Employee's
investment portfolio at any time.
6. Ownership of Proceeds of Employment; Confidentiality of Information;
--------------------------------------------------------------------
Etc.
---
(a) The Company shall be the sole and exclusive owner throughout the
universe in perpetuity of all of the results and proceeds of Employee's
services, work and labor during the Employment Period in connection with
Employee's employment by the Company, including without limitation all
Intellectual Property which Employee may develop, create, write or otherwise
produce during the Employment Period, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Employee's services, work and
labor during the Employment Period shall be deemed to be works-made-for-hire for
the Company within the meaning of the copyright laws of the United States and
the Company shall be deemed to be the sole author thereof in all territories and
for all purposes.
(b) All information, documents, notes, memoranda and Intellectual
Property of any kind received, compiled, produced or otherwise made available to
Employee during or in connection with Employee's employment by the Company
relating in any way to the business of the Company or of any of its Affiliates
and which has not been made available or confirmed to the public by the Company
("Confidential Materials") shall be the sole and exclusive property of the
Company and shall in perpetuity (both during and after Employee's employment by
the Company) be maintained in utmost confidence by Employee and held by Employee
in trust for the benefit of the Company. Employee shall not during the
Employment Period or at any time thereafter directly or indirectly release or
disclose to any other Person any Confidential Materials, except with the prior
written consent of the Company and in furtherance of the Company's business or
as required by law.
(c) Employee shall not, and shall not authorize or assist any other
Person to, directly or indirectly, at any time during the Employment Period or
for a period of twelve (12) months thereafter, without the Company's consent,
solicit, entice, persuade or induce any Person to terminate or refrain from
extending or renewing (on the same or different terms) such Person's employment
by, or contractual or business relationship with, the Company or any of its
Affiliates.
(d) The Company shall have the right to use the Employee's name,
approved biography (such approval not to be unreasonably withheld), and likeness
in connection with its business, including in advertising its products and
services, and may
A-3
<PAGE>
grant this right to others, but not for use as an endorsement.
7. Warranties and Covenants. Employee warrants, represents and covenants
------------------------
to the Company as follows:
(a) Employee is free to enter into this Agreement and to perform the
services contemplated hereunder.
(b) Employee is not currently (and will not, to the best knowledge
and ability of Employee, at any time during the Employment Period be) subject to
any agreement, understanding, obligation, claim, litigation, condition or
disability which could adversely affect Employee's performance of any of
Employee's obligations hereunder or the Company's complete ownership and
enjoyment of all of the rights, powers and privileges granted to the Company
hereunder.
(c) No Intellectual Property written, composed, created or submitted
by Employee at any time during Employee's employment by the Company shall, to
the best of Employee's knowledge, violate the rights of privacy or publicity,
constitute a libel or slander or infringe upon the copyright, literary,
personal, private, civil, property or other rights of any Person.
8. Employment after Term. Employee's employment by the Company may be
---------------------
continued beyond the Expiration Date by the express consent of both parties
(which consent each party shall have the right to grant or withhold in its sole
and absolute discretion). In the event of any such continuation of Employee's
employment by the Company beyond the Expiration Date, the relationship between
the Company and Employee shall be that of employment-at-will which may be
terminated by either the Company or Employee at any time upon ten (10) days'
written notice, with or without cause, for any reason or for no reason, and
without liability of any nature. Employee's employment by the Company, if any,
after the Expiration Date shall be governed by all of the terms and conditions
of this Agreement not inconsistent with the at-will nature of such employment.
9. Immigration. In accordance with the Immigration Reform and Control Act
-----------
of 1986 and the regulations adopted thereunder (8 CFR, Parts 109 and 274a), the
obligations of the Company under this Agreement are subject to and conditioned
upon Employee verifying and delivering to the Company, within three (3) business
days of Employee's first date of employment, the Form I-9 prescribed by the
Immigration and Naturalization Service, and presenting to the officer of the
Company designated therefor the original documentation required under such
regulations to establish (i) the identity of Employee and (ii) that Employee is
lawfully authorized to work in the United States. If Employee is unable to
provide the documents required within the aforesaid three (3) business-day
period, Employee must (i) present to such designated officer within said
A-4
<PAGE>
three (3) business days a receipt for the application for the documents
prescribed and (ii) the original documents required within twenty-one (21) days
of Employee's first date of employment. If Employee fails to verify and deliver
the Form I-9 and present the required original documents within the stated time
period, this Agreement and Employee's employment hereunder shall cease and
terminate as if this Agreement had never been entered into and neither party
shall have any further right, duty or obligation to the other under this
Agreement.
10. Equitable Relief. Employee acknowledges that the services to be
----------------
rendered by Employee under this Agreement, and the rights and privileges granted
by Employee to the Company hereunder, are of a special, unique, extraordinary
and intellectual character which gives them a peculiar and special value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law, and a breach by Employee of any of the provisions hereof will
cause the Company great and irreparable injury. Employee acknowledges that the
Company shall, therefore, be entitled, in addition to any other remedies which
it may have under this Agreement or at law, to receive injunctive and other
equitable relief (including without limitation specific performance) to enforce
any of the rights and privileges of the Company or any of the covenants or
obligations of Employee hereunder. Nothing contained herein, and no exercise by
the Company of any right or remedy, shall be construed as a waiver by the
Company of any other rights or remedies which the Company may have. In the event
that any court or tribunal shall at any time hereafter hold any covenants or
restrictions contained in this Agreement to be unenforceable or unreasonable as
to the scope, territory or period of time specified therein, such court shall
have the power, and is specifically requested by Employee and the Company, to
declare or determine the scope, territory or period of time which it deems to be
reasonable or enforceable and to enforce the restrictions contained therein to
such extent.
11. Governing Law, Legal Proceedings and Remedies.
---------------------------------------------
(a) The substantive laws (as distinguished from the choice of law
rules) of the State of New York shall govern (i) the validity and interpretation
of this Agreement, (ii) the performance by the parties hereto of their
respective duties and obligations hereunder and (iii) all other causes of action
(whether sounding in contract or in tort) arising out of or relating in any
fashion to Employee's employment by the Company or the termination of such
employment.
(b) Any and all actions, suits or legal proceedings of any nature
(whether sounding in contract or in tort) arising out of or relating to this
Agreement, to the employment of Employee by the Company or to the termination of
such employment shall be initiated and maintained only in a state or federal
court located in the City and County of New York, State of New York, which shall
be the exclusive forum for, and
A-5
<PAGE>
shall have sole and exclusive jurisdiction over the subject matter of, all such
proceedings. The Company and Employee each hereby submit and subject themselves
irrevocably to the personal jurisdiction of such New York State and federal
courts.
12. Notices. All notices, requests, demands or other communications in
-------
connection with this Agreement shall be in writing and shall be deemed to have
been duly given if delivered in person, by telegram, by telecopier to the
applicable telecopier number listed below, or by United States mail, postage
prepaid, certified or registered, with return receipt requested, or otherwise
actually delivered:
If to Employee, to him at the address listed on page 1 of this Agreement.
If to the Company, to it at:
711 Fifth Avenue
New York, New York 10022
Attention: Chief Executive Officer
with a copy at the same address,
Attention: General Counsel
or such other addresses as Employee or the Company shall have designated by
written notice to the other party hereto. Any such notice, demand or other
communication shall be deemed to have been given on the date actually delivered
(or, in the case of telecopier, on the date actually sent by telecopier) or upon
the expiration of three (3) days after the date mailed, as the case may be.
13. Service as Expert Witness. Employee acknowledges that during the
-------------------------
Employment Period Employee will have access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Employee
agrees that Employee shall not at any time either during or after the term of
this Agreement serve as an "expert witness" or in any similar capacity in any
litigation or other proceeding to which the Company or any of its Affiliates or
subsidiaries is a party without the prior written consent of the Company or such
affiliate or subsidiary, as the case may be.
14. Miscellaneous.
-------------
(a) This Agreement and the exhibits hereto contain a complete
statement of all of the arrangements between the parties with respect to
Employee's employment by the Company, supersede all existing agreements between
them concerning Employee's
A-6
<PAGE>
employment and cannot be changed or terminated orally. No provision of this
Agreement shall be interpreted against any party because that party or its legal
representative drafted the provision. There are no warranties, representations
or covenants, oral or written, express or implied, except as expressly set forth
herein. Employee acknowledges that Employee does not rely and has not relied
upon any representation or statement made by the Company or any of its
representatives relating to the subject matter of this Agreement except as set
forth herein.
(b) If any provision of this Agreement or any portion thereof is
declared by any court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, the remainder of such provision, and all of the
remaining provisions of this Agreement, shall continue in full force and effect
and no provision shall be deemed dependent on any other provision unless so
expressed herein.
(c) The failure of a party to insist on strict adherence to any term
of this Agreement shall not be considered a waiver of, or deprive that party of
the right thereafter to insist on strict adherence to, that term or any other
term of this Agreement.
(d) The headings in this Agreement (including the exhibits hereto)
are solely for convenience of reference and shall not affect its interpretation.
(e) The relationship between Employee and the Company is exclusively
that of employer and employee, and the Company's obligations to Employee
hereunder are exclusively contractual in nature.
(f) Employee shall, at the request of the Company, execute and
deliver to the Company all such documents as the Company may from time to time
deem necessary or desirable to evidence, protect, enforce or defend its right,
title and interest in or to any Confidential Materials, Intellectual Property or
other items described in Paragraph 6 hereof. If Employee shall fail or refuse to
execute or deliver to the Company any such document upon request, the Company
shall have, and is granted, the power and authority to execute the same in
Employee's name, as Employee's attorney-in-fact, which power is coupled with an
interest and irrevocable.
(g) The Company may assign this Agreement, Employee's services
hereunder or any of the Company's interests herein (i) to any Person which is a
party to a merger or consolidation with the Company, (ii) to any Affiliate of
the Company or (iii) to any Person acquiring substantially all of the assets of
the Company or the unit of the Company for which Employee is rendering services;
and, provided that any such assignee assumes the Company's obligations under
this Agreement, the Company shall thereupon be relieved of any and all liability
hereunder. Employee shall not have the right to assign this Agreement or to
delegate any duties imposed upon Employee under this Agreement without the
written consent of the Company, and any such purported assignment or delegation
shall be void ab initio.
-- ------
A-7
<PAGE>
* * * * * * * * * * * * * * * * * * * * *
A-8
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of January 19, 1998, between LOEWS CINEPLEX
ENTERTAINMENT CORPORATION, a Delaware corporation formerly known as LTM
Holdings, Inc., which maintains offices at 711 Fifth Avenue, New York, New York
10022 (the "Company"), and John C. McBride, Jr. ("Employee"), residing at 51
Hollowtree Road, Briarcliff Manor, New York 10510.
WHEREAS, Employee and the Company desire to enter into this Employment
Agreement to be effective as of the date hereof.
NOW, THEREFORE, the parties hereby agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee
------------------
hereby accepts employment, on the terms and subject to the conditions
hereinafter set forth, for a term (the "Employment Period") commencing on
January 19, 1998 (the "Commencement Date") and continuing until January 18, 2003
(the "Expiration Date").
2. DUTIES AND PRIVILEGES. During the Employment Period, Employee shall
---------------------
serve as Senior Vice President and General Counsel of the Company and be
responsible to and report to the Chief Executive Officer of the Company (the
"CEO") or such other executive as may be designated by the CEO (the person to
whom Employee reports being hereafter referred to as the "Supervisory Officer").
During the Employment Period, Employee shall have such authority and perform
such duties which are consistent with Employee's title and position as Senior
Vice President and General Counsel of the Company as the Supervisory Officer may
from time to time prescribe; devote Employee's entire business time, ability and
energy exclusively to the performance of Employee's duties hereunder (except
that Employee may participate in charitable and industry activities that do not
interfere with his duties hereunder); and use Employee's best efforts to advance
the interests and businesses of the Company, and its divisions and subsidiaries.
Employee's principal office shall be located at the Company's offices in the New
York metropolitan area.
3. COMPENSATION.
------------
(a) The Company shall pay to Employee a base salary at the rate of
$325,000 per year during the Employment Period, increased (i) effective as of
each of January 19, 1999, January 19, 2000 and January 19, 2002 to reflect the
increase (if any) in the cost of living during the previous year based upon the
Consumer Price Index for the New York-New Jersey Metropolitan area, as reported
by the Bureau of Labor Statistics of the United States Department of Labor and
(ii) effective as of January 19,
<PAGE>
2001, by $25,000.
(b) During the Employment Period, Employee shall be eligible to
participate in all then operative employee benefit plans of the Company which
are applicable generally to the Company's senior executives ("Employee Benefit
Plans"), subject to the respective terms and conditions of such Employee Benefit
Plans. Notwithstanding the foregoing, Employee shall be entitled to no less
than four weeks paid vacation each year during the Employment Period. Nothing
contained in this Agreement shall obligate the Company to adopt or implement any
Employee Benefit Plan, or prevent or limit the Company from making any blanket
amendments, changes or modifications of the eligibility requirements or any
other provisions of, or terminating, any Employee Benefit Plan at any time
(whether during or after the Employment Period), and Employee's participation in
or entitlement under any such Employee Benefit Plan shall at all times be
subject in all respects thereto. To the extent permitted by law and provided
for by the applicable Employee Benefit Plan, Employee shall be entitled to prior
service credit for his years of service with any group of which the Company (or
its predecessor) was a member in respect of any medical or retirement Employee
Benefit Plan for which years of service are generally applicable.
(c) During the Employment Period, Employee shall be eligible to
receive an annual bonus (the "Annual Bonus"), the amount of which will be
targeted at between $75,000 and $125,000. The amount and payment of the Annual
Bonus shall be based on the attainment of specified performance goals to be
developed by the Company's Board of Directors each year.
(d) To facilitate Employee's performance of Employee's duties
hereunder, the Company shall make available to Employee, during the Employment
Period, either a leased automobile or car allowance, each in accordance with the
Company's automobile policy as from time to time in effect. In the event
Employee elects to lease an automobile, the Company shall also pay for and
provide parking for Employee near the Company's New York office. In the event
Employee elects a car allowance, the Company shall not pay for or provide any
parking for Employee.
4. EXPIRATION OF TERM AND TERMINATION.
----------------------------------
(a) Employee's employment by the Company and this Agreement shall
automatically expire and terminate on the Expiration Date unless sooner
terminated pursuant to the provisions of this Section 4.
(b) Employee's employment by the Company and this Agreement shall
automatically terminate upon Employee's death.
(c) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after Employee has been unable to perform
the services or
-2-
<PAGE>
duties required of Employee in connection with Employee's employment by the
Company as a result of physical or mental disability (or disabilities) which has
(or have) continued for a period of twelve (12) consecutive weeks, or for a
period of sixteen (16) weeks in the aggregate, during any twelve (12) month
period.
(d) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after the occurrence of any of the
following events or contingencies (any such termination being deemed to be a
termination "for cause"):
(i) Employee materially breaches, materially repudiates or
otherwise materially fails to comply with or perform any of the terms of this
Agreement, any duties of Employee in connection with Employee's employment by
the Company or any of the Company's policies or procedures, or deliberately
interferes with the material compliance by any other employee of the Company
with any of the foregoing and such action (if correctable) is not materially
corrected within 30 days after notice from the Company;
(ii) The conviction by Employee of a felony or the pleading by
Employee of no contest (or similar plea) to any felony (other than a crime for
which vicarious liability is imposed upon Employee solely by reason of
Employee's position with the Company, and not by reason of Employee's conduct);
(iii) Any act or omission by Employee constituting fraud, gross
negligence or willful misconduct in connection with Employee's employment by the
Company and, if correctable, is not corrected within 30 days after notice from
the Company; or
(iv) Any other act, omission, event or condition constituting
cause for the discharge of an employee under the laws of New York which, if
correctable, is not corrected within 30 days after notice from the Company.
(e) The Company shall have no obligation to renew or extend the
Employment Period. Neither (i) the expiration of the Employment Period, nor
(ii) the failure or refusal of the Company to renew or extend the Employment
Period, this Agreement, or Employee's employment by the Company upon the
Expiration Date, nor (iii) the termination of this Agreement by the Company
pursuant to any provision of this Section 4 (except Section 4(g)), shall be
deemed to constitute a termination of Employee's employment by the Company
"without cause" for the purpose of triggering any rights of or causes of action
by Employee.
(f) If this Agreement, the Employment Period or Employee's employment
by the Company is terminated or expires pursuant to any provision of this
Section 4 (other than Section 4(g)), or is terminated by Employee by reason
other than Employer's material breach of this Agreement, Employee's right to
receive salary or other
-3-
<PAGE>
compensation from the Company and all other rights and entitlements of Employee
pursuant to this Agreement or as an employee of the Company shall forthwith
cease and terminate, and the Company shall have no liability or obligation
whatsoever to Employee, except that:
(i) The Company shall be obligated to pay to Employee (x) not
later than the effective date of such termination all unpaid salary, car
allowance (if any), vacation and reimbursable expenses which shall have accrued
as of the effective date of such termination and (y) as soon as practicable
after the end of the fiscal year in which the termination occurs, a pro rata
portion of the Annual Bonus for the portion of such fiscal year through the
effective date of such termination; and
(ii) The terms and conditions of applicable Employee Benefit
Plans, if any, shall control Employee's entitlement, if any, to receive benefits
thereunder.
(g) The Company shall have the unilateral right, at any time, without
notice, in the Company's sole and absolute discretion, to terminate Employee's
employment by the Company, without cause, and for any reason or for no reason
(the Company's "Termination Rights"). If the Company materially reduces the
duties or responsibilities of the Employee hereunder, or otherwise materially
breaches this Agreement, such action shall be deemed an exercise by the Company
of its Termination Rights. The Company's Termination Rights are not limited or
restricted by, and shall supersede, any policy of the Company requiring or
favoring continued employment of its employees during satisfactory performance,
any seniority system or any procedure governing the manner in which the
Company's discretion is to be exercised. No exercise by the Company of its
Termination Rights shall, under any circumstances, be deemed to constitute (i) a
breach by the Company of any term of this Agreement, express or implied
(including without limitation a breach of any implied covenant of good faith and
fair dealing), (ii) a wrongful discharge of Employee or a wrongful termination
of Employee's employment by the Company, (iii) a wrongful deprivation by the
Company of Employee's corporate office (or authority, opportunities or other
benefits relating thereto) or (iv) the breach by the Company of any other duty
or obligation, express or implied, which the Company may owe to Employee
pursuant to any principle or provision of law (whether contract or tort);
provided, however, that notwithstanding the foregoing, a breach by the Company
of its payment obligations pursuant to this Section 4(g) shall be deemed to be a
breach of this Agreement. If the Company elects to terminate Employee's
employment or is deemed to exercise its Termination Rights pursuant to this
Section 4(g) prior to the Expiration Date, the Company shall have no obligation
or liability to Employee pursuant to this Agreement, or otherwise, except to pay
to Employee until the Expiration Date (x) the salary and benefits (in each case
as if this Agreement had not been terminated) as provided in Sections 3(a) and
(b) hereof (excluding car allowance or parking benefits), and (y) an annual
bonus amount equal to the target bonus for the year in which such termination
occurs, or if no such target has been set for the year, the most recent Annual
-4-
<PAGE>
Bonus actually paid or payable to the Employee (pro-rated for the portion of a
fiscal year ending on the Expiration Date). If the Company elects to terminate
Employee's employment or is deemed to exercise its Termination Rights pursuant
to this Section 4(g) prior to the Expiration Date, Employee shall have no
obligation to mitigate. However, it is agreed that if Employee receives
employment income (whether direct or indirect salary, compensation or otherwise)
from subsequent employment (including self-employment) after such termination
and on or before the Expiration Date, such employment income shall be set off
against any payments to be made to Employee by the Company in connection with
its exercise or deemed exercise of its Termination Rights.
(h) Immediately upon any termination of Employee's employment
hereunder or of this Agreement (whether or not pursuant to this Section 4),
Employee shall return to the Company all property of the Company heretofore
provided to Employee by the Company, or otherwise in the custody, possession or
control of Employee (including, without limitation, the "Confidential Materials"
described in Paragraph 6(b) of Exhibit A attached hereto). Notwithstanding any
provision of this Agreement to the contrary, no termination of this Agreement or
of Employee's employment for any reason whatsoever shall in any manner operate
to terminate, limit or otherwise affect the Company's ownership of any of the
rights, properties or privileges granted to the Company hereunder.
5. STANDARD TERMS. Attached as Exhibit A hereto and deemed a part hereof
--------------
are the Company's Standard Terms and Conditions of Employment Agreement, all of
which terms are binding on the parties hereto and incorporated herein. For
convenience, provisions of this Agreement shall be referred to as "Sections" and
provisions of the Standard Terms shall be referred as "Paragraphs". In the case
of any conflict between the terms of this Agreement and the terms of Exhibit A
hereto, the terms of this Agreement shall govern.
6. SUPERSEDING AGREEMENT. This Agreement, including Exhibit A hereto,
---------------------
shall constitute the full and entire understanding of the parties hereto with
respect to the subject matter hereof and shall supersede any prior agreements
with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed on their behalf as of the date first above written.
/s/ JOHN C. MCBRIDE, JR.
______________________________
John C. McBride, Jr.
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By: /s/ LAWRENCE J. RUISI
______________________________________
Name: Lawrence J. Ruisi
Title: President and Chief Executive Officer
-5-
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
-----------------------------
OF EMPLOYMENT AGREEMENT
-----------------------
1. Definitions. All capitalized terms used herein shall have the meanings
-----------
ascribed to them in the Agreement attached hereto. The following words, terms
and phrases (and variations thereof) used herein shall have the following
meanings:
(a) An "Affiliate," of a party means a Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, such party.
(b) "Intellectual Property" means any and all intellectual, artistic,
literary, dramatic or musical rights, works or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, characters, plots, themes, dialogue, stories, scripts,
treatments, outlines, submissions, ideas, concepts, packages, compositions,
artwork and logos, and all audio, visual or audio-visual works of every kind and
in every stage of development, production and completion, and all rights to
distribute, advertise, promote, exhibit or otherwise exploit any of the
foregoing by any means, media or processes now known or hereafter devised.
(c) "Media Business" means all Persons engaging in any of the
following: (i) the creation, production, distribution, exhibition or other
exploitation of theatrical motion pictures, television programs, sound
recordings or other visual, audio or audio-visual works or recordings of any
kind; (ii) television (including pay, free, over-the-air, cable and satellite)
or radio broadcasting; (iii) book, newspaper or periodical publishing; (iv)
music publishing; (v) "merchandising" (as that term is generally understood in
the entertainment industry); or (vi) advertising.
(d) "Person" means any individual, corporation, trust, estate,
partnership, joint venture, company, association, league, group, governmental
agency or other entity of any kind or nature.
A-1
<PAGE>
2. Compensation.
------------
(a) Employee's salary shall be payable in equal installments (not
less frequently than monthly) in accordance with the Company's customary payroll
practices. No additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of any hours worked on Saturdays,
Sundays, holidays or otherwise. All compensation payable to Employee hereunder
(whether in the form of salary, benefits or otherwise) shall be subject to all
applicable laws, statutes, governmental regulations or orders, the terms of all
applicable Employee Benefit Plans and the terms of all agreements between or
binding upon the Company and Employee requiring the deduction or withholding of
any amounts from such payments, and the Company shall have the right to make
such deductions and withholdings in accordance with the Company's interpretation
thereof in the Company's sole judgment.
(b) Subject to Section 3(b) of the Agreement, Employee shall be
eligible to participate in fringe benefits, if any, maintained by the Company
for employees generally on the same basis as comparable employees of the
Company.
(c) Subject to the requirements of Employee's position and corporate
office, Employee shall be entitled to annual vacations in accordance with the
Company's vacation policy in effect from time to time.
(d) The Company recognizes that, in connection with Employee's
performance of Employee's duties and obligations hereunder, Employee will incur
certain ordinary and necessary expenses of a business character. The Company
shall pay Employee for such business expenses on the presentation of itemized
statements of such expenses, provided their extent and nature are approved in
accordance with the policies and procedures of the Company.
3. Right to Insure. The Company shall have the right to secure, in its
---------------
own name or otherwise and at its own expense, life, health, accident or other
insurance covering or otherwise insuring Employee, and Employee shall have no
right, title or interest in or to any such insurance or any of the proceeds or
benefits thereof. Employee shall fully assist and cooperate with the Company in
procuring any such insurance, including without limitation by submitting to such
examinations, and by signing such applications and other instruments, as may
reasonably be required by any insurance carrier to which application is made by
the Company for any such insurance.
4. Employment Exclusive. Employee shall not perform services for any
--------------------
Person other than the Company during the Employment Period without the prior
written consent of the Company and will not during the Employment Period engage
in any
A-2
<PAGE>
activity which would interfere with the performance of Employee's services
hereunder, or become financially interested in or associated with, directly or
indirectly, any Media Business.
5. Interest in Other Corporations. Notwithstanding anything to the
------------------------------
contrary contained in Paragraph 4 hereof, Employee may own up to one percent
(1%) of any class of any Person's outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934 or otherwise publicly traded, provided that the holdings of
Employee of any such security of a Media Business or any Person which does
business with the Company or its Affiliates do not represent more than 10% of
the aggregate of Employee's investment portfolio at any time.
6. Ownership of Proceeds of Employment; Confidentiality of Information;
--------------------------------------------------------------------
Etc.
---
(a) The Company shall be the sole and exclusive owner throughout the
universe in perpetuity of all of the results and proceeds of Employee's
services, work and labor during the Employment Period in connection with
Employee's employment by the Company, including without limitation all
Intellectual Property which Employee may develop, create, write or otherwise
produce during the Employment Period, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Employee's services, work
and labor during the Employment Period shall be deemed to be works-made-for-hire
for the Company within the meaning of the copyright laws of the United States
and the Company shall be deemed to be the sole author thereof in all territories
and for all purposes.
(b) All information, documents, notes, memoranda and Intellectual
Property of any kind received, compiled, produced or otherwise made available to
Employee during or in connection with Employee's employment by the Company
relating in any way to the business of the Company or of any of its Affiliates
and which has not been made available or confirmed to the public by the Company
("Confidential Materials") shall be the sole and exclusive property of the
Company and shall in perpetuity (both during and after Employee's employment by
the Company) be maintained in utmost confidence by Employee and held by Employee
in trust for the benefit of the Company. Employee shall not during the
Employment Period or at any time thereafter directly or indirectly release or
disclose to any other Person any Confidential Materials, except with the prior
written consent of the Company and in furtherance of the Company's business or
as required by law.
(c) Employee shall not, and shall not authorize or assist any other
A-3
<PAGE>
Person to, directly or indirectly, at any time during the Employment Period or
for a period of twelve (12) months thereafter, without the Company's consent,
solicit, entice, persuade or induce any Person to terminate or refrain from
extending or renewing (on the same or different terms) such Person's employment
by, or contractual or business relationship with, the Company or any of its
Affiliates.
(d) The Company shall have the right to use the Employee's name,
approved biography (such approval not to be unreasonably withheld), and likeness
in connection with its business, including in advertising its products and
services, and may grant this right to others, but not for use as an endorsement.
7. Warranties and Covenants. Employee warrants, represents and covenants
------------------------
to the Company as follows:
(a) Employee is free to enter into this Agreement and to perform the
services contemplated hereunder.
(b) Employee is not currently (and will not, to the best knowledge
and ability of Employee, at any time during the Employment Period be) subject to
any agreement, understanding, obligation, claim, litigation, condition or
disability which could adversely affect Employee's performance of any of
Employee's obligations hereunder or the Company's complete ownership and
enjoyment of all of the rights, powers and privileges granted to the Company
hereunder.
(c) No Intellectual Property written, composed, created or submitted
by Employee at any time during Employee's employment by the Company shall, to
the best of Employee's knowledge, violate the rights of privacy or publicity,
constitute a libel or slander or infringe upon the copyright, literary,
personal, private, civil, property or other rights of any Person.
8. Employment after Term. Employee's employment by the Company may be
---------------------
continued beyond the Expiration Date by the express consent of both parties
(which consent each party shall have the right to grant or withhold in its sole
and absolute discretion). In the event of any such continuation of Employee's
employment by the Company beyond the Expiration Date, the relationship between
the Company and Employee shall be that of employment-at-will which may be
terminated by either the Company or Employee at any time upon ten (10) days'
written notice, with or without cause, for any reason or for no reason, and
without liability of any nature. Employee's employment by the Company, if any,
after the Expiration Date shall be governed by all of the terms and conditions
of this Agreement not inconsistent with the at-will nature of such employment.
A-4
<PAGE>
9. Immigration. In accordance with the Immigration Reform and Control Act
-----------
of 1986 and the regulations adopted thereunder (8 CFR, Parts 109 and 274a), the
obligations of the Company under this Agreement are subject to and conditioned
upon Employee verifying and delivering to the Company, within three (3) business
days of Employee's first date of employment, the Form I-9 prescribed by the
Immigration and Naturalization Service, and presenting to the officer of the
Company designated therefor the original documentation required under such
regulations to establish (i) the identity of Employee and (ii) that Employee is
lawfully authorized to work in the United States. If Employee is unable to
provide the documents required within the aforesaid three (3) business-day
period, Employee must (i) present to such designated officer within said three
(3) business days a receipt for the application for the documents prescribed and
(ii) the original documents required within twenty-one (21) days of Employee's
first date of employment. If Employee fails to verify and deliver the Form I-9
and present the required original documents within the stated time period, this
Agreement and Employee's employment hereunder shall cease and terminate as if
this Agreement had never been entered into and neither party shall have any
further right, duty or obligation to the other under this Agreement.
10. Equitable Relief. Employee acknowledges that the services to be
----------------
rendered by Employee under this Agreement, and the rights and privileges granted
by Employee to the Company hereunder, are of a special, unique, extraordinary
and intellectual character which gives them a peculiar and special value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law, and a breach by Employee of any of the provisions hereof will
cause the Company great and irreparable injury. Employee acknowledges that the
Company shall, therefore, be entitled, in addition to any other remedies which
it may have under this Agreement or at law, to receive injunctive and other
equitable relief (including without limitation specific performance) to enforce
any of the rights and privileges of the Company or any of the covenants or
obligations of Employee hereunder. Nothing contained herein, and no exercise by
the Company of any right or remedy, shall be construed as a waiver by the
Company of any other rights or remedies which the Company may have. In the
event that any court or tribunal shall at any time hereafter hold any covenants
or restrictions contained in this Agreement to be unenforceable or unreasonable
as to the scope, territory or period of time specified therein, such court shall
have the power, and is specifically requested by Employee and the Company, to
declare or determine the scope, territory or period of time which it deems to be
reasonable or enforceable and to enforce the restrictions contained therein to
such extent.
11. Governing Law, Legal Proceedings and Remedies.
---------------------------------------------
A-5
<PAGE>
(a) The substantive laws (as distinguished from the choice of law
rules) of the State of New York shall govern (i) the validity and interpretation
of this Agreement, (ii) the performance by the parties hereto of their
respective duties and obligations hereunder and (iii) all other causes of action
(whether sounding in contract or in tort) arising out of or relating in any
fashion to Employee's employment by the Company or the termination of such
employment.
(b) Any and all actions, suits or legal proceedings of any nature
(whether sounding in contract or in tort) arising out of or relating to this
Agreement, to the employment of Employee by the Company or to the termination of
such employment shall be initiated and maintained only in a state or federal
court located in the City and County of New York, State of New York, which shall
be the exclusive forum for, and shall have sole and exclusive jurisdiction over
the subject matter of, all such proceedings. The Company and Employee each
hereby submit and subject themselves irrevocably to the personal jurisdiction of
such New York State and federal courts.
12. Notices. All notices, requests, demands or other communications in
-------
connection with this Agreement shall be in writing and shall be deemed to have
been duly given if delivered in person, by telegram, by telecopier to the
applicable telecopier number listed below, or by United States mail, postage
prepaid, certified or registered, with return receipt requested, or otherwise
actually delivered:
If to Employee, to him at the address listed on page 1 of this Agreement.
If to the Company, to it at:
711 Fifth Avenue
New York, New York 10022
Attention: Chief Executive Officer
with a copy at the same address,
Attention: Chief Financial Officer
or such other addresses as Employee or the Company shall have designated by
written notice to the other party hereto. Any such notice, demand or other
communication shall be deemed to have been given on the date actually delivered
(or, in the case of telecopier, on the date actually sent by telecopier) or upon
the expiration of three (3) days after the date mailed, as the case may be.
13. Service as Expert Witness. Employee acknowledges that during the
-------------------------
A-6
<PAGE>
Employment Period Employee will have access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Employee
agrees that Employee shall not at any time either during or after the term of
this Agreement serve as an "expert witness" or in any similar capacity in any
litigation or other proceeding to which the Company or any of its Affiliates or
subsidiaries is a party without the prior written consent of the Company or such
affiliate or subsidiary, as the case may be.
14. Miscellaneous.
-------------
(a) This Agreement and the exhibits hereto contain a complete
statement of all of the arrangements between the parties with respect to
Employee's employment by the Company, supersede all existing agreements between
them concerning Employee's employment and cannot be changed or terminated
orally. No provision of this Agreement shall be interpreted against any party
because that party or its legal representative drafted the provision. There are
no warranties, representations or covenants, oral or written, express or
implied, except as expressly set forth herein. Employee acknowledges that
Employee does not rely and has not relied upon any representation or statement
made by the Company or any of its representatives relating to the subject matter
of this Agreement except as set forth herein.
(b) If any provision of this Agreement or any portion thereof is
declared by any court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, the remainder of such provision, and all of the
remaining provisions of this Agreement, shall continue in full force and effect
and no provision shall be deemed dependent on any other provision unless so
expressed herein.
(c) The failure of a party to insist on strict adherence to any term
of this Agreement shall not be considered a waiver of, or deprive that party of
the right thereafter to insist on strict adherence to, that term or any other
term of this Agreement.
(d) The headings in this Agreement (including the exhibits hereto)
are solely for convenience of reference and shall not affect its interpretation.
(e) The relationship between Employee and the Company is exclusively
that of employer and employee, and the Company's obligations to Employee
hereunder are exclusively contractual in nature.
(f) Employee shall, at the request of the Company, execute and
deliver to the Company all such documents as the Company may from time to time
deem necessary or desirable to evidence, protect, enforce or defend its right,
title and interest in or to any Confidential Materials, Intellectual Property or
other items described in
A-7
<PAGE>
Paragraph 6 hereof. If Employee shall fail or refuse to execute or deliver to
the Company any such document upon request, the Company shall have, and is
granted, the power and authority to execute the same in Employee's name, as
Employee's attorney-in-fact, which power is coupled with an interest and
irrevocable.
(g) The Company may assign this Agreement, Employee's services
hereunder or any of the Company's interests herein (i) to any Person which is a
party to a merger or consolidation with the Company, (ii) to any Affiliate of
the Company or (iii) to any Person acquiring substantially all of the assets of
the Company or the unit of the Company for which Employee is rendering services;
and, provided that any such assignee assumes the Company's obligations under
this Agreement, the Company shall thereupon be relieved of any and all liability
hereunder. Employee shall not have the right to assign this Agreement or to
delegate any duties imposed upon Employee under this Agreement without the
written consent of the Company, and any such purported assignment or delegation
shall be void ab initio.
-- ------
* * * * * * * * * * * * * * * * * * * * *
A-8
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of December 15, 1997, between LOEWS CINEPLEX
ENTERTAINMENT CORPORATION, a Delaware corporation formerly known as LTM
Holdings, Inc., which maintains offices at 711 Fifth Avenue, New York, New York
10022 (the "Company"), and Mindy Tucker ("Employee"), residing at 8 Seneca Road,
Scarsdale, New York 10583.
WHEREAS, Employee and the Company desire to enter into this Employment
Agreement (this "Agreement") to be effective as of the date hereof.
NOW, THEREFORE, the parties hereby agree as follows:
1. TERM OF EMPLOYMENT.
------------------
(a) The Company hereby employs Employee, and Employee hereby accepts
employment, on the terms and subject to the conditions hereinafter set forth,
for a term (the "Employment Period") commencing on the date hereof and
continuing until December 14, 2000 or, if the term of this Agreement is extended
pursuant to Section 1(b) hereof, until December 14, 2002 (the "Expiration
Date").
(b) The Company shall have the right (the "Extension Option"),
exercisable upon written notice given to Employee on or before March 15, 2000,
to extend the Employment Period, all in accordance with and subject to the terms
and conditions hereof, for an additional two-year period commencing on December
15, 2000, and continuing until December 14, 2002.
2. DUTIES AND PRIVILEGES.
---------------------
(a) During the Employment Period, Employee shall serve as Corporate
Vice President, Strategic Planning and Secretary of the Company and be
responsible to and report to the Chief Executive Officer of the Company (the
"CEO"), or such other executive holding the title of Executive Vice President or
greater as designated by the CEO (the person to whom Employee reports being
hereafter referred to as the "Supervisory Officer"). During the Employment
Period, Employee shall have such authority and perform such duties which are
consistent with Employee's title and position as Corporate Vice President,
Strategic Planning and Secretary of the Company as the Supervisory Officer may
from time to time prescribe; devote Employee's entire business time, ability and
energy exclusively to the performance of Employee's duties hereunder (except
that Employee may participate in charitable and industry activities that do not
interfere with her duties hereunder); and use Employee's best efforts to advance
the interests and businesses of the Company, and its divisions and subsidiaries.
Employee's principal office shall be located at the Company's offices in the New
York metropolitan area.
<PAGE>
(b) The Company and Employee acknowledge that Employee's employment
shall be on a four-day-per-week basis, with Employee's work schedule to be
subject to the Company's and Employee's reasonable agreement, and with Employee
to be reasonably available by telephone on the fifth day. The Company and
Employee acknowledge that Employee shall be treated for all other purposes as a
full-time employee; provided, however, that Employee acknowledges that she must
work a minimum of 21 hours per week to qualify for participation in the
Company's benefit plans.
3. COMPENSATION.
------------
(a) The Company shall pay to Employee a base salary at the rate of
$200,000 per year during the Employment Period; provided, however, that (i)
effective as of the first, second and fourth anniversaries of the Commencement
Date, the annual rate of salary payable to Employee pursuant to this Section
3(a) shall be increased to reflect the increase (if any) in the cost of living
during the previous year based upon the Consumer Price Index for the New York-
New Jersey Metropolitan area, as reported by the Bureau of Labor Statistics of
the United States Department of Labor, and (ii) that effective as of the third
anniversary of the Commencement Date, if the Company exercises the Extension
Option pursuant to Section 1(b) hereof, the annual base salary then payable to
Employee pursuant to this Section 3(a) shall be increased by $25,000.
(b) During the Employment Period, Employee shall be eligible to
participate in all then operative employee benefit plans of the Company which
are applicable generally to the Company's senior executives ("Employee Benefit
Plans"), subject to the respective terms and conditions of such Employee Benefit
Plans. Notwithstanding the foregoing, Employee shall be entitled to no less
than four weeks paid vacation each year during the Employment Period. Nothing
contained in this Agreement shall obligate the Company to adopt or implement any
Employee Benefit Plan, or prevent or limit the Company from making any blanket
amendments, changes or modifications of the eligibility requirements or any
other provisions of, or terminating, any Employee Benefit Plan at any time
(whether during or after the Employment Period), and Employee's participation in
or entitlement under any such Employee Benefit Plan shall at all times be
subject in all respects thereto. To the extent permitted by law and provided
for by the applicable Employee Benefit Plan, Employee shall be entitled to prior
service credit for her years of service with any group of which the Company (or
its predecessor) was a member in respect of any medical or retirement Employee
Benefit Plan for which years of service are generally applicable. During the
Employment Period, the Company shall maintain a director and officer liability
insurance policy covering Employee in her capacity as an officer of the Company.
(c) During the Employment Period, Employee shall be eligible to
receive an annual bonus (the "Annual Bonus"), the amount of which will be
targeted at $75,000. The amount and payment of the Annual Bonus shall be based
on the attainment
-2-
<PAGE>
of specified performance goals to be developed by the Company's Board of
Directors each year.
(d) To facilitate Employee's performance of Employee's duties
hereunder, the Company shall make available to Employee, during the Employment
Period, a car allowance of not less than $900 per month. The Company shall also
pay for and provide parking for Employee near the Company's New York office.
(e) The Company shall pay for the installation and monthly charges
for a home fax machine and modem (each to be owned by the Company), and will pay
for all monthly access charges and business related call charges with respect to
Employee's personal cellular phone.
4. EXPIRATION OF TERM AND TERMINATION.
----------------------------------
(a) Employee's employment by the Company and this Agreement shall
automatically expire and terminate on the Expiration Date unless sooner
terminated pursuant to the provisions of this Section 4.
(b) Employee's employment by the Company and this Agreement shall
automatically terminate upon Employee's death.
(c) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after Employee has been unable to perform
the services or duties required of Employee in connection with Employee's
employment by the Company as a result of physical or mental disability (or
disabilities) which has (or have) continued for a period of twelve (12)
consecutive weeks, or for a period of sixteen (16) weeks in the aggregate,
during any twelve (12) month period.
(d) The Company shall have the right and option, exercisable by
giving written notice to Employee, to terminate Employee's employment by the
Company and this Agreement at any time after the occurrence of any of the
following events or contingencies (any such termination being deemed to be a
termination "for cause"):
(i) Employee materially breaches, materially repudiates or
otherwise materially fails to comply with or perform any of the terms of this
Agreement, any duties of Employee in connection with Employee's employment by
the Company or any of the Company's policies or procedures, or deliberately
interferes with the material compliance by any other employee of the Company
with any of the foregoing and such action (if correctable) is not materially
corrected within 30 days after notice from the Company;
(ii) The conviction by Employee of a felony or the pleading by
Employee of no contest (or similar plea) to any felony (other than a crime for
which
-3-
<PAGE>
vicarious liability is imposed upon Employee solely by reason of Employee's
position with the Company, and not by reason of Employee's conduct);
(iii) Any act or omission by Employee constituting fraud, gross
negligence or willful misconduct in connection with Employee's employment by the
Company and, if correctable, is not corrected within 30 days after notice from
the Company; or
(iv) Any other act, omission, event or condition constituting cause
for the discharge of an employee under the laws of New York which, if
correctable, is not corrected within 30 days after notice from the Company.
(e) The Company shall have no obligation to renew or extend the
Employment Period. Neither (i) the expiration of the Employment Period, nor
(ii) the failure or refusal of the Company to renew or extend the Employment
Period, this Agreement, or Employee's employment by the Company upon the
Expiration Date, nor (iii) the termination of this Agreement by the Company
pursuant to any provision of this Section 4 (except Section 4(g)), shall be
deemed to constitute a termination of Employee's employment by the Company
"without cause" for the purpose of triggering any rights of or causes of action
by Employee.
(f) If this Agreement, the Employment Period or Employee's
employment by the Company is terminated or expires pursuant to any provision of
this Section 4 (other than Section 4(g)), or is terminated by Employee by reason
other than Employer's material breach of this Agreement, Employee's right to
receive salary or other compensation from the Company and all other rights and
entitlements of Employee pursuant to this Agreement or as an employee of the
Company shall forthwith cease and terminate, and the Company shall have no
liability or obligation whatsoever to Employee, except that:
(i) The Company shall be obligated to pay to Employee (x) not
later than the effective date of such termination all unpaid salary, car
allowance (if any), vacation and reimbursable expenses which shall have accrued
as of the effective date of such termination and (y) as soon as practicable
after the end of the fiscal year in which the termination occurs, a pro rata
portion of the Annual Bonus for the portion of such fiscal year through the
effective date of such termination; and
(ii) The terms and conditions of applicable Employee Benefit
Plans, if any, shall control Employee's entitlement, if any, to receive benefits
thereunder.
(g) The Company shall have the unilateral right, at any time, without
notice, in the Company's sole and absolute discretion, to terminate Employee's
employment by the Company, without cause, and for any reason or for no reason
(the Company's "Termination Rights"). If the Company materially reduces the
duties or responsibilities of the Employee hereunder, or otherwise materially
breaches this
-4-
<PAGE>
Agreement, such action shall be deemed an exercise by the Company of its
Termination Rights. The Company's Termination Rights are not limited or
restricted by, and shall supersede, any policy of the Company requiring or
favoring continued employment of its employees during satisfactory performance,
any seniority system or any procedure governing the manner in which the
Company's discretion is to be exercised. No exercise by the Company of its
Termination Rights shall, under any circumstances, be deemed to constitute (i) a
breach by the Company of any term of this Agreement, express or implied
(including without limitation a breach of any implied covenant of good faith and
fair dealing), (ii) a wrongful discharge of Employee or a wrongful termination
of Employee's employment by the Company, (iii) a wrongful deprivation by the
Company of Employee's corporate office (or authority, opportunities or other
benefits relating thereto) or (iv) the breach by the Company of any other duty
or obligation, express or implied, which the Company may owe to Employee
pursuant to any principle or provision of law (whether contract or tort);
provided, however, that notwithstanding the foregoing, a breach by the Company
of its payment obligations pursuant to this Section 4(g) shall be deemed to be a
breach of this Agreement. If the Company elects to terminate Employee's
employment or is deemed to exercise its Termination Rights pursuant to this
Section 4(g) prior to the Expiration Date, the Company shall have no obligation
or liability to Employee pursuant to this Agreement, or otherwise, except to pay
to Employee until the Expiration Date (x) the salary and benefits (in each case
as if this Agreement had not been terminated) as provided in Sections 3(a) and
(b) hereof (excluding car allowance and parking benefits), and (y) an annual
bonus amount equal to the target bonus for the year in which such termination
occurs, or if no such target has been set for the year, the most recent Annual
Bonus actually paid or payable to the Employee (pro-rated for the portion of a
fiscal year ending on the Expiration Date). If the Company elects to terminate
Employee's employment or is deemed to exercise its Termination Rights pursuant
to this Section 4(g) prior to the Expiration Date, Employee shall have no
obligation to mitigate. However, it is agreed that if Employee receives
employment income (whether salary, direct or indirect compensation or otherwise)
from subsequent employment (including self-employment) after such termination
and on or before the Expiration Date, such employment income shall be set off
against any payments to be made to Employee by the Company in connection with
its exercise or deemed exercise of its Termination Rights.
(h) Immediately upon any termination of Employee's employment
hereunder or of this Agreement (whether or not pursuant to this Section 4),
Employee shall return to the Company all property of the Company heretofore
provided to Employee by the Company, or otherwise in the custody, possession or
control of Employee (including, without limitation, the "Confidential Materials"
described in Paragraph 6(b) of Exhibit A attached hereto). Notwithstanding any
provision of this Agreement to the contrary, no termination of this Agreement or
of Employee's employment for any reason whatsoever shall in any manner operate
to terminate, limit or otherwise affect the Company's ownership of any of the
rights, properties or privileges granted to the Company hereunder.
-5-
<PAGE>
5. STANDARD TERMS. Attached as Exhibit A hereto and deemed a part hereof
--------------
are the Company's Standard Terms and Conditions of Employment Agreement, all of
which terms are binding on the parties hereto and incorporated herein. For
convenience, provisions of this Agreement shall be referred to as "Sections" and
provisions of the Standard Terms shall be referred as "Paragraphs." In the case
of any conflict between the terms of this Agreement and the terms of Exhibit A
hereto, the terms of this Agreement shall govern.
6. SUPERSEDING AGREEMENT. This Agreement, including Exhibit A hereto,
---------------------
shall constitute the full and entire understanding of the parties hereto with
respect to the subject matter hereof and shall supersede any prior agreements
with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed on their behalf as of the date first above written.
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
By: /s/ LAWRENCE J. RUISI /s/ MINDY TUCKER
________________________ ______________________
Name: Lawrence J. Ruisi Mindy Tucker
Title: President and Chief Executive Officer
-6-
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
-----------------------------
OF EMPLOYMENT AGREEMENT
-----------------------
1. Definitions. All capitalized terms used herein shall have the
-----------
meanings ascribed to them in the Agreement attached hereto. The following words,
terms and phrases (and variations thereof) used herein shall have the following
meanings:
(a) An "Affiliate" of a party means a Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, such party.
(b) "Intellectual Property" means any and all intellectual, artistic,
literary, dramatic or musical rights, works or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, characters, plots, themes, dialogue, stories, scripts,
treatments, outlines, submissions, ideas, concepts, packages, compositions,
artwork and logos, and all audio, visual or audio-visual works of every kind and
in every stage of development, production and completion, and all rights to
distribute, advertise, promote, exhibit or otherwise exploit any of the
foregoing by any means, media or processes now known or hereafter devised.
(c) "Media Business" means all Persons engaging in any of the
following: (i) the creation, production, distribution, exhibition or other
exploitation of theatrical motion pictures, television programs, sound
recordings or other visual, audio or audio-visual works or recordings of any
kind; (ii) television (including pay, free, over-the-air, cable and satellite)
or radio broadcasting; (iii) book, newspaper or periodical publishing; (iv)
music publishing; (v) "merchandising" (as that term is generally understood in
the entertainment industry); or (vi) advertising.
(d) "Person" means any individual, corporation, trust, estate,
partnership, joint venture, company, association, league, group, governmental
agency or other entity of any kind or nature.
2. Compensation.
------------
(a) Employee's salary shall be payable in equal installments (not
less frequently than monthly) in accordance with the Company's customary payroll
practices. No additional compensation shall be payable to Employee by reason of
the number of hours worked or by reason of any hours worked on Saturdays,
Sundays, holidays or otherwise. All compensation payable to Employee hereunder
(whether in the form of salary, benefits or otherwise) shall be subject to all
applicable laws, statutes, governmental regulations or orders, the terms of all
applicable Employee Benefit Plans and the terms of all agreements between or
binding upon the Company and Employee requiring the deduction or withholding of
any amounts from such payments, and the Company shall have the right to make
such deductions and withholdings in accordance with the Company's interpretation
thereof in the Company's sole judgment.
(b) Subject to Section 3(b) of the Agreement, Employee shall be
eligible to participate in fringe benefits, if any, maintained by the Company
for employees generally on the same basis as comparable employees of the
Company.
(c) Subject to the requirements of Employee's position and corporate
A-2
<PAGE>
office, Employee shall be entitled to annual vacations in accordance with the
Company's vacation policy in effect from time to time.
(d) The Company recognizes that, in connection with Employee's
performance of Employee's duties and obligations hereunder, Employee will incur
certain ordinary and necessary expenses of a business character. The Company
shall pay Employee for such business expenses on the presentation of itemized
statements of such expenses, provided their extent and nature are approved in
accordance with the policies and procedures of the Company.
3. Right to Insure. The Company shall have the right to secure, in its
---------------
own name or otherwise and at its own expense, life, health, accident or other
insurance covering or otherwise insuring Employee, and Employee shall have no
right, title or interest in or to any such insurance or any of the proceeds or
benefits thereof. Employee shall fully assist and cooperate with the Company in
procuring any such insurance, including without limitation by submitting to such
examinations, and by signing such applications and other instruments, as may
reasonably be required by any insurance carrier to which application is made by
the Company for any such insurance.
4. Employment Exclusive. Employee shall not perform services for any
--------------------
Person other than the Company during the Employment Period without the prior
written consent of the Company and will not during the Employment Period engage
in any activity which would interfere with the performance of Employee's
services hereunder, or become financially interested in or associated with,
directly or indirectly, any Media Business.
5. Interest in Other Corporations. Notwithstanding anything to the
------------------------------
contrary contained in Paragraph 4 hereof, Employee may own up to one percent
(1%) of any class of any Person's outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934 or otherwise publicly traded, provided that the holdings of
Employee of any such security of a Media Business or any Person which does
business with the Company or its Affiliates do not represent more than 10% of
the aggregate of Employee's investment portfolio at any time.
6. Ownership of Proceeds of Employment; Confidentiality of Information;
--------------------------------------------------------------------
Etc.
----
(a) The Company shall be the sole and exclusive owner throughout the
A-3
<PAGE>
universe in perpetuity of all of the results and proceeds of Employee's
services, work and labor during the Employment Period in connection with
Employee's employment by the Company, including without limitation all
Intellectual Property which Employee may develop, create, write or otherwise
produce during the Employment Period, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Employee's services, work
and labor during the Employment Period shall be deemed to be works-made-for-hire
for the Company within the meaning of the copyright laws of the United States
and the Company shall be deemed to be the sole author thereof in all territories
and for all purposes.
(b) All information, documents, notes, memoranda and Intellectual
Property of any kind received, compiled, produced or otherwise made available to
Employee during or in connection with Employee's employment by the Company
relating in any way to the business of the Company or of any of its Affiliates
and which has not been made available or confirmed to the public by the Company
("Confidential Materials") shall be the sole and exclusive property of the
Company and shall in perpetuity (both during and after Employee's employment by
the Company) be maintained in utmost confidence by Employee and held by Employee
in trust for the benefit of the Company. Employee shall not during the
Employment Period or at any time thereafter directly or indirectly release or
disclose to any other Person any Confidential Materials, except with the prior
written consent of the Company and in furtherance of the Company's business or
as required by law.
(c) Employee shall not, and shall not authorize or assist any other
Person to, directly or indirectly, at any time during the Employment Period or
for a period of twelve (12) months thereafter, without the Company's consent,
solicit, entice, persuade or induce any Person to terminate or refrain from
extending or renewing (on the same or different terms) such Person's employment
by, or contractual or business relationship with, the Company or any of its
Affiliates.
(d) During the Employment Period and with Employee's prior consent
(such consent not to be unreasonably withheld), the Company shall have the right
to use the Employee's name, approved biography (such approval not to be
unreasonably withheld), and likeness in connection with its business, including
in advertising its products and services, and may grant this right to others,
but not for use as an endorsement.
7. Warranties and Covenants. Employee warrants, represents and covenants
------------------------
to the Company as follows:
A-4
<PAGE>
(a) Employee is free to enter into this Agreement and to perform the
services contemplated hereunder.
(b) Employee is not currently (and will not, to the best knowledge
and ability of Employee, at any time during the Employment Period be) subject to
any agreement, understanding, obligation, claim, litigation, condition or
disability which could adversely affect Employee's performance of any of
Employee's obligations hereunder or the Company's complete ownership and
enjoyment of all of the rights, powers and privileges granted to the Company
hereunder.
(c) No Intellectual Property written, composed, created or submitted
by Employee at any time during Employee's employment by the Company shall, to
the best of Employee's knowledge, violate the rights of privacy or publicity,
constitute a libel or slander or infringe upon the copyright, literary,
personal, private, civil, property or other rights of any Person.
8. Employment after Term. Employee's employment by the Company may be
---------------------
continued beyond the Expiration Date by the express consent of both parties
(which consent each party shall have the right to grant or withhold in its sole
and absolute discretion). In the event of any such continuation of Employee's
employment by the Company beyond the Expiration Date, the relationship between
the Company and Employee shall be that of employment-at-will which may be
terminated by either the Company or Employee at any time upon ten (10) days'
written notice, with or without cause, for any reason or for no reason, and
without liability of any nature. Employee's employment by the Company, if any,
after the Expiration Date shall be governed by all of the terms and conditions
of this Agreement not inconsistent with the at-will nature of such employment.
9. Immigration. In accordance with the Immigration Reform and Control
-----------
Act of 1986 and the regulations adopted thereunder (8 CFR, Parts 109 and 274a),
the obligations of the Company under this Agreement are subject to and
conditioned upon Employee verifying and delivering to the Company, within three
(3) business days of Employee's first date of employment, the Form I-9
prescribed by the Immigration and Naturalization Service, and presenting to the
officer of the Company designated therefor the original documentation required
under such regulations to establish (i) the identity of Employee and (ii) that
Employee is lawfully authorized to work in the United States. If Employee is
unable to provide the documents required within the aforesaid three (3)
business-day period, Employee must (i) present to such designated officer within
said
A-5
<PAGE>
three (3) business days a receipt for the application for the documents
prescribed and (ii) the original documents required within twenty-one (21) days
of Employee's first date of employment. If Employee fails to verify and deliver
the Form I-9 and present the required original documents within the stated time
period, this Agreement and Employee's employment hereunder shall cease and
terminate as if this Agreement had never been entered into and neither party
shall have any further right, duty or obligation to the other under this
Agreement.
10. Equitable Relief. Employee acknowledges that the services to be
----------------
rendered by Employee under this Agreement, and the rights and privileges granted
by Employee to the Company hereunder, are of a special, unique, extraordinary
and intellectual character which gives them a peculiar and special value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law, and a breach by Employee of any of the provisions hereof will
cause the Company great and irreparable injury. Employee acknowledges that the
Company shall, therefore, be entitled, in addition to any other remedies which
it may have under this Agreement or at law, to receive injunctive and other
equitable relief (including without limitation specific performance) to enforce
any of the rights and privileges of the Company or any of the covenants or
obligations of Employee hereunder. Nothing contained herein, and no exercise by
the Company of any right or remedy, shall be construed as a waiver by the
Company of any other rights or remedies which the Company may have. In the
event that any court or tribunal shall at any time hereafter hold any covenants
or restrictions contained in this Agreement to be unenforceable or unreasonable
as to the scope, territory or period of time specified therein, such court shall
have the power, and is specifically requested by Employee and the Company, to
declare or determine the scope, territory or period of time which it deems to be
reasonable or enforceable and to enforce the restrictions contained therein to
such extent.
11. Governing Law, Legal Proceedings and Remedies.
---------------------------------------------
(a) The substantive laws (as distinguished from the choice of law
rules) of the State of New York shall govern (i) the validity and interpretation
of this Agreement, (ii) the performance by the parties hereto of their
respective duties and obligations hereunder and (iii) all other causes of action
(whether sounding in contract or in tort) arising out of or relating in any
fashion to Employee's employment by the Company or the termination of such
employment.
(b) Any and all actions, suits or legal proceedings of any nature
A-6
<PAGE>
(whether sounding in contract or in tort) arising out of or relating to this
Agreement, to the employment of Employee by the Company or to the termination of
such employment shall be initiated and maintained only in a state or federal
court located in the City and County of New York, State of New York, which shall
be the exclusive forum for, and shall have sole and exclusive jurisdiction over
the subject matter of, all such proceedings. The Company and Employee each
hereby submit and subject themselves irrevocably to the personal jurisdiction of
such New York State and federal courts.
12. Notices. All notices, requests, demands or other communications in
-------
connection with this Agreement shall be in writing and shall be deemed to have
been duly given if delivered in person, by telegram, by telecopier to the
applicable telecopier number listed below, or by United States mail, postage
prepaid, certified or registered, with return receipt requested, or otherwise
actually delivered:
If to Employee, to her at the address listed on page 1 of this Agreement.
If to the Company, to it at:
711 Fifth Avenue
New York, New York 10022
Attention: Chief Executive Officer
with a copy at the same address,
Attention: General Counsel
or such other addresses as Employee or the Company shall have designated by
written notice to the other party hereto. Any such notice, demand or other
communication shall be deemed to have been given on the date actually delivered
(or, in the case of telecopier, on the date actually sent by telecopier) or upon
the expiration of three (3) days after the date mailed, as the case may be.
13. Service as Expert Witness. Employee acknowledges that during the
-------------------------
Employment Period Employee will have access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Employee
agrees that Employee shall not at any time either during or after the term of
this Agreement serve as an "expert witness" or in any similar capacity in any
litigation or other proceeding to which the Company or any of its Affiliates or
subsidiaries is a party without the prior written
A-7
<PAGE>
consent of the Company or such affiliate or subsidiary, as the case may be.
14. Miscellaneous.
-------------
(a) This Agreement and the exhibits hereto contain a complete
statement of all of the arrangements between the parties with respect to
Employee's employment by the Company, supersede all existing agreements between
them concerning Employee's employment and cannot be changed or terminated
orally. No provision of this Agreement shall be interpreted against any party
because that party or its legal representative drafted the provision. There are
no warranties, representations or covenants, oral or written, express or
implied, except as expressly set forth herein. Employee acknowledges that
Employee does not rely and has not relied upon any representation or statement
made by the Company or any of its representatives relating to the subject matter
of this Agreement except as set forth herein.
(b) If any provision of this Agreement or any portion thereof is
declared by any court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, the remainder of such provision, and all of the
remaining provisions of this Agreement, shall continue in full force and effect
and no provision shall be deemed dependent on any other provision unless so
expressed herein.
(c) The failure of a party to insist on strict adherence to any term
of this Agreement shall not be considered a waiver of, or deprive that party of
the right thereafter to insist on strict adherence to, that term or any other
term of this Agreement.
(d) The headings in this Agreement (including the exhibits hereto)
are solely for convenience of reference and shall not affect its interpretation.
(e) The relationship between Employee and the Company is exclusively
that of employer and employee, and the Company's obligations to Employee
hereunder are exclusively contractual in nature.
(f) Employee shall, at the request of the Company, execute and
deliver to the Company all such documents as the Company may from time to time
deem necessary or desirable to evidence, protect, enforce or defend its right,
title and interest in or to any Confidential Materials, Intellectual Property or
other items described in Paragraph 6 hereof. If Employee shall fail or refuse to
execute or deliver to the Company any such document upon request, the Company
shall have, and is granted, the power and authority to execute the same in
Employee's name, as Employee's attorney-in-fact, which power is coupled with an
interest and irrevocable.
(g) The Company may assign this Agreement, Employee's services
A-8
<PAGE>
hereunder or any of the Company's interests herein (i) to any Person which is a
party to a merger or consolidation with the Company, (ii) to any Affiliate of
the Company or (iii) to any Person acquiring substantially all of the assets of
the Company or the unit of the Company for which Employee is rendering services;
and, provided that any such assignee assumes the Company's obligations under
this Agreement, the Company shall thereupon be relieved of any and all liability
hereunder. Employee shall not have the right to assign this Agreement or to
delegate any duties imposed upon Employee under this Agreement without the
written consent of the Company, and any such purported assignment or delegation
shall be void ab initio.
-- ------
* * * * * * * * * * * * * * * * * * * * *
A-9
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-52453, No. 333-32080, and No. 333-32082) of
Loews Cineplex Entertainment Corporation of our report dated May 1, 2000
relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated May 1, 2000
relating to the financial statement schedules, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
New York, New York
May 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LOEWS CINEPLEX ENTERTAINMENT CORPORATION FOR THE FISCAL
YEAR ENDED FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> FEB-29-2000
<EXCHANGE-RATE> 1
<CASH> 31,735
<SECURITIES> 0
<RECEIVABLES> 17,288
<ALLOWANCES> 0
<INVENTORY> 5,148
<CURRENT-ASSETS> 60,228
<PP&E> 1,587,568
<DEPRECIATION> 369,234
<TOTAL-ASSETS> 1,907,389
<CURRENT-LIABILITIES> 213,851
<BONDS> 839,029
0
0
<COMMON> 587
<OTHER-SE> 618,215
<TOTAL-LIABILITY-AND-EQUITY> 1,907,389
<SALES> 243,511
<TOTAL-REVENUES> 930,423
<CGS> 38,245
<TOTAL-COSTS> 732,957
<OTHER-EXPENSES> 174,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,728
<INCOME-PRETAX> (49,728)
<INCOME-TAX> 1,662
<INCOME-CONTINUING> (51,390)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,390)
<EPS-BASIC> (0.88)
<EPS-DILUTED> (0.88)
</TABLE>
