FORM 8 - K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1997
Commission file number: 1-9454
CINEPLEX ODEON CORPORATION
(Exact name of Registrant as specified in its charter)
Ontario, Canada Non-Resident Alien
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Yonge Street, Toronto, Ontario M4T 2Y9
(Address of principal executive offices) (Postal Code)
416-323-6600
(Registrant's telephone number
including area code)
Item 5. Other Events
Cineplex Odeon Corporation, a corporation formed under the laws of the
province of Ontario (the Corporation), Sony Pictures Entertainment Inc.
(Sony Pictures) and LTM Holdings, Inc. (LTM) have entered into an
agreement which provides for the combination of the businesses of the
Corporation and LTM. LTM is a private Delaware corporation wholly-owned
by Sony Pictures. The transaction will involve combining the Corporation
with the Loews Theatres Exhibition Group, which consists of Sony/Loews
Theatres and its joint ventures with Star Theatres and Magic Johnson
Theatres. It is proposed that the combined company will be named Loews
Cineplex Entertainment Corporation (LCE). LCE will have over 2,600
screens in approximately 460 locations in North America.
Pursuant to a series of related transactions to be effected pursuant to
a Plan of Arrangement under the Business Corporations Act (Ontario), the
Corporation's shares will be exchanged for shares of LCE with the result
that the Corporation will become a wholly-owned subsidiary of LCE. Upon
closing of the transaction, Sony Pictures will own approximately 51.1%
of LCE's shares (representing 49.9% of LCE's voting shares); Universal
Studios, Inc. (Universal) will own approximately 26% of LCE's shares
(subsequent to a cash subscription of approximately $84.5 million for
shares of LTM); the Charles Rosner Bronfman Family Trust and certain
related parties (the Bronfman Trust) will own approximately 9.6% of
LCE's shares; and the shareholders of the Corporation, other than
Universal and the Bronfman Trust, will own approximately 13.3% of LCE's
shares. It is estimated that, upon closing, the total number of
outstanding shares of LCE will be 452 million. It is intended that the
LCE shares will be listed on the New York Stock Exchange and The Toronto
Stock Exchange.
On a combined pro forma basis for the 12 months ended August 31, 1997,
LCE would have generated approximately $700 million in box office
revenues and approximately $140 million in earnings before interest,
taxes, depreciation and amortization. It is anticipated that, as at the
closing of this transaction, LCE's total debt will be approximately $700
million.
The merger of the two circuits will give LCE an important presence in 22
states, including in major cities such as New York, Los Angeles,
Chicago, Boston, Seattle, Washington, D.C. and Houston, as well as a
leading position in Canada, including in major cities such as Toronto,
Montreal and Vancouver, as one of the two major exhibitors in that
country.
Morgan Stanley & Co. is advising the independent committee of the
Corporation with respect to this transaction and has provided such
committee with a fairness opinion in that regard.
Lawrence J. Ruisi, currently President of Sony Retail Entertainment,
will serve as President and Chief Executive Officer of LCE. Allen Karp,
currently President and Chief Executive Officer of the Corporation, will
serve as Chairman and Chief Executive Officer of Cineplex Odeon Canada,
which will be the Canadian operating subsidiary of LCE. LCE's corporate
headquarters will be in New York, with the United States operational
headquarters in New York and the Canadian operational headquarters in
Toronto.
The merger is subject to approval by the shareholders of the Corporation
and regulatory approval in both Canada and the United States. It is
anticipated that closing of this transaction will take place in
approximately six months.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(1) Master Agreement among Sony Pictures Entertainment Inc., LTM
Holdings, Inc. and Cineplex Odeon Corporation dated as of
September 30, 1997.
(2) Form of Plan of Arrangement of Cineplex Odeon Corporation
under Section 182 of the Business Corporations Act (Ontario).
(3) Stockholders Agreement among LTM Holdings, Inc., Sony Pictures
Entertainment Inc., Universal Studios, Inc., Charles Rosner
Bronfman Family Trust and certain other parties dated as of
September 30, 1997.
(4) Subscription Agreement by and between LTM Holdings, Inc. and
Universal Studios, Inc. dated as of September 30, 1997.
(5) Press Release of Cineplex Odeon Corporation and Sony
Corporation of America dated September 30, 1997.
SIGNATURE
Pursuant to the requirements 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.
Cineplex Odeon
Corporation
October 16, 1997
Dated: _________________ By: /s/s Stephen Brown
Name: Stephen Brown
Title: Senior Vice
President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Description Page No
1 Master Agreement
among Sony Pictures
Entertainment Inc.,
LTM Holdings, Inc.
and Cineplex Odeon
Corporation dated as
of September 30,
1997.
2 Form of Plan of
Arrangement of
Cineplex Odeon
Corporation under
Section 182 of the
Business Corporations
Act (Ontario).
3 Stockholders
Agreement among LTM
Holdings, Inc., Sony
Pictures
Entertainment Inc.,
Universal Studios,
Inc., Charles Rosner
Bronfman Family Trust
and certain other
parties dated as of
September 30, 1997.
4 Subscription
Agreement by and
between LTM Holdings,
Inc. and Universal
Studios, Inc. dated
as of September 30,
1997.
5 Press Release of
Cineplex Odeon
Corporation and Sony
Corporation of
America dated
September 30, 1997.
MASTER AGREEMENT
among
SONY PICTURES ENTERTAINMENT INC.,
LTM HOLDINGS, INC.
and
CINEPLEX ODEON CORPORATION
Dated as of September 30, 1997
TABLE OF CONTENTS
Page
ARTICLE I SONY ASSET TRANSFER, LTM DEBT REPAYMENT, CLOSING
ADJUSTMENT, ARRANGEMENT, UNIVERSAL SUBSCRIPTION AND
SPE TRANSFER TRANSACTIONS 5
Section 1.1. Sony Asset Transfer 5
Section 1.2. LTM Debt Repayment 5
Section 1.3. Closing Adjustment 5
Section 1.4. The Arrangement 5
Section 1.5. The Universal Subscription 6
Section 1.6. The SPE Transfer 6
Section 1.7. The Closing 6
Section 1.8. Deliveries at the Closing 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CINEPLEX ODEON 8
Section 2.1. Existence; Good Standing; Corporate
Authority; Compliance with Law 8
Section 2.2. Authorization, Validity and Effect of
Agreements 9
Section 2.3. Capitalization 9
Section 2.4. Subsidiaries 10
Section 2.5. Other Interests 11
Section 2.6. No Violation 11
Section 2.7. Reports 12
Section 2.8. Litigation 18
Section 2.9. Absence of Certain Changes 18
Section 2.10. Taxes 19
Section 2.11. Employee Benefit Plans 20
Section 2.12. No Brokers 28
Section 2.13. Opinions of Financial Advisor, Etc 29
Section 2.14. Environmental Matters 29
Section 2.15. Real Property; Leases. 32
Section 2.16. Operating Assets 36
Section 2.17. Contracts 37
Section 2.18. Insurance 38
Section 2.19. Interested Party Transactions 38
Section 2.20. Expenses 39
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LTM 39
Section 3.1. Existence; Good Standing; Corporate
Authority; Compliance with Law 39
Section 3.2. Authorization, Validity and Effect of
Agreements 40
Section 3.3. Capitalization 40
Section 3.4. Subsidiaries 41
Section 3.5. Other Interests 42
Section 3.6. No Violation 42
Section 3.7. Financial Statements 42
Section 3.8. Litigation 44
Section 3.9. Absence of Certain Changes 44
Section 3.10. Taxes 45
Section 3.11. Employee Benefit Plans 45
Section 3.12. No Brokers 50
Section 3.13. Cineplex Odeon Stock Ownership 50
Section 3.14. Environmental Matters 51
Section 3.15. Real Property; Leases 52
Section 3.16. Operating Assets 55
Section 3.17. Contracts 56
Section 3.18. Insurance 57
Section 3.19. Related Party Transactions 58
Section 3.20. Expenses 58
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SPE 58
Section 4.1. Existence; Good Standing; Corporate Authority 58
Section 4.2. Authorization, Validity and Effect of
Agreements 59
Section 4.3. No Violation 59
Section 4.4. Transferred SPE Subsidiaries 60
Section 4.5. Effects of Transactions 60
ARTICLE V CONDUCT OF BUSINESS PRIOR TO CLOSING 61
Section 5.1. Conduct of Business Prior to Closing 61
ARTICLE VI ADDITIONAL AGREEMENTS 64
Section 6.1. Access and Information 64
Section 6.2. Meetings of Shareholders 65
Section 6.3. Registration Statement/Proxy
Statement/Prospectus 65
Section 6.4. Change of Control Offer and Change of
Guarantor 67
Section 6.5. Compliance with the Securities Act 67
Section 6.6. Stock Exchange Listing 67
Section 6.7. HSR Act; Competition Act; Investment Canada
Act; Submission of Arrangement for Approval 68
Section 6.8. Bank Financing; Equity Offering 68
Section 6.9. Audit Requirements; Closing Adjustment 69
Section 6.10. No Shop 75
Section 6.11. Advice of Changes; SEC Filings 77
Section 6.12. Benefit Plans 77
Section 6.13. Inventory 78
Section 6.14. Registrar and Transfer Agent 78
Section 6.15. Additional Agreements 78
Section 6.16. Transition Services 79
Section 6.17. Adoption of LTM Charter and Bylaws 80
Section 6.18. Designation of Directors 80
Section 6.19. Amendments and Modifications of Documents 80
Section 6.20. No Capital Contributions 80
Section 6.21. Tax Sharing and Indemnity Agreement 81
Section 6.22. Sony Trademark Agreement; Existing Theaters 81
Section 6.23. Fractional Shares 81
Section 6.24. Reverse Stock Split 81
ARTICLE VII CONDITIONS PRECEDENT 82
Section 7.1. Conditions to Each Party's Respective
Obligations to Effect the Transactions 82
Section 7.2. Conditions to Obligation of Cineplex Odeon to
Effect the Transactions 84
Section 7.3. Conditions to Obligations of SPE and LTM to
Effect the Transactions 86
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 87
Section 8.1. Termination 87
Section 8.2. Fees 89
ARTICLE IX MISCELLANEOUS 90
Section 9.1. Non-Survival of Representations and
Warranties; Survival of Agreements 90
Section 9.2. Notices 90
Section 9.3. Fees and Expenses 92
Section 9.4. Publicity 93
Section 9.5. Specific Performance 93
Section 9.6. Assignment; Binding Effect 93
Section 9.7. Entire Agreement 93
Section 9.8. Amendment 94
Section 9.9. Governing Law 94
Section 9.10. Counterparts 94
Section 9.11. Headings and Table of Contents 94
Section 9.12. Interpretation 95
Section 9.13. Waivers 95
Section 9.14. Severability 95
Section 9.15. Certain Definitions 95
Section 9.16. Knowledge 96
Section 9.17. Release. 96
Exhibits
Exhibit A Form of Amended and Restated Certificate
of Incorporation of LTM Holdings, Inc.
Exhibit B Form of Plan of Arrangement
Exhibit C Letter Agreement
Exhibit D Form of Tax Sharing and Indemnity
Agreement
Exhibit E Form of Sony Trademark Agreement
Exhibit F Form of Amended and Restated By-laws of
LTM Holdings, Inc.
Exhibit G List of Transition Services
Exhibit H Stockholders Agreement
Exhibit I Universal Subscription Agreement
Index of Defined Terms
Term
Section
ADA
2.15(c)
Adjusted EBITDA
2.7(b)
Adjustment Factor
6.9(d)
Affiliate
6.5
Agreement
Preamble
Alternative Proposal
6.10(a)
Antitrust Law
6.15(a)
Applicable Law
2.11(h)
Arrangement
Recitals
Arrangement Filings
6.7(c)
Arrangement Shares
1.8(d)
Audited Financial Statements
6.9(a)
Bank Financing
Recitals
Benefit Plan
2.11(a)
Canadian GAAP
2.7(a)
Canadian Securities Authorities
2.7(a)
Canadian Securities Laws
2.6
Capital Lease Obligations
2.7(b)
Cash Flow
2.7(b)
Cash Flow Statement
2.7(b)
Cineplex Odeon
Preamble
Cineplex Odeon Benchmark
6.9(d)
Cineplex Odeon Benefit Plan
2.11(a)
Cineplex Odeon Canadian Benefit Plan
2.11(h)
Cineplex Odeon Canadian Pension Plans
2.11(h)
Cineplex Odeon Common Shares
2.3
Cineplex Odeon Contracts
2.17
Cineplex Odeon Disclosure Statement
Article II
Cineplex Odeon Employee
2.11(a)
Cineplex Odeon Employee Agreement
2.11(a)
Cineplex Odeon ERISA Affiliate
2.11(a)
Cineplex Odeon Leased Real Properties
2.15(a)
Cineplex Odeon Meeting
6.2
Cineplex Odeon Multi-Employer Plan
2.11(a)
Cineplex Odeon Negative Theaters
2.7(b)
Cineplex Odeon Original Consolidated EBITDA
6.9(d)
Cineplex Odeon Owned Real Properties
2.15(a)
Cineplex Odeon Pension Plan
2.11(a)
Cineplex Odeon Permits
2.15(c)
Cineplex Odeon Permitted Encumbrances
2.15(a)
Cineplex Odeon Real Properties
2.15(a)
Cineplex Odeon Reports
2.7(a)
Cineplex Odeon Revised Consolidated EBITDA
6.9(d)
Cineplex Odeon Shareholder Approval
7.1(a)
Cineplex Odeon Theaters
2.7(b)
Cineplex Odeon Welfare Plan
2.11(a)
Cinescapes
2.7(b)
Claridge Group
Stockholders Agreement
Closing
1.7
Closing Adjustment
Recitals
Closing Date
1.7
Code
2.11(a)
Combination Shares
Recitals
Combined Enterprise
Recitals
Competition Act
2.6
Confidentiality Agreement
6.1(a)
Consolidated EBITDA
2.7(b)
Consolidated Income Tax Expense
2.7(b)
Consolidated Interest Expense
2.7(b)
Consolidated Net Income
2.7(b)
Construction Work in Progress Statement
2.15(c)
Court
6.7(c)
Court Approval
7.1(a)
Debt
2.7(b)
Department
2.11(a)
DIR
6.7(a)
Documents
Recitals
EBITDA Statements
2.7(b)
Encumbrances
2.4
Environmental Costs
2.14(c)
Environmental Laws
2.14(c)
Environmental Matter
2.14(c)
Environmental Permits
2.14(a)
ERISA
2.11(a)
Exchange
Recitals
Exchange Act
2.6
Exchange Shares
Recitals
Final Closing Statement
6.9(e)
Final Order
6.7(c)
First Preference Shares
2.3
Form S-1
6.3
Form S-4
6.3
401(k) Plan
6.12(d)
GAAP
2.7(a)
Governmental Entity
2.11(h)
Hazardous Substances
2.14(c)
HMO
2.11(m)
HSR Act
2.6
IC Act
2.6
ICA Application
6.7(b)
ICA Minister
6.7(b)
IMAX Ground Leases
Recitals
IMAX Leases
Recitals
IMAX Purchase Price
Recitals
Independent Directors
Stockholders Agreement
Indianapolis Theaters
3.7(b)
Initial Closing Statements
6.9(e)
Intercompany Debt
Recitals
Interim Order
6.7(c)
IRS
2.11(a)
Knowledge
9.16
Letter Agreement
Recitals
LIBOR
8.2(b)
LTM
Preamble
LTM Benchmark
6.9(d)
LTM Benefit Plan
3.11(a)
LTM Bylaws
1.8(e)
LTM Cap
Recitals
LTM Charter
Recitals
LTM Common Stock
Recitals
LTM Contracts
3.17
LTM Debt Repayment
Recitals
LTM Disclosure Statement
Article III
LTM Dividend
Recitals
LTM Employee
3.11(a)
LTM Employee Agreement
3.11(a)
LTM Excluded Employee
3.11(a)
LTM Financial Statements
3.7(a)
LTM Leased Real Properties
3.15(a)
LTM Multi-Employer Plan
3.11(a)
LTM Negative Theaters
3.7(b)
LTM Non-Voting Common Stock
Recitals
LTM Original Consolidated EBITDA
6.9(d)
LTM Owned Real Properties
3.15(a)
LTM Permits
3.15(c)
LTM Preferred Stock
Recitals
LTM Permitted Encumbrances
3.15(a)
LTM Real Properties
3.15(a)
LTM Revised Consolidated EBITDA
6.9(d)
LTM Theaters
3.7(b)
LTM Welfare Plan
3.11(a)
Material Adverse Effect
9.15
Morgan Stanley
2.12
NASDAQ
6.6
Net Working Capital
2.7(b)
NYSE
6.6
OBCA
Recitals
Objecting Party
6.9(e)
PBGC
2.11(a)
PCBs
2.14(c)
Plan of Arrangement
Recitals
Plitt
Recitals
Plitt Debt
Recitals
Plitt Indenture
Recitals
Plitt Stock
Recitals
Preliminary Closing Qualified Tangible Net Worth
6.9(b)
Preliminary Closing Statements
6.9(b)
Preliminary Statements Date
6.9(b)
Prospectus
6.3
Proxy Statement
6.3
Qualified Tangible Net Worth
2.7(b)
Registration Statements
6.3
Regulatory Filings
2.6
Restated Subscription Agreement
2.3
Retained Negative Theaters
6.9(b)
Reverse Stock Split
6.24
San Francisco IMAX Equipment Lease
Recitals
SEC
2.7(a)
Securities Act
2.6
Significant Subsidiaries
9.15
Sony Asset Transfer
Recitals
Sony Capital
Recitals
Sony Land
Recitals
Sony Trademark Agreement
Recitals
SPE
Preamble
SPE Material Adverse Effect
4.3
SPE Permitted Encumbrances
4.4(b)
SPE Transfer
Recitals
SPE Transferred Shares
4.4
Special Committee
2.2
SRV Shares
2.3
Standstill Agreement
2.3
Stockholder Payments
Recitals
Stockholders Agreement
7.1(h)
Subsidiary
9.15
Tax Sharing and Indemnity Agreement
Recitals
Taxes
2.10(a)
Termination Date
8.1(b)
Termination Fee
8.2(a)
Theater Costs
2.15(c)
Three Party Agreement
Universal
Subscription
Agreement
Transaction Expenses
2.7(b)
Transactions
Recitals
Transfer Plans
6.12(d)
Transferred SPE Subsidiary
Recitals
Transferred SPE Subsidiaries
Recitals
Transferred SPE Subsidiary Purchase Price
Recitals
Transition Services Agreement
6.16
Trust
Recitals
TSE
6.6
Universal
Recitals
Universal Subscription
Recitals
Universal Subscription Agreement
7.1(i)
Working Capital Debt
Recitals
MASTER AGREEMENT
THIS MASTER AGREEMENT (this "Agreement"), dated as of September 30,
1997 by and among Sony Pictures Entertainment Inc., a Delaware corporation
("SPE"), LTM Holdings, Inc., a Delaware corporation ("LTM"), and Cineplex
Odeon Corporation, a corporation formed under the laws of the province of
Ontario ("Cineplex Odeon").
WHEREAS, LTM, an indirect subsidiary of SPE, is engaged directly
and through subsidiaries in the business of developing and operating motion
picture theaters primarily in the United States, and Cineplex Odeon is engaged
directly and through subsidiaries in the business of developing and operating
motion picture theaters primarily in the United States and Canada;
WHEREAS, the Boards of Directors of LTM and Cineplex Odeon have
each determined that a business combination between LTM and Cineplex Odeon is
in the best interests of their respective companies and shareholders and
presents an opportunity for their respective companies to achieve long-term
strategic and financial benefits, and accordingly, have agreed to the
following series of transactions (the "Transactions") pursuant to which a
business combination of LTM and Cineplex Odeon shall be accomplished:
1. Prior to the Closing, pursuant to an amendment and
restatement of LTM's certificate of incorporation, in the form attached hereto
as Exhibit A (the "LTM Charter"), the authorized capital stock of LTM shall be
increased to 3,000,000,000 shares of Common Stock, par value US$.01 per share
( "LTM Common Stock"), 100,000,000 shares of Non-Voting Common Stock, par
value US$.01 per share ("LTM Non-Voting Common Stock") and 100,000,000 shares
of preferred stock, par value US$.01 per share, without designation shares
("LTM Preferred Stock");
2. Prior to the Closing, LTM shall make a distribution to its
shareholder of record as of the day on which the LTM Charter becomes
effective, with respect to the 972 shares of LTM Common Stock held thereby, of
(i) that number of additional shares of LTM Common Stock that, when added to
the number of shares issuable in connection with the SPE Transfer described in
paragraph 9 below, equals an aggregate of 220,181,927 shares (for a total of
220,182,899 shares including the shares of LTM Common Stock owned by SPE as of
the date hereof) of LTM Common Stock and (ii) 11,188,212 shares of LTM Non-
Voting Common Stock;
3. SPE shall sell, assign and transfer, or shall cause to be
sold, assigned and transferred, to a Subsidiary of LTM (the "Sony Asset
Transfer") all of the right, title and interest of SPE and its Affiliates in
(i) the Lease Agreement between Lincoln Metrocenter Partners, L.P. and SPE
dated May 21, 1992, and all ancillary agreements thereto (the "IMAX Ground
Lease"), (ii) the Letter Agreement between IMAX Corporation and Sony Retail
Entertainment dated March 3, 1995 (the "San Francisco IMAX Equipment Lease")
and (iii) the Agreement between IMAX Corporation and SPE dated May 28, 1992,
as amended January 19, 1996 (together with the San Francisco IMAX Equipment
Lease and the IMAX Ground Lease, the "IMAX Leases") in exchange for a cash
payment of an amount equal to the fair market value thereof (the "IMAX
Purchase Price");
4. LTM shall enter into a new bank credit facility (the "Bank
Financing") providing for term loan commitments and revolving commitments
sufficient, in combination with the payment by Universal referred to in
paragraph 7 below, to refinance the existing Cineplex Odeon bank facility,
fund the Stockholder Payments referred to in paragraph 12 below, fund the LTM
Debt Repayment referred to in paragraph 5 below, finance the Change of Control
Offer required by Section 6.4 and finance the working capital requirements of
the Combined Enterprise (including, without limitation, providing alternative
financing until an Equity Offering (as defined in the Stockholders Agreement)
is consummated);
5. LTM shall (i) lend to various Subsidiaries of LTM and cause
such Subsidiaries to pay to Sony/Columbia Land Corporation, a California
corporation ("Sony Land"), in full satisfaction of the intercompany
indebtedness, including accrued interest thereon through the date of
repayment, identified as "Intercompany Debt" in the Preliminary Closing
Statement prepared by LTM in accordance with the provisions of Section 6.9 as
being subject to repayment at the Closing (the "Intercompany Debt") owed by
Subsidiaries of LTM to Sony Land at their face amount as of the Closing Date,
plus accrued interest thereon through the Closing Date and (ii) repay to Sony
Capital Corporation, a Delaware corporation ("Sony Capital"), in full
satisfaction of the intercompany indebtedness (including all liabilities to
Sony Corporation of America and its Affiliates in respect of taxes through the
Closing Date except taxes for periods prior to Closing resulting from audit as
provided in the Tax Sharing and Indemnity Agreement), including accrued
interest thereon through the date of repayment, identified as "Working Capital
Debt" in the Preliminary Closing Statement prepared by LTM in accordance with
the provisions of Section 6.9 as being subject to repayment at the Closing
(the "Working Capital Debt") owed by LTM and its direct or indirect
subsidiaries to Sony Capital at its face amount as of the Closing Date, plus
accrued interest thereon through the Closing Date (the repayment of the
Intercompany Debt and the Working Capital Debt, together, the "LTM Debt
Repayment");
6. Prior to the Closing, LTM shall declare as a dividend (the
"LTM Dividend") payable to its shareholder of record as of the day prior to
the Closing Date and shall pay to such shareholder on the Closing Date, an
amount equal to the difference between (a) US$409,347,000 (subject to
adjustment in accordance with Section 6.9 (such amount, as adjusted, being
referred to herein as the "LTM Cap")) and (b) the sum of the LTM Debt
Repayment, the IMAX Purchase Price and, if applicable, the Transferred SPE
Subsidiary Purchase Price (such difference, the "Closing Adjustment"), to the
extent such amount is positive;
7. Subject to the terms and conditions of the Universal
Subscription Agreement, Universal Studios, Inc., a Delaware corporation
("Universal"), (a) shall vote, and shall cause its subsidiaries to vote, all
of the shares of Cineplex Odeon capital stock owned by them to approve the
Transactions, and (b) shall subscribe for 44,266,062 shares of LTM Common
Stock in consideration of the payment and other deliveries provided for in the
Universal Subscription Agreement (the "Universal Subscription");
8. Pursuant to a plan of arrangement of Cineplex Odeon under
Section 182 of the Business Corporations Act (Ontario) (the "OBCA")
substantially in the form attached hereto as Exhibit B (the "Plan of
Arrangement") (a) Cineplex Odeon shall exchange (the "Exchange") all of the
capital stock (the "Plitt Stock") of its wholly-owned subsidiary, Plitt
Theatres, Inc., a Delaware corporation ("Plitt"), to LTM for 82,423,849 shares
of newly issued LTM Common Stock (the "Exchange Shares"), (b) Cineplex Odeon
shall distribute the Exchange Shares to its shareholders in consideration of
the purchase from them, and cancellation, of approximately 46.62% of their
shares of Cineplex Odeon capital stock at the rate of one Exchange Share for
each share of Cineplex Odeon capital stock, and (c) LTM shall immediately
thereafter acquire from Cineplex Odeon's shareholders the remaining
outstanding shares of Cineplex Odeon capital stock in exchange for, in the
aggregate, 94,375,484 shares of LTM Common Stock (the "Combination Shares") at
the rate of one Combination Share for each share of Cineplex Odeon capital
stock (the transactions described in subclauses (a), (b) and (c) hereof being
referred to herein, collectively, as the "Arrangement");
9. SPE shall either, with respect to each of Star Theatres of
Michigan, Inc., a Delaware corporation, and S&J Theatres Inc., a California
corporation (each, a wholly owned Subsidiary of SPE and a "Transferred SPE
Subsidiary," and, together, the "Transferred SPE Subsidiaries") (i)(A)
transfer or cause to be transferred to a Subsidiary of LTM all of the shares
of stock owned directly or indirectly by SPE of such Transferred SPE
Subsidiary, or (B) cause such Transferred SPE Subsidiary to merge with and
into a Subsidiary of LTM, with such Subsidiary of LTM surviving the merger, in
either case, in exchange for shares of LTM Common Stock, or (ii) cause such
Transferred SPE Subsidiary to transfer all of its assets and related
liabilities to a Subsidiary of LTM in exchange for a cash payment of an amount
equal to the fair market value thereof (such cash amount being the
"Transferred SPE Subsidiary Purchase Price")((i) and (ii) collectively, the
"SPE Transfer").
10. Subject to the terms and conditions of the letter agreement
of even date herewith between Charles Rosner Bronfman Family Trust, a trust
created under the laws of Quebec (the "Trust") and LTM, a conformed copy of
which is attached hereto as Exhibit C (the "Letter Agreement"), the Trust
shall cause all of the shares of Cineplex Odeon capital stock beneficially
owned by it to be voted to approve the Transactions;
11. Subject to the terms and conditions of a tax sharing and
indemnity agreement between Sony Corporation of America and LTM in the form
attached hereto as Exhibit D (the "Tax Sharing and Indemnity Agreement"), Sony
Corporation of America and LTM shall indemnify and hold one another harmless
for certain tax and employee benefits liabilities;
12. Subject to the terms and conditions of the Universal
Subscription Agreement and the Letter Agreement, LTM shall reimburse Universal
and the Trust (or at their option pay directly on their behalf) on the Closing
Date up to US$1,000,000, in the aggregate, for their reasonable out-of-pocket
expenses and fees (including fees and expenses of counsel, financial advisors,
accountants and other experts and consultants) incurred by such parties prior
to the Closing Date in connection with the Documents and the Transactions upon
receipt of reasonable documentation therefor at least five business days prior
to the Closing Date (collectively, the "Stockholder Payments"); and
13. Subject to the terms and conditions of a trademark agreement
in the form attached hereto as Exhibit E (the "Sony Trademark Agreement"),
Sony Corporation will grant LTM the right to use the trademark "Sony."
WHEREAS, upon consummation of the Transactions (and before giving
effect to any Equity Offering), it is contemplated that SPE will indirectly
own 220,182,899 shares of LTM Common Stock and 11,188,212 shares of LTM Non-
Voting Common Stock, representing approximately 51.14% of the outstanding LTM
Common Stock (including, for such purposes, the outstanding LTM Non-Voting
Common Stock), Universal will own 117,712,488 shares of LTM Common Stock,
representing approximately 26.02% of the outstanding LTM Common Stock
(including, for such purposes, the outstanding LTM Non-Voting Common Stock),
the Claridge Group (as defined in the Stockholders Agreement) will own
43,454,324 shares of LTM Common Stock, representing approximately 9.60% of the
outstanding LTM Common Stock (including, for such purposes, the outstanding
LTM Non-Voting Common Stock), and the shareholders of Cineplex Odeon, other
than Universal and the Claridge Group will own 59,898,583 shares of LTM Common
Stock, representing approximately 13.24% of the outstanding LTM Common Stock
(including, for such purposes, the outstanding LTM Non-Voting Common Stock);
WHEREAS, (i) Cineplex Odeon is a guarantor of Plitt's 10 7/8%
Senior Subordinated Securities due 2004 having an aggregate outstanding
principal amount of US$200,000,000 (the "Plitt Debt") and (ii) subject to the
terms of Section 5.01 of the Indenture (the "Plitt Indenture") dated June 23,
1994 governing the Plitt Debt, Cineplex Odeon may be released from its
obligations as the guarantor of the Plitt Debt; provided that, immediately
after consummation of the Exchange, LTM satisfies certain covenants contained
in the Plitt Indenture;
WHEREAS, the combined company formed as a result of the
Transactions is sometimes hereafter referred to as the "Combined Enterprise,"
and as used herein, the "Documents" refers, collectively, to this Agreement,
the Plan of Arrangement, the Stockholders Agreement, the LTM Charter, the
Universal Subscription Agreement, the Tax Sharing and Indemnity Agreement, the
Sony Trademark Agreement, the Transition Services Agreement (if entered into
pursuant to Section 6.16) the documents giving effect to each of the Universal
Subscription, the Sony Asset Transfer and the SPE Transfer, and the Letter
Agreement, and includes all exhibits and schedules attached hereto and
thereto.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
SONY ASSET TRANSFER, LTM DEBT REPAYMENT,
CLOSING ADJUSTMENT, ARRANGEMENT, UNIVERSAL SUBSCRIPTION AND SPE TRANSFER
TRANSACTIONS
Section 1.1. Sony Asset Transfer
. At or prior to the Closing, SPE and LTM shall effect the Sony
Asset Transfer.
Section 1.2. LTM Debt Repayment
. At the Closing, LTM shall effect the LTM Debt Repayment.
Section 1.3. Closing Adjustment
. At the Closing, LTM shall pay the LTM Dividend in cash to the
extent the amount of the Closing Adjustment is positive.
Section 1.4. The Arrangement
. Concurrently with the Closing, Cineplex Odeon and LTM shall
cause the Arrangement to become effective.
Section 1.5. The Universal Subscription
. Concurrently with the Closing, Universal and LTM shall
consummate the transactions contemplated by the Universal Subscription
Agreement.
Section 1.6. The SPE Transfer
. Concurrently with the Closing and immediately following
consummation of the transactions contemplated by Sections 1.2 through 1.5, SPE
and LTM shall cause the SPE Transfer to be consummated.
Section 1.7. The Closing
. The closing of the Transactions (the "Closing") in the order
specified in the recitals shall take place as soon as reasonably practicable
following the satisfaction or waiver of each of the conditions set forth in
Article VII hereof at the offices of Fried, Frank, Harris, Shriver & Jacobson,
One New York Plaza, New York, NY 10004 and Davies, Ward & Beck, 44th Floor,
One First Canadian Place, Toronto, Ontario, Canada M5X 1B1. The date of the
Closing shall be referred to herein as the "Closing Date."
Section 1.8. Deliveries at the Closing
. At the Closing, the following shall occur:
(a) LTM or its Subsidiary shall deliver or cause to be delivered
to SPE for its own account and the accounts of Sony Land and Sony Capital by
bank wire transfer in immediately available funds the sum of (i) the IMAX
Purchase Price, to the extent not previously paid to SPE, (ii) the LTM Debt
Repayment and (iii) the amount of the LTM Dividend, if any.
(b) SPE shall deliver, and shall cause its Subsidiaries to
deliver, to LTM (i) any note or notes evidencing the Intercompany Debt,
together with bond powers executed in blank by SPE or a Subsidiary thereof, as
applicable, (ii) the stock transfer and minute books of the Transferred SPE
Subsidiaries, (iii) to the extent that the SPE Transfer is effected by (A) a
transfer by SPE to one or more LTM Subsidiaries of all the shares of stock
owned directly or indirectly by SPE of one or both of the Transferred SPE
Subsidiaries, certificates representing the shares of capital stock of the
Transferred SPE Subsidiaries, registered in the name of one or more
Subsidiaries of LTM, as designated by LTM prior to Closing, and evidence of
the cancellation of the stock certificates representing the shares of the
capital stock of the Transferred SPE Subsidiaries which were, immediately
prior to Closing, in the name of SPE or any Subsidiary thereof, all in form
reasonably satisfactory to Cineplex Odeon, (B) merging one or both of the
Transferred SPE Subsidiaries with and into one or more LTM Subsidiaries in
exchange for shares of LTM Common Stock, all documents necessary to effect
such mergers, all in form reasonably satisfactory to Cineplex Odeon and/or
(C) causing one or more of the Transferred SPE Subsidiaries to transfer all of
its assets to one or more Subsidiaries of LTM in exchange for a cash payment
in an amount equal to the fair market value of such assets, such bills of sale
and other documents necessary to effect such transfer, all in form reasonably
satisfactory to Cineplex Odeon, and (iv) all documents necessary to effect the
assignment of the IMAX Leases to LTM, all in form reasonably satisfactory to
Cineplex Odeon.
(c) Cineplex Odeon shall deliver to LTM a certificate or
certificates representing the shares of Plitt Stock to be exchanged for the
Exchange Shares, registered in the name of LTM or its nominee. Delivery of
such certificates to LTM shall be made against receipt by or on behalf of
Cineplex Odeon from LTM of a certificate or certificates representing the
Exchange Shares, registered in the name of Cineplex Odeon or its nominee or,
if Cineplex Odeon shall so direct LTM, against delivery by LTM of the Exchange
Shares directly to the shareholders of Cineplex Odeon or their respective
nominees. Cineplex Odeon shall deliver to LTM (i) a copy of Cineplex Odeon's
Articles, certified by the Ministry of Consumer and Commercial Relations
(Ontario) as of a recent date, and (ii) a true, correct and complete copy of
the Bylaws of Cineplex Odeon, certified by the secretary of Cineplex Odeon.
Cineplex Odeon shall also deliver to LTM a certificate, in form and substance
reasonably satisfactory to LTM, that either (i) no withholding is due pursuant
to U.S. Treasury regulation 1.1445-3, as determined by the Internal Revenue
Service or (ii) the stock of Plitt is not a U.S. real property interest
pursuant to U.S. Treasury regulation 1.1445-2(c)(3).
(d) LTM and Cineplex Odeon (i) shall deliver to the Exchange
Agent appointed pursuant to the Plan of Arrangement the certificates
representing the Exchange Shares and Combination Shares (collectively, the
"Arrangement Shares") required to be delivered by them, respectively, in
accordance with the Plan of Arrangement and (ii) shall cause their respective
stock registers to reflect holders of the Arrangement Shares in accordance
with the Plan of Arrangement.
(e) LTM shall deliver to Cineplex Odeon (i) a copy of the LTM
Charter (which shall, among other things, change the name of LTM to Loews
Cineplex Entertainment Corporation) certified by the Delaware Secretary of
State as of a recent date, and (ii) a true, correct and complete copy of the
bylaws of LTM in the form attached hereto as Exhibit F (the "LTM Bylaws"),
certified by the secretary or assistant secretary of LTM.
(f) If required by Section 6.16, SPE and LTM shall execute and
deliver the Transition Services Agreement, meeting the requirements of such
section, a true and correct copy of which shall also be delivered to Cineplex
Odeon.
(g) LTM shall pay to the order of Universal and the Trust their
respective Stockholder Payments by bank wire transfer in immediately available
funds.
(h) Each of the parties shall execute and deliver such other
certificates and agreements as are required thereof to be executed and
delivered at or prior to the Closing in accordance with the provisions of this
Agreement and any other Document.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CINEPLEX ODEON
Except as set forth in the disclosure statement delivered at or
prior to the execution hereof to LTM (the "Cineplex Odeon Disclosure
Statement"), Cineplex Odeon represents and warrants to LTM as follows:
Section 2.1. Existence; Good Standing; Corporate Authority;
Compliance with Law
. Cineplex Odeon is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Cineplex Odeon is duly licensed or qualified to do business as
a foreign corporation and is in good standing under the laws of any state of
the United States or other province of Canada in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a Cineplex Odeon Material Adverse Effect. Cineplex
Odeon has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted. Each of
Cineplex Odeon's Significant Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not have a Cineplex Odeon Material Adverse Effect. Neither
Cineplex Odeon nor any of its Subsidiaries is in violation of any order of any
court, Governmental Entity or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Cineplex Odeon or any
Cineplex Odeon Subsidiary or any of their respective properties or assets is
subject, where such violation would have a Cineplex Odeon Material Adverse
Effect. Cineplex Odeon and the Cineplex Odeon Subsidiaries have obtained all
licenses, permits and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their
business as now conducted, except where the failure to obtain any such item or
to take any such action would not have a Cineplex Odeon Material Adverse
Effect. The copies of Cineplex Odeon's Articles and Bylaws attached as
exhibits to the Cineplex Odeon Disclosure Statement are complete, true and
correct.
Section 2.2. Authorization, Validity and Effect of Agreements
. Cineplex Odeon has the requisite corporate power and authority
to execute and deliver each of the Documents to which it is a party and all
agreements and documents contemplated thereby to which it is a party. Subject
only to Cineplex Odeon Shareholder Approval and Court Approval for the
Arrangement, the consummation of the Arrangement and the consummation by
Cineplex Odeon of the other Transactions to which it is a party has been duly
authorized by all requisite corporate action on the part of Cineplex Odeon,
including, without limitation, all requisite approvals of the Board of
Directors of Cineplex Odeon, and has been recommended to the Board of
Directors of Cineplex Odeon by the special committee of independent directors
(the "Special Committee"). Cineplex Odeon has previously delivered to LTM
copies of resolutions adopted by unanimous vote of the Special Committee
recommending, and of all members of the Board of Directors of Cineplex (other
than any member of the Board of Directors of Cineplex Odeon who reasonably and
in good faith, after considering applicable provisions of law on the basis of
advice of counsel, pursuant to section 132 of the OBCA discloses his or her
interest and does not vote on the resolution authorizing the execution and
delivery of the Documents and the consummation of the Transactions)
authorizing, Cineplex Odeon to execute and deliver the Documents to which it
is a party and to consummate the Transactions to which it is a party, and,
since the adoption thereof, such resolutions have not been amended, modified
or withdrawn in any manner through the date of this Agreement. The Documents
to which it is a party constitute, and all agreements and documents
contemplated thereby to which it is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Cineplex Odeon, enforceable against Cineplex Odeon in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
Section 2.3. Capitalization
. The authorized capital of Cineplex Odeon consists of an
unlimited number of Common Shares ("Cineplex Odeon Common Shares"), an
unlimited number of First Preference Shares ("First Preference Shares") and an
unlimited number of Subordinate Restricted Voting Shares ("SRV Shares"). As
of March 31, 1997, 103,334,157 Cineplex Odeon Common Shares, 73,446,426 SRV
Shares and no First Preference Shares were validly issued and outstanding.
Since such date, no additional shares of Cineplex Odeon capital stock have
been issued, except pursuant to the Cineplex Odeon Stock Option Plan or as
otherwise permitted by Section 5.1. There are no bonds, debentures, notes or
other indebtedness issued and outstanding having the right to vote (or that
are convertible into or exercisable for securities having the right to vote)
on any matters on which Cineplex Odeon's shareholders may vote. All such
issued and outstanding Cineplex Odeon Common Shares and SRV Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights other than the rights of Universal set forth in the Restated
Subscription Agreement between Cineplex Odeon and Universal dated January 15,
1986, as amended through the date of this Agreement (collectively, the
"Restated Subscription Agreement"), and the rights of Cineplex Odeon and
Universal set forth in the Standstill Agreement between Cineplex Odeon and
Universal, dated May 12, 1986, as amended through the date of this Agreement
(collectively, the "Standstill Agreement"). Except for the termination
agreement dated as of the date hereof by and between Universal and Cineplex
Odeon, neither the Restated Subscription Agreement nor the Standstill
Agreement will be amended or modified in any way prior to the Closing Date.
Except as set forth in the Standstill Agreement or as may be granted
subsequent to the date hereof in accordance with Section 5.1 under the
Cineplex Odeon Stock Option Plan, there are no options, warrants, calls or
other rights, agreements or commitments currently outstanding obligating
Cineplex Odeon to issue, deliver or sell any shares or debt securities, or
obligating Cineplex Odeon to grant, extend or enter into any option, warrant,
call or other such right, agreement or commitment. Except as contemplated by
the Documents, upon consummation of the Transactions, LTM will have no
obligation to issue, transfer or sell any shares of Cineplex Odeon or LTM
pursuant to any Cineplex Odeon Benefit Plan.
Section 2.4. Subsidiaries
. Cineplex Odeon owns directly or indirectly all of the
outstanding shares of capital stock of each of Cineplex Odeon's Subsidiaries.
Each of the outstanding shares of capital stock of each of Cineplex Odeon's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by Cineplex Odeon free and clear of all
liens, pledges, security interests, rights of first refusal, options, claims,
hypothecs or other encumbrances (collectively, "Encumbrances") other than
Encumbrances imposed by local law the enforcement of which would not have a
Cineplex Odeon Material Adverse Effect. The following information for each
Cineplex Odeon Subsidiary is set forth on Section 2.4 of the Cineplex Odeon
Disclosure Statement, if applicable: (i) its name and jurisdiction of
incorporation, formation or organization; (ii) its authorized capital stock or
share capital; and (iii) the number of issued and outstanding shares (and
options, warrants or other rights for purchase of shares) of capital stock or
share capital (and, with respect to partnerships, joint ventures, limited
liability companies and similar alternative business entities, analogous
information). Cineplex Odeon has previously provided to LTM true and complete
copies of the charter documents and bylaws for each of Cineplex Odeon's
Significant Subsidiaries. Other than as contemplated by the Documents, there
are no options, warrants, calls or other rights, agreements or commitments
currently outstanding obligating any Subsidiary of Cineplex Odeon to issue,
deliver or sell any shares or debt securities, or obligating any Subsidiary of
Cineplex Odeon to grant, extend or enter into any option, warrant, call or
other such right, agreement or commitment to issue, deliver or sell any equity
or debt securities. There are no bonds, debentures, notes or other
indebtedness issued and outstanding having the right to vote (or that are
convertible into or exercisable for securities having the right to vote) on
any matters on which the shareholders of any Subsidiary of Cineplex Odeon may
vote.
Section 2.5. Other Interests
. Except for interests in the Cineplex Odeon Subsidiaries,
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary owns, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity.
Section 2.6. No Violation
. Neither the execution and delivery by Cineplex Odeon of the
Documents to which it is a party, nor the consummation by Cineplex Odeon of
the Transactions to which it is a party contemplated thereby in accordance
with the terms thereof, will: (i) conflict with or result in a breach of any
provisions of the Articles and Bylaws of Cineplex Odeon; (ii) either
(a) result in a breach or violation of, a default under, or the triggering of
any payment or other material obligations pursuant to, or (b) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the material properties
of Cineplex Odeon or the Cineplex Odeon Subsidiaries under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which Cineplex Odeon or any of
the Cineplex Odeon Subsidiaries is a party, or by which Cineplex Odeon or any
of the Cineplex Odeon Subsidiaries or any of their properties is bound or
affected (except to the extent any of the effects described in this clause
(ii) would not (x) have a Cineplex Odeon Material Adverse Effect, (y) impair
the ability of Cineplex Odeon to perform its obligations under the Documents
in any material respect or (z) delay in any material respect or prevent the
consummation of the Transactions); or (iii) except for the United States and
Canadian federal, provincial, state and local regulatory filings, waivers or
orders required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), the Competition Act (Canada) (the "Competition Act"), the
Investment Canada Act, R.S.C. 1985, c.28 (1st Supp.) as amended ("IC Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), the OBCA, the
securities legislation of each Canadian province and territory, as amended
from time to time, and the rules, regulations, blanket orders and orders
having application to Cineplex Odeon and forms made or promulgated under that
legislation, and the policies, bulletins and notices of regulatory authorities
administering such legislation (collectively, the "Canadian Securities Laws"),
applicable state "Blue Sky" laws, and filings in connection with the
maintenance of qualification to do business in jurisdictions where such
filings are required (collectively, "Regulatory Filings") listed in the
Cineplex Odeon Disclosure Statement, require, to the extent applicable to
Cineplex Odeon, any material consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, the failure to obtain or make that would (x) have a
Cineplex Odeon Material Adverse Effect , (y) impair the ability of Cineplex
Odeon to perform its obligations under the Documents in any material respect
or (z) delay in any material respect or prevent the consummation of the
Transactions.
Section 2.7. Reports
. (a) Cineplex Odeon has previously furnished LTM with each
registration statement, prospectus, report filed with the Securities and
Exchange Commission ("SEC") or proxy statement prepared by it since December
31, 1994, including, without limitation, (i) its Annual Report on Form 10-K
for the years ended December 31, 1995 and December 31, 1996, (ii) its
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and
(iii) its management information circular and proxy included in its Proxy
Statement for the Annual Meeting of Shareholders held on June 26, 1997, each
in the form (including exhibits and any amendments thereto) filed with the SEC
or with the securities commission or other securities regulatory authority in
one or more of the provinces of Canada (collectively, the "Canadian Securities
Authorities") (collectively, the "Cineplex Odeon Reports"). As of their
respective dates, the Cineplex Odeon Reports (i) were prepared in all material
respects in accordance with the applicable requirements of the Securities Act
and the Exchange Act, and the rules and regulations thereunder, or the
Canadian Securities Laws, as the case may be, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
of the consolidated balance sheets of Cineplex Odeon included in or
incorporated by reference into the Cineplex Odeon Reports (including the
related notes and schedules) fairly presents in all material respects the
consolidated financial position of Cineplex Odeon and the Cineplex Odeon
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of Cineplex Odeon included in or incorporated
by reference into the Cineplex Odeon Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations,
retained earnings or cash flows, as the case may be, of Cineplex Odeon and the
Cineplex Odeon Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments that would
not be material in amount or effect), in each case in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP") consistently
applied during the periods involved, except as may be noted therein, in each
case with note disclosure to provide reconciliation to United States generally
accepted accounting principles ("GAAP") to the extent required to comply with
SEC regulations. Except as and to the extent set forth on the consolidated
balance sheet of Cineplex Odeon and the Cineplex Odeon Subsidiaries at March
31, 1997, including all notes thereto, or as set forth in the Cineplex Odeon
Reports, neither Cineplex Odeon nor any of the Cineplex Odeon Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as contemplated by or resulting from this
Agreement or the Transactions or (iii) that would not have a Cineplex Odeon
Material Adverse Effect.
(b) Attached as Section 2.7(b) of the Cineplex Odeon Disclosure
Statement are true and accurate copies of (1) a statement of Cash Flow for
each motion picture theater owned or operated by Cineplex Odeon or any
Cineplex Odeon Subsidiary (the "Cineplex Odeon Theaters"), in the aggregate
and on a theater-by-theater basis for the twelve months ended March 31, 1997
(a "Cash Flow Statement"), (2) statements of Consolidated EBITDA and Adjusted
EBITDA ("EBITDA Statements") of Cineplex Odeon, in each case for the twelve
months ended March 31, 1997, and (3) a statement showing Cineplex Odeon's
Qualified Tangible Net Worth as of March 31, 1997. Cineplex Odeon represents
and warrants that the Consolidated EBITDA and Adjusted EBITDA of Cineplex
Odeon for such twelve-month period and that its Qualified Tangible Net Worth
as of March 31, 1997 were as set forth on Section 2.7(b) of the Cineplex Odeon
Disclosure Statement. Cineplex Odeon has delivered to LTM true and accurate
copies of the following statements used in the determination of Adjusted
EBITDA and Qualified Tangible Net Worth:
(i) a statement listing each theater that has been disposed of
during the twelve-month period ended March 31, 1997, such theater's date of
disposition and the related Cash Flow of such theater from April 1, 1996
through the earlier of (A) one month after its date of disposition and
(B) March 31, 1997;
(ii) a statement listing each theater that has been or is
projected, as of the date of this Agreement, to be closed or disposed of
subsequent to March 31, 1997 but prior to the Closing Date (the "Cineplex
Odeon Negative Theaters"), the actual or, to the extent known, projected
closing or disposition date, as the case may be, and, to the extent known, any
material terms applicable to such disposition, and setting forth the related
Cash Flow of such theater for the twelve months ended March 31, 1997;
(iii) a statement listing each theater opened after April 1, 1996
and before March 31, 1997 and the Cash Flow generated by such theater during
the period from its opening through March 31, 1997 and the projected Cash Flow
for such theater for its first full year of operation. Such statement shall
exclude the cash flow of Cinescapes located at Eau Claire Marketplace,
Calgary, Alberta and at Sharpstown, Houston, Texas (the "Cinescapes");
(iv) a statement listing each capital lease or other agreement
pursuant to which Cineplex Odeon or any Cineplex Odeon Subsidiary had
outstanding a Capital Lease Obligation at March 31, 1997 and, with respect to
such lease or agreement, (A) the amount of payments thereunder during the
twelve months ended March 31, 1997, (B) the amount of payments thereunder
during the twelve months ended March 31, 1997 that relates to real property,
(C) the amount of the obligation in respect thereof as reflected on the
balance sheet of Cineplex Odeon at March 31, 1997 and (D) whether such lease
or other agreement relates to real property or equipment;
(v) a statement listing each component of Debt, including
maturity date, interest rate, payment terms, assets pledged as security (if
any), leasehold mortgages secured by leases (if any) and outstanding balance
as of March 31, 1997;
(vi) a statement listing and fairly presenting in all material
respects each component of Net Working Capital as of March 31, 1997; and
(vii) a Construction Work in Progress Statement.
Each of the foregoing statements as described herein is complete and fairly
presents such data for the periods or dates indicated and contains all
customary year-end adjustments. The foregoing statements may, at Cineplex
Odeon's option, be prepared in accordance with Canadian GAAP, provided such
statements include a reconciliation to GAAP if the amounts shown would be
materially different under GAAP. As used in this Agreement, the following
terms have the meanings set forth below (for the purposes of the definitions
set forth in this Section 2.7(b), the consolidated Subsidiaries of LTM shall
include the Transferred SPE Subsidiaries and the assets subject to the Sony
Asset Transfer):
"Cash Flow" in respect of any motion picture theater shall mean
(a) operating revenue net of applicable sales or admissions taxes (but only to
the extent allocable to the period in question and exclusive of amounts that,
are advance or prepaid items to be amortized in future periods) derived at
such theater during the period in question (i) from the sale of admission
tickets and concession items, (ii) from the rental or sale of home video
materials, (iii) from the rental of such theater, (iv) from the operation of
vending and gaming machines, (v) from pay telephones (net of commissions),
(vi) from advertising (vii) from advance ticket service charges, (viii) from
theater screenings, (ix) from pass service charges, (x) from the sale of movie
related merchandise, (xi) from the operation of Cinescapes, and theater cafes
and (xii) from partnerships minus (b) the sum of the following: (i) cost of
sales including film expenses, advertising expenses and confection and other
concession item purchases, (ii) all direct operating expenses of such theater
(including signs and marquees) including labor; employee benefits; employee
taxes; security; utilities; supplies and services; repairs and maintenance;
insurance; bank collection and deposit charges; marketing costs at the theater
level of group sales; cost of obtaining and marketing operating licenses and
fees; manager and staff awards at the theater level; direct theater special
event expenses (excepting, however, new theater pre-opening expenses); fees
for business licenses and permits; sewer rent and water charges; cleaning
costs; real and personal property taxes, and (iii) all amounts payable under
leases including basic rent, percentage rent, common area charges, insurance
and merchant associations fees; all to be determined on an accrual basis in
accordance with GAAP consistently applied.
"Consolidated EBITDA" of any party means for any period the
Consolidated Net Income for such period increased (a) by the sum of
(i) Consolidated Interest Expense of such party for such period, plus
(ii) Consolidated Income Tax Expense of such party for such period, plus
(iii) the consolidated depreciation and amortization expense deducted in
determining the Consolidated Net Income of such party for such period, less
(b) the pro rata share of any minority interest included in the items
identified in clause (a).
"Adjusted EBITDA" of any party means Consolidated EBITDA for the
twelve months ended March 31, 1997 adjusted as follows:
(i) There shall be added (in the case of negative Cash Flow) and
subtracted (in the case of positive Cash Flow) to Consolidated EBITDA for such
period an amount equal to (A) the absolute value of the positive or negative
Cash Flow generated for the twelve months ended March 31, 1997 for those
theaters that are closed or disposed of or projected to be closed or disposed
of as described in Sections 2.7(b)(i) and (ii) of the Cineplex Odeon
Disclosure Statement in the case of Cineplex Odeon and its Subsidiaries and
Sections 3.7(b)(i) and (ii) of the LTM Disclosure Statement in the case of LTM
and its Subsidiaries, and (B) the projected incremental impact of including
the first full year of operations of those new theaters described in Section
2.7(b)(iii) of the Cineplex Odeon Disclosure Statement in the case of Cineplex
Odeon and its Subsidiaries and Section 3.7(b)(iii) of the LTM Disclosure
Statement in the case of LTM and its Subsidiaries.
(ii) There shall be subtracted from Consolidated EBITDA all lease
payments (without duplication) during the twelve months until March 31, 1997
under Capital Lease Obligations in respect of real property described in
Section 2.7(b)(iv) (B) of the Cineplex Odeon Disclosure Statement or Section
3.7(b)(iv) (B) of the LTM Disclosure Statement, as the case may be.
(iii) In the case of Cineplex Odeon, there shall be added to
Consolidated EBITDA the amount of Canadian capital taxes expensed as a
component of general and administrative expenses for the twelve months ended
March 31, 1997.
"Capital Lease Obligations" of a party means the obligation to pay
rent or other payment amounts under a lease of (or other arrangements
conveying the right to use) real or personal property of such party that is
required to be classified and accounted for as a capital lease or a liability
on a balance sheet of such party in accordance with GAAP. The principal
amount of such obligation shall be the capitalized amount thereof that appear
on a balance sheet of such party in accordance with GAAP.
"Consolidated Income Tax Expense" of any party means for any
period the consolidated provision for income taxes of such party and its
consolidated Subsidiaries for such period determined in accordance with GAAP
applied, in the case of Cineplex Odeon, consistently with the financial
statements included in the Cineplex Odeon Reports and, in the case of LTM,
consistently with the LTM Financial Statements.
"Consolidated Interest Expense" of any party means for any period
the consolidated interest expense included in a consolidated income statement
(net of interest income) of such party and its consolidated Subsidiaries for
such period as reported on such party's financial statements for such period
and determined in accordance with GAAP applied, in the case of Cineplex Odeon,
consistently with the financial statements included in Cineplex Odeon Reports
and, in the case of LTM, consistently with the LTM Financial Statements.
"Consolidated Net Income" of any party means for any period the
consolidated net income (or loss) of such party and its consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
there shall be excluded therefrom (i) gains or losses on asset dispositions by
such party or its consolidated Subsidiaries, (ii) any net income (loss) of a
consolidated Subsidiary that is attributable to a minority interest in such
consolidated Subsidiary, (iii) all extraordinary gains and extraordinary
losses, (iv) all non-cash non-recurring charges and credits during such period
not in the ordinary course of business, (v) with respect to Cineplex Odeon,
other expenses of the type included under the caption "other expense" in its
Annual Report on Form 10-K for the year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and
(vi) the tax effect of any of the items described in clauses (i) through
(v) above.
"Debt" means (without duplication), with respect to any party at
any date, whether or not recourse is to all or a portion of the assets of such
party or any of its Subsidiaries, (i) every obligation of such party or any of
its Subsidiaries for money borrowed, (ii) every obligation of such party or
any of its Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such party or any of its
Subsidiaries with respect to letters of credit (including standby letters of
credit only to the extent drawn upon) bankers' acceptances or similar
facilities issued for the account of such party or any of its Subsidiaries,
(iv) every obligation of such party or any of its Subsidiaries issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course
of business), (v) every Capital Lease Obligation of such party or any of its
Subsidiaries other than Capital Lease Obligations of such party or any of its
Subsidiaries for real property as listed on Section 2.7(b)(iv)(B) of the
Cineplex Odeon Disclosure Statement or Section 3.7(b)(iv)(B) of the LTM
Disclosure Statement, and (vi) every obligation of the type referred to in
clauses (i) through (v) of another person and all dividends of another person
the payment of which, in either case, such party or any of its Subsidiaries
has guaranteed or for which such party is responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or otherwise but
without duplicating Debt to the extent included in such party's Net Working
Capital; provided, that, in the case of joint venture Debt, there shall be
included only that portion of such Debt equal to the party's ratable share in
such joint venture and; provided, further, in the case of LTM, Debt shall not
include the Intercompany Debt or Working Capital Debt or amount of any
dividend declared in respect of the Closing Adjustment.
"Net Working Capital" means with respect to any party at any date
and without duplication (i) the sum of such party's (A) current assets plus
(B) long-term receivables and marketable equity securities at cost plus
(C) long-term prepaid expenses (including Transaction Expenses previously paid
by LTM and Cineplex Odeon) and security deposits or unremitted cash from prior
earnings of any unconsolidated Subsidiaries plus (D) spare parts inventory
minus (ii) the sum of such party's (x) current liabilities (excluding (1) the
current portion of long-term Debt included in Debt and (2) the Intercompany
Debt and Working Capital Debt) plus (y) other liabilities (including pension
and other employee benefit liabilities, including, without limitation, post-
retirement obligations, and excluding Debt and Capitalized Lease Obligations
and, in the case of LTM, excluding any liability in respect of any dividend
declared in respect of the Closing Adjustment) required to appear on the face
of such party's balance sheet plus (z) deferred income and current tax
liabilities, all as determined in accordance with GAAP consistently applied.
For purposes of this definition, "Net Working Capital" in the case of LTM,
shall not include refundable construction advances made to the landlord under
the IMAX Ground Lease. In addition, working capital shall be adjusted further
to exclude the pro rata share of any minority interest in such working
capital. Net Working Capital shall not include any liability for (1) minority
interests or deferred taxes or (2) in respect of LTM's and Cineplex Odeon's
accrued and unpaid Transaction Expenses.
"Qualified Tangible Net Worth" means at any date for any party the
sum of (i) such party's pro rata share of the investment in Construction Work
in Progress as set forth in the Construction Work in Progress Statement of
such party, plus (ii) in the case of Cineplex Odeon, its investment at cost in
the Cinescapes (referred to in Section 2.7(b) (iii)) plus (iii) such party's
Net Working Capital if it is positive, minus (iv) the absolute value of such
party's Net Working Capital if it is negative, minus (v) such party's Debt
minus (vi) in the case of LTM, two times the Cash Flow for the twelve months
ended March 31, 1997 of the Indianapolis Theaters (as defined in Section
3.7(b)(viii), plus (vii) in the case of Cineplex Odeon, US$15 million, in each
case on a consolidated basis determined in accordance with GAAP.
"Transaction Expenses" means, with respect to LTM and Cineplex
Odeon, the out-of-pocket expenses and fees incurred by such party in
connection with the Documents and the Transactions, including (1) up to
US$1,000,000 of compensation expense in respect of bonuses payable to the
individuals listed on Section 2.7(b) of the Cineplex Odeon Disclosure
Statement, (2) severance costs and "stay" bonuses incurred by LTM and Cineplex
Odeon as a result of the Transactions in accordance with a plan jointly
approved by Cineplex Odeon and LTM, (3) fees and expenses of counsel,
financial advisors, accountants and other experts and consultants, (4)
printing and mailing costs, (5) proxy solicitation fees and expenses, and (6)
governmental, court, regulatory and stock exchange filing fees. Transaction
Expenses shall not include (x) any out-of-pocket expenses and fees incurred by
or on behalf of a stockholder of LTM or Cineplex Odeon or (y) liabilities
incurred or amounts paid to third parties in connection with obtaining
consents or waivers from such third parties to the Transactions.
Section 2.8. Litigation
. There are no actions, suits, proceedings or investigations
pending against Cineplex Odeon or the Cineplex Odeon Subsidiaries or, to the
Knowledge of Cineplex Odeon, threatened against Cineplex Odeon or the Cineplex
Odeon Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that would have a
Cineplex Odeon Material Adverse Effect.
Section 2.9. Absence of Certain Changes
. Except as disclosed in the Cineplex Odeon Reports filed with
the SEC prior to the date hereof, or as otherwise contemplated by this
Agreement or resulting from the Transactions, since March 31, 1997,
(a) Cineplex Odeon and the Cineplex Odeon Subsidiaries have conducted their
respective businesses only in the ordinary course of such business (b) except
for (i) facts and circumstances affecting the economy as a whole, (ii) facts
and circumstances affecting the motion picture industry generally, or
(iii) adverse changes in Cash Flow per screen from sales of tickets and
concession items, there has not been a Cineplex Odeon Material Adverse Effect,
and (c) there has not been (x) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or
(y) any material change in its accounting principles, practices or methods.
Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has deferred any
material expenses or accelerated any material income, other than in the
ordinary course of business in accordance with Canadian GAAP consistently
applied, in contemplation of the Transactions.
Section 2.10. Taxes
. (a) Except where the failure to do so would not have a
Cineplex Odeon Material Adverse Effect, Cineplex Odeon and each of the
Cineplex Odeon Subsidiaries (i) has timely filed all United States federal and
state tax returns required to be filed by any of them, all Canadian federal
and provincial tax returns required to be filed by any of them and all
material tax returns required to be filed by any of them under the laws of any
other country, in each case for tax years ended prior to the date of this
Agreement or requests for extensions have been timely filed and any such
request shall have been granted and not expired and all such returns are
correct and complete in all respects, (ii) has paid or accrued in the Cineplex
Odeon Reports all taxes, levies, assessments, charges, withholdings,
reassessments, penalties, interest, fines and any other governmental charges
of any kind (collectively, "Taxes") payable for all periods covered by such
returns, (iii) has properly accrued in the Cineplex Odeon Reports all Taxes
for periods subsequent to the periods covered by such returns and (iv) has
"open" years for United States and Canadian federal income tax returns only as
set forth in the Cineplex Odeon Disclosure Statement. Correct and complete
copies of all tax returns, including schedules thereto, filed by Cineplex
Odeon and the Cineplex Odeon Subsidiaries in respect of the last three
completed fiscal years with all regulatory authorities, including Canadian
federal goods and services tax returns and state, provincial or local sales or
use tax returns filed by Cineplex Odeon or the Cineplex Odeon Subsidiaries,
all assessments or reassessments in respect of such years, all waivers in
respect of such years or any other periods and all written communications and
other documents relating thereto have been made available to LTM prior to the
date of this Agreement.
(b) As of December 31, 1996, for Canadian federal income tax
purposes, Cineplex Odeon's (i) non-capital losses by year incurred and
(ii) undepreciated capital cost in its depreciable property (for each class of
assets set forth thereon), were as set forth in Section 2.10(b) of the
Cineplex Odeon Disclosure Statement. As of December 31, 1996, for Canadian
federal income tax purposes, Cineplex Odeon Quebec's (i) non-capital losses by
year incurred and (ii) undepreciated capital cost in its depreciable property
(for each class of assets set forth thereon), were as set forth in Section
2.10(b) of the Cineplex Odeon Disclosure Statement. As of December 31, 1996,
for US federal income tax purposes, Plitt's restricted and unrestricted net
operating losses were as set forth in Section 2.10 of the Cineplex Odeon
Disclosure Statement by year incurred.
(c) Except where the failure to do so would not have a Cineplex
Odeon Material Adverse Effect, Cineplex Odeon and the Cineplex Odeon
Subsidiaries have withheld, collected and remitted all amounts required to be
withheld, collected or remitted by them in respect of any Taxes, including any
such Taxes in respect of payments made to any past or present employees,
officers or directors, and to any persons not resident in Canada or the United
States (as applicable in the case of Cineplex Odeon and its Canadian
Subsidiaries and Plitt and its U.S. Subsidiaries, respectively), to the proper
tax or other receiving officers within the time prescribed under any
applicable legislation.
Section 2.11. Employee Benefit Plans
. (a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Benefit Plan" means each plan, program, policy, payroll practice,
contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether written or
oral, funded or unfunded, including, without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA and each "multi-
employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
"Cineplex Odeon Benefit Plan" means each Benefit Plan (other than
a Cineplex Odeon Employee Agreement and other than a Cineplex Odeon Canadian
Benefit Plan) which is currently in effect and which is or previously has been
sponsored, maintained, contributed to, or required to be contributed to, or
with respect to which any withdrawal liability (within the meaning of Section
4201 of ERISA) has been incurred, by Cineplex Odeon or any Cineplex Odeon
Subsidiary or any Cineplex Odeon ERISA Affiliate for the benefit of any
Cineplex Odeon Employee, and pursuant to which Cineplex Odeon or any Cineplex
Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate has or may have any
liability, contingent or otherwise.
"Cineplex Odeon Employee" means each current, former, or retired
employee, officer, consultant, independent contractor, agent or director of
Cineplex Odeon or any Cineplex Odeon Subsidiary.
"Cineplex Odeon Employee Agreement" means each management,
employment, severance, consulting, non-compete, confidentiality, or similar
agreement or contract, whether written or oral, between Cineplex Odeon or any
Cineplex Odeon Subsidiary and any Cineplex Odeon Employee pursuant to which
Cineplex Odeon or any Cineplex Odeon Subsidiary has or may have any liability
contingent or otherwise, in excess of US$100,000 in each instance.
"Cineplex Odeon ERISA Affiliate" means each business or entity
which is a member of a "controlled group of corporations," under "common
control" or an "affiliated service group" with Cineplex Odeon within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with Cineplex Odeon under Section 414(o) of the Code, or is under
"common control" with Cineplex Odeon within the meaning of Section 4001(a)(14)
of ERISA.
"Cineplex Odeon Multi-Employer Plan" means each Cineplex Odeon
Benefit Plan which is "multi-employer plan" within the meaning of Sections
3(37) or 4001(a)(3) of ERISA.
"Cineplex Odeon Pension Plan" means each Cineplex Odeon Benefit
Plan (other than a Cineplex Odeon Multi-Employer Plan) which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA.
"Cineplex Odeon Welfare Plan" means each Cineplex Odeon Benefit
Plan which is an "employee welfare benefit plan" within the meaning of Section
3(1) of ERISA and each Cineplex Odeon Canadian Benefit Plan that provides
similar benefits.
"Code" means the Internal Revenue Code of 1986, as amended.
"Department" means the U.S. Department of Labor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended and any regulations promulgated or proposed thereunder.
"IRS" means the Internal Revenue Service.
"PBGC" means the Pension Benefit Guaranty Corporation.
(b) Schedule. Section 2.11(b) of the Cineplex Odeon Disclosure
Statement contains a true and complete list of each Cineplex Odeon Benefit
Plan and each Cineplex Odeon Employee Agreement. Neither Cineplex Odeon nor
any Cineplex Odeon Subsidiary, nor any Cineplex Odeon ERISA Affiliate, has any
plan or commitment, whether legally binding or not, to establish any new
Cineplex Odeon Benefit Plan or Cineplex Odeon Canadian Benefit Plan, to enter
into any Cineplex Odeon Employee Agreement or to modify or to terminate any
Cineplex Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan or Cineplex
Odeon Employee Agreement (except to the extent required by law or to conform
any such Cineplex Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan or
Cineplex Odeon Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to LTM, or as required by this
Agreement), nor has any intention to do any of the foregoing been communicated
to Cineplex Odeon Employees. Section 2.11(b) of the Cineplex Odeon Disclosure
Statement identifies each employee of Cineplex Odeon or any Cineplex Odeon
Subsidiary who received total compensation in excess of US$100,000 in
connection with such employment in 1996 or is expected to receive at least
such amount in 1997 as employment compensation.
(c) Documents. Cineplex Odeon has made available to LTM
(i) current, accurate and complete copies of all material documents embodying
or relating to each Cineplex Odeon Benefit Plan and each Cineplex Odeon
Employee Agreement, including all amendments thereto, and trust or funding
agreements with respect thereto; (ii) the two (2) most recent annual actuarial
valuations, if any, prepared for each Cineplex Odeon Benefit Plan; (iii) the
two (2) most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA in connection with each Cineplex Odeon Benefit Plan
or related trust; (iv) a statement of alternative form of compliance pursuant
to Department Regulation 2520.104-23, if any, filed for each Cineplex Odeon
Benefit Plan that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA for a select group of management or highly compensated
employees; (v) the most recent determination letter received from the IRS, if
any, for each Cineplex Odeon Benefit Plan and related trust which is intended
to satisfy the requirements of Section 401(a) of the Code; (vi) if the
Cineplex Odeon Benefit Plan is funded, the most recent annual and periodic
accounting of Cineplex Odeon Benefit Plan assets; and (vii) the most recent
summary plan description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Cineplex
Odeon Benefit Plan.
(d) Compliance. With respect to each Cineplex Odeon Benefit
Plan except as would not have a Cineplex Odeon Material Adverse Effect
(i) Cineplex Odeon, each Cineplex Odeon Subsidiary and each Cineplex Odeon
ERISA Affiliate have performed all obligations required to be performed by
them under each Cineplex Odeon Benefit Plan and Cineplex Odeon Employee
Agreement and neither Cineplex Odeon nor any Cineplex Odeon Subsidiary, nor
any Cineplex Odeon ERISA Affiliate is in default under or in violation of, any
Cineplex Odeon Benefit Plan, (ii) each Cineplex Odeon Benefit Plan has been
established and maintained in accordance with its terms and in compliance with
all applicable laws, orders, rules and regulations, including but not limited
to ERISA and the Code, including without limiting the foregoing, the timely
filing of all required reports, documents and notices, where applicable, with
the IRS and the Department; (iii) each Cineplex Odeon Benefit Plan intended to
qualify under Section 401 of the Code is, and since its inception has been, so
qualified and a determination letter has been issued by the IRS to the effect
that each such Cineplex Odeon Benefit Plan is so qualified and that each trust
forming a part of any such Cineplex Odeon Benefit Plan is exempt from tax
pursuant to Section 501(a) of the Code and no circumstances exist which would
adversely affect this qualification or exemption; (iv) no non-exempt
"prohibited transaction," within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any Cineplex Odeon Benefit
Plan; (v) no action or failure to act and no transaction or holding of any
asset by, or with respect to, any Cineplex Odeon Benefit Plan has or may
subject Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon
ERISA Affiliate or any fiduciary to any tax, penalty or other liability,
whether by way of indemnity or otherwise; (vi) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the Knowledge of
Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA
Affiliate, threatened or anticipated (other than routine claims for benefits)
against Cineplex Odeon or any Cineplex Odeon Subsidiary or any Cineplex Odeon
ERISA Affiliate or any administrator, trustee or other fiduciary of any
Cineplex Odeon Benefit Plan with respect to any Cineplex Odeon Benefit Plan or
Cineplex Odeon Employee Agreement, or against any Cineplex Odeon Benefit Plan
or against the assets of any Cineplex Odeon Benefit Plan; (vii) no event or
transaction has occurred with respect to any Cineplex Odeon Benefit Plan that
would result in the imposition of any tax under Chapter 43 of Subtitle D of
the Code; (viii) each Cineplex Odeon Benefit Plan can be amended, terminated
or otherwise discontinued without liability to Cineplex Odeon, any Cineplex
Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate; (ix) Cineplex Odeon,
each Cineplex Odeon Subsidiary and each Cineplex Odeon ERISA Affiliate have
made all payments due and owing with respect to all periods through the date
hereof; and (x) no Cineplex Odeon Benefit Plan is under audit or investigation
by the IRS, the Department or the PBGC, no such audit or investigation is
pending and to the Knowledge of Cineplex Odeon, each Cineplex Odeon Subsidiary
and any Cineplex Odeon ERISA Affiliate no such audit or investigation is
threatened.
(e) Pension Plans. With respect to each Cineplex Odeon Pension
Plan, except as would not have a Cineplex Odeon Material Adverse Effect,
(i) no steps have been taken to terminate any Cineplex Odeon Pension Plan now
maintained or contributed to, no termination of any Cineplex Odeon Pension
Plan has occurred pursuant to which all liabilities have not been satisfied in
full, no liability under Title IV of ERISA has been incurred by Cineplex
Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate
that has not been satisfied in full, and no event has occurred and no
condition exists that could reasonably be expected to result in Cineplex
Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA Affiliate
incurring a liability under Title IV of ERISA or could constitute grounds for
terminating any Cineplex Odeon Pension Plan; (ii) no proceeding has been
initiated by the PBGC to terminate any Cineplex Odeon Pension Plan or to
appoint a trustee to administer any Cineplex Odeon Pension Plan; (iii) each
Cineplex Odeon Pension Plan which is subject to Part 3 of Subtitle B of Title
I of ERISA or Section 412 of the Code, has been maintained in compliance with
the minimum funding standards of ERISA and the Code and no such Cineplex Odeon
Pension Plan has incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code and Section 302 of ERISA, whether or not waived;
(iv) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary, nor any
Cineplex Odeon ERISA Affiliate, has sought nor received a waiver of its
funding requirements with respect to any Cineplex Odeon Pension Plan and all
contributions payable with respect to each Cineplex Odeon Pension Plan have
been timely made; (v) within the immediately preceding three years, no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 of ERISA, has occurred with respect to any
Cineplex Odeon Pension Plan; and (vi) the funded status of each Cineplex Odeon
Pension Plan as reflected in the actuarial reports of Watson Wyatt and
Company, with respect to the United States employees, prepared as of January,
1996 are accurate and such reports fairly present the funded status of such
Cineplex Odeon Pension Plan as of the respective date on the basis set forth
therein.
(f) Cineplex Odeon Multi-Employer Plans. Except as would not
have a Cineplex Odeon Material Adverse Effect, as of the Closing Date,
Cineplex Odeon, each Cineplex Odeon Subsidiary and each Cineplex Odeon ERISA
Affiliate will not have completely or partially withdrawn from any Cineplex
Odeon Multi-Employer Plan and will not be subject to any withdrawal liability
as described in Section 4201 of ERISA for withdrawals that have occurred on or
prior to the Closing Date (including, without limitation, any withdrawal
deemed to have occurred as a result of the Transactions). To the Knowledge of
Cineplex Odeon, any Cineplex Odeon Subsidiary or any Cineplex Odeon ERISA
Affiliate and with such exceptions as would not have a Cineplex Odeon Material
Adverse Effect, (i) no Cineplex Odeon Multi-Employer Plan fails to qualify
under Section 401(a) of the Code, is insolvent or is in reorganization within
the meaning of Part 3 of Subtitle E of Title IV of ERISA; and (ii) no
condition exists which presents a risk of any Cineplex Odeon Multi-Employer
Plan becoming insolvent or going into reorganization. Except as would not
have a Cineplex Odeon Material Adverse Effect, no event has occurred which
could result in a "partial withdrawal" under Section 4205 of ERISA with
respect to any Cineplex Odeon Multi-Employer Plan and neither Cineplex Odeon,
any Cineplex Odeon Subsidiary nor any Cineplex Odeon ERISA Affiliate has any
contingent liability under Section 4204 of ERISA.
(g) No Post-Employment Obligations. Except as would not have a
Cineplex Odeon Material Adverse Effect, neither Cineplex Odeon, any Cineplex
Odeon Subsidiary nor any Cineplex Odeon ERISA Affiliate (i) maintains or
contributes to any Cineplex Odeon Benefit Plan or Cineplex Odeon Canadian
Benefit Plan which provides, or has any liability to provide, life insurance,
medical, severance or other Cineplex Odeon Employee welfare benefits to any
Cineplex Odeon Employee upon his retirement or termination of employment,
except as may be required by Section 4980B of the Code or Applicable Law; or
(ii) has ever represented, promised or contracted (whether in oral or written
form) to any Cineplex Odeon Employee in the United States (either individually
or to Cineplex Odeon Employees as a group) that such Cineplex Odeon
Employee(s) would be provided with life insurance, medical, severance or other
Cineplex Odeon Employee welfare benefits upon their retirement or termination
of employment, except to the extent required by Section 4980B of the Code or
Applicable Law.
(h) Canadian Plans. Section 2.11(h) of the Cineplex Odeon
Disclosure Statement contains a true and complete list of each retirement,
pension, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation,
benefits relating to legal services, unemployment benefits, vacation,
incentive or other compensation plan or arrangement, or other employee
benefit, other than Cineplex Odeon Benefit Plans (each, a "Cineplex Odeon
Canadian Benefit Plan") that is currently in effect and is now or previously
has been sponsored, maintained, contributed to or required to be contributed
to, by Cineplex Odeon or by any Cineplex Odeon Subsidiary in Canada or any
province thereof, for the benefit of Cineplex Odeon Employees or former
Cineplex Odeon Employees and their spouses, dependents or beneficiaries.
Cineplex Odeon has made available to LTM (i) current, accurate and complete
copies of all documents embodying or relating to each Cineplex Odeon Canadian
Benefit Plan including all amendments thereto, and written interpretations
thereof and trust or funding agreements with respect thereto, (ii) the two
most recent annual reports, if any, for each Cineplex Odeon Canadian Benefit
Plan, (iii) the two most recent actuarial valuations, if any, prepared for
each Cineplex Odeon Canadian Benefit Plan; (iv) the most recent summary plan
descriptions and determination letters for each Cineplex Odeon Canadian
Benefit Plan; (v) if the Cineplex Odeon Canadian Benefit Plan is funded, the
most recent accounting of the Cineplex Odeon Canadian Benefit Plan assets;
(vi) all material communications to any Cineplex Odeon Employee or Employees
relating to each Cineplex Odeon Canadian Benefit Plan; and (vii) all opinions
Cineplex Odeon has received from legal counsel, accountants and actuaries
relating to contribution holidays or surplus withdrawal from any of the
Cineplex Odeon Canadian Pension Plans. Except as would not have a Cineplex
Odeon Material Adverse Effect (1) Cineplex Odeon and each Cineplex Odeon
Subsidiary, as applicable, is in compliance with each law, statute, ordinance,
rule, code or regulation enacted or promulgated, or order, directive,
instruction or other guideline or policy having the force of law and
applicable to the Cineplex Odeon Canadian Benefit Plans ("Applicable Law")
imposed or administered by any Canadian federal, provincial or local executive
office, legislature, governmental agency or ministry, commission, or
administrative or regulatory authority or instrumentality (a "Governmental
Entity"); (2) with respect to each Cineplex Odeon Canadian Benefit Plan that
provides pension or retirement benefits or obligations to current or former
Cineplex Odeon Employees or their spouses, dependents and beneficiaries
(collectively, the "Cineplex Odeon Canadian Pension Plans") identified in
Section 2.11(h) of the Cineplex Odeon Disclosure Statement, no provision
concerning any Cineplex Odeon Canadian Pension Plan is contained in any
collective bargaining agreement affecting any current or former employees of
Cineplex Odeon or any Cineplex Odeon Subsidiary; (3) each Cineplex Odeon
Canadian Pension Plan is registered under, and is in compliance in all
material respects with, Applicable Law; (4) all contributions to, and payments
from, each Cineplex Odeon Canadian Benefit Plan that may have been required to
be made in accordance with the terms of such Cineplex Odeon Canadian Benefit
Plan and, where applicable, Applicable Laws that govern such Cineplex Odeon
Canadian Benefit Plan, have been made in a timely manner and each Cineplex
Odeon Canadian Benefit Plan has otherwise at all times been administered in
accordance with its terms and Applicable Law; (5) except as disclosed in the
Cineplex Odeon Reports, no contribution holidays have been taken with respect
to any of the Cineplex Odeon Canadian Pension Plans and no surplus has been
withdrawn from any of the Cineplex Odeon Canadian Pension Plans; (6) all
contribution holidays taken and withdrawals of surplus made from each Cineplex
Odeon Canadian Pension Plan have been in accordance with the terms of such
plan and Applicable Law; (7) all material reports, taxation returns and
similar documents with respect to any Cineplex Odeon Canadian Benefit Plan
required to be filed with any Governmental Entity or distributed to any
Cineplex Odeon Canadian Benefit Plan participant have been duly filed on a
timely basis or distributed; (8) there are no pending investigations by any
Governmental Entity involving or related to any Cineplex Odeon Canadian
Benefit Plan, no claims (except for claims for benefits payable in the normal
operation of the Cineplex Odeon Canadian Benefit Plan), suits or proceedings
pending or threatened, against any Cineplex Odeon Canadian Benefit Plan or
asserting any rights or claims for benefits under any Cineplex Odeon Canadian
Benefit Plan that could give rise to an unfunded liability nor are there any
facts that could give rise to an unfunded liability in the event of any such
investigation, claim, suit or proceeding; (9) no notice has been received by
Cineplex Odeon or any Cineplex Odeon Subsidiary of any complaint or other
proceeding of any kind involving Cineplex Odeon or any Cineplex Odeon
Subsidiary or any of their employees or other potential claimants before any
Governmental Entity relating to any Cineplex Odeon Canadian Benefit Plan or to
Cineplex Odeon; (10) the funded status of each Cineplex Odeon Canadian Pension
Plan as reflected in the actuarial report of William M. Mercer prepared as of
December 31, 1996 is accurate and such report fairly presents the status of
such Cineplex Odeon Canadian Pension Plan on the basis set forth therein, and
no event has occurred since the date of that report that would materially
adversely affect the funded status of any Cineplex Odeon Canadian Pension
Plan; and (11) there exists no condition or set of circumstances in connection
with which LTM or Cineplex Odeon would be subject to any unfunded liability
under the terms of any Cineplex Odeon Canadian Pension Plan or under any
Applicable Law with respect thereto.
(i) Effect of Transactions. Section 2.11(i) of the Cineplex
Odeon Disclosure Statement contains a true and complete list of every Cineplex
Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan and every Cineplex
Odeon Employee Agreement with respect to which payments or benefits under such
plan or agreement would increase or accelerate by reason of the Transactions.
Except as would not have a Cineplex Odeon Material Adverse Effect, (i) the
execution of this Agreement and the performance by Cineplex Odeon of its
obligations hereunder will not (either alone or upon the occurrence of any
additional or subsequent events) (x) constitute an event under any Cineplex
Odeon Benefit Plan, Cineplex Odeon Canadian Benefit Plan, Cineplex Odeon
Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Cineplex Odeon Employee, or (y) result in
the triggering or imposition of any restrictions or limitations on the right
of Cineplex Odeon to amend or terminate any Cineplex Odeon Benefit Plan or
Cineplex Odeon Canadian Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
Applicable Law and applicable taxes; and (ii) no payment or benefit which will
or may be made by Cineplex Odeon, any Cineplex Odeon Subsidiary, or any of
their respective affiliates, with respect to any Cineplex Odeon U.S. Employee
will be characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code.
(j) Employment Matters. Except as would not have a Cineplex
Odeon Material Adverse Effect, Cineplex Odeon and each Cineplex Odeon
Subsidiary (i) is in compliance with all applicable Canadian federal,
provincial and local laws, rules and regulations, United States federal, state
and local laws, rules and regulations and foreign national, state and local
laws, rules and regulations respecting employment, employment practices,
labor, terms and conditions of employment and wages and hours, in each case,
with respect to Cineplex Odeon Employees; (ii) has withheld and remitted, as
required, all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Cineplex Odeon Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable (other than for
amounts accrued but not yet payable) for any payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or social insurance,
employment insurance, Canada pension plan payment or other benefits for
Cineplex Odeon Employees.
(k) Labor. Except as would not have a Cineplex Odeon Material
Adverse Effect or as otherwise disclosed in the Cineplex Odeon Reports or the
Cineplex Odeon Disclosure Statement, no work stoppage or labor strike against
Cineplex Odeon or any Cineplex Odeon Subsidiary by Cineplex Odeon Employees is
pending or, to the Knowledge of Cineplex Odeon, threatened. Except as
disclosed in the Cineplex Odeon Reports or Cineplex Odeon Disclosure Statement
or as would not otherwise have a Cineplex Odeon Material Adverse Effect,
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary (i) is involved in
or, to the Knowledge of Cineplex Odeon, threatened with any labor dispute,
grievance, or litigation relating to labor matters involving any Cineplex
Odeon Employees, including, without limitation, violation of any federal,
state, provincial or local labor, safety or employment laws (domestic or
foreign), charges of unfair labor practices or discrimination complaints;
(ii) has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act, the Railway Labor Act, the Labor Relations Act
(Ontario) or any other similar applicable legislation; or (iii) is presently,
nor has been in the past a party to, or bound by, any collective bargaining
agreement or union contract with respect to Cineplex Odeon Employees, and no
such agreement or contract is currently being negotiated by Cineplex Odeon or
any Cineplex Odeon Subsidiary. Except as disclosed on the Cineplex Odeon
Reports or Cineplex Odeon Disclosure Statement, no Cineplex Odeon Employees
are currently represented by any labor union for purposes of collective
bargaining and no activities the purpose of which is to achieve such
representation of all or some of such Cineplex Odeon Employees are ongoing or,
to the Knowledge of Cineplex Odeon, threatened.
(l) 501(c)(9) Trust. Except as would not have a Cineplex Odeon
Material Adverse Effect, no Cineplex Odeon Benefit Plan or Cineplex Odeon
Employee Agreement is funded by a trust described in Section 501(c)(9) of the
Code.
(m) Welfare Plan Funding. Except as would not have a Cineplex
Odeon Material Adverse Effect with respect to each Cineplex Odeon Welfare
Plan, all material claims incurred (including claims incurred but not
reported) by Cineplex Odeon Employees thereunder for which Cineplex Odeon is,
or will become, liable are (i) insured pursuant to a contract of insurance
whereby the insurance company bears any risk of loss with respect to such
claims; (ii) covered under a contract with a health maintenance organization
(an "HMO") pursuant to which the HMO bears the liability for such claims; or
(iii) reflected as a liability or accrued for on the Cineplex Odeon Financial
Statements to the extent required by Canadian GAAP.
(n) Controlled Group Liability. Except as would not have a
Cineplex Odeon Material Adverse Effect, Cineplex Odeon is not (i) a member of
a "controlled group of corporations," under "common control" or an "affiliated
service group" within the meanings of Sections 414(b), (c) or (m) of the Code
with any entity other than Cineplex Odeon Subsidiaries, (ii) required to be
aggregated under Section 414(o) of the Code; or (iii) under "common control,"
within the meaning of Section 4001(a)(14) of ERISA, and no Benefit Plan (other
than Cineplex Odeon Benefit Plans, Cineplex Odeon Canadian Benefit Plans and
Cineplex Odeon Employee Agreements) is now or previously has been sponsored,
maintained, contributed to or required to be contributed to, by Cineplex Odeon
or any Cineplex Odeon Subsidiary.
Section 2.12. No Brokers
. Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
entered into any contract, arrangement or understanding with any person or
firm that may result in the obligation of Cineplex Odeon, any Cineplex Odeon
Subsidiary or LTM to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement, any of the other Documents or the consummation of the transactions
contemplated hereby or thereby, except that the Special Committee has retained
Morgan Stanley & Co. Incorporated ("Morgan Stanley") as its financial advisor,
the arrangements with which have been disclosed in writing to LTM prior to the
date hereof. Other than the foregoing arrangements, Cineplex Odeon is not
aware of any claim against Cineplex Odeon for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement, any of the other Documents or the
consummation of the Transactions.
Section 2.13. Opinions of Financial Advisor, Etc
. The Special Committee has received the opinion of Morgan
Stanley, to the effect that, as of the date hereof, the consideration to be
received by the shareholders of Cineplex Odeon, other than Universal and the
Claridge Group, upon consummation of the Transactions is fair from a financial
point of view.
Section 2.14. Environmental Matters
. (a) Except as set forth in the Cineplex Odeon Reports or the
Cineplex Odeon Disclosure Statement or as would not have a Cineplex Odeon
Material Adverse Effect:
(i) each of Cineplex Odeon and the Cineplex Odeon Subsidiaries
has been and is in compliance in all respects with all applicable
Environmental Laws;
(ii) each of Cineplex Odeon and the Cineplex Odeon Subsidiaries
has obtained, and is in compliance with, all permits, licenses,
authorizations, approvals, registrations and other governmental consents
required for their operations as currently conducted by applicable
Environmental Laws ("Environmental Permits"), including, without limitation,
those regulating emissions, discharges, or releases of Hazardous Substances;
(iii) to the Knowledge of Cineplex Odeon, the Cineplex Odeon Real
Properties are free of any Hazardous Substances (except those present,
maintained, used, stored, discharged or released in compliance in all respects
with Environmental Laws) and free of all contamination, including, but not
limited to groundwater contamination, arising from, relating to, or resulting
from any Hazardous Substances, that exceeds any applicable clean-up levels or
any level at which any report or other action by Cineplex Odeon or any
Cineplex Odeon Subsidiary is required under any applicable Environmental Law;
(iv) there are no claims, notices, civil, criminal or
administrative actions, suits, orders or proceedings pending or, to the
Knowledge of Cineplex Odeon, threatened against Cineplex Odeon or any Cineplex
Odeon Subsidiary that are based on or related to any Environmental Matters or
the failure to have any required Environmental Permits, and, to the Knowledge
of Cineplex Odeon, there are no investigations pending or threatened against
Cineplex Odeon or any Cineplex Odeon Subsidiary that are based on or related
to any Environmental Matters or the failure to have any Environmental Permits;
(v) to the Knowledge of Cineplex Odeon, there are no past or
present conditions, events or circumstances, (a) that may reasonably be
expected to interfere with or prevent continued material compliance by any of
Cineplex Odeon or the Cineplex Odeon Subsidiaries with Environmental Laws and
the requirements of Environmental Permits, (b) that may reasonably be expected
to give rise to any liability or other obligation under any Environmental Laws
that may require any of Cineplex Odeon or the Cineplex Odeon Subsidiaries to
incur any Environmental Costs, or (c) that may reasonably be expected to form
the basis of any claim, action, suit, order, proceeding, hearing,
investigation or inquiry against or involving any of Cineplex Odeon or the
Cineplex Odeon Subsidiaries based on or related to any Environmental Matter or
which could reasonably be expected to require any of Cineplex Odeon and the
Cineplex Odeon Subsidiaries to incur any Environmental Costs; and
(vi) except to the extent such request or requirement has been
fully complied with, since January 1, 1990, neither Cineplex Odeon nor any
Cineplex Odeon Subsidiary has been requested or required by any Governmental
Entity to perform any investigatory or remedial activity or other action in
connection with any Environmental Matter.
(b) Cineplex Odeon has made available to LTM each environmental
audit, assessment, study, report or other information relating in any material
respect to Cineplex Odeon or any Cineplex Odeon Subsidiary in the possession
or under the control of Cineplex Odeon or any Cineplex Odeon Subsidiary.
(c) For the purposes of this Agreement, the following terms
shall have the meanings indicated:
"Environmental Costs" means, to the extent applicable, without
limitation, any actual or potential cleanup costs, remediation, removal,
containment, control or other response costs (which, without limitation, shall
include costs to cause a party to come into compliance with Environmental
Laws), investigation costs (including, without limitation, fees of
consultants, counsel, and other experts in connection with any environmental
investigation, testing, audits or studies), losses, liabilities or obligations
(including, without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including, without limitation, any actual,
punitive or consequential damages under any statutory laws, common law cause
of action or contractual obligations or otherwise, including, without
limitation, damages (a) of third parties for personal injury or property
damage, or (b) to natural resources), civil or criminal fines or penalties,
judgments, and amounts paid in settlement arising out of or relating to or
resulting from any Environmental Matter.
"Environmental Laws" means, to the extent applicable, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. 11001, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq.; the Toxic
Substances Control Act, 15 U.S.C. 2601, et seq.; the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. 136, et seq.; the Clean Air Act,
42 U.S.C. 7401, et seq.; the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. 1251, et seq.; the Safe Drinking Water Act, 42
U.S.C. 300f, et seq.; the Occupational Safety and Health Act, 29 U.S.C.
651, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
1801, et seq.; the Canadian Environmental Protection Act; the
Transportation of Dangerous Goods Act, 1992 (Canada); the Fisheries Act
(Canada); the Environmental Protection Act (Ontario); the Ontario Water
Resources Act; the Occupational Health and Safety Act (Ontario); as any of the
above statutes have been amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other
international, foreign, federal, state, provincial or local treaty, law,
statute, ordinance, by-law, rule or regulation governing Environmental
Matters, as the same have been amended from time to time, including any common
or civil law cause of action providing any right or remedy relating to
Environmental Matters, all indemnity agreements and other contractual
obligations (including leases, asset purchase and merger agreements) relating
to Environmental Matters, the requirements of all applicable Environmental
Permits, and all applicable and legally binding judicial and administrative
decisions, directives, judgments, orders, and decrees relating to
Environmental Matters.
"Environmental Matter" means any matter arising out of, relating
to, or resulting from pollution, contamination, protection of the environment,
human health or safety, health or safety of employees, sanitation, and any
matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Substances into the air (indoor and
outdoor), surface water, groundwater, soil, land surface or subsurface,
buildings, facilities, real or personal property or fixtures or otherwise
arising out of, relating to, or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, release
or threatened release of Hazardous Substances.
"Hazardous Substances" means any pollutants, contaminants, toxic,
deleterious or hazardous substances, materials, wastes, constituents,
compounds, chemicals (including, without limitation, petroleum or any by-
products or fractions thereof, any form of natural gas, lead, asbestos and
asbestos-containing materials, building construction materials and debris,
polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon and
other radioactive elements, infectious, carcinogenic, mutagenic, or etiologic
agents, pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by any Environmental Laws.
Section 2.15. Real Property; Leases.
(a) Section 2.15(a) of the Cineplex Odeon Disclosure Statement
lists all real property leased by Cineplex Odeon and all Cineplex Odeon
Subsidiaries (the "Cineplex Odeon Leased Real Properties") and all real
property owned by Cineplex Odeon and all Cineplex Odeon Subsidiaries (the
"Cineplex Odeon Owned Real Properties," and together with the Cineplex Odeon
Leased Real Properties, the "Cineplex Odeon Real Properties"). For each
Cineplex Odeon Leased Real Property, Section 2.15(a) of the Cineplex Odeon
Disclosure Statement sets forth the following information as at the date of
this Agreement: (i) the address of the property; (ii) the name of the
landlord, manager or payee, as appropriate; (iii) the name of the tenant;
(iv) the date of the lease and all amendments thereto; (v) the current
expiration date of such lease; (vi) any options to extend the term of such
lease; (vii) if a theater site, the number of screens at such theater;
(viii) whether the theaters on such site are operating or non-operating;
(ix) whether the landlord's consent is required as a result of the
Transactions; (x) any landlord right to terminate the lease (other than
arising from a default, casualty, or condemnation); (xi) with respect only to
those theaters located in markets where LTM has theaters, any tenant radius
restrictions set forth in such lease; (xii) whether the landlord has sent to
the tenant under such lease a notice of default or a notice of termination of
such lease which remains uncured; (xiii) whether the tenant under such lease
is obligated to purchase such property; (xiv) whether such lease is required
to be accounted for under GAAP as a capitalized lease; (xv) whether there are
any leasehold mortgages secured by such lease and whether the consent of the
mortgagee is required in connection with the Transactions; and (xvi) whether
the rent, common area charges, taxes or other payments due under such lease
are in arrears in excess of 60 days. For each Cineplex Odeon Owned Real
Property, Section 2.15(a) of the Cineplex Odeon Disclosure Statement lists as
at the date of this Agreement: (i) the address for each such property and
(ii) whether the consent of any mortgage or lien holder of such property is
required as a result of the Transactions. Except for such exceptions as would
not have a Cineplex Odeon Material Adverse Effect and except for (A) the items
set forth in Section 2.15(a) of the Cineplex Odeon Disclosure Statement;
(B) zoning and planning restrictions, easements, permits and other
restrictions or limitations of public record affecting the use of such
properties; provided, that individually and in the aggregate, such
restrictions, easements and permits do not materially impair the use of such
properties as motion picture theaters or for such other purposes as such
properties are currently being used; (C) mechanic's liens or other similar
Encumbrances arising in the ordinary course of business and securing
obligations not yet due and payable; and (D) other Encumbrances that
individually and in the aggregate do not materially impair the ability of the
owner to obtain financing by using such assets as collateral, (I) Cineplex
Odeon and the Cineplex Odeon Subsidiaries have good and marketable title and,
with respect to real property located in the United States, insurable title to
the Cineplex Odeon Owned Real Properties, (II) properties are free and clear
of all mortgages, liens, leases, tenancies, security interests, options to
purchase or lease or rights of first refusal and (III) except for any matter
of public record affecting the use of such properties, such properties are
free and clear of all covenants, conditions, Encumbrances, restrictions,
rights-of-way, easements, servitudes, judgments or other imperfections of
title. The items listed in subsections (A) through (D) above are hereinafter
collectively referred to as the "Cineplex Odeon Permitted Encumbrances." With
respect to the Cineplex Odeon Leased Real Properties, to the Knowledge of
Cineplex Odeon as at the date of this Agreement, all such leases are in full
force and effect. Except for such exceptions as would not have a Cineplex
Odeon Material Adverse Effect, (i) all such leases are the result of bona-fide
arm's-length negotiations between the parties and (ii) Cineplex Odeon and the
Cineplex Odeon Subsidiaries are not in arrears in the payment of rents, common
area charges, real estate taxes or other amounts due under any such leases in
excess of 60 days. As at the date of this Agreement, except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, with
respect to each Cineplex Odeon Leased Real Property, so long as the tenant
performs all of its obligations under such lease within applicable notice and
grace periods, (i) the rights of Cineplex Odeon or any Cineplex Odeon
Subsidiary under such lease cannot be legally terminated by the landlord
thereof and (ii) Cineplex Odeon's or such Subsidiary's possession of such
Cineplex Odeon Leased Real Property and the use and enjoyment thereof cannot
be legally disturbed by any landlord. Except for such exceptions as would not
have a Cineplex Odeon Material Adverse Effect, Cineplex Odeon is not obligated
to purchase any Cineplex Odeon Leased Real Property, and no Cineplex Odeon
Leased Real Property is required to be accounted for under GAAP as a
capitalized lease. To the Knowledge of Cineplex Odeon, except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, there
are no intended public improvements that will result in any material charge
being levied against, or in the creation of any Encumbrances upon the Cineplex
Odeon Owned Real Properties or any portion thereof, and there are no options,
rights of first refusal, rights of first offer or other similar rights with
respect to the Cineplex Odeon Owned Real Properties.
(b) The leases pursuant to which Cineplex Odeon or any Cineplex
Odeon Subsidiary leases or has the right to possess the Cineplex Odeon Leased
Real Properties have not been amended or modified since March 31, 1996 except
as set forth in Section 2.15(a) of the Cineplex Odeon Disclosure Statement,
except where such amendment or modification would not have a Cineplex Odeon
Material Adverse Effect.
(c) Except for such exceptions as would not have a Cineplex
Odeon Material Adverse Effect:
(i) Cineplex Odeon or a Cineplex Odeon Subsidiary is the owner
of, and no other person, firm or corporation has any interest as owner in or
to, or any right to occupancy in, any Cineplex Odeon Owned Real Property;
(ii) Cineplex Odeon or a Cineplex Odeon Subsidiary is the tenant
or lessee with respect to, and no other person, firm or corporation has any
interest as tenant or lessee in or to, or any right to occupancy in, any
Cineplex Odeon Leased Real Property;
(iii) there are no persons, firms or corporations currently in
possession of the Cineplex Odeon Real Properties other than Cineplex Odeon and
the Cineplex Odeon Subsidiaries, nor are there any leases, subleases,
licenses, concessions or other agreements permitting anyone other than
Cineplex Odeon and the Cineplex Odeon Subsidiaries, to use, manage, occupy or
possess any Cineplex Odeon Real Property or any part thereof;
(iv) (A) neither Cineplex Odeon nor any Cineplex Oden Subsidiary
has received any written notes or notices of violation of law or local or
municipal ordinances or orders, or regulations, presently noted in or issued
by federal, state, local or municipal departments having jurisdiction against
or affecting any of the Cineplex Odeon Real Properties that remain uncured and
(B) to the Knowledge of Cineplex Odeon the current maintenance, operation, use
and occupancy of the Cineplex Odeon Real Properties does not violate any
building, zoning, health, environmental, fire or similar law, ordinance, order
or regulation (other than the Americans with Disabilities Act of 1990, 42
U.S.C. 12183, as amended (the "ADA")) and comparable state and municipal
legislation), or the terms and conditions of any of the applicable leases;
(v) to the Knowledge of Cineplex Odeon, the Cineplex Odeon Real
Properties do not violate the provisions of the ADA and comparable state and
municipal legislation based upon the reasonable interpretation and
understanding of Cineplex Odeon of the provisions of the ADA and such other
legislation and any reference to compliance with laws, or any other reference
to like effect, contained in this Agreement with respect to the Cineplex Odeon
Real Properties shall, solely as it relates to compliance with the ADA, be
deemed to be qualified to the Knowledge of Cineplex Odeon in addition to any
other qualifications set forth in this Agreement as may be applicable, and
neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has received any
written notice of violation of the ADA and/or comparable state and municipal
legislation against or affecting the Cineplex Odeon Real Properties that
remain uncured;
(vi) (A) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary
has received written notice of its failure to obtain any necessary certificate
of occupancy (or similar permit) for use of each of the theaters located on
the Cineplex Odeon Real Properties as a motion picture theater, (B) to
Cineplex Odeon's Knowledge, either Cineplex Odeon or a Cineplex Odeon
Subsidiary possesses the certificate of occupancy and all other certificates,
approvals, permits and licenses from any Governmental Entity having
jurisdiction over such theaters that are necessary to permit the lawful use
and operation of such theaters as motion picture theaters (the "Cineplex Odeon
Permits"), and all of the same are valid and in full force and effect, and
(C) to the Knowledge of Cineplex Odeon, there exists no threatened revocation
of any certificate of occupancy or any of the Cineplex Odeon Permits;
(vii) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
received any written notice that it has failed to obtain any necessary sign
permits, illuminated sign permits, and marquee permits from the appropriate
Governmental Entity having jurisdiction over existing signs and marquees at
the Cineplex Odeon Real Properties, and, to the Knowledge of Cineplex Odeon,
such permits are valid and in full force and effect and there exists no
threatened revocation of any such permits;
(viii) Cineplex Odeon has no Knowledge of any action pending
or threatened to adversely change the zoning or building ordinances affecting
any of the Cineplex Odeon Real Properties, or of any pending or threatened
condemnation of any of the Cineplex Odeon Real Properties;
(ix) neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
received any written notice from any insurance carrier of any work required to
be performed at any theater located on the Cineplex Odeon Real Properties or
the real property on which such theater is located that has not been performed
as of the date hereof or of any defects or inadequacies in a Cineplex Odeon
Theater that have not been corrected as of the date hereof and which if not
corrected could result in termination of insurance coverage or a material
increase in the cost thereof;
(x) with respect to all operating Cineplex Odeon Theaters, all
water, sewer, gas, electricity, telephone and other utilities required for the
operation of each such theater located on a Cineplex Odeon Real Property are
installed and operating and all installations and connection charges charged
to Cineplex Odeon or any Cineplex Odeon Subsidiary pursuant to applicable
invoices that are not the subject of a good faith dispute have been paid in
full and any installation and connection charges that are properly charges to
Cineplex Odeon or such Cineplex Odeon Subsidiary after the date hereof and
prior to the Closing Date shall be paid in full, except, in each case, for
payments that are current and will be paid in the ordinary course of business;
and
(xi) Cineplex Odeon has delivered to LTM a statement of theaters
currently under construction, or with respect to which construction is
pending, planned, contemplated or under study setting forth (A) a brief
description of each theater, including location, budget and related financial
projections, lease terms, if any, capacity, planned equipment and assumptions
regarding attendance, (B) a statement of costs relating to planning,
developing, constructing, equipping and supplying each such theater ("Theater
Costs"), (C) the total amount invested in such project as of March 31, 1997,
(D) an estimate of the amount that will be invested in such project as of
February 28, 1998 and (E) an estimate of the total amount that will be
invested in such project upon its completion (a "Construction Work in Progress
Statement").
Section 2.16. Operating Assets
. Except for such exceptions as would not have a Cineplex Odeon
Material Adverse Effect, (a) Cineplex Odeon has good and marketable title or
leasehold title or a valid license to all of the personal property used, or
held for use, in connection with the theaters operated on the Cineplex Odeon
Real Properties (other than gaming and vending machines used in the ordinary
course of business), subject to no Encumbrance other than the Cineplex Odeon
Permitted Encumbrances; (b) no financing statement under the Uniform
Commercial Code or under the personal property securities laws and regulations
of any province or territory of Canada or any similar applicable statute has
been filed in any jurisdiction except as contemplated in the Cineplex Odeon
Disclosure Statement, and neither Cineplex Odeon nor any Cineplex Odeon
Subsidiary has signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing statement;
(c) each theater located on a Cineplex Odeon Real Property and each of the
items of personal property used or held for use in, or in connection with,
each such theater, including without limitation, seating, projection equipment
and screens, are in good operating condition, subject to normal wear and tear,
and are fit for the use for which they are intended and to which they are
presently devoted; (d) except for closed theaters, each theater located on a
Cineplex Odeon Real Property, together with the related items of personal
property located therein, constitutes a fully operable motion picture theater
and is sufficient to permit Cineplex Odeon to operate the business as
currently being conducted therein; and (e) except as contemplated by this
Agreement, since March 31, 1997, neither Cineplex Odeon nor any Cineplex Odeon
Subsidiary has sold, removed or transferred any equipment or property from any
theater located on a Cineplex Odeon Real Property, except in the ordinary
course of business and so long as such equipment or property has been replaced
prior to the date hereof.
Section 2.17. Contracts
. Cineplex Odeon has delivered to LTM a statement of all
contracts, agreements, leases (other than leases with respect to the Cineplex
Odeon Leased Real Property and film rental contracts in the ordinary course of
business), mortgages, notes, bonds, indentures, licenses, intellectual
property rights and other obligations, oral or written express or implied,
involving the payment (or the provision of goods and/or services having value)
in each case of more than US$500,000 per annum to which Cineplex Odeon or any
Cineplex Odeon Subsidiary is bound as of the date of this Agreement,
including, without limitation, contracts relating to employment, collective
bargaining, consultants, independent contractors, agents, advertising,
concessions, as well as contracts relating to any partnerships and joint
ventures and contracts restricting the ability to operate theaters in any
geographical area (collectively, the "Cineplex Odeon Contracts"), excluding
(a) those that are terminable without penalty by Cineplex Odeon within 30 days
upon the giving of notice and (b) those directly relating to the construction
of theaters currently under construction, or with respect to which
construction is pending, planned, contemplated or under study as set forth on
Cineplex Odeon's Construction Work in Progress Statement; such statement sets
forth with respect to each Cineplex Odeon Contract the names of the parties
thereto. True and complete copies of all of the Cineplex Odeon Contracts, or,
in the case of oral Cineplex Odeon Contracts, true and complete descriptions
thereof, have been made available to LTM. Section 2.17 of the Cineplex Odeon
Disclosure Statement summarizes the material terms of each Cineplex Odeon
Contract that provides for (a) the payment of refunds or similar arrangements
if specified conditions are not satisfied or the volume of specified services
provided during a reference period is not continued at minimum levels and/or
(b) supplemental payments if specified conditions are satisfied or the volume
of specified services provided during a reference period exceeds a specified
threshold. In addition to the foregoing, (x) prior to the date hereof,
Cineplex Odeon has provided to LTM a summary of the material terms of the
Cineplex Odeon Contracts and arrangements with Universal and Universal's
Affiliates, and the Trust and the Trust's Affiliates, and the impact of such
Cineplex Odeon Contracts and arrangements on Cineplex Odeon's Consolidated
EBITDA during the twelve-month period ended March 31, 1997, and (y) since
March 31, 1997, there has been no material change in the material terms of
such Cineplex Odeon Contracts and arrangements, including, without limitation,
with respect to the exhibition of motion pictures. For purposes of clause (y)
of the preceding sentence only, film rental contracts shall be deemed to be
included within the definition of Cineplex Odeon Contracts. Except for such
exceptions as would not have a Cineplex Odeon Material Adverse Effect, (a) the
Cineplex Odeon Contracts are valid, existing and in full force and effect and
(subject to (i) the application of any applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar law, now or
hereafter in effect, affecting creditors rights generally and (ii) the
application of general principles of equity) binding against Cineplex Odeon
and, to the Knowledge of Cineplex Odeon, the other parties to such Cineplex
Odeon Contracts in accordance with their respective terms, and (b) there has
not occurred any material default or breach or event which, with the giving of
notice or lapse of time, or both, would constitute a material default or
breach under any of them. No officer or director of Cineplex Odeon, and no
shareholder of Cineplex Odeon that owns directly or indirectly 10% or more of
the outstanding equity of Cineplex Odeon, nor any Affiliate of any such
officer, director or shareholder, is a party to any such Cineplex Odeon
Contract as lessor, landlord, supplier or in any other capacity except as
noted on the Cineplex Odeon Reports.
Section 2.18. Insurance
. All of the material assets of each of Cineplex Odeon and the
Cineplex Odeon Subsidiaries that are of insurable character are covered by
insurance with reputable insurers against risks of liability, casualty and
fire and other losses and liabilities customarily obtained to cover comparable
businesses and tangible assets in amounts, scope and coverage that are
consistent with prudent industry practice. Neither Cineplex Odeon nor any
Cineplex Odeon Subsidiary is in default in any material respect with respect
to its obligations under any material insurance policy maintained by it.
Section 2.18 of the Cineplex Odeon Disclosure Statement sets forth a list of
all insurance coverage carried by Cineplex Odeon and the Cineplex Odeon
Subsidiaries, including the carrier, the terms and the amount of coverage.
All such policies and other instruments are in full force and effect and all
premiums due and payable with respect thereto have been paid. Except to the
extent that the failure to do so would not have a Cineplex Odeon Material
Adverse Effect, neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has
failed to give any notice or present any claim under any such insurance policy
in due and timely fashion or as required by any of such insurance policies or
has not otherwise, through any act, omission or non-disclosure, jeopardized or
impaired full recovery of any claim under such policies, and, except as
aforesaid, there are no material claims by Cineplex Odeon or any Cineplex
Odeon Subsidiary under any of such policies to which any insurance company is
denying liability or defending under a reservation of rights or similar
clause. Neither Cineplex Odeon nor any Cineplex Odeon Subsidiary has received
notice of any pending or threatened termination of any of such policies or any
material premium increases for the current policy period with respect to any
of such policies.
Section 2.19. Interested Party Transactions
. Except as set forth in the Cineplex Odeon Reports and as
contemplated by the Transactions, since the date of Cineplex Odeon's Proxy
Statement dated May 26, 1997 no event has occurred that would be required to
be reported pursuant to Item 404 of Regulation S-K promulgated by the SEC or
that would constitute related party transactions subject to the requirements
of Sections 18 and 20 of Ontario Securities Commission Policy 9.1 promulgated
as a rule pursuant to the Securities Act (Ontario).
Section 2.20. Expenses
. Cineplex Odeon has provided to LTM a good faith estimate and
description of the expenses that Cineplex Odeon expects to incur, or has
incurred, in connection with the Transactions, and Cineplex Odeon will
promptly notify LTM if it believes that Cineplex Odeon will incur expenses
materially in excess of such amount in connection with the Transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LTM
Except as set forth in the disclosure statement delivered at or
prior to the execution hereof to Cineplex Odeon (the "LTM Disclosure
Statement"), LTM represents and warrants to Cineplex Odeon as follows:
Section 3.1. Existence; Good Standing; Corporate Authority;
Compliance with Law
. LTM is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation. LTM is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a LTM Material Adverse Effect.
LTM has all requisite corporate power and authority to own, operate and lease
its properties and carry on its business as now conducted. Each of LTM's
Significant Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or partnership power and
authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its property or the conduct of
its business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing would not have a LTM
Material Adverse Effect. Neither LTM nor any of the LTM Subsidiaries is in
violation of any order of any court, Governmental Entity or arbitration board
or tribunal, or any law, ordinance, governmental rule or regulation to which
LTM or any LTM Subsidiary or any of their respective properties or assets is
subject, where such violation would have a LTM Material Adverse Effect. LTM
and the LTM Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
would not have a LTM Material Adverse Effect. The copies of LTM's Certificate
and Bylaws attached as exhibits to the LTM Disclosure Statement are complete,
true and correct.
Section 3.2. Authorization, Validity and Effect of Agreements
. LTM has the requisite corporate power and authority to execute
and deliver each of the Documents to which it is a party and all agreements
and documents contemplated thereby to which it is a party, and the
consummation by LTM of the Transactions to which it is a party has been duly
authorized by all requisite corporate action on the part of LTM, including,
without limitation, all requisite approvals of the Board of Directors of LTM
and any special or other committee thereof. LTM has previously delivered to
Cineplex Odeon copies of resolutions adopted by unanimous vote of the Board of
Directors of LTM authorizing LTM to execute and deliver the Documents to which
it is a party and to consummate the Transactions, and, since the adoption
thereof, such resolutions have not been amended, modified or withdrawn in any
manner through the date of this Agreement. The Documents to which it is a
party constitute (or in the case of the LTM Charter will at the Closing
constitute), and all agreements and documents contemplated thereby to which it
is a party (when executed and delivered pursuant hereto for value received)
will constitute, the valid and legally binding obligations of LTM, enforceable
against LTM in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
Section 3.3. Capitalization
. (a) As of the date hereof, the authorized capital stock of LTM
consists of 1,000 shares of Common Stock, US$.01 par value per share, of which
972 shares are issued and outstanding. All of such issued and outstanding
shares of LTM Common Stock are duly authorized, validly issued, fully paid,
nonassessible and free of preemptive rights.
(b) As of the Closing, the authorized capital stock of LTM will
consist of 3,000,000,000 shares of LTM Common Stock, 100,000,000 shares of LTM
Non-Voting Common Stock and 100,000,000 shares of LTM Preferred Stock. As of
the Closing (including issuances made in connection with the Arrangement and
the transactions contemplated by this Agreement (but before giving effect to
any Equity Offering and assuming no Cineplex Odeon shareholders exercise
dissenters rights)), there will be 441,248,294 shares of LTM Common Stock
issued and outstanding, 11,188,212 shares of LTM Non-Voting Common Stock
issued and outstanding and no shares of LTM Preferred Stock issued and
outstanding, subject to the redemption of Cineplex Odeon capital stock as a
consequence of the exercise of dissenting shareholders' rights. As of the
Closing, all issued and outstanding shares of LTM Common Stock (including the
shares of LTM Common Stock to be issued pursuant to the Arrangement and the
other Transactions) will be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights or any Encumbrances created by SPE
or LTM or any of their respective Affiliates.
(c) LTM does not have and, as of the Closing, LTM will not have
any outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or that are convertible into or exercisable for
securities having the right to vote) with the stockholders of LTM on any
matter. There are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments that obligate LTM or any LTM Subsidiary to issue,
transfer or sell any shares of capital stock of LTM or any LTM Subsidiary.
Section 3.4. Subsidiaries
. LTM owns directly or indirectly all of the outstanding shares
of capital stock of each of LTM's Subsidiaries (other than the Transferred SPE
Subsidiaries). Each of the outstanding shares of capital stock of each of the
LTM Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and (except for the capital stock of the Transferred SPE
Subsidiaries) is owned, directly or indirectly, by LTM free and clear of all
Encumbrances other than Encumbrances imposed by local law the enforcement of
which would not have a LTM Material Adverse Effect. The following information
for each LTM Subsidiary is set forth on Section 3.4 of the LTM Disclosure
Statement, if applicable: (a) its name and jurisdiction of incorporation,
formation or organization; (b) its authorized capital stock or share capital;
and (c) the number of issued and outstanding shares (and options, warrants or
other rights for purchase of shares) of capital stock or share capital (and,
with respect to partnerships, joint ventures, limited liability companies and
similar alternative business entities, analogous information). LTM has
previously provided to Cineplex Odeon true and complete copies of the charter
documents and bylaws for each of LTM's Significant Subsidiaries. Other than
as contemplated by the Documents, there are no options, warrants, calls or
other rights, agreements or commitments currently outstanding obligating any
Subsidiary of LTM to issue, deliver or sell any shares or debt securities, or
obligating any Subsidiary of LTM to grant, extend or enter into any option,
warrant, call or other such right, agreement or commitment to issue, deliver
or sell any equity or debt securities. There are no bonds, debentures, notes
or other indebtedness issued and outstanding having the right to vote (or that
are convertible into or exercisable for securities having the right to vote)
on any matters on which the shareholders of any Subsidiary of LTM may vote.
Section 3.5. Other Interests
. Except for interests in the LTM Subsidiaries, neither LTM nor
any LTM Subsidiary owns, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity.
Section 3.6. No Violation
. Neither the execution and delivery by LTM of the Documents to
which it is a party, nor the consummation by LTM of the Transactions
contemplated thereby to which it is a party in accordance with the terms
thereof, will: (i) conflict with or result in a breach of any provisions of
the Certificate of Incorporation or Bylaws of LTM; (ii) either (a) result in a
breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or (b) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any Encumbrance upon any of the material properties of LTM or the
LTM Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation to which LTM or any of the LTM Subsidiaries is a party, or by
which LTM or any of the LTM Subsidiaries or any of their properties is bound
or affected (except to the extent any of the effects described in this clause
(ii) would not (x) have a LTM Material Adverse Effect, (y) impair the ability
of LTM to perform its obligations under the Documents in any material respect
or (z) delay in any material respect or prevent the consummation of the
Transactions); or (iii) other than the Regulatory Filings listed in the LTM
Disclosure Statement, require, to the extent applicable to LTM, any material
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make that would (x) have a LTM Material Adverse Effect, (y) impair the
ability of LTM to perform its obligations under the Documents in any material
respect or (z) delay in any material respect or prevent the consummation of
the Transactions.
Section 3.7. Financial Statements
. (a) LTM has previously furnished Cineplex Odeon with the
combined statements of income, shareholders' equity and cash flows of LTM and
its consolidated Subsidiaries and the Transferred SPE Subsidiaries for the
twelve months ended February 28, 1995, February 29, 1996, February 28, 1997
and March 31, 1997 and the combined balance sheet of LTM and its consolidated
Subsidiaries and the Transferred SPE Subsidiaries as of such dates (all such
financial statements being collectively referred to herein as the "LTM
Financial Statements"). The LTM Financial Statements (including the audited
financial statements required to be delivered pursuant to Section 6.9(a))
(i) are in accordance with the books and records of LTM, (ii) have been
prepared in accordance with GAAP consistently applied (except that such
unaudited financial statements do not contain all of the footnotes and do not
reflect provisions for income taxes on a stand-alone basis as required under
GAAP) and (iii) fairly present in all material respects the combined financial
position of LTM and its consolidated Subsidiaries and the Transferred SPE
Subsidiaries as of February 28, 1995, February 29, 1996, February 28, 1997 and
March 31, 1997 and the combined results of their operations and cash flows for
the twelve months ended February 28, 1995, February 28, 1996, February 28,
1997 and March 31, 1997 (subject, in the case of such unaudited financial
statements, to normal year-end audit adjustments). Except as and to the
extent set forth on the combined balance sheet of LTM and the LTM Subsidiaries
at March 31, 1997, including all notes thereto, or as set forth in the LTM
Disclosure Statement, neither LTM nor any of the LTM Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as contemplated by or resulting from this
Agreement or the Transactions, or (ii) that would not have a LTM Material
Adverse Effect.
(b) Attached as Section 3.7(b) of the LTM Disclosure Statement
are true and accurate copies of (1) a Cash Flow Statement for each motion
picture theater owned or operated by LTM or any LTM Subsidiary (the "LTM
Theaters"), in the aggregate and on a theater-by-theater basis for the twelve
months ended March 31, 1997, (2) EBITDA Statements of LTM, in each case for
the twelve months ended March 31, 1997, and (3) a statement showing LTM's
Qualified Tangible Net Worth as of March 31, 1997. LTM represents and
warrants that the Consolidated EBITDA and Adjusted EBITDA of LTM for such
twelve-month period and that its Qualified Tangible Net Worth as of March 31,
1997 were as set forth on Section 3.7(b) of the LTM Disclosure Statement. LTM
has delivered to Cineplex Odeon true and accurate copies of the following
statements used in the determination of Adjusted EBITDA and Qualified Tangible
Net Worth:
(i) a statement listing each theater that has been disposed of
during the twelve-month period ended March 31, 1997, such theater's date of
disposition and the related Cash Flow of such theater from April 1, 1996
through the earlier of (A) one month after its date of disposition and
(B) March 31, 1997;
(ii) a statement listing each theater that has been or is
projected, as of the date of this Agreement, to be closed or disposed of
subsequent to March 31, 1997 but prior to the Closing Date (the "LTM Negative
Theaters"), the actual or, to the extent known, projected closing or
disposition date, as the case may be, and, to the extent known, any material
terms applicable to such disposition, and setting forth the related Cash Flow
of such theater for the twelve months ended March 31, 1997;
(iii) a statement listing each theater opened after April 1, 1996
and before March 31, 1997 and the Cash Flow generated by such theater during
the period from its opening through March 31, 1997 and the projected Cash Flow
for such theater for its first full year of operation;
(iv) a statement listing each capital lease or other agreement
pursuant to which LTM or any LTM Subsidiary had outstanding a Capital Lease
Obligation at March 31, 1997 and, with respect to each such lease or
agreement, (A) the amount of payments thereunder during the twelve months
ended March 31, 1997, (B) the amount of payments thereunder during the twelve
months ended March 31, 1997 that relates to real property, (C) the amount of
the obligation in respect thereof as reflected on the balance sheet of LTM at
March 31, 1997 and (D) whether such lease or other agreement relates to real
property or equipment;
(v) a statement listing each component of Debt, including
maturity date, interest rate, payment terms, assets pledged as security (if
any), leasehold mortgages secured by leases (if any) and outstanding balance
as of March 31, 1997;
(vi) a statement listing and fairly presenting in all material
respects each component of Net Working Capital as of March 31, 1997;
(vii) a Construction Work in Progress Statement; and
(viii) the Cash Flow for the twelve months ended March 31,
1997 of the theaters listed on Section 3.7(b)(viii) of the LTM Disclosure
Statement (the "Indianapolis Theaters").
Each of the foregoing statements as described herein is complete and fairly
presents such data for the periods or dates indicated and contains all
customary year-end adjustments.
Section 3.8. Litigation
. There are no actions, suits, proceedings or investigations
pending against LTM or the LTM Subsidiaries or, to the Knowledge of LTM,
threatened against LTM or the LTM Subsidiaries, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, that would have a LTM Material Adverse Effect.
Section 3.9. Absence of Certain Changes
. Except as otherwise contemplated by this Agreement or resulting
from the Transactions, since March 31, 1997, (a) LTM and the LTM Subsidiaries
have conducted their respective businesses, only in the ordinary course of
such business, (b) except for (i) facts and circumstances affecting the
economy as a whole, (ii) facts and circumstances affecting the motion picture
industry generally, or (iii) adverse changes in Cash Flow per screen from
sales of tickets and concession items, there has not been a LTM Material
Adverse Effect, and (c) there has not been (x) any declaration, setting aside
or payment of any dividend or other distribution with respect to its capital
stock or (y) any material change in its accounting principles, practices or
methods. Neither LTM nor any LTM Subsidiary has deferred any material
expenses or accelerated any material income, other than in the ordinary
course of business in accordance with GAAP consistently applied, in
contemplation of the Transactions.
Section 3.10. Taxes
. Except where the failure to do so would not have a LTM Material
Adverse Effect, LTM and each of the LTM Subsidiaries (i) has timely filed all
United States federal, state and material foreign tax returns required to be
filed by any of them for tax years ended prior to the date of this Agreement
or requests for extensions have been timely filed and any such request shall
have been granted and not expired and all such returns are correct and
complete in all respects, (ii) has paid or accrued in the LTM Financial
Statements all Taxes payable for all periods covered by such returns,
(iii) has properly accrued in the LTM Financial Statements all Taxes for
periods subsequent to the periods covered by such returns, and (iv) has "open"
years for United States federal income tax returns only as set forth in the
LTM Disclosure Statement. Correct and complete copies of all tax returns,
including schedules thereto, filed by LTM and the LTM Subsidiaries or the
portions of tax returns relating solely to LTM or any LTM Subsidiary in the
case of tax returns filed on behalf of LTM or any LTM Subsidiary by any
affiliated, combined or unitary group which included any corporation other
than LTM or any LTM Subsidiary, in respect of the last three completed fiscal
years with all regulatory authorities, all assessments or reassessments in
respect of such years, all waivers in respect of such years or any other
periods and all written communications and other documents relating thereto
have been made available to Cineplex Odeon prior to the date of this
Agreement. Except where the failure to do so would not have a LTM Material
Adverse Effect, LTM and the LTM Subsidiaries have withheld, collected and
remitted all amounts required to be withheld, collected or remitted by them in
respect of any Taxes, including any such Taxes in respect of payments made to
any past or present employees, officers or directors, and to any persons not
resident in the United States, to the proper tax or other receiving officers
within the time prescribed under any applicable legislation.
Section 3.11. Employee Benefit Plans
. (a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"LTM Benefit Plan" means each Benefit Plan (other than a LTM
Employee Agreement) which is currently in effect and which is or previously
has been sponsored, maintained, contributed to, or required to be contributed
to, or with respect to which any withdrawal liability (within the meaning of
Section 4201 of ERISA) has been incurred, by LTM or any LTM Subsidiary for the
benefit of any LTM Employee, and pursuant to which LTM or any LTM Subsidiary
has or may have any liability, contingent or otherwise.
"LTM Employee" means each current, former, or retired employee,
officer, consultant, independent contractor, agent or director of LTM or any
LTM Subsidiary (other than the LTM Excluded Employees).
"LTM Employee Agreement" means each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
contract, whether written or oral, between LTM or any LTM Subsidiary and any
LTM Employee pursuant to which LTM or any LTM Subsidiary has or may have any
liability contingent or otherwise, in excess of US$100,000 in each instance.
"LTM Excluded Employee" means each current, former or retired
employee, officer, consultant, independent contractor, agent or director of
Sony Corporation of America, Sony Plaza Inc. and LTMA, Inc. whose payroll is
or has been processed through LTM.
"LTM Multi-Employer Plan" means each LTM Benefit Plan which is
"multi-employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"LTM Welfare Plan" means each LTM Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
(b) Schedule. Section 3.11(b) of the LTM Disclosure Statement
contains a true and complete list of each LTM Benefit Plan and each LTM
Employee Agreement. Neither LTM nor any LTM Subsidiary has any plan or
commitment, whether legally binding or not, to establish any new LTM Benefit
Plan, to enter into any LTM Employee Agreement or to modify or to terminate
any LTM Benefit Plan or LTM Employee Agreement (except to the extent required
by law or to conform any such LTM Benefit Plan or LTM Employee Agreement to
the requirements of any applicable law, in each case as previously disclosed
to Cineplex Odeon, or as required by this Agreement), nor has any intention to
do any of the foregoing been communicated to LTM Employees. Section 3.11(b)
of the LTM Disclosure Statement identifies each LTM Employee who received
total compensation in excess of US$100,000 in connection with such employment
in 1996 or is expected to receive at least such amount in 1997 as employment
compensation.
(c) Documents. LTM has made available to Cineplex Odeon
(i) current, accurate and complete copies of all material documents embodying
or relating to each LTM Benefit Plan and each LTM Employee Agreement,
including all amendments thereto, and trust or funding agreements with respect
thereto; (ii) the two (2) most recent annual actuarial valuations, if any,
prepared for each LTM Benefit Plan; (iii) the two (2) most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA
in connection with each LTM Benefit Plan or related trust; (iv) a statement of
alternative form of compliance pursuant to Department Regulation 2520.104-23,
if any, filed for each LTM Benefit Plan that is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA for a select group of management or
highly compensated employees; (v) the most recent determination letter
received from the IRS, if any, for each LTM Benefit Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the Code;
(vi) if the LTM Benefit Plan is funded, the most recent annual and periodic
accounting of LTM Benefit Plan assets; and (vii) the most recent summary plan
description together with the most recent summary of material modifications,
if any, required by ERISA with respect to each LTM Benefit Plan.
(d) Compliance. With respect to each LTM Benefit Plan, except
as would not have a LTM Material Adverse Effect (i) LTM and each LTM
Subsidiary have performed all obligations required to be performed by them
under each LTM Benefit Plan and LTM Employee Agreement and neither LTM nor any
LTM Subsidiary is in default under or in violation of, any LTM Benefit Plan,
(ii) each LTM Benefit Plan has been established and maintained in accordance
with its terms and in compliance with all applicable laws, orders, rules and
regulations, including but not limited to ERISA and the Code including without
limiting the foregoing, the timely filing of all required reports, documents
and notices, where applicable, with the IRS and the Department; (iii) each LTM
Benefit Plan intended to qualify under Section 401 of the Code is, and since
its inception has been, so qualified and a determination letter has been
issued by the IRS to the effect that each such LTM Benefit Plan is so
qualified and that each trust forming a part of any such LTM Benefit Plan is
exempt from tax pursuant to Section 501(a) of the Code and no circumstances
exist which would adversely affect this qualification or exemption; (iv) no
non-exempt "prohibited transaction," within the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred with respect to any LTM Benefit
Plan; (v) no action or failure to act and no transaction or holding of any
asset by, or with respect to, any LTM Benefit Plan has or may subject LTM or
any LTM Subsidiary or any fiduciary to any tax, penalty or other liability,
whether by way of indemnity or otherwise; (vi) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the Knowledge of LTM
or any LTM Subsidiary, threatened or anticipated (other than routine claims
for benefits) against LTM or any LTM Subsidiary or any administrator, trustee
or other fiduciary of any LTM Benefit Plan with respect to any LTM Benefit
Plan or LTM Employee Agreement, or against any LTM Benefit Plan or against the
assets of any LTM Benefit Plan; (vii) no event or transaction has occurred
with respect to any LTM Benefit Plan that would result in the imposition of
any tax under Chapter 43 of Subtitle D of the Code; (viii) each LTM Benefit
Plan can be amended, terminated or otherwise discontinued without liability to
Cineplex Odeon or any LTM Subsidiary; (ix) LTM and each LTM Subsidiary have
made all payments due and owing with respect to all periods through the date
hereof; and (x) no LTM Benefit Plan is under audit or investigation by the
IRS, the Department or the PBGC, no such audit or investigation is pending and
to the Knowledge of LTM and each LTM Subsidiary, no such audit or
investigation is threatened.
(e) Pension Plans. Except as would not have a LTM Material
Adverse Effect neither LTM nor any LTM Subsidiary presently sponsors,
maintains, contributes to, nor is LTM, any LTM Subsidiary required to
contribute to, nor has LTM or any LTM Subsidiary ever sponsored, maintained,
contributed to, or been required to contribute to, an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA that is subject to
Title IV of ERISA.
(f) LTM Multi-Employer Plans. Except as would not have a LTM
Material Adverse Effect, as of the Closing Date, LTM and each LTM Subsidiary
will not have completely or partially withdrawn from any LTM Multi-Employer
Plan and will not be subject to any withdrawal liability as described in
Section 4201 of ERISA for withdrawals that have occurred on or prior to the
Closing Date (including, without limitation, any withdrawal deemed to have
occurred as a result of the Transactions). To the Knowledge of LTM or any LTM
Subsidiary and with such exceptions as would not have a LTM Material Adverse
Effect, (i) no LTM Multi-Employer Plan fails to qualify under Section 401(a)
of the Code, is insolvent or is in reorganization within the meaning of Part 3
of Subtitle E of Title IV of ERISA; and (ii) no condition exists which
presents a risk of any LTM Multi-Employer Plan becoming insolvent or going
into reorganization. Except as would not have a LTM Material Adverse Effect,
no event has occurred that could result in a "partial withdrawal" under
Section 4205 of ERISA with respect to any LTM Multi-Employer Plan and neither
LTM nor any LTM Subsidiary has any contingent liability under Section 4204 of
ERISA.
(g) No Post-Employment Obligations. Except as would not have a
LTM Material Adverse Effect, neither LTM nor any LTM Subsidiary (i) maintains
or contributes to any LTM Benefit Plan which provides, or has any liability to
provide, life insurance, medical, severance or other LTM Employee welfare
benefits to any LTM Employee upon his retirement or termination of employment,
except as may be required by Section 4980B of the Code or Applicable Law; or
(ii) has ever represented, promised or contracted (whether in oral or written
form) to any LTM Employee (either individually or to LTM Employees as a group)
that such LTM Employee(s) would be provided with life insurance, medical,
severance or other LTM Employee welfare benefits upon their retirement or
termination of employment, except to the extent required by Section 4980B of
the Code or Applicable Law.
(h) Effect of Transactions. Section 3.11(h) of the LTM
Disclosure Statement contains a true and complete list of every LTM Benefit
Plan and every LTM Employee Agreement with respect to which payments or
benefits under such plan or agreement would increase or accelerate by reason
of the Transactions. Except as would not have a LTM Material Adverse Effect,
(i) the execution of this Agreement and the performance by LTM of its
obligations hereunder will not (either alone or upon the occurrence of any
additional or subsequent events) (x) constitute an event under any LTM Benefit
Plan, LTM Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any LTM Employee, or (y) result in the
triggering or imposition of any restrictions or limitations on the right of
LTM or any LTM Subsidiary to amend or terminate any LTM Benefit Plan and
receive the full amount of any excess assets remaining or resulting from such
amendment or termination, subject to Applicable Law and applicable taxes; and
(ii) no payment or benefit which will or may be made by LTM, any LTM
Subsidiary, or any of their respective affiliates, with respect to any LTM
Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. Except as would not have a LTM Material
Adverse Effect, LTM and each LTM Subsidiary (i) is in compliance with all
applicable United States federal, state and local laws, rules and regulations
and foreign national, state and local laws, rules and regulations respecting
employment, employment practices, labor, terms and conditions of employment
and wages and hours, in each case, with respect to LTM Employees; (ii) has
withheld and remitted all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to LTM Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable (other
than for amounts accrued but not yet payable) for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits for LTM
Employees.
(j) Labor. Except as would not have a LTM Material Adverse
Effect or as otherwise disclosed in the LTM Disclosure Statement, no work
stoppage or labor strike against LTM or any LTM Subsidiary by LTM Employees is
pending, or to the Knowledge of LTM, threatened. Except as disclosed in the
LTM Disclosure Statement or as would not otherwise have a LTM Material Adverse
Effect, neither LTM nor any LTM Subsidiary (i) is involved in or, to the
Knowledge of LTM, threatened with any labor dispute, grievance, or litigation
relating to labor matters involving any LTM Employees, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints; (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act or any other similar applicable legislation; or (iii) is presently, or has
been in the past a party to, or bound by, any collective bargaining agreement
or union contract with respect to LTM Employees and no such agreement or
contract is currently being negotiated by LTM or any LTM Subsidiary. Except
as disclosed on the LTM Disclosure Statement, no LTM Employees are currently
represented by any labor union for purposes of collective bargaining and no
activities the purpose of which is to achieve such representation of all or
some of such LTM Employees are ongoing or, to the Knowledge of LTM,
threatened.
(k) 501(c)(9) Trust. Except as would not have a LTM Material
Adverse Effect, no LTM Benefit Plan or LTM Employee Agreement is funded by a
trust described in Section 501(c)(9) of the Code.
(l) Welfare Plan Funding. Except as would not have a LTM
Material Adverse Effect, with respect to each LTM Welfare Plan, all material
claims incurred (including claims incurred but not reported) by LTM Employees
thereunder for which LTM is, or will become, liable are (i) insured pursuant
to a contract of insurance whereby the insurance company bears any risk of
loss with respect to such claims; (ii) covered under a contract with an HMO
pursuant to which the HMO bears the liability for such claims; or
(iii) reflected as a liability or accrued for on the LTM Financial Statements
to the extent required by GAAP.
Section 3.12. No Brokers
. Neither LTM nor any LTM Subsidiary has entered into any
contract, arrangement or understanding with any person or firm that may result
in the obligation of LTM, any LTM Subsidiary or Cineplex Odeon to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, any of the other
Documents or the consummation of the transactions contemplated hereby or
thereby. LTM is not aware of any claim against LTM for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement, any of the other
Documents or the consummation of the Transactions.
Section 3.13. Cineplex Odeon Stock Ownership
. Neither SPE or LTM, nor any of their respective Subsidiaries or
Affiliates, owns any Cineplex Odeon Common Shares or other securities
convertible into Cineplex Odeon Common Shares.
Section 3.14. Environmental Matters
. (a) Except as set forth in Section 3.14 of the LTM Disclosure
Statement or as would not have a LTM Material Adverse Effect:
(i) each of LTM and the LTM Subsidiaries has been and is in
compliance in all respects with all applicable Environmental Laws;
(ii) each of LTM and the LTM Subsidiaries has obtained, and is in
compliance with, all Environmental Permits, including, without limitation,
those regulating emissions, discharges, or releases of Hazardous Substances;
(iii) to the Knowledge of LTM, the LTM Real Properties are free of
any Hazardous Substances (except those present, maintained, used, stored,
discharged or released in compliance in all respects with Environmental Laws)
and free of all contamination, including, but not limited to groundwater
contamination, arising from, relating to, or resulting from any Hazardous
Substances, that exceeds any applicable clean-up levels or any level at which
any report or other action by LTM or any LTM Subsidiary is required under any
applicable Environmental Laws;
(iv) there are no claims, notices, civil, criminal or
administrative actions, suits, orders or proceedings pending or, to the
Knowledge of LTM, threatened against LTM or any LTM Subsidiary that are based
on or related to any Environmental Matters or the failure to have any required
Environmental Permits, and, to the Knowledge of LTM, there are no
investigations pending or threatened against LTM or any LTM Subsidiary that
are based on or related to any Environmental Matters or the failure to have
any Environmental Permits;
(v) to the Knowledge of LTM, there are no past or present
conditions, events or circumstances, (a) that may reasonably be expected to
interfere with or prevent continued material compliance by any of LTM or the
LTM Subsidiaries with Environmental Laws and the requirements of Environmental
Permits, (b) that may reasonably be expected to give rise to any liability or
other obligation under any Environmental Laws that may require any of LTM or
the LTM Subsidiaries to incur any Environmental Costs, or (c) that may
reasonably be expected to form the basis of any claim, action, suit, order,
proceeding, hearing, investigation or inquiry against or involving any of LTM
or the LTM Subsidiaries based on or related to any Environmental Matter or
which could reasonably be expected to require any of LTM and the LTM
Subsidiaries to incur any Environmental Costs; and
(vi) except to the extent such request or requirement has been
fully complied with, since January 1, 1990, neither LTM nor any LTM Subsidiary
has been requested or required by any Governmental Entity to perform any
investigatory or remedial activity or other action in connection with any
Environmental Matter.
(b) LTM has made available to Cineplex Odeon each environmental
audit, assessment, study, report or other information relating in any material
respect to LTM or any LTM Subsidiary in the possession or under the control of
LTM or any LTM Subsidiary.
Section 3.15. Real Property; Leases
. (a) Section 3.15(a) of the LTM Disclosure Statement lists all real property
leased by LTM and all LTM Subsidiaries (the "LTM Leased Real Properties") and
all real property owned by LTM and all LTM Subsidiaries (the "LTM Owned Real
Properties," and together with the LTM Leased Real Properties, the "LTM Real
Properties"). For each LTM Leased Real Property, Section 3.15(a) of the LTM
Disclosure Statement sets forth the following information as at the date of
this Agreement: (i) the address of the property; (ii) the name of the
landlord, manager or payee, as appropriate; (iii) the name of the tenant;
(iv) the date of the lease and all amendments thereto; (v) the current
expiration date of such lease; (vi) any options to extend the term of such
lease; (vii) if a theater site, the number of screens at such theater;
(viii) whether the theaters on such site are operating or non-operating;
(ix) whether the landlord's consent is required as a result of the
Transactions; (x) any landlord right to terminate the lease (other than
arising from a default, casualty, or condemnation); (xi) with respect solely
to those theaters located in markets where Cineplex Odeon has theaters, any
tenant radius restrictions set forth in such lease; (xii) whether the landlord
has sent to the tenant under such lease a notice of default or a notice of
termination of such lease which remains uncured; (xiii) whether the tenant
under such lease is obligated to purchase such property; (xiv) whether such
lease is required to be accounted for under GAAP as a capitalized lease;
(xv) whether there are any leasehold mortgages secured by such lease and
whether the consent of the mortgagee is required in connection with the
Transactions; and (xvi) whether the rent, common area charges, taxes or other
payments due under such lease are in arrears in excess of 60 days. For each
LTM Owned Real Property, Section 3.15(a) of the LTM Disclosure Statement lists
as at the date of this Agreement: (i) the address for each such property and
(ii) whether the consent of any mortgage or lien holder of such property is
required as a result of the Transactions. Except for such exceptions as would
not have a LTM Material Adverse Effect and except for (A) the items set forth
in Section 3.15(a) of the LTM Disclosure Statement; (B) zoning and planning
restrictions, easements, permits and other restrictions or limitations of
public record affecting the use of such properties; provided that,
individually and in the aggregate, such restrictions, easements and permits do
not materially impair the use of such properties as motion picture theaters or
for such other purposes as such properties are currently being used;
(C) mechanic's liens or other similar Encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable; and
(D) other Encumbrances that individually and in the aggregate do not
materially impair the ability of the owner to obtain financing by using such
assets as collateral, (I) LTM and the LTM Subsidiaries have good and
marketable and insurable title to the LTM Owned Real Properties, (II) such
properties are free and clear of all mortgages, liens, leases, tenancies,
security interests, options to purchase or lease and rights of first refusal
and (III) except for any matter of public record affecting the use of such
properties, such properties are free and clear of all covenants, conditions,
Encumbrances, restrictions, rights-of-way, easements, servitudes, judgments or
other imperfections of title. The items listed in subsections (A) through
(D) above are hereinafter collectively referred to as the "LTM Permitted
Encumbrances." With respect to the LTM Leased Real Properties, to the
Knowledge of LTM all such leases are in full force and effect. Except for
such exceptions as would not have a LTM Material Adverse Effect, (i) all such
leases are the result of bona-fide arm's-length negotiations between the
parties and (ii) LTM and the LTM Subsidiaries are not in arrears in the
payment of rents, common area charges, real estate taxes or other amounts due
under any such leases in excess of 60 days. As at the date of this Agreement,
except for such exceptions as would not have a LTM Material Adverse Effect,
with respect to each LTM Leased Real Property, so long as the tenant performs
all of its obligations under such lease within applicable notice and grace
periods, (i) the rights of LTM or any LTM Subsidiary under such lease cannot
be legally terminated by the landlord thereof and (ii) LTM's or such
Subsidiary's possession of such LTM Leased Real Property and the use and
enjoyment thereof cannot be legally disturbed by any landlord. Except for
such exceptions as would not have a LTM Material Adverse Effect, LTM is not
obligated to purchase any LTM Leased Real Property, and no LTM Leased Real
Property is required to be accounted for under GAAP as a capitalized lease.
To the Knowledge of LTM, except for such exceptions as would not have a LTM
Material Adverse Effect, there are no intended public improvements that will
result in any material charge being levied against, or in the creation of any
Encumbrances upon the LTM Owned Real Properties or any portion thereof, and
there are no options, rights of first refusal, rights of first offer or other
similar rights with respect to the LTM Owned Real Properties.
(b) The leases pursuant to which LTM or any LTM Subsidiary
leases or has the right to possess the LTM Leased Real Properties have not
been amended or modified since March 31, 1996, except as set forth in Section
3.15(a) of the LTM Disclosure Statement, except where such amendment or
modification would not have a LTM Material Adverse Effect.
(c) Except for such exceptions as would not have a LTM Material
Adverse Effect:
(i) LTM or a LTM Subsidiary is the owner of, and no other
person, firm or corporation has any interest as owner in or to, or any right
to occupancy in, any LTM Owned Real Property;
(ii) LTM or any LTM Subsidiary is the tenant or lessee with
respect to, and no other person, firm or corporation has any interest as
tenant or lessee in or to, or any right to occupancy in, any LTM Leased Real
Property;
(iii) there are no persons, firms or corporations currently in
possession of the LTM Real Properties other than LTM and the LTM Subsidiaries,
nor are there any leases, subleases, licenses, concessions or other agreements
permitting anyone other than LTM and the LTM Subsidiaries, to use, manage,
occupy or possess any LTM Real Property or any part thereof;
(iv) (A) neither LTM nor any LTM Subsidiary has received any
written notes or notices of violation of law or local or municipal ordinances
or orders, or regulations, presently noted in or issued by federal, state,
local or municipal departments having jurisdiction against or affecting any of
the LTM Real Properties that remain uncured and (B) to the Knowledge of LTM,
the current maintenance, operation, use and occupancy of the LTM Real
Properties does not violate any building, zoning, health, environmental, fire
or similar law, ordinance, order or regulation (other than the ADA and
comparable state and municipal legislation) or the terms and conditions of any
of the applicable leases;
(v) to the Knowledge of LTM, the LTM Real Properties do not
violate the provisions of the ADA and comparable state and municipal
legislation based upon the reasonable interpretation and understanding of LTM
of the provisions of the ADA and such other legislation and any reference to
compliance with laws, or any reference to like effect, contained in this
Agreement with respect to the LTM Real Properties shall, solely as it relates
to compliance with the ADA, be deemed to be qualified to the Knowledge of LTM
in addition to any other qualifications set forth in this Agreement as may be
applicable, and neither LTM nor any LTM Subsidiary has received any written
notice of violation of the ADA and/or any comparable state and municipal
legislation against or affecting the LTM Real Properties that remain uncured;
(vi) (A) neither LTM nor any LTM Subsidiary has received written
notice of its failure to obtain any necessary certificate of occupancy (or
similar permit) for use of each of the theaters located on the LTM Real
Properties as a motion picture theater, (B) to LTM's Knowledge, either LTM or
a LTM Subsidiary possesses the certificate of occupancy and all other
certificates, approvals, permits and licenses from any Governmental Entity
having jurisdiction over such theaters that are necessary to permit the lawful
use and operation of such theaters as motion picture theaters (the "LTM
Permits"), and all of the same are valid and in full force and effect and
(C) to the Knowledge of LTM, there exists no threatened revocation of any
certificate of occupancy or any of the LTM Permits;
(vii) neither LTM nor any LTM Subsidiary has received any written
notice that it has failed to obtain any necessary sign permits, illuminated
sign permits, and marquee permits from the appropriate Governmental Entity
having jurisdiction over existing signs and marquees at the LTM Real
Properties, and to the Knowledge of LTM, such permits are valid and in full
force and effect and there exists no threatened revocation of any such
permits.
(viii) LTM has no Knowledge of any action pending or
threatened to adversely change the zoning or building ordinances affecting any
of the LTM Real Properties, or of any pending or threatened condemnation of
any of the LTM Real Properties;
(ix) neither LTM nor any LTM Subsidiary has received any written
notice from any insurance carrier of any work required to be performed at any
theater located on the LTM Real Properties or the real property on which such
theater is located that has not been performed as of the date hereof or of any
defects or inadequacies in a LTM Theatre that have not been corrected as of
the date hereof and which if not corrected could result in termination of
insurance coverage or a material increase in the cost thereof;
(x) with respect to all operating LTM Theatres, all water,
sewer, gas, electricity, telephone and other utilities required for the
operation of each such theater located on a LTM Real Property are installed
and operating and all installations and connection charges charged to LTM or
any LTM Subsidiary pursuant to applicable invoices that are not the subject of
a good faith dispute have been paid in full and any installation and
connection charges that are properly charges to LTM or such LTM Subsidiary
after the date hereof and prior to the Closing Date shall be paid in full
except, in each case, for payments that are current and will be paid in the
ordinary course of business; and
(xi) LTM has delivered to Cineplex Odeon a Construction Work in
Progress Statement.
Section 3.16. Operating Assets
. Except for such exceptions as would not have a LTM Material
Adverse Effect, (a) LTM has good and marketable title or leasehold title or a
valid license to all of the personal property used, or held for use, in
connection with the theaters operated on the LTM Real Properties (other than
gaming and vending machines used in the ordinary course of business), subject
to no Encumbrance other than LTM Permitted Encumbrances; (b) no financing
statement under the Uniform Commercial Code or any similar applicable statute
has been filed in any jurisdiction except as contemplated in the LTM
Disclosure Statement, and neither LTM nor any LTM Subsidiary has signed any
such financing statement or any security agreement authorizing any secured
party thereunder to file any such financing statement; (c) each theater
located on a LTM Real Property and each of the items of personal property used
or held for use in, or in connection with, each such theater, including
without limitation, seating, projection equipment and screens, are in good
operating condition, subject to normal wear and tear, and are fit for the use
for which they are intended and to which they are presently devoted; (d)
except for closed theaters, each theater located on a LTM Real Property,
together with the related items of personal property located therein,
constitutes a fully operable motion picture theater and is sufficient to
permit LTM to operate the business as currently being conducted therein; and
(e) except as contemplated by this Agreement, since March 31, 1997, neither
LTM nor any LTM Subsidiary has sold, removed or transferred any equipment or
property from any such theater located on a LTM Real Property, except in the
ordinary course of business and so long as such equipment or property has been
replaced prior to the date hereof.
Section 3.17. Contracts
. Section 3.17 of the LTM Disclosure Statement set forth a true
and complete statement of all contracts, agreements, leases (other than leases
with respect to the LTM Leased Real Property and film rental contracts in the
ordinary course of business), mortgages, notes, bonds, indentures, licenses,
intellectual property rights and other obligations, oral or written, express
or implied, involving the payment (or the provision of goods and/or services
having value) in each case of more than US$500,000 per annum to which LTM or
any LTM Subsidiary is bound as of the date of this Agreement, including,
without limitation, contracts relating to employment, collective bargaining,
consultants, independent contractors, agents, advertising, concessions, as
well as contracts relating to any partnerships and joint ventures and
contracts restricting the ability to operate theaters in any geographic area
(collectively, the "LTM Contracts"), excluding (a) those that are terminable
without penalty by LTM within 30 days upon the giving of notice and (b) those
directly relating to the construction of theaters currently under
construction, or with respect to which construction is pending, planned,
contemplated or under study as set forth on LTM's Construction Work in
Progress Statement; such statement sets forth with respect to each LTM
Contract the names of the parties thereto. True and complete copies of all of
the LTM Contracts, or, in the case of oral LTM Contracts, true and complete
descriptions thereof, have been made available to Cineplex Odeon.
Section 3.17 of the LTM Disclosure Statement summarizes the material terms of
each LTM Contract that provides for (a) the payment of refunds or similar
arrangements if specified conditions are not satisfied or the volume of
specified services provided during a reference period is not continued at
minimum levels and/or (b) supplemental payments if specified conditions are
satisfied or the volume of specified services provided during a reference
period exceeds a specified threshold. In addition to the foregoing, (x) prior
to the date hereof, LTM has provided to Cineplex Odeon a summary of the
material terms of the LTM Contracts and arrangements with SPE and SPE's
Affiliates and the impact of such LTM Contracts and arrangements on LTM's
Consolidated EBITDA during the twelve-month period ended March 31, 1997, and
(y) since March 31, 1997, there has been no material change in the material
terms of such LTM Contracts and arrangements, including, without limitation,
with respect to the exhibition of motion pictures. For purposes of clause (y)
of the preceding sentence only, film rental contracts shall be deemed to be
included within the definition of LTM Contracts. Except for such exceptions
as would not have a LTM Material Adverse Effect, (a) the LTM Contracts are
valid, existing and in full force and effect and (subject to (i) the
application of any applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar law, now or hereafter in effect,
affecting creditors rights generally and (ii) the application of general
principles of equity) binding against LTM and, to the Knowledge of LTM, the
other parties to such LTM Contracts in accordance with their respective terms,
and (b) there has not occurred any material default or breach or event which,
with the giving of notice or lapse of time, or both, would constitute a
material default or breach under any of them. No officer or director of LTM
nor any Affiliate of any such officer, director or shareholder, is a party to
any such LTM Contract as lessor, landlord, supplier or in any other capacity
except as noted on the LTM Disclosure Statement.
Section 3.18. Insurance
. All of the material assets of each of LTM and the LTM
Subsidiaries that are of insurable character are covered by insurance with
reputable insurers against risks of liability, casualty and fire and other
losses and liabilities customarily obtained to cover comparable businesses and
tangible assets in amounts, scope and coverage that are consistent with
prudent industry practice. Neither LTM nor any LTM Subsidiary is in default
in any material respect with respect to its obligations under any material
insurance policy maintained by it. Section 3.18 of the LTM Disclosure
Statement sets forth a list of all insurance coverage carried by LTM and the
LTM Subsidiaries, including the carrier, the terms and the amount of coverage.
All such policies and other instruments are in full force and effect and all
premiums due and payable with respect thereto have been paid. Except to the
extent that failure to do so would not have a LTM Material Adverse Effect,
neither LTM nor any LTM Subsidiary has failed to give any notice or present
any claim under any such insurance policy in due and timely fashion or as
required by any of such insurance policies or has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
claim under such policies, and, except as aforesaid, there are no material
claims by LTM or any LTM Subsidiary under any of such policies to which any
insurance company is denying liability or defending under a reservation of
rights or similar clause. Neither LTM nor any LTM Subsidiary has received
notice of any pending or threatened termination of any of such policies or any
material premium increases for the current policy period with respect to any
of such policies.
Section 3.19. Related Party Transactions
. Section 3.19 of the LTM Disclosure Statement contains a summary
of all contracts (whether oral or written), agreements, transactions or other
arrangements (including those relating to the provision of any services or the
sale of any goods) since March 1, 1994 and all proposed contracts, agreements,
transactions or other arrangements between LTM, any LTM Subsidiary or any
Transferred SPE Subsidiary, on the one hand, and SPE or any of its Affiliates
(other than LTM, any LTM Subsidiary and any Transferred SPE Subsidiary), on
the other hand, other than film booking agreements or arrangements, entered
into in the ordinary course of business. Section 3.19 of the LTM Disclosure
Statement also contains a summary of all contracts, agreements, transactions
or other arrangements since March 1, 1994 and all proposed contracts,
agreements, transactions or other arrangements between LTM, any LTM Subsidiary
or any Transferred SPE Subsidiary, on the one hand, and any current or former
director or officer of SPE or any of its Affiliates (other than LTM, any LTM
Subsidiary and any Transferred SPE Subsidiary) or any entity controlled by
such current or former director or officer, on the other hand, other than
employment agreements or arrangements or under employee benefit plans.
Section 3.20. Expenses
. LTM has provided to Cineplex Odeon a good faith estimate and
description of the expenses that LTM expects to incur, or has incurred, in
connection with the Transactions, and LTM will promptly notify Cineplex Odeon
if it believes that LTM will incur expenses materially in excess of such
amount in connection with the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPE
SPE represents and warrants to Cineplex Odeon as follows:
Section 4.1. Existence; Good Standing; Corporate Authority
. SPE is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation. SPE has
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Neither SPE nor any of
the Transferred SPE Subsidiaries is in violation of any order of any court,
Governmental Entity or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which SPE or any of the Transferred SPE
Subsidiaries or any of their respective properties or assets is subject that
would prevent SPE from performing its obligations under the Documents in any
material respect.
Section 4.2. Authorization, Validity and Effect of Agreements
. SPE has the requisite corporate power and authority to execute
and deliver each of the Documents to which it is a party and all agreements
and documents contemplated thereby to which it is a party. The consummation
by SPE of the Transactions to which it is a party has been duly authorized by
all requisite corporate action on the part of SPE, including, without
limitation, all requisite approvals of the Board of Directors of SPE. The
Documents to which it is a party constitute, and all agreements and documents
contemplated thereby to which it is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of SPE, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
Section 4.3. No Violation
. Neither the execution and delivery by SPE of the Documents to
which it is a party, nor the consummation by SPE of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict
with or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of SPE; (ii) either (a) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or (b) violate, or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any
Encumbrance upon the Imax Leases or the Transferred SPE Subsidiaries or any of
their assets under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation or court decree to which SPE or any of the Transferred SPE
Subsidiaries is a party, or by which SPE or any of the Transferred SPE
Subsidiaries or any of their properties is bound or affected, except for any
of the foregoing matters which would not (x) have a LTM Material Adverse
Effect, (y) impair the ability of SPE to perform its obligations under the
Documents in any material respect (an "SPE Material Adverse Effect") or
(z) delay in any material respect or prevent the consummation of the
Transactions; or (iii) other than the Regulatory Filings, require any material
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make which would have a LTM or SPE Material Adverse Effect or delay in any
material respect or prevent the consummation of the Transactions.
Section 4.4. Transferred SPE Subsidiaries
. (a) SPE owns directly or indirectly all of the outstanding
shares of capital stock or other equity interests of the Transferred SPE
Subsidiaries(the "SPE Transferred Shares"). Each of the SPE Transferred
Shares is owned, directly or indirectly, by Encumbrances. To the extent that
the SPE Transfer is effected by a transfer by SPE to one or more LTM
Subsidiaries of all the shares of stock owned directly or indirectly by SPE of
the Transferred SPE Subsidiaries, such LTM Subsidiary or LTM Subsidiaries will
have good and marketable title to the SPE Transferred Shares, free and clear
of all Encumbrances other than LTM Permitted Encumbrances. To the extent that
the SPE Transfer is effected by merging one or both of the Transferred SPE
Subsidiaries with and into one or more LTM Subsidiaries in exchange for shares
of LTM Common Stock, LTM or one or more of its Subsidiaries will have good and
marketable title to all of the issued and outstanding shares of capital stock
of the surviving corporation or corporations in such merger or mergers, free
and clear of all Encumbrances other than LTM Permitted Encumbrances.
(b) Each of the representations and warranties of LTM in
Sections 3.1, 3.7 through 3.11 and 3.14 through 3.19, insofar as they relate
to the IMAX Leases and the Transferred SPE Subsidiaries, are true and correct.
Section 4.5. Effects of Transactions
. Immediately following the Closing, (a) all of the motion
picture exhibition assets owned by SPE or its Affiliates and used in
connection with or relating to SPE's motion picture exhibition business in the
United States or Canada will be owned by LTM and/or LTM's Subsidiaries
(including, without limitation, the Transferred SPE Subsidiaries), (b) neither
SPE nor any affiliate thereof (other than LTM or any LTM Subsidiary) will own,
operate or manage any motion picture theaters in the United States or Canada,
and (c) except for liabilities for film booking arrangements and obligations
and liabilities included in clauses (ii)(x) or (y) of the definition of Net
Working Capital or Debt reflected in each case in LTM's Preliminary Closing
Statement or arising under the Documents or with respect to which LTM is
required to indemnify SPE or SPE's Affiliates in accordance with the Tax
Sharing and Indemnity Agreement, neither LTM nor any LTM Subsidiary
(including, without limitation, the Transferred SPE Subsidiaries) will have
any obligation or liability, contingent or otherwise, owed to SPE or any
Affiliate thereof (other than LTM and the LTM Subsidiaries).
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO CLOSING
Section 5.1. Conduct of Business Prior to Closing
. (a) Prior to the Closing Date except (i) as set forth in the
Cineplex Odeon Disclosure Statement or the LTM Disclosure Statement, as the
case may be, (ii) as required or contemplated by the Documents or (iii) as
otherwise permitted by Section 5.1(b), LTM shall, and shall cause each of the
LTM Subsidiaries, SPE shall in respect of the assets subject to the Imax
Leases and shall cause each of the Transferred SPE Subsidiaries and Cineplex
Odeon shall, and shall cause each of the Cineplex Odeon Subsidiaries:
(A) to carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted including, without limitation:
(i) using their reasonable best efforts to negotiate and
enter into and performing its obligations (contemplated or otherwise) under
agreements or leases to operate, develop or construct those theaters which are
planned, contemplated, under study or pursuant to which construction has
commenced or is pending, as described in the Construction Work in Progress
Statements delivered pursuant to this Agreement; and
(ii) using their reasonable best efforts to preserve intact
their present business organizations and preserve their relationships with
film studios, distributors, customers, suppliers and others having business
dealings with them;
(B) except as contemplated in Section 2.7(b)(ii) of the Cineplex
Odeon Disclosure Statement or Section 3.7(b)(ii) of the LTM Disclosure
Statement, as the case may be, or except as would not otherwise result in a
Cineplex Odeon Material Adverse Effect or a LTM Material Adverse Effect, as
the case may be, use their reasonable best efforts to:
(i) sell, close or otherwise dispose of the Cineplex Odeon
Negative Theatres or the LTM Negative Theatres;
(ii) maintain insurance coverages and its books, accounts
and records in the usual manner consistent with prior practices;
(iii) comply in all material respects with all laws,
ordinances and regulations of Governmental Entities applicable to it;
(iv) maintain and keep its properties and equipment in good
repair, working order and condition, ordinary wear and tear excepted; and
(v) perform in all material respects its obligations under
the leases with respect to the Cineplex Odeon Leased Real Properties and the
LTM Leased Real Properties, as the case may be;
(C) not to, or not to propose to, as the case may be:
(i) amend its charter documents;
(ii) split, combine or reclassify its outstanding capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or,
other than, in each case, in accordance with such party's current cash
management practices and in the ordinary course of business, declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property; or
(iii) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock;
(iv) issue, deliver or sell or agree to issue, deliver or
sell any additional shares of, or rights of any kind to acquire any shares of,
its capital stock of any class, any indebtedness having the right to vote on
which its shareholders may vote or any option, rights or warrants to acquire,
any securities convertible into, shares of capital stock other than, in the
case of Cineplex Odeon, (a) Cineplex Odeon Common Shares pursuant to
employment agreements or stock options as in effect on the date hereof and (b)
shares of Cineplex Odeon Common Shares issued upon the exercise of stock
options;
(v) acquire, develop, build or construct any new theaters,
or purchase, lease or otherwise acquire, directly or indirectly, an interest
in any theaters or make any investment in any business or any corporation,
partnership, association or other business organization or division thereof
(other than an entity that is a wholly owned Subsidiary of such party as at
the date hereof), other than, with respect to either Cineplex Odeon or LTM,
(a) those theaters described on their respective Construction Work in Progress
Statements (b) pursuant to pre-existing contractual arrangements or (c) where
the purchase price, financial commitment or investment (including, without
limitation, any build-out commitments under a lease) does not exceed (1)
US$25,000,000 on an individual basis or (2) US$75,000,000 in the aggregate in
respect of all such acquisitions, investments or financial commitments;
(vi) directly or indirectly sell, close or otherwise
dispose of any theaters other than (a) the Cineplex Odeon Negative Theaters
and the LTM Negative Theaters, as the case may be, (b) other theaters that by
the terms of their respective leases expire or are terminated by the landlord
in accordance with the term of any such leases, or (c) other theaters of which
the Cash Flow for the twelve months ended March 31, 1997 does not exceed
US$500,000 on an individual theater basis or US$2,000,000 in the aggregate for
all such theaters;
(vii) borrow monies to finance the construction, development
or acquisition of theaters described in the Cineplex Odeon's or LTM's
Construction Work in Progress Statement, as the case may be, or to finance the
disposition of the Cineplex Odeon Negative Theaters or the LTM Negative
Theaters, as the case may be, except (a) pursuant to bank commitments and
lines of credit existing on the date hereof; (b) in the case of Cineplex Odeon
and its Subsidiaries, pursuant to proposed bank commitments and lines of
credit substantially on the terms set forth in Section 5.1(C)(vii) of the
Cineplex Odeon Disclosure Statement; (c) in the case of LTM, pursuant proposed
bank commitments and lines of credit substantially on the terms set forth in
Section 5.1(C)(vii) of the LTM Disclosure Statement; or (d) solely
specifically to finance the acquisition, development or construction of such
theaters, provided that any security therefor is limited to the theaters being
financed;
(viii) other than in the ordinary course of business
consistent with past practice or as contemplated by the Cineplex Odeon
Disclosure Statement or the LTM Disclosure Statement or this Agreement, amend
or supplement any lease relating to the Cineplex Odeon Leased Real Properties
or the LTM Leased Real Properties, as the case may be, so as to increase
materially the obligations of the tenant, or decrease the obligations of the
landlord under such lease;
(ix) grant increases in compensation payable to directors,
officers or employees, except in any of the foregoing cases (A) as required by
Applicable Law or this Agreement; (B) in accordance with pre-existing
contractual arrangements; (C) cash bonuses to employees specifically for past
services rendered; or (D) in the ordinary course of business consistent with
past practice;
(x) (A) except as set forth in Section 5.1(a)(x) of the
LTM Disclosure Statement, employ the services of any individual who is not
currently a member of senior management in a senior management capacity; (B)
enter into a new written employment agreement with a member of senior
management; (C) renew or amend any existing written employment agreement with
a member of senior management, or (D) pay any bonus or other amount to any
member of senior management as an inducement to maintain the ongoing services
of such individual.
(b) Notwithstanding the provisions of Section 5.1(a), LTM
may and may permit the LTM Subsidiaries, and SPE may and may permit the
Transferred SPE Subsidiaries, to do anything otherwise prohibited thereby with
the prior written consent of Cineplex Odeon, not to be unreasonably withheld;
provided, however, that no such consent granted by Cineplex Odeon shall be
effective unless and until such consent is accompanied by delivery to LTM of
evidence satisfactory to LTM that such consent will not result in a breach or
violation of the Three Party Agreement (as defined in the Universal
Subscription Agreement), and Cineplex Odeon may and may permit the Cineplex
Odeon Subsidiaries to do anything otherwise prohibited by Section 5.1(a) with
the prior written consent of LTM, not to be unreasonably withheld.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. Access and Information
. (a) Each of Cineplex Odeon and LTM and their respective
Subsidiaries shall afford to the other and to the other's accountants, counsel
and other representatives reasonable access during normal business hours (and
at such other times as the parties may mutually agree) throughout the period
prior to the Closing Date to all of its properties, books, contracts,
commitments, records and personnel (including, without limitation, consultants
and agents) and ensure the cooperation of its personnel and, during such
period, each shall furnish promptly to the other (i) a copy of each report,
schedule and other document filed or received by it pursuant to the
requirements of United States or Canadian federal, provincial or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as the other may reasonably request. Each of the
parties hereto shall hold, and shall cause their respective employees and
agents to hold, in confidence all such information in accordance with the
terms of the Confidentiality Agreements dated September 24, 1996 (each a
"Confidentiality Agreement").
(b) SPE and the Transferred SPE Subsidiaries shall afford to
Cineplex Odeon and to its accountants, counsel and other representatives
reasonable access during normal business hours (and at such other times as the
parties may mutually agree) throughout the period prior to the Closing Date to
all of the properties, books, contracts, commitments, records and personnel
relating to the Transferred SPE Subsidiaries and the Imax Leases and, during
such period, shall furnish promptly to Cineplex Odeon all other information
concerning the IMAX Leases and the business, properties, and personnel of the
Transferred SPE Subsidiaries as Cineplex Odeon may reasonably request.
Section 6.2. Meetings of Shareholders
. Provided that the Board of Directors of Cineplex Odeon has not
withdrawn its approval or recommendation of this Agreement or the
Transactions, Cineplex Odeon will take all action necessary, including
permitting and instructing its registrar and transfer agent to act as
depository in connection with the Arrangement and timely mailing of the Proxy
Statement, in accordance with Applicable Law and its Articles and Bylaws to
convene a meeting of its shareholders (the "Cineplex Odeon Meeting") as
promptly as practicable following the later of (x) the date on which the
Interim Order is issued and (y) the date on which the Form S-4 is declared
effective, to consider and vote upon the approval of the Arrangement as
provided for in this Agreement and the transactions contemplated thereby.
Subject to the exercise of its fiduciary duties, the Board of Directors of
Cineplex Odeon shall recommend such approval and Cineplex Odeon shall take all
necessary and appropriate lawful actions to solicit such approval. Cineplex
Odeon and LTM shall, as the context may require, take all necessary action,
prior to mailing the Proxy Statement, to ensure that (i) LTM shall have
received a "comfort" letter from KPMG, independent auditors for Cineplex
Odeon, dated the date of the Proxy Statement with respect to the financial
statements of Cineplex Odeon included in the Proxy Statement, substantially in
the form described in Section 7.3(b), and (ii) Cineplex Odeon shall have
received a "comfort" letter from Price Waterhouse, L.L.P., independent public
accountants for LTM, dated the date of the Proxy Statement, with respect to
the financial statements of LTM and the LTM Subsidiaries included in the Proxy
Statement, substantially in the form described in Section 7.2(b).
Section 6.3. Registration Statement/Proxy Statement/Prospectus
. LTM and Cineplex Odeon (i) shall cooperate and promptly
prepare, and LTM shall file with the SEC as soon as practicable, a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the LTM Common Stock, portions of which Registration Statement
shall also serve as the proxy statement and management information circular
(the "Proxy Statement") with respect to the Cineplex Odeon Meeting. LTM and
Cineplex Odeon will cooperate in the preparation and filing with the SEC and
the Canadian Securities Authorities of a Registration Statement on Form S-1
(the "Form S-1" and, together with the Form S-4, the "Registration
Statements") and a prospectus prepared in accordance with Canadian Securities
Laws (the "Prospectus") in respect of any Equity Offering. LTM shall use all
reasonable efforts, and Cineplex Odeon shall cooperate with LTM, to have the
Form S-4 declared effective by the SEC and the Prospectus accepted for filing
and receipted by the Canadian Securities Authorities as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Transactions. LTM shall, as promptly as practicable, provide
copies of any written comments received from the SEC and Canadian Securities
Authorities with respect to the Registration Statements and the Prospectus to
Cineplex Odeon and advise Cineplex Odeon of any oral comments with respect to
the Registration Statements received from the SEC and with respect to the
Prospectus received from Canadian Securities Authorities. LTM shall use its
best efforts to obtain, prior to the effective date of the Registration
Statements, all necessary provincial or state securities law or "Blue Sky"
permits or approvals required to carry out the Transactions, and LTM shall pay
all expenses incident thereto. LTM agrees that none of the information
supplied or to be supplied by LTM for inclusion or incorporation by reference
in the Registration Statements, the Proxy Statement or the Prospectus (i) in
the case of the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the Cineplex Odeon Meeting, or
(ii) in the case of each Registration Statement or the Prospectus and each
amendment or supplement thereto, at the time it is filed or becomes effective,
as applicable, will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Cineplex Odeon agrees that none of the information supplied
or to be supplied by Cineplex Odeon for inclusion or incorporation by
reference in the Registration Statements, the Proxy Statement or the
Prospectus (i) in the case of the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Cineplex Odeon Meeting, or, (ii) in the case of each Registration Statement
and the Prospectus or any amendment or supplement thereto, at the time it is
filed or becomes effective, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. For purposes of the foregoing, it is
understood and agreed that (x) information concerning or related to LTM and
the LTM Subsidiaries will be deemed to have been supplied by LTM, and
(y) information concerning or related to Cineplex Odeon, the Cineplex Odeon
Subsidiaries, and the Cineplex Odeon Meeting shall be deemed to have been
supplied by Cineplex Odeon. No amendment or supplement to the Proxy
Statement, a Registration Statement or the Prospectus shall be made by LTM or
Cineplex Odeon without the approval of the other affected party. LTM will
advise Cineplex Odeon, promptly after it receives notice thereof, of the time
when the Registration Statements have become effective or any supplement or
amendment has been filed, and when a receipt has been issued for a Prospectus
by a Canadian Securities Authority, the issuance of any stop order or cease-
trade order, the suspension of the qualification of the shares of LTM Common
Stock for offering or sale in any jurisdiction, or any request by the SEC or a
Canadian Securities Authority for amendment of the Proxy Statement, a
Registration Statement or the Prospectus or comments thereon and responses
thereto or requests by the SEC or a Canadian Securities Authority for
additional information.
Section 6.4. Change of Control Offer and Change of Guarantor
. (a) Not later than 30 days following the Closing Date, LTM
shall make, or shall cause Plitt to make, a Change of Control Offer, as
defined in, and in accordance with, the terms of Section 4.19 of the Plitt
Indenture.
(b) LTM shall use its best efforts to cause Cineplex Odeon to be
released on and after the Closing Date from all of its obligations under its
Parent Guarantee (as such term is defined in the Plitt Indenture) and the
Plitt Indenture, if and to the extent that the requirements for such release
set forth in Section 5.01 of the Plitt Indenture are then satisfied.
Section 6.5. Compliance with the Securities Act
. At least 30 days prior to the Closing Date, Cineplex Odeon
shall deliver to LTM a list of names and addresses of those persons (other
than Universal and its affiliates and the members of the Claridge Group) who
were, in Cineplex Odeon's reasonable judgment, at the record date for the
Cineplex Odeon Meeting, "affiliates" of Cineplex Odeon within the meaning of
Rule 145 of the rules and regulations promulgated under the Securities Act
(each such person, an "Affiliate"). Cineplex Odeon shall use all reasonable
efforts to deliver or cause to be delivered to LTM, prior to the Closing Date,
from each of the Affiliates of Cineplex Odeon identified in the foregoing
list, an affiliate letter in customary form satisfactory to Cineplex Odeon and
LTM. LTM shall be entitled to place legends as specified in such affiliate
letters on the certificates evidencing any LTM Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for LTM Common
Stock, consistent with the terms of such affiliate letters.
Section 6.6. Stock Exchange Listing
. LTM and Cineplex Odeon shall use their best efforts to list and
post for trading LTM Common Stock on The New York Stock Exchange, Inc. (the
"NYSE") (or, if LTM Common Stock shall not be approved for listing on the
NYSE, the Nasdaq Stock Market (the "NASDAQ")) and The Toronto Stock Exchange
(the "TSE"), upon official notice of issuance.
Section 6.7. HSR Act; Competition Act; Investment Canada Act;
Submission of Arrangement for Approval
. (a) Each of the parties hereto shall use its best efforts to
file as soon as practicable notifications under the HSR Act and the
Competition Act in connection with the Transactions, and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission, the Antitrust Division of the Department of Justice and/or the
Director of Investigation and Research appointed under the Competition Act
(the "DIR") for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters.
(b) Cineplex Odeon shall cooperate with LTM in connection with
the preparation and filing within five business days after the date hereof,
(i) with the Minister responsible for administering the IC Act (the "ICA
Minister"), an application by LTM for review under the IC Act in connection
with the Arrangement (the "ICA Application") and (ii) with the DIR an
application for an advance ruling certificate under the Competition Act in
connection with the Arrangement. Cineplex Odeon and LTM each hereby agrees to
be bound by the undertakings set forth in the ICA Application as initially
filed with the ICA Minister.
(c) As promptly as practicable after the Form S-4 is declared
effective as contemplated in Section 5.3, Cineplex Odeon shall apply to the
Ontario Court (General Division) (the "Court") pursuant to Subsection 182(5)
of the OBCA for an interim order of the Court in form and substance reasonably
satisfactory to LTM and Cineplex Odeon (the "Interim Order") providing for,
among other things, the holding the Cineplex Odeon Meeting. As promptly as
practicable following approval by Cineplex Odeon's shareholders at the
Cineplex Odeon Meeting of the Arrangement as provided in the Interim Order,
Cineplex Odeon shall take all steps necessary to submit the Arrangement to the
Court and to apply for and use all reasonable efforts to obtain a final order
of the Court in form and substance reasonably satisfactory to LTM and Cineplex
Odeon approving the Arrangement (the "Final Order"). As soon as reasonably
practicable after issuance of the Final Order, subject to the satisfaction
and/or waiver of the conditions set forth in Article VII hereof, and
concurrently with the Closing, Cineplex Odeon shall file articles of
arrangement and such other documents required to be filed in connection
therewith in accordance with the provisions of the OBCA to give effect to the
Arrangement (collectively, the "Arrangement Filings").
Section 6.8. Bank Financing; Equity Offering
. (a) LTM and Cineplex Odeon shall cooperate with each other
and shall use their respective best efforts to arrange the Bank Financing on
terms that the respective boards of directors of LTM and Cineplex Odeon have
determined in good faith are not commercially unreasonable and as contemplated
in the recitals, including providing such financial and other information
concerning their respective businesses, and such opinions of counsel and
certifications as the lenders may reasonably request and the members of LTM's
and Cineplex Odeon's senior management shall, to the extent reasonably
requested by the lenders, assist such lenders in syndicating the Bank
Financing. SPE shall provide such financial and other information concerning
the Transferred SPE Subsidiaries and the IMAX Leases as the lenders may
reasonably request in connection with the Bank Financing.
(b) Subject to prevailing market conditions, LTM and Cineplex
Odeon shall cooperate in effecting an Equity Offering simultaneously with the
Closing or as soon thereafter as the Board of Directors of LTM deems
advisable. Consummation of an Equity Offering shall not be a condition to the
Closing hereunder.
Section 6.9. Audit Requirements; Closing Adjustment
. (a) Each of LTM and Cineplex Odeon shall promptly and in any
event no later than 60 days following the date of this Agreement, prepare and
deliver to the other (i) audited financial statements and an unaudited
statement of Consolidated EBITDA for the twelve months ended March 31, 1997,
in the case of Cineplex Odeon, for Cineplex Odeon and its consolidated
Subsidiaries, and, in the case of LTM, for LTM and the LTM Subsidiaries
(including the Transferred SPE Subsidiaries and the assets subject to the Sony
Asset Transfer) on a combined basis. Such financial statements shall include,
in each case, an audited balance sheet at March 31, 1997, and audited
statements of income, cash flow and changes in shareholders' equity for the
twelve months then ended and an unaudited statement of Consolidated EBITDA
(the "Audited Financial Statements"). The Audited Financial Statements of
each of LTM and Cineplex Odeon delivered hereunder shall contain all customary
year-end adjustments, shall be accompanied by the unqualified report of their
respective independent auditors and shall include all footnote disclosures as
required under GAAP in the case of LTM and Canadian GAAP in the case of
Cineplex Odeon. In the case of Cineplex Odeon, such footnotes shall include a
reconciliation to United States GAAP. The respective statements of
Consolidated EBITDA shall be accompanied by a report issued in the case of LTM
by Price Waterhouse LLP and in the case of Cineplex Odeon by KPMG indicating
that the statement has been examined in accordance with standards prescribed
by the AICPA in the case of Price Waterhouse LLP and the CICA Handbook in the
case of KPMG and that such statements have been prepared in accordance with
the terms of Sections 2.7, 3.7 and 6.9 of this Agreement.
(b) Not earlier than five days nor later than one day prior to
the Closing Date, each of LTM and Cineplex Odeon shall deliver to the other as
of the last day of the month ended immediately preceding the Closing Date (the
"Preliminary Statement Date" provided that if the Closing Date shall be prior
to the fifteenth day of a month, the Preliminary Statement Date shall be the
last day of the second preceding month) a statement (the "Preliminary Closing
Statements") consisting of the following:
(i) a statement (A) listing each theater (a "Retained Negative
Theater") identified in Schedule 2.7(b)(ii) in the case of Cineplex Odeon and
Schedule 3.7(b)(ii) in the case of LTM that has not been and as of the
Preliminary Statement Date is not expected to be sold, closed or disposed of
prior to the Closing Date and (B) setting out an amount equal to the actual
positive or negative Cash Flow for the twelve months ended March 31, 1997 for
each of such party's Retained Negative Theaters.
(ii) a statement setting out the annualized incremental impact of
the new theaters required to be identified under Section 2.7(b)(iii) in the
case of Cineplex Odeon and Section 3.7(b)(iii) in the case of LTM (for
purposes of this calculation, the annualized incremental impact shall be: (1)
(A) actual positive or negative Cash Flow, as the case may be, generated by
such theater for the first twelve months of operations commencing on the date
of opening if such theater has been operating for twelve months or more and
(B) if such theater has not been operating for at least twelve months, actual
Cash Flow for the period from opening through the Preliminary Statement Date,
divided by the number of days in operation and multiplied by 365 (and in the
case of Cineplex Odeon shall exclude Cash Flow of the Cinescapes); less (2) in
each case, the actual negative or positive Cash Flow of such theater for the
twelve months ended March 31, 1997;
(iii) a statement (A) listing each theater that is not identified
in Schedule 2.7(b)(i) or 2.7(b)(ii) in the case of Cineplex Odeon and Schedule
3.7(b)(i) or 3.7(b)(ii) in the case of LTM but that has been sold, closed or
disposed of subsequent to the date of this Agreement or is at the Preliminary
Statement Date expected to be sold, closed or disposed of prior to the Closing
Date and (B) setting out an amount equal to the actual positive or negative
Cash Flow for the twelve months ended March 31, 1997 for each such theater;
(iv) in the case of LTM, a statement of the estimated amount of
the IMAX Purchase Price, the Intercompany Debt and Working Capital Debt as of
the Closing Date; and
(v) a Construction Work in Progress Statement setting forth the
amount invested as of the Preliminary Statement Date with respect to each
theater identified on Section 2.15(c)(xi) of the Cineplex Odeon Disclosure
Statement, in the case of Cineplex Odeon, and Section 3.15(c)(xi) of the LTM
Disclosure Statement, in the case of LTM.
(vi) a statement of Qualified Tangible Net Worth calculating the
Qualified Tangible Net Worth of such party as of the Preliminary Statement
Date (the "Preliminary Closing Qualified Tangible Net Worth"), provided that
each of the following shall be included in calculating Preliminary Closing
Qualified Tangible Net Worth (and such statement shall set forth each of the
following, without duplication: (A) a liability representing the estimated
disposal costs (including any costs associated with the buy-out of any Leases)
of the party's Retained Negative Theaters which shall include the present
value of projected negative Cash Flow of such theaters through their estimated
dates of disposition and (B) the amount invested as of the Preliminary
Statement Date in each theater not identified in Schedule 2.15(c)(xi) of the
Cineplex Odeon Disclosure Statement in the case of Cineplex Odeon and Section
3.15(c)(xi) of the LTM Disclosure Statement in the case of LTM that has been
or is at the Preliminary Statement Date expected to be acquired subsequent to
the date of this Agreement and prior to the Closing Date or in respect of
which such party has invested an amount in theater construction or at the
Preliminary Statement Date expects to have invested an amount in theater
construction prior to the Closing Date). The Preliminary Closing Statement
shall include a list of each such theater, the amount invested as of the
Preliminary Statement Date and an estimate of the amount that will be invested
in each such newly acquired theater or theater under construction at the
Closing Date.
(c) The Preliminary Closing Statements required by Section
6.9(b) shall be accompanied by a report issued in the case of LTM by Price
Waterhouse LLP which includes their findings based upon performing procedures
in accordance with AICPA standards and in the case of Cineplex Odeon by KPMG
which includes their findings based upon performing such procedures with
respect to the Preliminary Closing Statements required by Section 6.9(b) in
accordance with the CICA Handbook. Such reports shall confirm that the
Preliminary Closing Statements have been prepared in accordance with the terms
of Sections 2.7, 3.7 and 6.9 of this Agreement.
(d) The LTM Cap shall be adjusted on the Closing Date in
accordance with the relevant information set out in the Preliminary Closing
Statements, without duplication, as follows:
(i) (A) if the Consolidated EBITDA of Cineplex Odeon set out in
the Audited Financial Statements delivered by it in accordance with Section
6.9(a) (the "Cineplex Odeon Revised Consolidated EBITDA") differs from
Cineplex Odeon's Consolidated EBITDA set out in Schedule 2.7(b) of the
Cineplex Odeon Disclosure Statement (the "Cineplex Odeon Original Consolidated
EBITDA"), then the LTM Cap shall be increased by the product of the Adjustment
Factor and ten times the absolute value of any negative change in the Cineplex
Odeon Revised Consolidated EBITDA from the Cineplex Odeon Original
Consolidated EBITDA, and the LTM Cap shall be decreased by the product of the
Adjustment Factor and ten times any positive change in the Cineplex Odeon
Revised Consolidated EBITDA from the Cineplex Odeon Original Consolidated
EBITDA; and
(B) if the Consolidated EBITDA of LTM set out in the
Audited Financial Statements delivered by it in accordance with Section 6.9(a)
(the "LTM Revised Consolidated EBITDA") differs from LTM's Consolidated EBITDA
set out in Schedule 3.7(b) of the LTM Disclosure Statement (the "LTM Original
Consolidated EBITDA"), then the LTM Cap shall be increased by ten times any
positive change in the LTM Revised Consolidated EBITDA from the LTM Original
Consolidated EBITDA, and the LTM Cap shall be decreased by ten times the
absolute value of any negative change in the LTM Revised Consolidated EBITDA
from the LTM Original Consolidated EBITDA;
(ii) the LTM Cap shall be increased by:
(A) the product of the Adjustment Factor and two times the
absolute value of the Cash Flow for the twelve months ended March
31, 1997 of each of Cineplex Odeon's Retained Negative Theaters
whose Cash Flow for such period is a negative amount, and
(B) two times the positive Cash Flow for the twelve months
ended March 31, 1997 of each of LTM's Retained Negative Theaters
whose Cash Flow for such period is a positive amount,
and the LTM Cap shall be decreased by:
(C) the product of the Adjustment Factor and two times the
positive Cash Flow for the twelve months ended March 31, 1997 of
each of Cineplex Odeon's Retained Negative Theaters whose Cash
Flow for such period is a positive amount, and
(D) two times the absolute value of the Cash Flow for the
twelve months ended March 31, 1997 of each of LTM's Retained
Negative Theaters whose Cash Flow for such period is a negative
amount.
(iii) with respect to the annualized incremental impact of new
theaters of Cineplex Odeon or LTM described under Section 6.9(b)(ii), the LTM
Cap shall be increased by:
(A) ten times any positive change in the annualized
incremental impact of LTM's new theaters from the amount set out
in Section 3.7(b) of the LTM Disclosure Statement,
(B) the product of the Adjustment Factor and ten times the
absolute value of any negative change in the annualized
incremental impact of Cineplex Odeon's new theaters from the
amount set out in Section 2.7(b) of the Cineplex Odeon Disclosure
Statement,
and the LTM Cap shall be decreased by:
(C) ten times the absolute value of any negative change in
the annualized incremental impact of LTM's new theaters from the
amount set out in Section 3.7(b) of the LTM Disclosure Statement
and
(D) the product of the Adjustment Factor and ten times any
positive change in the annualized incremental impact of Cineplex
Odeon's new theaters from the amount set out in Section 2.7(b) of
the Cineplex Odeon Disclosure Statement;
(iv) if on or prior to the Closing Date Cineplex Odeon or LTM
sells, closes or disposes of any theater other than those identified under
Section 2.7(b)(i) or 2.7(b)(ii) in the case of Cineplex Odeon and Section
3.7(b)(i) or 3.7(b)(ii) in the case of LTM, the LTM Cap shall be increased by
(A) the product of the Adjustment Factor and ten times the
positive Cash Flow for the twelve months ended March 31, 1997
from each of such theaters sold, closed or disposed of by
Cineplex Odeon whose Cash Flow for such period is a positive
amount,
(B) ten times the absolute value of the Cash Flow for the
twelve months ended March from each of such theaters sold, closed
or disposed of by LTM whose Cash Flow for such period is a
negative amount,
and the LTM Cap shall be decreased by
(C) the product of the Adjustment Factor and ten times the
absolute value of the Cash Flow for the twelve months ended March
31, 1997 from each of such theaters sold, closed or disposed of
by Cineplex Odeon whose Cash Flow for such period is a negative
amount, and
(D) ten times the positive Cash Flow for the twelve months
ended March 31, 1997 from each of such theaters sold, closed or
disposed of by LTM whose Cash Flow for such period is a positive
amount.
(v) the LTM Cap shall be increased by the product of the
Adjustment Factor and the amount required to be reimbursed to Universal and
the Trust pursuant to the terms of the Universal Subscription Agreement and
the Letter Agreement;
(vi) if the Preliminary Closing Qualified Tangible Net Worth of
Cineplex Odeon or of LTM differs from (a) in the case of Cineplex Odeon the
sum of (1) the Qualified Tangible Net Worth of Cineplex Odeon as set out in
Section 2.7(b) of the Cineplex Odeon Disclosure Statement plus
(2) US$7,172,000 (such sum, the "Cineplex Odeon Benchmark") and (b) in the
case of LTM the sum of (1) the Qualified Tangible Net Worth of LTM as set out
in Section 3.7(b) of the LTM Disclosure Statement plus (2) US$69,078,000 (such
sum, the "LTM Benchmark"), then the LTM Cap shall be increased by any positive
difference between LTM's Preliminary Closing Qualified Tangible Net Worth less
the LTM Benchmark and by the product of the Adjustment Factor and the absolute
value of any negative difference between Cineplex Odeon's Preliminary Closing
Qualified Tangible Net Worth less the Cineplex Odeon Benchmark, and the LTM
Cap shall be decreased by the absolute value of any negative difference
between LTM's Preliminary Closing Qualified Tangible Net Worth less the LTM
Benchmark and by the product of the Adjustment Factor and any positive
difference between Cineplex Odeon's Preliminary Closing Qualified Tangible Net
Worth less the Cineplex Odeon Benchmark.
As used in this Agreement, "Adjustment Factor" means 1.046618.
As used in this Section 6.9 and Sections 2.7(b) and 3.7(b), a
theater will be deemed to be closed or disposed of if a binding agreement has
been entered into that has, in substance, terms as favorable as if such
theater were closed or disposed of without significant additional cost, and a
theater will be deemed not to be closed or disposed of it is temporarily
closed by reason of damage or destruction and Cineplex Odeon or LTM, as the
case may be, intends to reopen the theater and is proceeding diligently to
achieve such reopening.
(e) Within 60 days following the Closing Date, LTM shall prepare
(or cause to be prepared) and shall deliver to SPE, Universal, Claridge Inc.
(as agent for the Claridge Group) and the Independent Directors (as defined in
the Stockholders Agreement), (i) audited balance sheets for LTM and Cinexplex
Odeon as of the Closing Date, prepared by their respective accounting firms,
(ii) initial closing statements giving effect to the adjustments required
under Sections 6.9 (ii), (iii), (iv), (v) and (vi) as of the Closing Date
rather than the Preliminary Statement Date (the "Initial Closing Statements")
and (iii) a final Closing Statement, recalculating the LTM Cap as of the
Closing Date reflecting the results of the Initial Closing Statements as of
the Closing Date rather than as of the Preliminary Statement Date (the "Final
Closing Statement"), and shall make available to SPE, Universal, Claridge Inc.
(as agent for the Claridge Group) and such Independent Directors for their
review the work papers and supporting documents generated in connection
therewith. The audited balance sheets delivered hereunder shall contain all
customary year-end adjustments, shall include all appropriate footnote
disclosures as required under GAAP in the case of LTM and Canadian GAAP in the
case of Cineplex Odeon. In the case of Cineplex Odeon such footnotes shall
include a reconciliation to US GAAP. The Final Closing Statement shall be
accompanied by a report issued by LTM's independent accountants addressed to
SPE, Universal, Claridge Inc. (as agent for the Claridge Group) and the
Independent Directors that shall include the results of reports in the Initial
Closing Statements prepared by Price Waterhouse in the case of LTM and KPMG in
the case of Cineplex Odeon indicating their findings based upon performing
procedures in accordance with AICPA standards in the case of LTM and the CICA
Handbook in the case of Cineplex Odeon. Such report shall indicate that the
Final Closing Statements have been prepared in accordance with the terms of
Sections 2.7, 3.7 and 6.9 of this Agreement. Unless (i) a majority of the
Independent Directors, (ii) SPE, (iii) Universal or (iv) Claridge Inc. (as
agent for the Claridge Group) (each an "Objecting Party") within 30 days after
delivery of the Final Closing Statement, notifies LTM in writing that it
objects to any information contained in the Final Closing Statement and
specifying in reasonable detail the basis for such objection, the Final
Closing Statement shall be conclusively binding upon the parties without
further rights of appeal. If LTM and the Objecting Parties are unable to
agree upon the information contained in the Final Closing Statement within 10
days after notice of objection has been given, a nationally recognized
independent accounting firm to be mutually agreed upon by LTM and the
Objecting Parties shall finally resolve the disputed items and make the
appropriate adjustments to the Final Closing Statement based on its resolution
of the disputed items within 30 days after its acceptance of appointment. Any
such determination shall be conclusively binding upon the parties without
further rights of appeal. The LTM Cap shall be adjusted in accordance with
the provisions of this Section 6.9 based on the Final Closing Statement, and,
within ten business days following determination of the Final Closing
Statement, LTM shall pay to SPE or SPE shall refund to LTM, as applicable, an
amount equal to such adjustment. LTM shall bear the fees, costs and expenses
of the accounting firm selected in the event of a dispute.
Section 6.10. No Shop
. Prior to the Closing Date, Cineplex Odeon agrees that:
(a) neither it, nor any of its Subsidiaries, and none of the
officers, directors, employees, agents and representatives thereof (including,
without limitation, any investment banker, attorney or accountant retained
thereby), shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with respect to
a merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or (except with
respect to the exercise of stock options issued pursuant to the terms of the
Cineplex Odeon Stock Option Plan) any equity securities of Cineplex Odeon or
any of Cineplex Odeon's Significant Subsidiaries (any such proposal or offer
being hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal,
or release any third party from any obligations under any existing standstill
agreement or arrangement relating to any Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 6.10; and
(c) it will notify the other parties without unnecessary delay
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with it;
provided, however, that nothing contained in this Section 6.10 shall prohibit
the Board of Directors of Cineplex Odeon from, prior to the time at which the
shareholders of Cineplex Odeon approve the Arrangement and the transactions
contemplated thereby at the Cineplex Odeon Meeting, (i) furnishing information
to or entering into discussions or negotiations with, any person or entity
that makes an unsolicited bona fide proposal to acquire such party pursuant to
a merger, consolidation, share exchange, purchase of a substantial portion of
the assets, business combination or other similar transaction, if, and only to
the extent that, (A) such Alternative Proposal is, in the opinion of the
financial advisor to Cineplex Odeon, financially superior to the Transactions,
(B) the third party making such Alternative Proposal has demonstrated that the
consideration necessary for the Acquisition Proposal is likely to be available
(as reasonably determined in good faith by the Special Committee after
consultation with its financial advisors), (C) the Board of Directors of
Cineplex Odeon shall reasonably conclude in good faith, after considering
applicable provision of law, on the basis of oral or written advice of outside
counsel, that such action may be required for the Board of Directors to comply
with its fiduciary duties to stockholders imposed by law, (D) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Cineplex Odeon provides written notice to LTM to
the effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or entity, and (E) Cineplex Odeon or its
representative receives from such person or entity an executed confidentiality
agreement in reasonably customary form on terms not in the aggregate
materially more favorable to such person or entity than the terms of the
Confidentiality Agreements; and (ii) to the extent applicable, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative
Proposal. Cineplex Odeon shall notify LTM orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it), by
the close of business on the business day following the receipt thereof by
Cineplex Odeon, and shall keep LTM informed of the status and details of any
such inquiry, offer or proposal, and shall give LTM one business day's advance
notice of any agreement to be entered into with, or any information to be
supplied to, any person making such inquiry, offer or proposal.
Section 6.11. Advice of Changes; SEC Filings
. The parties shall confer with each other on a regular basis on
operational matters affecting or which may reasonably be expected to affect
the Combined Enterprise. LTM and Cineplex Odeon shall advise each other
promptly orally and in writing of any change or event that has had, or could
reasonably be expected to have, a Cineplex Odeon Material Adverse Effect or a
LTM Material Adverse Effect, as the case may be. Cineplex Odeon and LTM shall
provide to the other (or their respective counsel) promptly copies of all
filings made by such party with the SEC, any Canadian Securities Authority or
any other Governmental Entity in connection with the Transactions.
Section 6.12. Benefit Plans
. (a) LTM and Cineplex Odeon agree that each of their respective
employee incentive or benefit plans, programs and arrangements shall be
amended, to the extent necessary or appropriate, to reflect the Transactions.
The actions to be taken by LTM and Cineplex Odeon pursuant to this Section
6.12 shall include the submission by LTM and Cineplex Odeon of the amendments
to the benefit plans, programs or arrangements referred to herein to such
Governmental Entity and to their respective stockholders, if any such
submission is determined to be necessary or advisable by counsel to LTM and
Cineplex Odeon after consultation with one another; provided, however, that
such approval shall not be a condition to the consummation of the Transaction.
(b) Effective as of the Closing Date, each option to purchase
Cineplex Odeon Common Shares that is outstanding on the Closing Date, whether
or not exercisable, and whether or not vested, shall be treated as provided
for in the Plan of Arrangement.
(c) LTM shall reserve for issuance the number of shares of LTM
Common Stock as required under the Plan of Arrangement.
(d) As of the Closing Date or as soon as practicable thereafter,
(i) each LTM Excluded Employee who currently participates in the Sony Theatres
Salaried Employees' Profit Sharing and 401(k) Plan, (the "401(k) Plan") shall
cease to actively participate in the 401(k) Plan and (ii) each LTM Excluded
Employee shall participate in the SPE Savings and Profit-Sharing Plan or such
other defined contribution plan as SPE shall designate (collectively, the
"Transfer Plans"). LTM and SPE shall take, or cause to be taken, all action
as may be necessary to effect such cessation of participation and to cause the
transfer of the LTM Excluded Employees from the 401(k) Plan to a Transfer
Plan; provided that prior to any such transfer, SPE shall demonstrate to the
reasonable satisfaction of LTM that such Transfer Plan meets the qualification
requirements under Section 401(a) of the Code.
(e) Prior to the Closing Date, LTM shall deliver to Cineplex
Odeon a list of the LTM Excluded Employees.
Section 6.13. Inventory
. Each of LTM and Cineplex Odeon shall maintain inventories of
spare parts and items sold in its respective theaters at levels and variety
consistent with past practice in the ordinary course of business and industry
custom. All such items of inventory shall be of good quality and, with respect
to items held for sale, salable in the ordinary course of business.
Section 6.14. Registrar and Transfer Agent
. Cineplex Odeon shall permit its registrar and transfer agent to
act as depository in connection with the Arrangement and the Transactions.
Section 6.15. Additional Agreements
. (a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the Transactions, including using all reasonable efforts to
obtain all necessary waivers, consents (including all third party consents
that may be required in connection with the Sony Asset Transfer, the LTM Debt
Repayment and the LTM Dividend) and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the
HSR Act, the Competition Act and the IC Act and with all applicable
Governmental Entities); provided, however, that nothing in this Agreement
shall obligate any party hereto to agree to any condition or commitment sought
to be imposed on such party or its Affiliates in connection with the approval
or authorization of, consent or waiver with respect to, or determination by
any Governmental Entity not to challenge any of the Transactions under the IC
Act or any Antitrust Law that in the good faith judgment of its board of
directors (and, in the case of LTM, the board of directors of Sony Corporation
of America) would, in and of itself, and without regard to any other
circumstance or factor, be a material and substantial basis for rendering the
Transactions no longer in the best interests of LTM or Cineplex Odeon, as the
case may be. As used in this Agreement, the term "Antitrust Law" shall mean
any of the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act,
the Federal Trade Commission Act, as amended, the Competition Act, and all
other applicable United States federal and state and Canadian federal and
state, if any, statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through
merger or acquisition.
(b) In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement
or any other Documents, the proper officers and/or directors of SPE, LTM and
Cineplex Odeon shall take all such necessary action.
(c) (i) For a period of six years after the Closing, LTM shall
cause Cineplex Odeon to maintain in effect the current provisions regarding
indemnification of officers and directors contained in the charter and bylaws
of Cineplex Odeon and its Subsidiaries and any directors, officers or
employees indemnification agreements of Cineplex Odeon and its Subsidiaries,
(ii) LTM shall cause Cineplex Odeon to purchase policies of directors' and
officers' liability insurance and fiduciary liability insurance of at least
the same coverage and amount containing terms and conditions that are no less
advantageous to the insured in any material respect than policies currently
maintained by Cineplex Odeon with respect to claims arising from facts or
events that occurred on or before the Closing Date, subject to a six year
"discovery period," effective as of the Closing (provided, however, that, in
connection with the foregoing, LTM shall only be obligated to cause Cineplex
Odeon to purchase insurance at an aggregate cost equal to 250% of the annual
cost of such insurance coverage as currently provided by Cineplex Odeon),
except that if the insurance coverage contemplated in the principal provision
of this clause (ii) is not available as of the Closing, LTM shall cause
Cineplex Odeon to maintain in effect the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Cineplex Odeon with respect to claims arising from facts or events that
occurred on or before the Closing Date, subject to a six year "discovery
period" (provided that LTM may substitute therefor policies of at least the
same coverage and amount containing terms and conditions that are no less
advantageous to the insured in any material respect; provided, further, that,
in connection with this exception, LTM shall only be obligated to cause
Cineplex Odeon to purchase insurance at an annual cost of up to 150% of the
cost of such insurance as currently provided by Cineplex Odeon) and (iii) for
a period of six years after the Closing LTM shall cause Cineplex Odeon to, and
LTM shall, indemnify the directors and officers of Cineplex Odeon and LTM,
respectively, to the fullest extent to which Cineplex Odeon and LTM are
permitted to indemnify such officers and directors under their respective
charters and bylaws and applicable law.
Section 6.16. Transition Services
. Following the date hereof, SPE, LTM and Cineplex Odeon shall
negotiate in good faith the terms of a transition services agreement between
LTM and SPE (the "Transition Services Agreement") to be executed and delivered
on the Closing Date pursuant to which SPE will agree to provide LTM with
certain services currently performed by SPE or its Affiliates on behalf of LTM
listed on Exhibit G hereto following the Closing Date to the extent LTM will
require such services to conduct its operations in the ordinary course
following the Closing Date at such prices and rates, and subject to such
termination provisions, as may be agreed upon by SPE, Cineplex Odeon and LTM,
and which shall be no less favorable to LTM as would be obtainable from
unaffiliated third parties.
Section 6.17. Adoption of LTM Charter and Bylaws
. Prior to the Closing, LTM and SPE shall take all steps
necessary and proper to cause the LTM Charter and the LTM Bylaws to be adopted
in accordance with the provisions of the Delaware General Corporation Law and
SPE shall cause the LTM Charter to be filed with the Delaware Secretary of
State.
Section 6.18. Designation of Directors
. SPE shall use its reasonable best efforts, prior to the
effective date of the Form S-4 and mailing of the Proxy Statement, to identify
in writing to LTM, Universal and Cineplex Odeon the persons who will serve as
SPE Directors (as defined in the Stockholders Agreement) upon election thereof
effective as of the Closing pursuant to the Stockholders Agreement. Effective
as of the Closing, SPE shall cause the then-current members of the Board of
Directors of LTM to resign, and shall cause (i) the persons designated by SPE
pursuant to this Section 6.18 to serve as SPE Directors, (ii) the Management
Directors (as defined in the Stockholders Agreement), (iii) the persons
designated by mutual agreement of LTM, Universal, SPE and a majority of the
members of the Special Committee to serve as Independent Directors, (iv) the
persons designated by Universal pursuant to the Universal Subscription
Agreement to serve as USI Directors (as defined in the Stockholders Agreement)
and (v) the person designated by the Claridge Group pursuant to the Letter
Agreement to serve as the Claridge Director (as defined in the Stockholders
Agreement) to be elected as members of the Board of Directors of LTM.
Section 6.19. Amendments and Modifications of Documents
. Cineplex Odeon and LTM each agree not to amend or modify any of
the Documents, including any schedules or exhibits thereto, or terminate any
of the Documents (other than this Agreement in accordance with its terms) to
which they are party, respectively, or to waive any provisions or conditions
thereof, or grant any consents thereunder, without the consent of the other,
which shall not be unreasonably withheld.
Section 6.20. No Capital Contributions
. SPE and LTM shall take such steps as are necessary (other than
through capital contributions) to ensure that the LTM Cap will not be less
than the sum of the LTM Debt Repayment, the IMAX Purchase Price and, if
applicable, the Transferred SPE Subsidiary Purchase Price.
Section 6.21. Tax Sharing and Indemnity Agreement
. At or prior to the Closing, LTM shall, and SPE shall cause Sony
Corporation of America to, enter into and deliver the Tax Sharing and
Indemnity Agreement.
Section 6.22. Sony Trademark Agreement; Existing Theaters
. At or prior to the Closing, LTM shall, and SPE shall cause Sony
Corporation, a Japanese Corporation to, enter into and deliver the Sony
Trademark Agreement. LTM hereby agrees that it will, within 60 days after the
date hereof, prepare, subject to confirmation by Sony Corporation prior to the
Closing, a complete and correct list of the movie theater facilities owned,
operated or managed by LTM or the Subsidiaries which used, on September 30,
1997, the Trademark (as defined in the Sony Trademark Agreement) in the name
of the movie theater (other than Lincoln Square (as defined in the Sony
Trademark Agreement)). The parties agree that, upon such confirmation, such
list will be attached as Schedule A to the Trademark Agreement.
Section 6.23. Fractional Shares
. LTM shall cause the depositary under the Plan of Arrangement to
sell shares of LTM Common Stock as contemplated by Section 4.03 of the Plan of
Arrangement.
Section 6.24. Reverse Stock Split
. The parties agree that prior to filing the Form S-4 with the
SEC and listing applications with the TSE and the NYSE, the LTM share amounts
set forth herein (other than the 972 shares of LTM Common Stock held by SPE on
the date hereof) shall be reverse split by such divisor as the parties, based
on the recommendation of their respective financial advisors, deem appropriate
(provided that the share amount immediately preceding the parenthetical in
paragraph 2 of the recitals shall (prior to dividing by the applicable
divisor) be reduced by a number equal to the product of (a) such divisor less
1.0 multiplied by (b) 972) (the "Reverse Stock Split").
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions to Each Party's Respective Obligations
to Effect the Transactions
. The respective obligations of each party to effect the
Transactions to which it is a party shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) The Arrangement and the Transactions shall have been
approved and adopted at the Cineplex Odeon Meeting by (i) all requisite votes
of the shareholders of Cineplex Odeon required pursuant to the OBCA, Canadian
Securities Laws and the Interim Order and (ii) the affirmative vote of the
holders of at least a majority (50.1%) of the votes cast by the holders of the
outstanding Cineplex Odeon Common Shares other than Universal and its
Affiliates and the Claridge Group (together "Cineplex Odeon Shareholder
Approval"), the Court shall have issued the Final Order approving the
Arrangement in form and substance reasonably satisfactory to each party (the
"Court Approval"), the Plan of Arrangement shall have been filed and become
effective in accordance with the Final Order, and all other conditions
precedent to the consummation of the Arrangement shall have been satisfied in
full or waived in accordance with the Plan of Arrangement or this Agreement.
(b) The waiting period applicable to the consummation of the
Transactions under the HSR Act shall have expired or been terminated. In
addition, either (i) the DIR shall have issued an advance ruling certificate
under Section 102 of the Competition Act in respect of the Arrangement and the
Transactions, or (ii) the applicable time period under Section 123 of the
Competition Act shall have expired, and, in either case, the DIR or
representative thereof shall have advised Cineplex Odeon and LTM that the DIR
does not currently intend to make an application under either Section 92 or
Section 100 of the Competition Act in respect of the Arrangement and the
Transactions and neither the DIR nor any representative thereof shall have
rescinded such advice.
(c) The Form S-4 shall have become effective in accordance with
the provisions of the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no cease
trade order shall have been issued by a Canadian Securities Authority and, in
either case, remain in effect and all necessary orders, rulings and approvals
shall have been obtained under Canadian Securities Laws relating to the
issuance or trading of LTM Common Stock.
(d) No preliminary or permanent injunction or other order by any
federal, state or provincial court in the United States or Canada of competent
jurisdiction that prevents the consummation of the Transactions shall have
been issued and remain in effect, nor shall any proceeding by any Governmental
Entity seeking any of the foregoing be pending. Each party hereby agrees to
use its reasonable efforts to have any such injunction or order lifted.
(e) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Transactions that makes the consummation of the Transactions illegal.
(f) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body (i) required so that upon the Arrangement becoming effective
there shall be no restriction under Canadian Securities Laws on the resale and
trading in the Arrangement Shares by persons (other than those specified in
clause (c) of the definition of "distribution" in subsection 1.1 of the
Securities Act (Ontario or the analogous definitions contained in the
securities laws of the other Canadian provinces)), and (ii) otherwise required
in connection with the execution, delivery and performance of the Documents,
shall have been obtained or made, including, without limitation, the Final
Order and the Arrangement Filings as well as such orders and/or waivers as may
be required under Canadian Securities Laws with respect to the distribution of
the Arrangement Shares, including the distribution of the Exchange Shares, in
consideration for the purchase by Cineplex Odeon of a portion of its shares as
provided in the Plan of Arrangement, except, in the case of clause (ii) above,
for any documents required to be filed after the Closing Date and except where
the failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a LTM Material Adverse Effect
or a Cineplex Odeon Material Adverse Effect following the Closing Date.
(g) LTM Common Stock shall have been approved for listing on TSE
and either NYSE or NASDAQ, subject only to official notice of issuance.
(h) The Stockholders Agreement, dated the date hereof, among
SPE, LTM, Universal and the Claridge Group, a conformed copy of which is
attached hereto as Exhibit H (the "Stockholders Agreement"), shall not have
been amended and shall be in full force and effect.
(i) The transactions contemplated by the Universal Subscription
Agreement, dated the date hereof, among LTM and Universal, a conformed copy of
which is attached hereto as Exhibit I (the "Universal Subscription
Agreement"), shall have closed or shall close concurrently with the Closing
and the Universal Subscription Agreement shall be in full force and effect.
(j) LTM shall have received from the ICA Minister a notice,
satisfactory in form and substance to LTM and Cineplex Odeon, stating either
that (A) under Subsections 21(1) or 22(2) or paragraph 23(3)(a) of the IC Act,
the ICA Minister is satisfied that the Transactions are likely to be of net
benefit to Canada or (B) under Subsections 21(2) or 22(3) of the IC Act, the
ICA Minister shall have been deemed to be satisfied that the Transactions are
likely to be of net benefit to Canada.
(k) Holders of not more than 3.5% of the issued and outstanding
shares of Cineplex Odeon capital stock shall have exercised (and not withdrawn
as at the Closing) dissent rights under the Arrangement.
(l) LTM shall have entered into definitive agreements in respect
of the Bank Financing in accordance with Section 6.8, and such agreements
shall be in full force and effect.
(m) Cineplex Odeon and LTM shall have received the written
opinion of Goodman and Carr that the Arrangement has become effective in
accordance with applicable law.
(n) The Letter Agreement shall not have been amended and shall
be in full force and effect.
(o) The persons designated to be elected as members of the Board
of Directors of LTM (i) by SPE as SPE Directors pursuant to Section 6.18 of
this Agreement, (ii) by Claridge (as agent for the Claridge Group) as the
Claridge Director, pursuant to the Letter Agreement, (iii) by Universal as the
USI Directors pursuant to the Universal Subscription Agreement and (iv) by
mutual agreement of LTM, SPE, Universal and a majority of the Special
Committee as the Independent Directors shall have been elected as members of
the Board of Directors of LTM and shall be the only persons serving in such
capacity effective as of the Closing.
Section 7.2. Conditions to Obligation of Cineplex Odeon to
Effect the Transactions
. The obligations of Cineplex Odeon to effect the Transactions to
which it is a party shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions, unless waived by Cineplex
Odeon:
(a) Each of SPE and LTM shall have performed in all material
respects its agreements contained in the Documents required to be performed on
or prior to the Closing Date; its representations and warranties contained in
this Agreement and any of the other Documents shall be true and correct in all
material respects when made and on and as of the Closing Date as if made on
and as of such date (except to the extent they relate to a particular date),
except as expressly contemplated or permitted by this Agreement or such other
Documents, as the case may be (provided, however, that only for purposes of
this Section 7.2(a) and Article VIII, such representations and warranties
shall be deemed to be true and correct in all material respects unless the
failure or failures of such representations and warranties to be so true and
correct (without regard to materiality qualifiers contained therein),
individually or in the aggregate, results or would reasonably be expected to
result in a LTM Material Adverse Effect), and Cineplex Odeon shall have
received a certificate of the President or Chief Executive Officer or a Vice
President of LTM to that effect. In addition, Cineplex Odeon shall have
received a certificate of the Chief Financial Officer of LTM certifying that,
as of the Closing Date, except for (a) liabilities for film booking
arrangements and (b) obligations and liabilities included in clauses (ii)(x)
or (y) of the definition of Net Working Capital or Debt reflected in each case
in LTM's Preliminary Closing Statement or arising under the Documents or as
disclosed in Section 3.19 of the LTM Disclosure Schedule or with respect to
which LTM is required to indemnify SPE or SPE's Affiliates in accordance with
the Tax Sharing and Indemnity Agreement, neither LTM nor any LTM Subsidiary
(including, without limitation, the Transferred SPE Subsidiaries) will have
any obligation or liability, contingent or otherwise, owed to SPE or any
Affiliate thereof (other than LTM and the LTM Subsidiaries).
(b) Cineplex Odeon shall have received a "comfort" letter from
Price Waterhouse, L.L.P. of the kind contemplated by the AICPA Statement,
dated the Closing Date, in form and substance reasonably satisfactory to
Cineplex Odeon, in connection with the procedures undertaken by them with
respect to the combined financial statements of LTM and the LTM Subsidiaries
contained in the Form S-4 and the other matters contemplated by the AICPA
Statement and customarily included in comfort letters relating to transactions
similar to the Transactions.
(c) Sony Corporation of America and LTM shall have entered into
the Tax Sharing and Indemnity Agreement, and such agreement shall be in full
force and effect.
(d) To the extent LTM is required to, or requires to, use the
trademark "Sony," Sony Corporation and LTM shall have entered into the Sony
Trademark Agreement and such agreement shall be in full force and effect.
(e) If required by Section 6.16, SPE, SPE and LTM shall have
entered into the Transition Services Agreement on terms satisfactory to the
parties hereto and Universal, and such agreement shall be in full force and
effect.
(f) The LTM Charter and the LTM Bylaws shall have been adopted
and shall be in full force and effect.
(g) SPE and LTM shall have satisfied their obligations under
Section 6.20.
(h) Cineplex Odeon shall have received such legal opinions from
counsel to LTM and SPE reasonably requested by it and customary in
transactions similar to the Transactions.
Section 7.3. Conditions to Obligations of SPE and LTM to Effect
the Transactions
. The obligations of SPE and LTM to effect the Transactions shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, unless waived by LTM:
(a) Cineplex Odeon shall have performed in all material respects
its agreements contained in the Documents required to be performed on or prior
to the Closing Date; Cineplex Odeon's representations and warranties contained
in this Agreement and any of the other Documents shall be true in all material
respects when made and on and as of the Closing Date as if made on and as of
such date (except to the extent they relate to a particular date), except as
expressly contemplated or permitted by this Agreement or such other Document,
as the case may be (provided, however, that only for purposes of this Section
7.3(a) and Article VIII, such representations and warranties shall be deemed
to be true and correct in all material respects unless the failure or failures
of such representations and warranties to be so true and correct (without
regard to materiality qualifiers contained therein), individually or in the
aggregate, results or would reasonably be expected to result in a Cineplex
Odeon Material Adverse Effect), and LTM shall have received a certificate of
the President or Chief Executive Officer or a Vice President of Cineplex Odeon
to that effect. In addition, LTM shall have received a certificate of the
Chief Financial Officer of Cineplex Odeon certifying that, as of the Closing
Date, except for (a) amounts owed to Universal and its Affiliates for film
booking and home video arrangements or under the management agreement in
respect of the Universal City Cinema, (b) obligations and liabilities included
in clauses (ii)(x) and (y) of the definition of Net Working Capital and Debt
reflected in each case in Cineplex Odeon's Closing Statement or arising under
the Documents or as disclosed in the Cineplex Odeon Reports or in Section 2.19
of the Cineplex Disclosure Schedule and (c) the exclusions set forth in the
final sentence of paragraph 9 of the Letter Agreement, Cineplex Odeon has no
outstanding obligations or liabilities, contingent or otherwise, owed to
Universal or the Claridge Group, or their respective Affiliates.
(b) LTM shall have received a "comfort" letter from KPMG of the
kind contemplated by the CICA Handbook, dated the Closing Date, in form and
substance reasonably satisfactory to LTM, in connection with the procedures
undertaken by them with respect to the financial statements of Cineplex Odeon
contained in the Form S-4 and the other matters contemplated by the CICA
Handbook and customarily included in comfort letters relating to transactions
similar to the Transactions.
(c) LTM shall have received such legal opinions from counsel to
Cineplex Odeon reasonably requested by it and customary in transactions
similar to the Transactions.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination
. This Agreement may be terminated at any time before the Closing
Date, in each case as authorized by the respective Board of Directors of
Cineplex Odeon or LTM:
(a) by mutual written consent of each of Cineplex Odeon and LTM;
(b) by either Cineplex Odeon or LTM if the Closing shall not
have occurred on or before June 30, 1998 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date; provided, further, that if
on the Termination Date the conditions to the Closing set forth in
Section 7.1(b), 7.1(d), 7.1(f), or 7.1(j) shall not have been fulfilled, but
all other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be extended to December 31,
1998. The parties agree that any amendment of this Agreement to extend the
Termination Date beyond June 30, 1998 shall be made without any amendment to
or renegotiating of any other material provisions of this Agreement;
(c) by either Cineplex Odeon or LTM if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties shall use their commercially
reasonable efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Cineplex Odeon or LTM if the other shall have
breached, or failed to comply with, or by Cineplex Odeon if SPE shall have
breached, or failed to comply with, in any material respect any of its
obligations under this Agreement or any representation or warranty made by
such other party shall have been incorrect in any material respect when made
or shall have since ceased to be true and correct in any material respect, and
such breach, failure or misrepresentation is not cured within 30 days after
notice thereof and such breaches, failures or misrepresentations, individually
or in the aggregate and without regard to materiality qualifiers contained
therein, results or would reasonably be expected to result in a Cineplex
Odeon Material Adverse Effect or a LTM Material Adverse Effect as the case may
be (it being understood that failure to obtain any consent from landlords to
the entering into or completion of any of the Transactions shall not give rise
to any rights under this Section 8.1(d));
(e) by LTM if the Board of Directors of Cineplex Odeon or any
committee of the Board of Directors of Cineplex Odeon (i) shall withdraw or
modify in any manner adverse to LTM its approval or recommendation of this
Agreement or the Transactions, (ii) shall fail to reaffirm such approval or
recommendation within 15 business days following receipt of a written request
for such reaffirmation from LTM acting reasonably, (iii) shall approve or
recommend any acquisition of Cineplex Odeon or a material portion of its
assets or any tender offer for shares of its capital stock, in each case,
other than by a party or an affiliate thereof, or (iv) shall resolve to take
any of the actions specified in clauses (i) and (iii) above;
(f) by LTM or Cineplex Odeon if the Cineplex Odeon Shareholder
Approvals are not obtained at the Cineplex Odeon Meeting, including any
adjournments thereof;
(g) by Cineplex Odeon, prior to the Cineplex Odeon Meeting, upon
five days' prior notice to LTM, if, as a result of an Alternative Proposal,
the Board of Directors of Cineplex Odeon determines in good faith that their
fiduciary obligations under applicable law require that such Alternative
Proposal be accepted; provided, however, that (i) the conditions set forth in
the last sentence of Section 6.10(c) shall have been satisfied; (ii) the Board
of Directors of Cineplex Odeon shall have reasonably concluded in good faith,
after considering provisions of applicable law and after giving effect to all
concessions which may be offered by LTM pursuant to clause (iii) below, on the
basis of oral or written advice of outside counsel, that such action may be
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under the applicable law and (iii) prior to any such
termination, Cineplex Odeon shall, and shall cause its financial and legal
advisors to, negotiate with LTM to make such adjustments in the terms and
conditions of this Agreement as would enable Cineplex Odeon to proceed with
the transactions contemplated hereby; provided, however, that no termination
by Cineplex Odeon shall be effective pursuant to this Section 8.1(g) under
circumstances in which a Cineplex Odeon Termination Fee is payable by Cineplex
Odeon under Section 8.2(a), unless concurrently with such termination, such
Cineplex Odeon Termination Fee is paid in full by Cineplex Odeon in accordance
with the provisions of Section 8.2(a); and
(h) by LTM or Cineplex Odeon if a final decision that is
nonappealable has been issued by a court of competent jurisdiction denying
either the Interim Order or the Final Order.
Section 8.2. Fees
. (a) If this Agreement (i) is terminated by LTM pursuant to
Section 8.1(e) hereof or by Cineplex Odeon pursuant to Section 8.1(g) hereof
or (ii) is terminated by LTM as a result of Cineplex Odeon's material breach
of Section 6.2 hereof that is not cured within 30 days after notice thereof to
Cineplex Odeon, Cineplex Odeon shall pay to LTM a one-time termination fee
(the "Termination Fee") of US$11 million. In addition, Cineplex Odeon shall
pay to LTM the Termination Fee (if it has not already been paid pursuant to
the prior sentence) if (x) this Agreement is terminated by LTM or Cineplex
Odeon pursuant to Section 8.1(f) hereof because of the failure to obtain
Cineplex Odeon Shareholder Approval at the Cineplex Odeon Meeting or by LTM or
Cineplex Odeon pursuant to Section 8.1(h) hereof if a final decision that is
nonappealable has been issued by a court of competent jurisdiction denying
either the Interim Order or the Final Order, (y) prior to the Cineplex Odeon
Meeting or denial of the Interim Order or the Final Order, as the case may be,
there shall have been an Alternative Proposal (other than an Alternative
Proposal initiated prior to the date of this Agreement that shall have been
withdrawn, rejected, terminated or otherwise no longer under consideration as
of the date of this Agreement and that shall not have been renewed or re-
initiated, in any form, by the party or parties that previously initiated such
Alternative Proposal or any Affiliates, agents, representatives or advisors
thereof) involving Cineplex Odeon or any of its Significant Subsidiaries
(whether or not such Alternative Proposal shall have been rejected or
withdrawn prior to such meeting or the denial of either the Interim Order or
the Final Order) and (z) within twelve months of such termination, Cineplex
Odeon consummates or accepts a written offer to consummate an Alternative
Proposal. In no case shall more than one Termination Fee be payable pursuant
to this Section 8.2.
(b) The parties agree that the agreements contained in
Section 8.2(a) above are an integral part of the Transactions and constitute
liquidated damages and not a penalty. The parties agree that the Termination
Fee is intended to reimburse LTM for the time and costs attributable to
negotiating this Agreement and analyzing the Transactions, LTM's opportunity
cost and foregone alternative transactions and the impact on LTM's other
business relationships that otherwise cannot be reasonably quantified. If
Cineplex Odeon fails to promptly pay to LTM any fee due under Section 8.2(a),
in addition to such fees, if LTM shall initiate any action, including the
filing of any lawsuit or other legal action taken to collect payment, the
party with respect to whom such action is determined adversely shall reimburse
the other for its costs and expenses (including legal fees and expenses) in
connection with such action and, if such action is determined adversely to
Cineplex Odeon, Cineplex Odeon shall also pay interest on the amount of any
unpaid fee at the one-year London Interbank Offered Rate that appears on the
Reuters Telerate Page 3750 as of 11 a.m. London time on the day such
Termination Fee is required to be paid in an amount of U.S. dollars most
nearly similar to the amount of the Termination Fee ("LIBOR") rate plus 2% per
annum accruing from the date such fee was required to be paid.
(c) In the event of termination of this Agreement and the
abandonment of the Transactions pursuant to this Article VIII, all obligations
of the parties hereto shall terminate, and no party shall have any further
liability to the others except (i) as set forth in the next sentence, and
(ii) the obligations of the parties pursuant to this Section 8.2 and Section
9.3 and (iii) as provided in Sections 9.1, 9.2, 9.5, 9.6, 9.7, 9.9, 9.11,
9.12, 9.14, 9.15, 9.16 and 9.17. Moreover, in the event of termination of
this Agreement pursuant to Section 8.1(d), nothing herein shall prejudice the
ability of the non-breaching party from seeking damages from any other party
for any willful breach of such other party's obligations to perform its
covenants under this Agreement and the right to pursue any remedy at law or in
equity. With respect to any proceeding initiated hereunder, any party that
shall be found to have willfully breached any of such party's obligations to
perform its covenants under this Agreement shall bear the costs and expenses
of the other party in connection with such proceeding, including, without
limitation, attorneys' fees.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Non-Survival of Representations and Warranties;
Survival of Agreements
. Except for Section 4.5(c), no representations and warranties
set forth in this Agreement shall survive the Closing Date. Subject to
Section 8.2(c), all covenants and agreements set forth in this Agreement shall
survive in accordance with their terms.
Section 9.2. Notices
. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telegram, telex or other
standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to Cineplex Odeon:
Cineplex Odeon Corporation
1303 Yonge Street
Toronto, Ontario M4T 2Y9
Attention: Allen Karp
Facsimile: (416) 323-6677
With a copy to:
Goodman and Carr
200 King Street West
Suite 2300
Toronto, Ontario M5H 3W5
Attention: Lawrence S. Chernin
Facsimile: (416) 595-0567
and
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Attention: Stephen Jacobs
Facsimile: (212) 735-4777
If to LTM:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: Larry Ruisi
Facsimile: (212) 833-6780
With a copy to:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: Seymour Smith
Facsimile: (212) 833-6266
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: David Golay
Facsimile: (212) 859-8587
and
Davies, Ward & Beck
1 First Canadian Place, 44th Floor
Toronto, Ontario M5X 1B1
Attention: William M. Ainley
Facsimile: (416) 863-0871
If to SPE:
Sony Pictures Entertainment
10202 West Washington Boulevard
Culver City, CA 90232-3195
Attention: Ronald N. Jacobi
Facsimile: (310) 244-1797
With a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: Morton A. Pierce
Facsimile: (212) 259-7407
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 9.3. Fees and Expenses
. Whether or not the Transactions are consummated, except as
otherwise provided in the Documents, all costs and expenses incurred in
connection with the Documents and the Transactions shall be paid by the party
incurring such expenses. With respect to any sales, transfer, stamp or
similar taxes or other governmental fees payable in connection with any
transfer forming part of the Transactions, such taxes or governmental fees
shall be borne by the transferor.
Section 9.4. Publicity
. So long as this Agreement is in effect, LTM and Cineplex Odeon
agree to consult with each other in issuing any press release or otherwise
making any public statement with respect to the Transactions, and none of them
shall issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange. The commencement
of litigation relating to the Documents or the Transactions, or any
proceedings in connection therewith, shall not be deemed a violation of this
Section 9.4. Nothing in this Section 9.4 shall require LTM or Cineplex Odeon
to consult the other with respect to press releases other than those directly
related to the Transactions, including without limitation press releases
relating to theater openings, theaters to be built or developed, or the
acquisition and/or disposition of theaters.
Section 9.5. Specific Performance
. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. The parties
accordingly agree that each shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States, Canada or any
province or state having jurisdiction. The provisions of this Section 9.5 are
in addition to any other remedy to which a party is entitled at law or in
equity.
Section 9.6. Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except for the rights in favor of the Persons identified in
Sections 1.8(g), 6.9(e), 6.15(c), 6.18, 6.20, 6.21, 7.1(o), 7.2(c), 7.2(d) and
7.2(e).
Section 9.7. Entire Agreement
. This Agreement, the exhibits attached hereto, the
Confidentiality Agreement and any documents delivered by the parties in
connection herewith and therewith or on the date hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 9.8. Amendment
. This Agreement, including the exhibits and schedules hereto,
may be amended by the parties hereto, by action taken by their respective
Boards of Directors, at any time before or after approval of matters presented
in connection with the Arrangement Transaction by the shareholders of Cineplex
Odeon, but after any such shareholder approval, no amendment shall be made
that by law requires the further shareholder approval without obtaining such
further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; and no purported
amendment, modification or supplement of this Agreement (including any
amendment, modification or supplement of the exhibits or schedules hereto) by
Cineplex Odeon shall be effective unless and until such amendment,
modification or supplement is accompanied by the delivery to LTM of evidence
satisfactory to LTM that such amendment, modification or supplement will not
result in a breach or violation of the Three Party Agreement.
Section 9.9. Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflict of laws.
Section 9.10. Counterparts
. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
Section 9.11. Headings and Table of Contents
. Headings of the Articles and Sections of this Agreement are for
the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
Section 9.12. Interpretation
. In this Agreement, unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words denoting natural
persons shall include corporations and partnerships and vice versa.
Section 9.13. Waivers
. At any time prior to the Closing Date, the parties hereto, by
or pursuant to action taken by their respective Boards of Directors, may
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party; and no purported waiver or consent
granted under this Agreement (including any of the exhibits or schedules
hereto) by Cineplex Odeon shall be effective unless and until such waiver or
consent is accompanied by the delivery to LTM of evidence satisfactory to LTM
that such waiver or consent will not result in a breach or violation of the
Three Party Agreement. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
Section 9.14. Severability
. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
Section 9.15. Certain Definitions
. As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly
owns or controls at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board
of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is
a general partner. For purposes of Article III and Article IV, the
Subsidiaries of LTM shall include the Transferred SPE Subsidiaries and the LTM
Contracts shall include the Imax Leases, and the Transferred SPE Subsidiaries
shall also be deemed to be consolidated subsidiaries of LTM. As used in this
Agreement, the words "Significant Subsidiaries" of a party shall refer to the
Subsidiaries that constitute "significant subsidiaries" of such party under
Rule 405 promulgated by the SEC under the Securities Act. As used in this
Agreement, "Material Adverse Effect" means such state of facts, event, change
or effect that has had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations or financial condition
of the referenced party and its Subsidiaries (including, in the case of LTM,
the Transferred SPE Subsidiaries and the assets subject to the Sony Asset
Transfer) taken as a whole.
Section 9.16. Knowledge
. As used in this Agreement, the word "Knowledge" when used with
respect to any party means the actual knowledge of any senior executive
officer of such party.
Section 9.17. Release.
Subject to the consummation of the Transactions, and excluding
(a) amounts owed to SPE and its Affiliates for film booking arrangements (b)
obligations and liabilities included in clauses (ii)(x)and (y) of the
definition of Net Working Capital and Debt reflected in each case in LTM's
Closing Statement and (c) amounts owed to SPE and its Affiliates (i) arising
under the Documents or (ii) with respect to which LTM is required to indemnify
SPE or its Affiliates in accordance with the Tax Sharing and Indemnity
Agreement, SPE, on behalf of itself and its Affiliates, (including, without
limitation, Sony Land and Sony Capital), hereby acknowledges, releases and
discharges and indemnifies and saves harmless LTM and the LTM Subsidiaries
(including the Transferred SPE Subsidiaries) and their successors and assigns
from all actions, causes of action, suits, debts, dues, sums of money,
accounts, claims and demands owed by LTM and the LTM Subsidiaries (including,
without limitation, the Transferred SPE Subsidiaries) to SPE and its
Affiliates by reason of any matter, cause, contract (whether written or oral),
course of dealing or thing whatsoever arising during, or in respect of, the
period on or before the Closing Date.
IN WITNESS WHEREOF, SPE, LTM and Cineplex Odeon have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
SONY PICTURES ENTERTAINMENT INC.
Ronald N. Jacobi
By: ________________________________________
Name: Ronald N. Jacobi
Title: Executive Vice President and General Counsel
LTM HOLDINGS, INC.
By: Stanley P. Steinberg
Name: Stanley P. Steinberg
Title: Exec. V.P.
CINEPLEX ODEON CORPORATION
By: Michael Herman
Name:
Title:
DRAFT : September 30, 1997
Providing for a 1 :1 exchange
EXHIBIT B
Form of
Plan of Arrangement of Cineplex Odeon Corporation Under Section 182
of the Business Corporations Act (Ontario)
ARTICLE 1 - INTERPRETATION
1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
following meanings respectively:
(a) "Arrangement" means the arrangement under the OBCA involving
Cineplex, its shareholders and LTM on the terms and conditions set
forth in this Plan of Arrangement;
(b) "Cineplex" means Cineplex Odeon Corporation, a corporation existing
under the OBCA;
(c) "Cineplex Common Shares" means the common shares in the capital of
Cineplex;
(d) "Cineplex Share Exchange Ratio" means one LTM Common Share for each
Cineplex Share;
(e) "Cineplex Common Shareholders" means the registered holders of
Cineplex Common Shares;
(f) "Cineplex Shareholders" means the registered holders of either
Cineplex Common Shares or Cineplex SRV Shares, as applicable;
(g) "Cineplex Shares" means the Cineplex Common Shares and the Cineplex
SRV Shares;
(h) "Cineplex Stock Option Plan" means the stock option plan of
Cineplex as amended effective June 6, 1996;
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended;
(j) "Court" means the Ontario Court (General Division);
(k) "Depositary" means at its principal offices in Toronto, Ontario;
(l) "Dissenting Shareholders" means Cineplex Common Shareholders who
validly exercise rights of dissent pursuant to Section 3.1 hereof
and are ultimately entitled to be paid fair value for their
Cineplex Common Shares;
(m) "Effective Date" means the date shown on the certificate of
arrangement issued under section 183 of the OBCA by the Director
appointed under the OBCA giving effect to the Arrangement;
(n) "Effective Time" means 10:00 a.m. (Toronto time) on the Effective
Date;
(o) "Final Order" means the final order of the Court made in connection
with the approval of the Arrangement and the fairness of the terms
and conditions thereof following the application therefor
contemplated by Section 6.7 of the Master Agreement;
(p) "Interim Order" means the interim order of the Court made in
connection with the approval of the Arrangement following
application therefor contemplated by Section 6.7 of the Master
Agreement, as the same may be amended, supplemented or varied by
the Court, providing for, among other things, the holding of a
special meeting of holders of Cineplex Shares to consider and, if
thought fit, approve this Plan of Arrangement;
(q) "LTM" means LTM Holdings, Inc., a corporation existing under the
laws of the State of Delaware;
(r) "LTM Common Shares" means shares of common stock of LTM;
(s) "Master Agreement" means the agreement dated September 30, 1997
between LTM, Sony Pictures Entertainment, Inc. and Cineplex;
(t) "OBCA" means the Business Corporations Act (Ontario), as amended;
(u) "Plitt" means Plitt Theatres, Inc., a corporation existing under
the laws of the State of Delaware;
(v) "Plitt Shares" means all the issued and outstanding shares of
common stock of Plitt;
(w) "Special Meeting" means the Special General Meeting of the Cineplex
Shareholders called to consider the Arrangement.
(x) "Cineplex SRV Shares" means the subordinate restricted voting
shares in the capital of Cineplex.
1.2 Interpretation Not Affected by Headings, etc.
The division of this Plan of Arrangement into Articles, Sections and
other portions and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Plan of
Arrangement. The terms "Plan of Arrangement", "hereof", "herein" and
"hereunder" and similar expressions refer to this Plan of Arrangement and not
to any particular Article, Section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
1.3 Number, etc.
Unless the context requires the contrary, words importing the singular
number only shall include the plural and vice versa; words importing the use
of any gender shall include all genders; and words importing persons shall
include firms, corporations, partnerships, trusts and trustees, unincorporated
associations and governments and their agents and instrumentalities.
ARTICLE 2 - THE ARRANGEMENT
2.1 Arrangement
At the Effective Time, the following shall occur and be deemed to occur
in the following order without any further act or formality, subject to the
provisions of Section 3.1:
(a) all issued and outstanding Plitt Shares shall be exchanged by
Cineplex with LTM for fully paid and non-assessable LTM Common
Shares;
(b) upon the exchange referred to in Subsection 2.1(a) hereof, Cineplex
shall have its name removed from the register of the holders of
Plitt Shares and shall be added to the registers of holders of LTM
Common Shares as to the LTM Common Shares received in connection
with the exchange referred to in Subsection 2.1(a) hereof, and LTM
shall become the holder of all of the issued and outstanding Plitt
Shares and the registers of holders of Plitt Shares shall so
reflect;
(c) Cineplex shall distribute to holders of Cineplex Shares, other than
Cineplex Common Shares held by Dissenting Shareholders, on a pro
rata basis according to the number of issued and outstanding
Cineplex Shares, other than Cineplex Common Shares held by
Dissenting Shareholders, LTM Common Shares acquired by Cineplex
in the exchange referred to in Subsection 2.1(a) hereof, in
consideration for the purchase from such Cineplex Shareholders and
cancellation of Cineplex Shares, on a pro rata basis according to
the number of issued and outstanding Cineplex Shares, other than
Cineplex Common Shares held by Dissenting Shareholders;
(d) upon the purchases and cancellations referred to in Subsection
2.1(c) hereof, Cineplex shall have its name removed from the
registers of the holders of LTM Common Shares, and the holders of
Cineplex Shares, other than the Dissenting Shareholders, shall
become the holders of the LTM Common Shares distributed to them by
Cineplex pursuant to Subsection 2.1(c) hereof, and the registers of
holders of LTM Common Stock to so reflect;
(e) each issued and outstanding Cineplex Share, other than Cineplex
Common Shares held by Dissenting Shareholders, shall be exchanged
by the holder thereof with LTM for the number of fully paid and
non-assessable LTM Common Shares equal to the Cineplex Share
Exchange Ratio;
(f) upon the exchange referred to in Subsection 2.1(e) hereof, each
holder of Cineplex Shares, other than Dissenting Shareholders,
shall have his or her name removed from the registers of holders of
Cineplex Shares and his or her name shall be added accordingly to
the register of holders of LTM Common Shares and LTM shall become
the holder of all of the issued and outstanding Cineplex Shares,
other than Cineplex Common Shares held by Dissenting Shareholders,
and the registers of holders of Cineplex Shares shall so reflect;
(g) the Cineplex Stock Option Plan shall be amended by adding thereto a
new section 10.01 as follows:
"10.01 Plan of Arrangement
In the event that the Corporation consummates a
plan of arrangement (the "Arrangement") under section
182 of the Business Corporations Act (Ontario) pursuant
to which outstanding shares of the Corporation (other
than shares held by dissenting shareholders) are
exchanged for common stock of LTM Holdings, Inc., a
corporation existing under the laws of the State of
Delaware then the definition of Corporation in section
1.01 shall be deemed to be LTM Holdings, Inc., and the
options granted under the Plan outstanding at the
effective time of such plan of arrangement shall
subsequently entitle the optionee to purchase, instead
of common shares of Cineplex, a number of common stock
of LTM Holdings, Inc. equal to the number of Cineplex
common shares which could have been purchased under
such options immediately prior to the Arrangement. The
purchase price per share of common stock of LTM
Holdings, Inc. shall be equal to the previous purchase
price of the Cineplex common shares under such option
immediately prior to the Arrangement. In all other
respect such options shall remain unaffected by such
Arrangement."; and
(h) all stock option agreements entered into by Cineplex with any of
its past or present employees for the granting or governing of the
terms of options for shares of Cineplex shall be construed and
interpreted in accordance with the Cineplex Stock Option Plan, as
amended, and this Plan of Arrangement.
ARTICLE 3 - RIGHTS OF DISSENT
3.1 Rights of Dissent.
Registered holders of Cineplex Common Shares may exercise rights of
dissent with respect to such class pursuant to and in the manner set forth in
section 185 of the OBCA in connection with the Arrangement as the same may be
modified by the Interim Order or the Final Order. Registered holders (a) who
duly exercise such rights of dissent and are ultimately entitled to be paid
fair value for their Cineplex Common Shares shall be deemed to have
transferred such Cineplex Common Shares to Cineplex for cancellation on the
Effective Date, and (b) who are ultimately not entitled to be paid fair value,
for any reason, for their Cineplex Common Shares shall be deemed to have
participated in the Arrangement on the same basis as any non-dissenting holder
of Cineplex Common Shares and shall receive LTM Common Shares on the basis
determined in accordance with section 2.1, but in no case shall Cineplex be
required to recognize such holders as holders of Cineplex Common Shares on and
after the Effective Date, and the names of such holders of Cineplex Common
Shares shall be deleted from the register of holders of Cineplex Common Shares
on the Effective Date.
ARTICLE 4 - CERTIFICATES
4.1 Entitlement to Certificates and Dividends, etc.
(a) As soon as practicable after the Effective Date, LTM shall cause
to be issued to the Depositary for the benefit of Cineplex Shareholders (other
than Dissenting Shareholders) a certificate or certificates representing in
the aggregate the number of LTM Common Shares to which such holders are
entitled in accordance with the terms of the Arrangement and shall deliver
such certificate or certificates to the Depositary to be delivered to such
holders in accordance with the terms hereof.
(b) On or after the Effective Date, certificates formerly representing
Cineplex Shares shall represent only the right to receive certificates for LTM
Common Shares, upon the holder depositing with the Depositary such
certificates duly endorsed for transfer and accompanied by letters of
transmittal and such other documents and instruments as would have been
required to effect the transfer of the securities formerly represented by such
certificates under the OBCA and the by-laws of Cineplex as the Depositary may
reasonably require. Upon receiving such certificates, documents and
instruments, the Depositary shall deliver to the holder depositing the same a
certificate or certificates representing the LTM Common Shares to which such
holder is entitled in accordance with the terms of the Arrangement.
(c) All dividends paid and distributions made in respect of each LTM
Common Shares that has been issued to a Cineplex Shareholder pursuant to
Subsections 2.1(c) and 2.1(e), but for which a certificate has not been
delivered to such holder in accordance with Subsection 4.1(b), shall be paid
and made to the Depositary to be held by the Depositary in trust for such
holder. All monies received by the Depositary shall be invested by it in
interest bearing trust accounts upon terms which the Depositary may reasonably
deem appropriate. The Depositary shall pay and deliver to any such holder, as
soon as reasonably practicable after application therefor is made by such
holder to the Depositary in such form as the Depositary may reasonably
require, such dividends, distributions and interest accrued, net of
withholding and other taxes, to which such holder is entitled.
4.2 Lost Certificates
If any certificate which immediately prior to the Effective Date
represented one or more outstanding Cineplex Shares has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed and the giving by such person
of a bond satisfactory to Cineplex and the Depositary in such sum as Cineplex
and the Depositary may direct or otherwise indemnifying Cineplex and the
Depositary in a manner satisfactory to Cineplex and the Depositary against any
claim that may be made against Cineplex or the Depositary with respect to the
certificate alleged to have been lost, stolen or destroyed, the Depositary
will make such distribution or delivery in respect of the Cineplex Shares
represented by such lost, stolen or destroyed certificate as determined in
accordance with Sections 4.1 and 4.3.
4.3 Fractional Shares
No certificates or scrip representing fractional LTM Common Shares will
be issued or delivered pursuant to the Arrangement. In lieu thereof, each
person entitled to a fractional interest in an LTM Common Share will receive a
cash payment equal to such person's pro rata portion of the price received by
the Depositary upon the sale of whole shares representing an accumulation of
all fractional interests in LTM Common Shares to which all such persons would
be otherwise entitled. The Depositary will sell the LTM Common Shares
involved on The Toronto Stock Exchange or on such other stock exchange on
which the LTM Common Shares are listed or quoted as may be selected by The
Depositary in its discretion during the 60-day period following the Effective
Date. The Depositary shall initially endeavour to sell the whole shares made
up of such fractions when a board lot is accumulated or in any event not later
than 30 days following the Effective Date. The aggregate proceeds of each
such sale will be distributed by the Depositary pro rata, in relation to the
respective fractions, among the persons otherwise entitled to receive
fractional interests in LTM Common Shares.
4.4 Extinction of Rights
Any certificate which immediately prior to the Effective Time
represented outstanding Cineplex Shares that were purchased and/or exchanged
pursuant to Section 2.1 and not deposited, with all other instruments required
by Section 4.1, on or prior to the third anniversary of the Effective Date
shall cease to represent a claim or interest of any kind or nature as a
shareholder of Cineplex or LTM. On such date, the LTM Common Shares to which
the former registered holder of the certificate referred to in the preceding
sentence was ultimately entitled shall be deemed to have been surrendered to
LTM, as the case may be, together with all entitlements to dividends,
distributions and interests thereon held for such former registered holder.
4.5 Withholding Right
Cineplex, LTM and the Depositary shall be entitled to deduct and
withhold from any dividend or consideration otherwise payable under this Plan
of Arrangement to any holder of Cineplex Shares such amount as Cineplex, LTM
or the Depositary is required or permitted to deduct and withhold with respect
to such payment under the Income Tax Act (Canada), the Code or any provision
of provincial, state, local or foreign tax law, in each case as amended. To
the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes hereof as having been paid to the holder of the
shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent the amount so required or permitted to be deducted or
withheld from any payment to a holder exceeds the cash portion of the
consideration otherwise payable to the holder, Cineplex, LTM and the
Depositary are hereby authorized to sell or otherwise dispose of such portion
of the consideration as is necessary to provide sufficient funds to Cineplex,
LTM or the Depositary, as the case may be, to enable it to comply with such
deduction or withholding requirement and Cineplex, LTM or the Depositary shall
notify the holder thereof and remit any unapplied balance of the net proceeds
of such sale.
ARTICLE 5 - AMENDMENT
5.1 Plan of Arrangement Amendment
(a) Cineplex and LTM reserve the right to amend, modify and/or
supplement this Plan or Arrangement at any time and from time to time provided
that any such amendment, modification, or supplement must be contained in a
written document which is filed with the Court and, if made following the
Special Meeting, approved by the Court and communicated to Cineplex
Shareholders in the manner required by the Court (if so required).
(b) Any amendment, modification or supplement to this Plan of
Arrangement may be proposed by Cineplex and LTM at any time prior to or at the
Special Meeting with or without any other prior notice or communication and,
if so proposed and accepted by the persons voting at the Special Meeting,
shall become part of this Plan for all purposes.
(c) Any amendment, modification or supplement to this Plan of
Arrangement which is approved or directed by the Court following the Special
Meeting shall be effective only if it is consented to by Cineplex and LTM.
STOCKHOLDERS AGREEMENT
among
LTM HOLDINGS, INC.,
SONY PICTURES ENTERTAINMENT INC.,
UNIVERSAL STUDIOS, INC.,
CHARLES ROSNER BRONFMAN FAMILY TRUST
AND
THE OTHER PARTIES HERETO
dated as of September 30, 1997
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms 1
SECTION 1.2 Other Defined Terms 11
SECTION 1.3 Other Definitional Provisions 12
SECTION 1.4 Methodology for Calculations 12
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1 Composition of the Board 13
SECTION 2.2 Board Procedures 18
SECTION 2.3 Committees 19
SECTION 2.4 Voting on Certain Matters 20
SECTION 2.5 Irrevocable Proxy 20
SECTION 2.6 Certain Restrictions 21
SECTION 2.7 Cooperation 22
ARTICLE III
CONSENT RIGHTS
SECTION 3.1 Consent for Certain Actions 22
SECTION 3.2 Certain Certificate Provisions 28
SECTION 3.3 Arbitration 28
SECTION 3.4 Approval of Disinterested Directors 29
SECTION 3.5 Additional Shares 30
ARTICLE IV
TRANSFER OF COMMON SHARES
SECTION 4.1 Restrictions on Transfer during Six-Months Following
Closing 30
SECTION 4.2 Tag-Along for All Stockholders 30
SECTION 4.3 Tag-Along for USI and Claridge Group 31
SECTION 4.4 Right of First Refusal 32
SECTION 4.5 Transferees 35
SECTION 4.6 Notice of Transfer 37
SECTION 4.7 Compliance with Transfer Provisions 37
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.1 Demand Registrations 38
SECTION 5.2 Piggyback Registrations 40
SECTION 5.3 Registration Procedures 41
SECTION 5.4 Registration Expenses 46
SECTION 5.5 Limitations on Sale or Distribution of Other
Securities 47
SECTION 5.6 Company Right to Postpone Registration 47
SECTION 5.7 No Required Sale 48
SECTION 5.8 Indemnification 48
SECTION 5.9 Contribution 50
SECTION 5.10 Underwritten Offerings 52
SECTION 5.11 Rule 144 52
SECTION 5.12 Article V Termination 52
ARTICLE VI
STANDSTILL
SECTION 6.1 Standstill with the Company 53
SECTION 6.2 Standstill among the Stockholders 55
ARTICLE VII
EQUITY PURCHASE RIGHTS
SECTION 7.1 Equity Purchase Rights 57
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Conflicting Agreements 59
SECTION 8.2 Duration of Agreement 59
SECTION 8.3 Best Efforts 59
SECTION 8.4 Ownership Information 60
SECTION 8.5 Further Assurances 60
SECTION 8.6 Amendment and Waiver 60
SECTION 8.7 Severability 60
SECTION 8.8 Entire Agreement 61
SECTION 8.9 Successors and Assigns 61
SECTION 8.10 Counterparts 61
SECTION 8.11 Remedies 61
SECTION 8.12 Notices 62
SECTION 8.13 Governing Law; Consent to Jurisdiction 64
SECTION 8.14 Legends 64
SECTION 8.15 Interpretation 65
SECTION 8.16 Agents for Stockholders 65
SECTION 8.17 Additional Agreement 66
SECTION 8.18 Effectiveness 66
EXHIBITS
Exhibit A Members of the Claridge Group
Exhibit B Form of Arbitration Agreement
Exhibit C Sound Systems
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of September 30, 1997 among LTM
Holdings, Inc., a Delaware corporation (the "Company"), Sony Pictures
Entertainment Inc., a Delaware corporation ("SPE"), Universal Studios, Inc., a
Delaware corporation ("USI"), the Charles Rosner Bronfman Family Trust, a
trust created under the laws of the province of Quebec (the "Trust"), and the
other persons listed on Exhibit A (such persons, together with the Trust,
collectively, the "Claridge Group").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, SPE and Cineplex Odeon Corporation, a corporation
formed under the laws of the province of Ontario ("CO"), are entering into a
Master Agreement dated as of the date hereof (the "Master Agreement") pursuant
to which and subject to the terms and conditions thereof, among other things,
(i) CO and the Company will engage in a business combination (the
"Transaction") and (ii) the shareholders of CO will exchange shares of CO for
shares of Common Stock (as defined below);
WHEREAS, upon the closing of the Transaction (the "Closing"), and
before giving effect to any Equity Offering (as defined below), (i) SPE will
beneficially own 51.14% of the issued and outstanding Common Shares (as
defined below), 49.90% of the issued and outstanding Common Stock and 100% of
the issued and outstanding Non-Voting Common Stock (as defined below), (ii)
USI will beneficially own 26.02% of the issued and outstanding Common Shares
and 26.68% of the issued and outstanding Common Stock, and (iii) the Claridge
Group will beneficially own 9.60% of the issued and outstanding Common Shares
and 9.85% of the issued and outstanding Common Stock; and
WHEREAS, the parties hereto desire to enter into certain
post-Closing arrangements relating to the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used herein, the following
terms shall have the following meanings:
"Adjusted Applicable Percentage" means, with respect to any
Stockholder, at any time, such Stockholder's Applicable Percentage,
recalculated after subtracting from (x) the Voting Shares beneficially owned
by such Stockholder and its Permitted Transferees and, in the case of the
Claridge Group, all other members of the Claridge Group and their respective
Permitted Transferees (y) all Voting Shares acquired in open market purchases,
in privately-negotiated transactions (other than from a Stockholder or a
Permitted Transferee of any Stockholder) or from the Company (other than
pursuant to Section 7.1 or a transaction described in clause (ii) of Section
7.1(g)).
"Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person. For
purposes of this definition, (i) no member of the Claridge Group shall be
considered an Affiliate of USI or any Subsidiary of USI, (ii) Matsushita
Electric Industrial Co., Ltd. ("MEI") shall not be considered an Affiliate of
USI or any Subsidiary of USI, provided, that clause (ii) shall not be
applicable at any time that USI shall disclose in a Schedule 13D filed
pursuant to the Exchange Act that USI and MEI have formed a Group with respect
to Voting Shares, and (iii) each member of the Claridge Group shall be
considered an Affiliate of each other member of the Claridge Group.
"Agreement" means this Stockholders Agreement as it may be
amended, supplemented, restated or modified from time to time.
"Applicable Percentage" means, with respect to any Stockholder, at
any time, the ratio, expressed as a percentage, of (i) the then outstanding
Voting Shares beneficially owned by such Stockholder and (a) in the case of
SPE or USI, such Stockholder's Permitted Transferees, and (b) in the case of
any member of the Claridge Group, all other members of the Claridge Group and
all Permitted Transferees of the Claridge Group, to (ii) the sum of (x) the
total then outstanding Voting Shares and (y) with respect to such Stockholder,
any Voting Shares included in clause (i) that are issuable upon conversion,
exchange or exercise of Voting Share Equivalents, provided, that if the
Company shall issue or sell Voting Shares in a transaction (other than the
Equity Offering) in respect of which either SPE or USI does not have the right
to consent pursuant to clause (vii) of Section 3.1(a) at a time when such
Stockholder has an Article III Consent Right, the aggregate amount of Voting
Shares issued or sold pursuant to all such transactions shall be subtracted
from the amount of outstanding Voting Shares in calculating such Stockholder's
Applicable Percentage for purposes of Articles II and III and for any
calculation of such Stockholder's Applicable Percentage under the Certificate,
subject to the applicable rules of any stock exchange on which the Common
Stock shall then be listed.
"Article III Consent Right" means, with respect to SPE or USI, the
right of such Stockholder pursuant to Section 3.1(a) to approve the actions
specified in clauses (i)-(xiv) of such Section.
"beneficial owner" or "beneficially own" has the meaning given
such term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of Voting Shares shall be calculated in accordance with the
provisions of such Rule, provided, however, that (i) in determining beneficial
ownership for purposes of Article II, Section 4.3 and clauses (ii) and (iii)
of Section 4.5(b) and for any calculation of such Stockholder's Applicable
Percentage under the Certificate (including in the calculation of a
Stockholder's Applicable Percentage and Adjusted Applicable Percentage in such
provisions), a Person shall not be deemed to be the beneficial owner of any
Voting Shares which may be acquired by such Person upon the conversion,
exchange or exercise of any Voting Share Equivalents, except for purposes of
Section 4.3, a Person shall be deemed to beneficially own such Voting Shares
if such Person has irrevocably agreed to convert, exchange or exercise the
related Voting Share Equivalent upon consummation of the applicable Third
Party Sale, (ii) in determining beneficial ownership for purposes of the other
provisions of this Agreement, a Person shall be deemed to be the beneficial
owner of any Voting Shares which may be acquired by such Person, whether
within 60 days or thereafter, upon the conversion, exchange or exercise of any
warrants, options, rights or other securities issued by the Company or any
Subsidiary thereof and (iii) in determining beneficial ownership for purposes
of Sections 2.1(a), (b) and (c), clauses (i) and (ii) of Section 2.1(g),
Sections 4.2, 4.3 and 5.12, Article VII and Section 8.2 and for any
calculation of such Stockholder's Applicable Percentage under the Certificate
(including in the calculation of a Stockholder's Applicable Percentage and
Adjusted Applicable Percentage in such provisions), a Person shall not be
deemed to be the beneficial owner of any Voting Shares unless such Person has
a pecuniary interest in such Voting Shares.
"Board" means the Board of Directors of the Company.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
The City of New York.
"Bylaws" means the Amended and Restated Bylaws of the Company in
the form attached as Exhibit F to the Master Agreement, as the same may be
amended, supplemented or modified from time to time.
"Capital Lease Obligations" of a Person means the obligation to
pay rent or other payment amounts under a lease of (or other arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on a balance sheet of such Person in accordance with GAAP. The principal
amount of such obligation shall be the capitalized amount thereof that appears
on a balance sheet of such Person in accordance with GAAP.
"Capital Stock" means, with respect to any Person at any time, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or
issued by such Person.
"Cash Flow" means, for purposes of determining the cash flow of an
asset under clauses (i) or (ii) of Section 3.1(a), (i) with respect of any
motion picture theater, "Cash Flow" as defined in the Master Agreement, and
(ii) with respect to any other type of asset, cash flow shall be defined as
the Company and each Stockholder who at the time of determination has an
Article III Consent Right shall jointly determine in good faith and, in making
any such determination, such parties shall consider any definition of cash
flow that is customarily utilized by nationally recognized investment banking
firms to measure the cash flow of such assets.
"Certificate" means the Amended and Restated Certificate of
Incorporation of the Company in the form attached as Exhibit A to the Master
Agreement, as the same may be amended, supplemented or modified from time to
time.
"Certificate Amendment" means any amendment or restatement of the
Certificate after the Closing.
"Claridge Director" means any Director designated pursuant to
Section 2.1 by the Claridge Group.
"Commission" means the Securities and Exchange Commission, and any
successor commission or agency having similar powers.
"Common Shares" means, collectively, the Common Stock and the Non-
Voting Common Stock.
"Common Stock" means common stock, par value $0.01 per share, of
the Company and any securities issued in respect thereof, or in substitution
therefor, in connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other
similar reorganization.
"Company Expenses" means (i)(a) fees and disbursements of counsel
for the Company and (b) fees and disbursements of all independent public
accountants (including the expenses of any audit and/or "cold comfort" letter)
and fees and expenses of other Persons, including special experts retained by
the Company, incident to the Company's performance of or compliance with its
obligations under Article V, and (ii) if the Company participates in a
registration pursuant to Article V, the Company's pro rata share of other
Expenses related to such registration on the basis of the number of securities
included in such registration by the Company relative to the total number of
securities included in such registration.
"Consolidated Income Tax Expense" of any Person means for any
period the consolidated provision for income taxes of such Person and its
consolidated Subsidiaries for such period as reported on such Person's
financial statements for such period and determined in accordance with GAAP.
"Consolidated Interest Expense" of any Person means for any period
the consolidated interest expense included in a consolidated income statement
(net of interest income) of such Person and its consolidated Subsidiaries for
such period as reported on such Person's financial statements for such period
and determined in accordance with GAAP.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as reported on such Person's financial statements
for such period and determined in accordance with GAAP; provided that there
shall be excluded therefrom (i) gains or losses on asset dispositions by such
Person or its consolidated Subsidiaries, (ii) all extraordinary gains and
extraordinary losses, (iii) any net income (loss) of a consolidated Subsidiary
that is attributable to a minority interest in such consolidated Subsidiary,
(iv) all non-cash non-recurring charges and credits during such period not in
the ordinary course of business and (v) the tax effect of any of the items
described in clauses (i) through (iv) above.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, of the power to direct
or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, as trustee or executor, by
contract or otherwise.
"Current Market Value" means, with respect to any security, the
average of the daily closing prices on the New York Stock Exchange (or such
principal exchange or market on which such security may be listed or may
trade) for such security for the 20 consecutive trading days commencing on the
22nd trading day prior to the date with respect to which the Current Market
Value is being determined. The closing price for each day shall be the
closing price, if reported, or, if the closing price is not reported, the
average of the closing bid and asked prices as reported by the New York Stock
Exchange (or such principal exchange or market) or a similar source selected
from time to time by the Company for such purpose. In the event such closing
prices are unavailable, the Current Market Value shall be the Fair Market
Value of such security established by a Determination of the Independent
Directors. If a determination is required under this Agreement of the Current
Market Value of any Non-Voting Common Stock, such value shall be deemed to be
equal to the Current Market Value of an equivalent number of shares of Common
Stock.
"Debt" means (without duplication), with respect to any Person,
whether or not recourse is to all or a portion of the assets of such Person or
any of its Subsidiaries, (i) every obligation of such Person or any of its
Subsidiaries for money borrowed, (ii) every obligation of such Person or any
of its Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person or any of its
Subsidiaries with respect to letters of credit (including standby letters of
credit to the extent drawn upon), bankers' acceptances or similar facilities
issued for the account of such Person or any of its Subsidiaries, (iv) every
obligation of such Person or any of its Subsidiaries issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business),
(v) every Capital Lease Obligation of such Person or any of its Subsidiaries
other than Capital Lease Obligations of such Person or any of its Subsidiaries
for real property, and (vi) every obligation of the type referred to in
clauses (i) through (v) of another Person and all dividends of another Person
the payment of which, in either case, such Person or any of its Subsidiaries
has guaranteed or for which such Person is responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or otherwise; provided
that, in the case of joint venture Debt, there shall only be included that
portion of such Debt equal to the ratable share in such joint venture of such
Person or any of its Subsidiaries.
"DGCL" means the Delaware General Corporation Law.
"Determination of the Independent Directors" means, with respect
to any matter, a determination made in good faith, on the basis of such
relevant factors as the Independent Directors consider, in their judgment,
appropriate, by the vote of a majority of the Independent Directors present at
a meeting of the Independent Directors called for such purpose, a quorum being
present (or at a meeting of the Board if a quorum of the Independent Directors
is present at such meeting), or without a meeting if a majority of all
Independent Directors consent thereto in writing. For these purposes, a
majority of all Independent Directors, acting at a meeting duly assembled,
shall constitute a quorum for the making of any such determination at such
meeting.
"Director" means any member of the Board.
"Directors Chart" means the chart attached as Schedule I.
"Disinterested Directors" means, with respect to any matter that
is subject to approval under Section 3.4, all Directors other than any
Director who is a designee of SPE (in the case of Section 3.4(a)) or USI (in
the case of Section 3.4(b)).
"Dissolution" means a voluntary liquidation, dissolution or
winding up of the Company.
"EBITDA" of any Person means for any period the Consolidated Net
Income for such period increased by the sum of (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Income Tax
Expense of such Person for such period, plus (iii) the consolidated
depreciation and amortization expense deducted in determining the Consolidated
Net Income of such Person for such period (excluding amortization of
Capitalized Lease Obligations other than those incurred to finance equipment);
provided, however, that the Consolidated Interest Expense, Consolidated Income
Tax Expense and consolidated depreciation and amortization expense of a
consolidated Subsidiary of such Person shall be added to the Consolidated Net
Income of such Person pursuant to the foregoing only to the extent and in the
same proportion that the Consolidated Net Income of such consolidated
Subsidiary was included in calculating the Consolidated Net Income of such
Person.
"Equity Offering" means the sale for cash by the Company in one or
more underwritten public offerings of Common Stock for an aggregate offering
price of $200 million (before deducting underwriting discounts or
commissions).
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Excluded Securities" means options issued by the Company to
employees or directors of the Company or its Subsidiaries pursuant to any
stock option or similar plan (and any Common Stock issuable thereunder)
approved by the Board and any Common Stock issuable upon conversion of Non-
Voting Common Stock.
"Expenses" means any and all fees and expenses incident to the
Company's performance of or compliance with its obligations under Article V
(other than internal expenses incurred by the Company including the services
of the Company's executives and legal department), including: (i) listing and
filing fees of the Commission or any stock exchange registration, (ii) fees
and expenses of compliance with state and provincial securities or "blue sky"
laws and in connection with the preparation of a "blue sky" survey, including
reasonable fees and expenses of "blue sky" counsel, (iii) fees and expenses of
compliance with any Canadian securities laws, (iv) printing and copying
expenses, (v) messenger and delivery expenses, (vi) expenses incurred in
connection with any road show, (vii) fees and disbursements of counsel for the
Company, (viii) with respect to each registration, the reasonable fees and
disbursements of one counsel for the selling Holder(s) (selected by the
Initiating Holder, in the case of a Demand Registration, or by the Requisite
Percentage of Participating Holders, in the case of a Piggyback Registration),
(ix) fees and disbursements of all independent public accountants (including
the expenses of any audit and/or "cold comfort" letter) and fees and expenses
of other Persons, including special experts, retained by the Company, and (x)
any other fees and disbursements of underwriters, if any, customarily paid by
issuers or sellers of securities.
"Fair Market Value" means, as to any securities or other property,
the cash price at which a willing seller would sell and a willing buyer would
buy such securities or property in an arm's-length negotiated transaction
without time constraints.
"Five-Year Plan" means (i) the Initial Five-Year Plan, or any
replacement of such plan adopted in accordance with Section 3.1(b), and (ii)
after the expiration of the Initial Five-Year Plan, or any replacement
thereof, subsequent five-year strategic business plans of the Company adopted
by the Board in accordance with Section 3.1(d) or any replacement thereof
adopted in accordance with Section 3.1(b).
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"Group" shall have the meaning assigned to it in Section 13(d)(3)
of the Exchange Act.
"Holder" means SPE, USI, each member of the Claridge Group and any
of their respective Permitted Transferees, and any Third Party Transferee (i)
to the extent the rights and obligations of a Holder are specifically assigned
to such Third Party Transferee by a Stockholder in accordance with Section
4.5(b)(iv) and (ii) who agrees, pursuant to Sections 4.5(b) and 4.5(c), to be
bound by the provisions of this Agreement as a "Holder" hereunder.
"Independent Director" means any Director who satisfies the
criteria set forth in the second paragraph of Section 2.1(i).
"Initial Five-Year Plan" means the Company's five-year strategic
business plan in effect as of the Closing, as adopted by the Board.
"Initial Interest" means, with respect to any Stockholder, all of
the Common Shares beneficially owned by such Stockholder and its Permitted
Transferees immediately following the Closing.
"Management Director" means any Director who is also an executive
officer of the Company.
"Market Capitalization" means, as of any Determination Date, the
product of (i) the number of Common Shares outstanding and (ii) the Current
Market Value.
"Market Sale" means a "brokers' transaction" within the meaning of
Section 4(4) of the Securities Act.
"Maximum Debt Ratio" means 6.0 to 1.0, provided that such ratio
shall be decreased by 0.25 to 1.0 if the Company shall have issued Common
Stock in a public offering after the Closing for an aggregate net offering
price of $40 million and by an additional 0.25 to 1.0 for each additional $40
million that the Company shall issue in a public offering after the Closing,
provided, further, that in no event shall such ratio be less than 4.75 to 1.0.
"Merger" means any merger or consolidation in which the Company is
a constituent corporation or any sale of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole, provided that a
merger which satisfies all of the following criteria shall not be deemed a
Merger for purposes of this definition: (i) the Company is the surviving
corporation, (ii) all shares of Common Stock outstanding immediately prior to
the consummation thereof remain outstanding immediately after the consummation
thereof and the only change in the Capital Stock of the Company resulting from
such merger is the issuance of shares of Capital Stock pursuant thereto, and
(iii) no consent of the Stockholders would be required in connection therewith
either under the DGCL or under Article III.
"Minimum Percentage" means, with respect to SPE or USI, an
Applicable Percentage of 17.86%, provided that if such Stockholder and its
Permitted Transferees beneficially own at least 80% of such Stockholder's
Initial Interest, such percentage shall equal 15%.
"Non-Voting Common Stock" means non-voting common stock, par value
$0.01 per share, of the Company and any securities issued in respect thereof,
or in substitution therefor, in connection with any stock split, dividend or
combination, or any reclassification, recapitalization, merger, consolidation,
exchange or other similar reorganization.
"pecuniary interest" has the meaning given such term in Rule 16a-
1(a)(2) under the Exchange Act.
"Permitted Transferee" means (i) with respect to SPE, any direct
or indirect wholly-owned Subsidiary of Sony Corporation which is incorporated
in the United States, (ii) with respect to USI, any direct or indirect wholly-
owned Subsidiary of The Seagram Company Ltd. or USI which is incorporated in
the United States, and (iii) with respect to each member of the Claridge
Group, (a) any member of the Claridge Group, (b) any one or more of the lineal
descendants of Charles R. Bronfman, Senator E. Leo Kolber or Arnold M.
Ludwick, (c) the spouses of any one or more of the foregoing Persons referred
to in this clause (iii), (d) any trust of which any one or more of the
foregoing Persons referred to in this clause (iii) is the principal
beneficiary, (e) Phyllis Lambert, (f) the legal representatives of any one or
more of the Persons referred to in clauses (a), (b) or (c) of this clause
(iii), (g) any corporation, partnership or other entity directly or indirectly
of which more than 90% of the total voting power of the Capital Stock entitled
to vote in the election of directors, managers or administrators thereof is
beneficially owned by Persons referred to in this clause (iii), and (h) any
private charitable foundation of which one or more of the foregoing Persons
referred to in this clause (iii) constitutes a majority of the members. In
addition, each of SPE, USI and each member of the Claridge Group shall each be
a Permitted Transferee of its respective Permitted Transferees.
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any
agency or political subdivisions thereof or any Group comprised of two or more
of the foregoing.
"Public Stockholder" means any stockholder of the Company other
than (i) the Stockholders and their respective Permitted Transferees and (ii)
stockholders of the Company who are required to file a Schedule 13D pursuant
to the Exchange Act with respect to their ownership of Voting Shares,
excluding any such stockholders that (a) are investment advisers registered
under Section 203 of the Investment Advisers Act of 1940, as amended, (b) are
not participating and have not publicly disclosed (in a Schedule 13D filing or
otherwise) an intention to participate in an election contest affecting the
Company and (c) have not publicly disclosed (in a Schedule 13D filing or
otherwise) any intention or purpose of influencing control of the Company in
any material respect (including seeking representation on the Board).
"Registrable Securities" means any Common Stock beneficially owned
by any Holder (including any Common Stock issuable upon conversion of Non-
Voting Common Stock), whether beneficially owned as of the Closing or
thereafter acquired. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) such
securities shall have been sold (other than in a privately-negotiated sale)
pursuant to Rule 144 (or any successor provision) under the Securities Act or
(iii) such securities shall have ceased to be outstanding.
"Requisite Percentage of Participating Holders" means, with
respect to any registration pursuant to Article V, Holders of a majority of
the total Registrable Securities which the Company has been requested to
register by all Holders.
"Securities Act" means the Securities Act of 1933, as amended.
"SPE Director" means any Director designated pursuant to Section
2.1 by SPE.
"Stockholder" means each of SPE, USI and each member of the
Claridge Group.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture, limited liability company or other entity
controlled by such Person directly or indirectly through one or more
intermediaries.
"Targeted EBITDA" means (i) for the 12-month period commencing on
the Closing Date, if the Closing Date shall be on the first day of a month, or
otherwise for the 12-month period commencing on the first day of the month
following the month during which the Closing shall occur, and (ii) for each
12-month period thereafter (each full 12-month period, including the initial
period described in clause (i), a "Measurement Period"), Targeted EBITDA of
the Company as set forth in the Five-Year Plan, subject to the following
adjustments: (x) Targeted EBITDA shall be reduced (but not increased) as at
the end of any Measurement Period if subsidiaries or assets specifically
identified in the Five-Year Plan to be disposed of or closed during such
period shall not have been disposed of or closed, such reduction to be in an
amount equal to the extent to which the aggregate actual EBITDA of such assets
or subsidiaries during such Measurement Period is negative (net of any
positive actual EBITDA of any such assets or subsidiaries), and if such assets
or subsidiaries are not disposed of or closed within 12 months following the
date projected in the Five-Year Plan for such disposition or closure, Targeted
EBITDA in respect of such 12-month period shall be reduced (but not increased)
in an amount equal to the extent to which the aggregate actual EBITDA of such
assets or subsidiaries during such 12-month period is negative (net of any
positive actual EBITDA of any such assets or subsidiaries), (y) Targeted
EBITDA shall be reduced (but not increased) as at the end of any Measurement
Period if expansions and acquisitions specifically identified in the Five-Year
Plan to be made during such period shall not have occurred during such period,
such reduction to be in an amount equal to the amount of EBITDA specifically
identified in the Five-Year Plan as being associated with such expansions and
acquisitions (net of any positive actual EBITDA during such Measurement Period
from expansions and acquisitions that were not specifically identified in the
Five-Year Plan), and (z) Targeted EBITDA shall be reduced by an amount equal
to 25% of the projected expense savings that are specifically identified in
the Five-Year Plan.
"Third Party Transferee" means any Person to whom a Stockholder
(including a Third Party Transferee subject to this Agreement pursuant to
Sections 4.5(b) and 4.5(c)) or a Permitted Transferee Transfers Voting Shares,
other than a Permitted Transferee of such Stockholder.
"Transfer" means, directly or indirectly, to sell, transfer,
assign, pledge, encumber, hypothecate or similarly dispose of, either
voluntarily or involuntarily, or to enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, assignment,
pledge, encumbrance, hypothecation or similar disposition of, any Voting
Shares or any interest in any Voting Shares, provided, however, that, subject
to the second to last sentence of Section 4.5(a), a merger or consolidation in
which a Stockholder is a constituent corporation shall not be deemed to be the
Transfer of any Voting Shares beneficially owned by such Stockholder
(provided, that the primary purpose of any such transaction is not to avoid
the provisions of this Agreement).
"USI Director" means any Director designated pursuant to Section
2.1 by USI.
"USI Subscription Agreement" means the Agreement between USI and
the Company attached as Exhibit I to the Master Agreement, as the same may be
amended, supplemented or modified from time to time.
"Voting Share Equivalents" means any warrants, options, rights or
securities convertible into, or exchangeable or exercisable for, Voting
Shares.
"Voting Shares" means any securities of the Company the holders of
which are generally entitled to vote for members of the Board and any
securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or other
similar reorganization.
SECTION 1.2 Other Defined Terms.
The following terms shall have the meanings defined for such terms in the
Sections set forth below:
Term Section
Aggrieved Stockholder 8.11(c)
Arbitration Agreement 3.3(c)
Arbitrator 3.3(c)
Bylaw Amendment 2.4(a)
CO Recitals
Claims 5.8(a)
Claridge Group Preamble
Closing Recitals
Company Preamble
Demand Exercise Notice 5.1(a)
Demand Registration Requests 5.1(a)
Demand Registrations 5.1(a)
Determination Date 3.1(a)
Initiating Holder 5.1(a)
Issuance Notice 7.1(b)
Issuance Shares 7.1(a)
Litigation 8.13
Master Agreement Recitals
New Five-Year Plan 3.1(b)
Nominating Committee 2.1(i)
Offer Notice 4.4(b)
Offer Price 4.4(c)
Offered Shares 7.1(a)
Offeree 7.1(a)
Other Holders 5.1(b)
Other Stockholder 4.4(b)
Permitted Debt 3.1(a)
Piggyback Registration 5.2(a)
Reorganization Proposal 3.1(f)
Significant Sale 4.2(a)
Significant Sale Initiator 4.2(a)
Significant Sale Notice 4.2(a)
Significant Sale Shares 4.2(a)
SPE Preamble
Tag-Along Notice 4.3(a)
Tag-Along Offeree 4.3(a)
Tag-Along Sale 4.3(a)
Tag-Along Shares 4.3(a)
Target 3.1(a)
Transaction Recitals
Transferring Party 4.4(a)
Trust Preamble
USI Preamble
SECTION 1.3 Other Definitional Provisions. (a) The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 1.4 Methodology for Calculations. For purposes of this Agreement,
the Transfer or issuance of a Voting Share Equivalent shall be treated as the
Transfer or issuance of the Voting Shares into which such Voting Share
Equivalent can be converted, exchanged or exercised. For purposes of
calculating the amount of outstanding Voting Shares as of any date and the
amount of Voting Shares beneficially owned by any Person as of any date, (i)
the amount of any Voting Shares shall be equal to the number of votes such
Voting Shares shall then entitle the holder thereof to cast in an election for
members of the Board, (ii) any Voting Shares held in the Company's treasury or
owned by any Subsidiaries of the Company shall be disregarded, (iii) the
Stockholders shall not be deemed to share beneficial ownership of any Voting
Shares as a result of any of the provisions of this Agreement and (iv) if any
Voting Shares shall otherwise be deemed to be beneficially owned by more than
one Stockholder, such shares shall be deemed to be beneficially owned only by
the Stockholder with the greatest pecuniary interest in such shares (provided
that if such Stockholders shall have an equal pecuniary interest in any such
shares, each Stockholder shall be deemed to beneficially own an equal portion
of such shares (which portions shall not exceed 100% in the aggregate)).
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1 Composition of the Board.
(a) Effective as of the Closing, the Board
shall be comprised of 16 members, consisting of six designees of SPE, three
designees of USI, one designee of the Claridge Group, two Management Directors
and four Independent Directors. The designees of SPE, USI and the Claridge
Group shall have been designated by SPE, USI and the Claridge Group prior to
the Closing in accordance with the provisions of Section 6.18 of the Master
Agreement, the Independent Directors shall have been designated by SPE, USI
and a majority of the members of the Special Committee (as defined in the
Master Agreement) prior to the Closing in accordance with the provisions of
Section 6.18 of the Master Agreement and the Management Directors shall be the
individuals satisfying the criteria set forth in Section 2.1(j).
(b) After the Closing, SPE, USI and the Claridge Group shall be
entitled to designate for nomination for election to the Board the number of
Directors set forth in the Directors Chart which corresponds to such
Stockholder's Applicable Percentage; provided, however, that:
(i) (x) until the five-year anniversary of the Closing, the
Claridge Group shall be entitled to designate one Director if its
Applicable Percentage exceeds 3.5%, and, thereafter, if its Applicable
Percentage exceeds 5%, and (y) the Claridge Group's entitlement to
designate two or more Directors shall be determined in accordance with
this Section 2.1 on the same basis as the entitlement of the other
Stockholders;
(ii) if the Directors Chart provides that the Stockholders
would in the aggregate be entitled to designate more than 14 Directors,
each reference to a percentage in such chart under the "Applicable
Percentage" column, shall be increased by the least number of percentage
points that would result in the Stockholders in the aggregate being
entitled to designate 14 Directors (after giving effect to the
provisions of clause (i)(x) above); and
(iii) prior to the four-year anniversary of the Closing, no
Stockholder shall be entitled to designate more than eight Directors,
provided, however, that if any Stockholder would be entitled to
designate more than eight Directors pursuant to the Directors Chart
based on such Stockholder's Adjusted Applicable Percentage (rather than
such Stockholder's Applicable Percentage), (x) such Stockholder shall be
entitled to designate the number of Directors set forth in the Directors
Chart based on such Stockholder's Applicable Percentage and (y) the
limitation contained in this clause (iii) regarding a Stockholder's
entitlement to designate Directors shall thereupon terminate.
(c) Notwithstanding anything to the contrary contained in Section
2.1(b), each of SPE and USI covenants and agrees with the other and each
member of the Claridge Group covenants and agrees with each of SPE and USI
that:
(i) no Stockholder shall be entitled to designate more than
six Directors, provided, however, that if any Stockholder would be
entitled to designate more than eight Directors pursuant to the
Directors Chart based on such Stockholder's Adjusted Applicable
Percentage (rather than such Stockholder's Applicable Percentage), such
Stockholder shall be entitled to designate such greater number of
Directors and the limitation contained in this clause (i) regarding a
Stockholder's entitlement to designate Directors shall thereupon
terminate, provided, further, that, if at any time commencing on the
three-year anniversary of the Closing, any Stockholder's Applicable
Percentage exceeds 45%, the limitation contained in this clause (i)
regarding a Stockholder's entitlement to designate Directors shall be
increased from six Directors to seven Directors;
(ii) at any time that SPE's Applicable Percentage equals or
exceeds 40.625% but the number of SPE Directors is limited to six by
clause (i) of this Section 2.1(c), USI agrees with SPE that one of the
individuals designated by USI to serve as a Director shall be an
Independent Director so long as USI's Applicable Percentage equals or
exceeds 21.875% (provided that in determining whether such individual is
an Independent Director, the opinion of such Stockholder shall be
substituted for the opinion of the Nominating Committee for purposes of
clauses (i) and (iii) of Section 2.1(i)); and
(iii) at any time that USI's Applicable Percentage equals
or exceeds 40.625% but the number of USI Directors is limited to six by
clause (i) of this Section 2.1(c), SPE agrees with USI that one of the
individuals designated by SPE to serve as a Director shall be an
Independent Director so long as SPE's Applicable Percentage exceeds
21.875% (provided that in determining whether such individual is an
Independent Director, the opinion of such Stockholder shall be
substituted for the opinion of the Nominating Committee for purposes of
clauses (i) and (iii) of Section 2.1(i)).
(d) After the Closing, except for the designees of the
Stockholders and for the Management Directors (who shall be selected in
accordance with Section 2.1(i) and (j)), the individuals to be nominated for
election as Directors shall all be Independent Directors and shall be selected
in accordance with Section 2.1(i), unless the Independent Directors (based on
a Determination of the Independent Directors) shall otherwise agree, provided
that there shall be at least two Independent Directors and at least two
Management Directors nominated in each such election.
(e) Each Stockholder agrees to vote (and cause each of its
Affiliates to vote, if applicable), or act by written consent with respect to,
any Voting Shares beneficially owned by it to cause the designees of SPE, USI
and the Claridge Group and each of the Independent Directors and Management
Directors designated by the Nominating Committee to be elected to the Board,
and the Company agrees to use its best efforts to cause the election of each
such designee to the Board, including nominating such individuals to be
elected as members of the Board as provided herein. At least 45 days prior to
its distribution of its proxy statement or information statement with respect
to each meeting of stockholders at which Directors are to be elected, the
Company shall notify each Stockholder that is then entitled to designate
Directors pursuant to Section 2.1(b) of (i) the aggregate number of Directors
to be elected at the meeting, (ii) such Stockholder's Applicable Percentage as
of the record date for such meeting and (iii) the number of Directors such
Stockholder is entitled to designate (calculated based on such Stockholder's
Applicable Percentage as of the record date). Each Stockholder shall notify
the Company of the Directors designated by it pursuant to this Section on or
prior to the close of business on the later of (x) the 15th day following its
receipt of the Company's notice and (y) the 20th day prior to the Company's
distribution of such proxy statement or information statement.
(f) In the event that a vacancy is created at any time by the
death, disability, retirement, resignation or removal (with or without cause)
of any SPE Director, USI Director or Claridge Director, SPE, USI or the
Claridge Group, as the case may be, shall have the right to designate a
replacement Director to fill such vacancy and the Company agrees to use its
best efforts to cause such vacancy to be filled with the replacement Director
so designated. Upon the written request of SPE, USI or the Claridge Group,
each Stockholder shall vote (and cause each of its Affiliates to vote, if
applicable), or act by written consent with respect to, all Voting Shares
beneficially owned by it and otherwise take or cause to be taken all actions
necessary to remove any Director designated by such requesting party and to
elect any replacement Director designated as provided in the first sentence of
this Section 2.1(f). Unless all the Stockholders otherwise agree, no
Stockholder or any of its Affiliates shall take any action to cause the
removal of any SPE Director, USI Director, Claridge Director, Management
Director or Independent Director without cause, except (i) in the case of an
SPE Director, USI Director or Claridge Director, upon the written request of
the Stockholder which designated such Director, (ii) in the case of a
Management Director, if such individual shall cease to serve as one of the two
most senior executive officers of the Company, and (iii) as provided in
Section 2.1(g). For purposes of the preceding sentence, "cause" shall mean
the wilful and continuous failure of a Director to substantially perform such
Director's duties to the Company or the wilful engaging by a Director in gross
misconduct materially and demonstrably injurious to the Company.
(g) If, at any time, any of the Stockholders or any of their
respective Permitted Transferees shall Transfer Voting Shares and, upon
consummation of such Transfer, the Applicable Percentage of such Stockholder
is reduced such that the number of Directors such Stockholder is entitled to
designate pursuant to Section 2.1(b) and 2.1(c) is reduced by one or more
Directors, then:
(i) the number of SPE Directors, USI Directors and Claridge
Directors shall be recalculated by the Company in accordance with
Section 2.1(b) and 2.1(c) as of the consummation of such Transfer (and
after giving effect thereto);
(ii) to the extent that, after giving effect to the
recalculation described in clause (i), any of SPE, USI or the Claridge
Group is entitled to designate fewer Directors than the number of
Directors then serving as designees of such Stockholder(s), any such
Stockholder shall use its best efforts to cause Director(s) designated
by such Stockholder to resign from the Board as promptly as practicable
so that the number of Directors designated by such Stockholder does not
exceed the number of designees such Stockholder shall then be entitled
to designate based on such recalculation;
(iii) if a sufficient number of SPE Directors, USI
Directors or Claridge Directors, as the case may be, shall not have
resigned within 30 days of the event requiring such recalculation, each
Stockholder shall vote (and cause each of its Affiliates to vote, if
applicable), or act by written consent with respect to, all Voting
Shares beneficially owned by it and otherwise take or cause to be taken
all actions necessary to remove such excess number of Directors
designated by the Stockholder(s) whose designees have not resigned in
accordance with clause (ii);
(iv) upon the effectiveness of the resignation(s) or
removal(s) described in clauses (ii) and (iii), the Company shall cause
the Board (and each Stockholder shall use its best efforts to cause its
respective designees to the Board) to fill all vacancies created by such
resignation(s) or removal(s) (x) by appointing to the Board designees of
any Stockholder (including any Third Party Transferee described in
clause (ii) of Section 4.5(b)) who is entitled, as a result of the
recalculation described in clause (i), to designate more Directors than
the number of Directors then serving as designees of such Stockholder
and (y) to the extent vacancies remain after giving effect to clause
(x), by filling such remaining vacancies with Independent Directors
designated by the Nominating Committee pursuant to Section 2.1(i); and
(v) if the vacancies to the Board have not be filled in
accordance with clause (iv), each Stockholder shall vote (and cause each
of its Affiliates to vote, if applicable), or act by written consent
with respect to, all Voting Shares beneficially owned by it and
otherwise take or cause to be taken all actions necessary to fill all
vacancies as provided in clause (iv).
(h) The Company agrees not to take any action that would cause
the number of Directors constituting the entire Board to be other than 16 and
each Stockholder agrees to use its best efforts to cause the number of
Directors constituting the entire Board to be 16.
(i) In connection with each election of Directors, the Company
will use its best efforts to cause there to be nominated for election as
Directors, in accordance with the Company's procedures for the nomination of
Directors and to the extent permissible in accordance with applicable legal
requirements, (1) the two Management Directors who satisfy the criteria set
forth in Section 2.1(j), and (2) the number of Independent Directors required
to be nominated in accordance with Section 2.1(d). With respect to each
election held after the Closing, the Management Directors referred to in
clause (1) above and the Independent Directors referred to in clause (2) above
shall be designated by a nominating committee of the Board (the "Nominating
Committee") established to determine whether prospective nominees meet the
criteria set forth in Section 2.1(j) with respect to such Management Directors
and the criteria set forth in the following paragraph with respect to such
Independent Directors. The Company agrees to cause the Nominating Committee
to be comprised of four Directors, consisting of (x) two Independent Directors
designated by a majority of the Independent Directors and (y) one SPE Director
and one USI Director, provided if at any time there shall cease to be at least
one USI Director or one SPE Director, then the Nominating Committee shall
include two SPE Directors or two USI Directors, as the case may be, to the
extent SPE or USI, as applicable, then has two designees serving as Directors.
An Independent Director is a Director who, and each future
qualified nominee for election as an Independent Director shall be an
individual who:
(i) is free from any relationship that, in the opinion of
the Nominating Committee, would interfere with the exercise of
independent judgment as a member of the Board;
(ii) is not an Affiliate of the Company, SPE, USI or the
Claridge Group or a current or former officer of the Company or any of
its Subsidiaries or a current or former officer or director of SPE or
USI or any of their respective Subsidiaries;
(iii) does not, in addition to such individual's role as a
Director, also act on a regular basis as an individual or representative
of an organization serving as a professional advisor, legal counsel or
consultant to management of the Company or SPE, USI or the Claridge
Group or any of their respective Subsidiaries; and
(iv) does not represent, and is not a member of the
immediate family of, a Person who does not satisfy the requirements of
clauses (i), (ii) or (iii) above.
In the event that the Stockholders collectively have the right to
designate at least 13 of the members of the Board pursuant to Section 2.1, SPE
and USI agree that at least one of the individuals designated by each such
Stockholder to serve as a Director shall be an Independent Director, provided
that if one of such Stockholders shall be entitled to designate only one
Director, such Stockholder shall not be required to designate an Independent
Director and the other such Stockholder shall be required to designate two
Independent Directors (provided, further, that such designees shall qualify to
serve on the Audit Committee of the Board in accordance with the policies of
the New York Stock Exchange governing membership on audit committees).
(j) The two Management Directors referenced in clause (1) of
Section 2.1(i) shall be the two most senior executive officers of the Company,
provided that so long as Allen Karp shall be an executive officer of the
Company or any Affiliate thereof he shall be a Management Director even if he
is not one of the two most senior executive officers and, in such
circumstances, the Management Directors shall be the most senior executive
officer of the Company and Mr. Karp. If any Management Director shall cease
to satisfy the foregoing criteria, the Company shall cause such individual to
immediately resign as a Management Director, and upon such resignation, the
Company shall cause the Board (and each Stockholder shall use its best efforts
to cause its respective designees to the Board) to fill the vacancy created
thereby in accordance with Section 2.1.
(k) If, on the three-year anniversary of the Closing, any
Stockholder shall then be entitled to designate seven Directors rather than
six Directors in accordance with the second proviso contained in clause (i) of
Section 2.1(c), at the request of such Stockholder, the Company shall take
such action as may be necessary to cause one of the Independent Directors to
resign from the Board so as to enable such Stockholder to designate a seventh
Director, and if an Independent Director has not so resigned within 30 days of
such Stockholder's request to the Company, at the request of such Stockholder,
each other Stockholder shall vote (and cause each of its Affiliates to vote,
if applicable), or act by written consent with respect to, all Voting Shares
beneficially owned by it and otherwise take or cause to be taken all actions
necessary to remove the Independent Director designated by the requesting
Stockholder.
(l) If the number of SPE Directors or USI Directors shall have
been limited to six by clause (i) of Section 2.1(c) and as a result thereof
one of the USI Directors or the SPE Directors shall be an Independent Director
in accordance with clauses (ii) or (iii), as the case may be, of Section
2.1(c), and if the number of SPE Directors or USI Directors shall cease to be
limited to six on the three-year anniversary of Closing in accordance with the
second proviso contained in clause (i) of Section 2.1(c), at the request of
USI or SPE, as the case may be, the Company shall take such action as may be
necessary to cause the Independent Director designated by USI or SPE, as the
case may be, to resign and, if such Independent Director has not resigned
within 30 days of such Stockholder's request to the Company, at the request of
such Stockholder, each other Stockholder shall vote (and cause each of its
Affiliates to vote, if applicable), or act by written consent with respect to,
all Voting Shares beneficially owned by it and otherwise take or cause to be
taken all actions necessary to remove the Independent Director designated by
USI or SPE, as the case may be.
SECTION 2.2 Board Procedures. The Company shall cause
the following procedures to be followed:
(a) Meetings. The Board shall hold at least six regularly
scheduled meetings per year at such times as may from time to time be fixed by
resolution of the Board and no notice (other than the resolution) need be
given as to a regularly scheduled meeting. Special meetings of the Board may
be held at any time upon the call of the Chairman of the Board or at least two
Directors, following notice to each Director which shall be given orally or by
personal delivery, facsimile or reliable overnight courier at least three
Business Days before the meeting. Reasonable efforts shall be made to ensure
that each Director actually receives timely notice of any such special
meeting. An annual meeting of the Board shall be held without notice
immediately following the annual meeting of the stockholders of the Company.
(b) Agenda. A reasonably detailed agenda shall be supplied to
each Director reasonably in advance of each meeting of the Board, together
with other appropriate documentation with respect to agenda items calling for
Board action, to inform adequately the Directors regarding matters to come
before the Board. Any Director wishing to place a matter on the agenda for
any meeting of the Board may do so by communicating with the Chairman of the
Board sufficiently in advance of the meeting of the Board so as to permit
timely dissemination to all Directors of information with respect to the
agenda items.
(c) Powers of the Board. The Board shall reserve to itself the
power to approve transactions that are of a type customarily subject to board
approval as a matter of good corporate practice for public companies in the
United States. The Board shall not delegate to any committee of the Board or
to any officers of the Company the authority to conduct business in any manner
that would circumvent, or deprive SPE, USI or the Claridge Group or any of
their respective Permitted Transferees of, any of their respective rights set
forth in this Agreement. In no event will the Board establish an executive
committee, or any committee performing functions comparable to those
customarily performed by executive committees of boards of directors of public
companies in the United States, without the prior written consent of SPE and
USI. All committees of the Board will report to and be accountable to the
Board. The Board shall establish, in cooperation with the Chief Executive
Officer of the Company, a schedule for Board review or action, as appropriate,
with respect to matters which shall typically come before the Board,
including, but not limited to (i) annual and multi-year business plans
(including capital expenditures and operating budgets), (ii) major
collaborative arrangements with third parties not in the ordinary and normal
course of business as theretofore conducted and (iii) appointments of
officers.
SECTION 2.3 Committees. Except for the Nominating
Committee and except for an audit committee and compensation committee
performing functions comparable to those
customarily performed by audit committees and compensation committees of
boards of directors of public companies in the United States, the Company
shall cause the Board not to establish any committees without the prior
written consent of SPE and USI. Except for the Nominating Committee, the
members of which shall be determined in accordance with Section 2.1(i) above,
the Company shall cause each committee of the Board to, subject to any
requirements under the Exchange Act or applicable to securities, or the
issuance of securities, traded on the principal United States exchange or
market on which the Common Stock shall be listed or trade, include (x) at the
request of SPE, a number of SPE Directors (rounded to the nearest whole
number, but in no event less than one such SPE Director) equivalent to the
proportion of SPE Directors then serving on the whole Board multiplied by the
total number of members comprising such committee and (y) at the request of
USI, a number of USI Directors (rounded to the nearest whole number, but in no
event less than one such USI Director) equivalent to the proportion of USI
Directors then serving on the whole Board multiplied by the total number of
members comprising such committee. Subject to the rights of SPE and USI
pursuant to clause (xi) of Section 3.1, the Company shall cause matters
relating to the hiring, termination or compensation of executive officers of
the Company (including any entering into, amendment, termination or renewal
(including option renewals) of any agreement with an executive officer of the
Company) to be approved by the compensation committee of the Board. The
Company shall not permit any Management Director to serve on the audit or
compensation committee of the Board. Subject to the foregoing, the Board
shall have the power at any time to fill vacancies in, to change the
membership of or to discharge any committee.
SECTION 2.4 Voting on Certain Matters.
(a) In connection with any vote
or action by written consent of the Board relating to a Merger, Dissolution or
Certificate Amendment or the amendment or repeal of any provision of, or the
addition of any provision to, the Bylaws (a "Bylaw Amendment"), each
Stockholder agrees to use its best efforts to cause the Director(s) designated
by such Stockholder, to vote against (and not consent to) such Merger,
Dissolution, Certificate Amendment or Bylaw Amendment at the request of SPE or
USI, provided, that at the time SPE or USI delivers such request its
Applicable Percentage exceeds the Minimum Percentage.
(b) In connection with any vote or action by written consent of
the stockholders of the Company relating to a Merger, Dissolution, Certificate
Amendment or Bylaw Amendment, each Stockholder agrees (and agrees to cause
each of its Affiliates, if applicable), with respect to any Voting Shares
beneficially owned by it, to vote against (and not consent to) such Merger,
Dissolution, Certificate Amendment or Bylaw Amendment at the request of SPE or
USI (which, in the case of a vote at a meeting of stockholders, shall be
delivered to such Stockholder no later than fifteen Business Days prior to the
applicable meeting), provided, that at the time SPE or USI delivers such
request its Applicable Percentage exceeds the Minimum Percentage.
SECTION 2.5 Irrevocable Proxy.
(a) At least ten Business Days prior to any meeting of
stockholders (or three Business Days following receipt of proxy solicitation
materials from the Company, if later), each Stockholder agrees to deliver a
duly executed irrevocable proxy to the Company (and a copy of such proxy to
each other Stockholder by such day) specifying how such Stockholder intends to
vote as to each matter scheduled to be brought before the meeting. Such proxy
shall appoint the Chief Executive Officer of the Company and Secretary of the
Company as such Stockholder's true and lawful proxies and attorneys-in-fact as
to the matters to be voted at the meeting, shall state that it is irrevocable
and shall be voted in accordance with the provisions of this Agreement. Such
proxy shall also state that it is not effective until the date of the
applicable meeting of stockholders and that its effectiveness is contingent
upon the Company not having received, prior to the third Business Day before
the meeting, a notification from any other Stockholder asserting such other
Stockholder's good faith belief that such proxy does not comply with the
provisions of this Agreement.
(b) In connection with any proposed action by written consent of
the stockholders, each Stockholder agrees that it shall execute and deliver
its written consent to the Company (with simultaneous delivery of a copy
thereof to each other Stockholder). Such consent shall state that it is not
effective until a specified date (which date shall be at least ten Business
Days following delivery to the Company), and that its effectiveness is
contingent upon the Company not having received prior to the third Business
Day before such specified date a notification from any other Stockholder
asserting such other Stockholder's good faith belief that such consent does
not comply with the provisions of this Agreement. Any written consent
delivered by any Stockholder shall be made in accordance with the terms of
this Agreement.
(c) If any Stockholder shall fail to deliver a proxy to the
Company and the other Stockholders by the date described in Section 2.5(a) or
a consent to the Company and the other Stockholders by the date described in
Section 2.5(b) or if such proxy (or consent) shall not comply with the
provisions of this Agreement, or shall be voted in a manner that is contrary
to this Agreement, the irrevocable proxies set forth in Section 2.5(d) below
shall thereupon be irrevocably activated with respect to the matters to be
brought before the meeting or which are subject to the consent, as the case
may be.
(d) In order to secure each Stockholder's obligation to vote (or
to act or not act by written consent with respect to) all Voting Shares
beneficially owned by it in accordance with the provisions of this Article II
and Sections 3.2 and 8.11, each Stockholder hereby appoints each other
Stockholder as its true and lawful proxy and attorney-in-fact, with full power
of substitution, to vote (or to act or not act by written consent with respect
to) all of the Voting Shares beneficially owned by it in accordance with the
terms of this Agreement and to take all such other actions as are necessary to
enforce the rights of such other Stockholders under this Article II and
Sections 3.2 and 8.11 in the event the Stockholder fails to comply with any
provision of this Agreement granting such other Stockholder rights under this
Article II and Sections 3.2 and 8.11. The proxies and powers granted by each
Stockholder pursuant to this Section 2.5 are irrevocable and are coupled with
an interest and are given to secure the performance of the Stockholders'
obligations under this Article II and Sections 3.2 and 8.11. Such proxies and
powers shall survive the bankruptcy, insolvency, dissolution or liquidation of
a Stockholder. Notwithstanding the foregoing, upon termination of the rights
and obligations of a Stockholder pursuant to Section 8.2 any proxy granted by
such Stockholder or granted to such Stockholder pursuant to this Section 2.5
shall terminate.
SECTION 2.6 Certain Restrictions .
Without the prior written consent of SPE and
USI, each Stockholder agrees not to, and to cause each of its Affiliates not
to, directly or indirectly, alone or in concert with others:
(a) seek election to, seek to place a representative on, or seek
the removal (other than for cause) of any member of, the Board, except
pursuant to Section 2.1;
(b) deposit any Common Shares in a voting trust or subject any
Common Shares to any arrangement or agreement with respect to the voting of
such Common Shares (other than this Agreement or a voting trust, arrangement
or agreement solely among members of the Claridge Group);
(c) engage in any "solicitation" (within the meaning of Rule 14a-
1 under the Exchange Act) of proxies or consents (whether or not relating to
the election or removal of directors) with respect to the Company, or become a
"participant" in any "election contest" (within the meaning of Rule 14a-11
under the Exchange Act) or, except as contemplated by this Agreement, execute
any written consent in lieu of a meeting of the holders of any class of Common
Shares, provided that the foregoing shall not prohibit any such action (i) in
response to a solicitation conducted by any Person that is neither a
Stockholder nor an Affiliate thereof or (ii) to facilitate a tender offer or
exchange offer by such Stockholder in response to a bona fide tender or
exchange offer to acquire more than 20% of the Voting Shares made by any
Person other than such Stockholder or any Affiliate thereof, in each case so
long as such Stockholder otherwise remains in compliance with its obligations
under this Agreement in all material respects; or
(d) form, join or in any way participate in or assist in the
formation of a Group with respect to any Common Shares, other than any such
Group consisting exclusively of Stockholders, any of their Affiliates or
Permitted Transferees.
SECTION 2.7 Cooperation.
Each Stockholder shall vote (or act or not act by written
consent with respect to) all of its Voting Shares and shall take all other
necessary or desirable actions within its control (including attending all
meetings in person or by proxy for purposes of obtaining a quorum, executing
all written consents in lieu of meetings and voting to remove members of the
Board, as applicable), and the Company shall take all necessary and desirable
actions within its control (including calling special Board and stockholder
meetings, as applicable), to effectuate the provisions of this Article II.
ARTICLE III
CONSENT RIGHTS
SECTION 3.1 Consent for Certain Actions.
(a) The Company shall not,
and shall cause its Subsidiaries not to, directly or indirectly, take any of
the following actions without the prior written consent of (i) SPE, if its
Applicable Percentage equals or exceeds the Minimum Percentage, and (ii) USI,
if its Applicable Percentage equals or exceeds the Minimum Percentage:
(i) in the case of the Company or any Subsidiary of the
Company that is a "significant subsidiary" as defined in Rule 405
under the Securities Act, voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United
States Code as now constituted or hereafter amended, or any other
federal, state or foreign bankruptcy, insolvency or similar law;
(ii) merge or consolidate with, purchase or otherwise
acquire any other Person (the "Target") or all or substantially
all of the business or any assets of another Person in one or a
series of related transactions if (x) the book value of the assets
of the Target (in the case of an acquisition of a Target) or of
the business and/or assets to be acquired as reflected on the
books of the seller of such business or assets, as the case may
be, as of the end of such Person's most recently ended fiscal
quarter preceding the earlier of the date the Company or a
Subsidiary thereof enters into definitive agreements in respect of
such transaction or publicly announces such transaction (the
"Determination Date") (based on a Determination of the Independent
Directors) would exceed 20% of the book value of the Company's
total assets as of the end of the Company's most recently ended
fiscal quarter preceding the Determination Date or (y) the Fair
Market Value (based on a Determination of the Independent
Directors) of the consideration paid or payable for the Target,
the business and/or assets to be acquired as of the Determination
Date (including, with respect to any asset acquisition, the value
of any Debt assumed or to be assumed in such transaction) would
exceed 20% of the Company's Market Capitalization as of the
Determination Date or (z) EBITDA of the Target and/or of the
business and/or the Cash Flow of the assets to be acquired as
reflected on the books of the Target and/or such seller, as the
case may be, for its last four fiscal quarters preceding the
Determination Date exceeds 20% of the Company's EBITDA for the
Company's last four fiscal quarters preceding the Determination
Date;
(iii) sell, lease, transfer or otherwise dispose of
(including by merger, dividend or other distribution or other
transaction involving one or more stockholders of the Company,
formation of a joint venture or otherwise) any other Person,
business or assets in one or a series of related transactions if
(x) the book value of such Person, business and/or assets exceeds
15% of the book value of the Company's total assets as of the end
of the Company's most recent fiscal quarter preceding the
Determination Date or (y) the Fair Market Value (based on a
Determination of the Independent Directors) of the consideration
received or receivable for such Person, the business and/or assets
(including, with respect to any asset acquisition, the value of
any Debt assumed or to be assumed in such transaction) exceeds 15%
of the Company's Market Capitalization as of the Determination
Date or (z) the EBITDA of such Person and/or business and/or the
Cash Flow of such assets for the Company's last four fiscal
quarters preceding the Determination Date exceeds 15% of the
Company's EBITDA for such four fiscal quarters;
(iv) enter into, commence or engage in any business other
than the exhibition of films (including as a result of an
acquisition or pursuant to a joint venture) except as otherwise
provided for in the Five-Year Plan and except for matters
customarily related to the exhibition of films in respect of which
the Company and its Subsidiaries do not expend more than an
aggregate of $5 million of cash during any calendar year;
(v) enter into any contract with or otherwise engage in or
become obligated to engage in any transaction or series of related
transactions with SPE or USI or any of their respective Affiliates
involving more than $1 million per calendar year; provided,
however, that (A) all such contracts and transactions (whether or
not exceeding the $1 million limitation) shall be on an arms'
length basis and (B) the $1 million limitation shall not apply to
transactions that occur in the ordinary course of the Company's
business, including film booking arrangements;
(vi) increase or decrease the number of Directors that
comprise the entire Board or that constitute a quorum for purposes
of convening a meeting of the Board;
(vii) issue or sell (including by merger or otherwise) any
Voting Shares or Voting Share Equivalents (other than pursuant to
the Equity Offering or upon conversion of the Non-Voting Common
Stock) that would, upon closing of such issuance or sale (A)
together with the aggregate amount of all such issuances or sales
during the 12-month period preceding the proposed date of issuance
or sale, increase the number of Voting Shares by more than 10% of
the average number of Voting Shares outstanding as of the last day
of each of the 12 full calendar months preceding the proposed date
of issuance or sale or (B) together with the aggregate amount of
all such issuances or sales during the 24-month period preceding
the proposed date of issuance or sale, increase the number of
Voting Shares by more than 15% of the average number of Voting
Shares outstanding as of the last day of each of the 24 full
calendar months preceding the proposed date of issuance or sale;
provided, (1) in determining whether SPE or USI shall have an
Article III Consent Right in respect of issuances or sales
described in clauses (A) or (B), issuances or sales pursuant to
the Equity Offering shall be disregarded in calculating the
aggregate amount of issuances or sales during the applicable
period (but shall not be disregarded in calculating the
outstanding Voting Shares as of any date) and (2) the issuance or
sale of Voting Shares upon the exercise, conversion or exchange of
Voting Share Equivalents shall not be an issuance or sale that is
subject to this clause (vii) but the issuance or sale of Voting
Share Equivalents shall be subject to this clause (vii) in
accordance with Section 1.4;
(viii) pay, declare or set aside any sums for the payment
of any cash dividends on, or make any other cash distributions on
(including by merger or otherwise), any shares of Capital Stock,
or any warrants, options, rights or securities convertible into,
exchangeable or exercisable for, Capital Stock (excluding any such
payment or distribution made to the Company or any of its
Subsidiaries), if the amount thereof, together with the aggregate
amount of any other items referred in this clause (viii) and
clause (ix) below, during the prior 12 months, exceeds 5% of the
Company's Market Capitalization at the time of such action;
provided that the payment of any such dividend or distribution
shall be permitted to be made within 60 days of its declaration if
such declaration was not subject to an Article III Consent Right;
(ix) redeem, purchase or otherwise acquire for cash
(including by merger or otherwise), any shares of Capital Stock or
any warrants, options and rights or securities convertible into,
exchangeable or exercisable for, Capital Stock, or redeem or
purchase for cash or make any cash payments with respect to any
stock appreciation rights or phantom stock plans (excluding any
such redemption, purchase or payment from the Company or any of
its Subsidiaries), if the amount thereof, together with the
aggregate amount of any other items referred to in clause (viii)
above and this clause (ix), during the prior 12 months, exceed 5%
of the greater of (x) the Company's Market Capitalization at the
time of such payment and (y) the Company's Market Capitalization
at the time it commits to make such redemption, purchase or
payment;
(x) incur, assume or otherwise become obligated with
respect to, any Debt (x) if immediately after giving effect to the
incurrence of such Debt and the receipt and application of the
proceeds thereof, the ratio of the Company's consolidated Debt to
EBITDA for the four full fiscal quarters next preceding the
incurrence of such Debt, calculated on a pro forma basis as if
such Debt had been incurred and the proceeds thereof had been
received and so applied at the beginning of the four full fiscal
quarters, would be greater than the Maximum Debt Ratio or (y) in
excess of $100,000,000 in aggregate principal amount in one or a
series of related transactions, provided that this clause (y)
shall not apply to (1) Debt owed by the Company to any of its
Subsidiaries or Debt owed by a Subsidiary of the Company to the
Company or to another Subsidiary of the Company, (2) Debt
outstanding immediately following the Closing and (3) Debt
incurred to renew, extend, refinance or refund any outstanding
Debt permitted in clauses (1) or (2) and any Debt incurred in
connection with subsequent refinancings of such Debt
(collectively, "Permitted Debt"), provided, further, that any Debt
described in clause (3) shall not be Permitted Debt if the amount
of such Debt shall exceed the amount of the outstanding Debt that
is being renewed, extended, refinanced or refunded.
(xi) hire, or renew the employment contract (including
option renewals) of, either the Chief Executive Officer of the
Company or the second most senior executive officer of the
Company;
(xii) enter into any arrangement (other than this Agreement
or pursuant to this Agreement) with any holder of Voting Shares in
such holder's capacity as a holder of Voting Shares which subjects
actions taken by the Company or any Subsidiary to the prior
approval of any Person, or issue or sell any series or class of
Capital Stock of the Company having either (x) more than one vote
per share or (y) a class vote on any matter, except to the extent
such class vote is required by the DGCL or to the extent that the
holders of any series of preferred stock may have the right,
voting separately as a class, to elect a number of Directors upon
the occurrence of a default in payment of dividend or redemption
price;
(xiii) adopt any stockholder rights plan, or any other plan
or arrangement that could reasonably be expected to disadvantage
any stockholder on the basis of the size of its shareholding, such
that any holder of Common Shares or any of its Affiliates would be
adversely affected; or
(xiv) adopt a Bylaw Amendment by action of the Board.
Notwithstanding anything to the contrary contained in this Section 3.1(a),
neither SPE nor USI shall have an Article III Consent Right to the extent such
action requires the approval of holders of Common Stock under the DGCL or the
Certificate.
(b) If any of the following shall occur and be continuing:
(i) the Company's actual EBITDA in each of the two most
recently ended fiscal years is less than 80% of Targeted EBITDA
for such year;
(ii) at the end of the most recent fiscal quarter, the
Company's ratio of consolidated Debt as reported in its financial
statements to EBITDA for the last four fiscal quarters exceeds the
Maximum Debt Ratio, or
(iii) at the end of the most recent fiscal quarter, the
Company's EBITDA for the last four fiscal quarters is less than
8.5% of the Company's consolidated total assets as reported in its
financial statements (excluding intangible assets and construction
work-in-process);
the Company (x) shall submit to SPE, if its Applicable Percentage equals or
exceeds the Minimum Percentage, and USI, if its Applicable Percentage equals
or exceeds the Minimum Percentage, for approval a new plan for the Company
covering a new five-year term commencing with the first day of the next fiscal
year of the Company (the "New Five-Year Plan") which shall replace the Five-
Year Plan and which shall be consistent in form and contain a corresponding
level of detail with the Initial Five-Year Plan and (y) pending the
effectiveness of the New Five-Year Plan, shall submit to SPE, if its
Applicable Percentage equals or exceeds the Minimum Percentage, and USI, if
its Applicable Percentage equals or exceeds the Minimum Percentage, for
approval no later than the last Business Day of the month immediately
preceding the end of the Company's fiscal year, annual operating and capital
budgets for the next fiscal year. The Company and any such Stockholder agree
to cooperate in good faith to adopt the New Five-Year Plan and such budgets as
promptly as practicable.
(c) If any of the conditions specified in paragraph (b)(i)
through (iii) above shall have occurred, then until the Company's actual
EBITDA for each of two consecutive fiscal years shall equal or exceed Targeted
EBITDA for each of such years as reflected in the New Five-Year Plan, the
Company shall not, and shall cause its Subsidiaries not to, directly or
indirectly, take any of the following actions without the prior written
consent of SPE (so long as its Applicable Percentage equals or exceeds the
Minimum Percentage) and USI (so long as its Applicable Percentage equals or
exceeds the Minimum Percentage): (w) make, or agree to make, any capital
expenditures not specifically identified in the New Five-Year Plan in excess
of $5,000,000 per expenditure or series of related expenditures or $10,000,000
in the aggregate during any 12-month period, (x) incur an aggregate amount of
Debt in excess of $25,000,000, excluding Debt specifically identified in the
New Five-Year Plan and Permitted Debt, (y) create or incur any lien on the
assets of the Company or any of its Subsidiaries to secure unsecured Debt of
the Company or any of its Subsidiaries and (z) except for issuances or sales
of Excluded Securities, authorize the issuance of, or issue or sell, any
additional shares of, or any new series or class of, Capital Stock of the
Company.
(d) So long as any Stockholder shall have an Article III Consent
Right, at least six months prior to the expiration of the period covered by
any Five-Year Plan, the Company shall in good faith prepare a Five-Year Plan
for the subsequent five year period, which shall be subject to prior approval
by the Board and which shall be consistent in form and contain a corresponding
level of detail with the Initial Five-Year Plan. The provisions of Sections
3.1(a), (b) and (c) shall be applicable to all Five-Year Plans or New Five-
Year Plans, whether adopted prior to, on or after the five-year anniversary of
the Closing.
(e) Any action or attempted action of the Company or any
Subsidiary of the Company in violation of any provision of Section 3.1 shall
be void.
(f) The Company agrees to notify the Trust when practicable of
any proposed (A) corporate reorganization, (B) share capital reorganization,
(C) transaction involving the exchange of Capital Stock of the Company for
other equity of the Company or any other corporation or (D) merger with
another corporation (any one of such proposals, a "Reorganization Proposal")
which would, in the opinion of counsel for the Company, constitute a
disposition of Common Stock pursuant to the Income Tax Act (Canada) or any
successor legislation, for Canadian resident holders thereof in respect of
which any resulting gain would be taxable pursuant to such Act. In the event
of any such Reorganization Proposal, the Company shall assist the Claridge
Group, at the request of the Claridge Group and at its expense, with an
application for a remission order pursuant to the Financial Administration Act
(Canada), provided that counsel to the Company considers that the Department
of Finance (Canada) is likely to issue a remission order providing fiscal
relief to Canadian resident stockholders of the Company.
(g) In connection with the grant of any consent relating to a
matter described in clauses (ii) or (iii) of Section 3.1(a), the Company and
each Stockholder who then has an Article III Consent Right agree to negotiate
in good faith appropriate adjustments to Targeted EBITDA. If after 21 days
following the grant of such consent, the Company and the Stockholders have not
agreed upon appropriate adjustments, then each of SPE and USI shall have the
opportunity to submit its reasonable estimate of the appropriate adjustments
to Targeted EBITDA to any "Big Six" accounting firm mutually selected by SPE
and USI that is not the principal outside accounting firm for SPE, CO or USI
within the 10 days (the "Submission Period") following the end of such 21-day
period. If the parties cannot agree upon such an accounting firm, the
principal outside accounting firms of SPE and USI shall mutually select
another "Big Six" accounting firm to act hereunder.
Along with their proposed adjustments to Targeted EBITDA, the
Company and each Stockholder who then has an Article III Consent Right may
submit to the accounting firm such written memoranda, arguments, briefs and
other evidence in support of their respective adjustments as they see fit,
copies of which shall also be provided to the other parties hereto. Within 10
days following the expiration of the Submission Period, the accounting firm
shall make a determination as to which of the adjustments submitted by the
parties is the most reasonable estimate of the impact on the Company's EBITDA
of the matter which was subject to consent (the adjustment so chosen, the
"Final Adjustment"). The accounting firm shall be limited to selecting one of
the adjustments submitted by the parties as the Final Adjustment and shall
have no authority to alter in any way any adjustment so submitted.
The Final Adjustment shall be deemed to be approved by all parties
to this Agreement for all purposes of this Agreement. If the accounting firm
shall select the adjustment submitted by USI, SPE shall bear all fees and
expenses of the accounting firm, including the fees and expenses of any
experts hired by the accounting firm to assist it in rendering a decision
hereunder. If the accounting firm shall select the adjustment submitted by
SPE, USI shall bear all such fees and expenses.
Following the determination of the Final Adjustment, the Company
shall cause the Final Adjustment to be submitted to the Board for its
approval. The Company shall use its best efforts to cause the Final
Adjustment to be adopted by the Board, and SPE and USI covenant and agree with
each other to use their respective best efforts to cause the Company to
fulfill the Company's obligations under this Section 3.1(g).
SECTION 3.2 Certain Certificate Provisions.
So long as the Applicable
Percentage of SPE or USI equals or exceeds the Minimum Percentage, (i) the
Company agrees that the Certificate will provide that effecting a Merger or
Dissolution or adopting a Certificate Amendment or adopting a Bylaw Amendment
by action of the stockholders of the Company shall require the affirmative
vote or written consent of the holders of at least 80% of the outstanding
Common Stock, provided that in the case of any of the foregoing matters (other
than adopting a Bylaw Amendment by action of the stockholders) such 80%
stockholder approval requirement shall not be applicable if 14 members of the
Board shall have approved such matter, provided, further, that in the case of
any Merger that is approved by 14 members of the Board, such Merger shall
require the affirmative vote or written consent of the holders of at least 66
2/3% of the outstanding Common Stock and (ii) no Stockholder shall vote in
favor of, consent in writing to, or take any other action to effect an
amendment or repeal of such provisions of the Certificate.
SECTION 3.3 Arbitration .
(a) At least seven Business Days prior to the Company or any
Subsidiary thereof (i) merging or consolidating with, or purchasing or
otherwise acquiring, any other entity or assets, except in the ordinary course
of business consistent with past practice, (ii) selling, leasing, transferring
or otherwise disposing of any assets, except in the ordinary course of
business consistent with past practice, (iii) issuing or selling any Voting
Shares or new series or class of Capital Stock (other than Excluded
Securities), (iv) incurring or assuming any Debt, other than incurrences of
Debt in the ordinary course of business consistent with past practice that
could not reasonably be expected to trigger an Article III Consent Right, or
(v) taking any action described in clauses (i), (iv), (v), (vi), (viii), (ix),
(xi), (xii), (xiii) or (xiv) of Section 3.1(a), the Company shall provide SPE
and USI with a notice that describes the material terms of such proposed
action and indicates whether the Company reasonably believes in good faith
that any Article III Consent Right will be triggered by such action. The
Company shall also provide such Stockholders with all information reasonably
relevant and necessary to determine whether an Article III Consent Right will
be triggered by such action. The foregoing notification requirement will be
satisfied if the Company provides the requisite information to any SPE
Director, in the case of SPE, and any USI Director, in the case of USI. If
either SPE or USI disagrees with the Company's conclusion and reasonably
believes in good faith that such Stockholder has an Article III Consent Right
in connection with such action, such Stockholder shall provide the Company
with written notice of its disagreement by the close of business on the sixth
Business Day following receipt of the Company's notice.
(b) In addition, if either SPE or USI reasonably believes in good
faith that the Company intends to take any action in respect of which the
Company has not delivered a notice described in Section 3.3(a) and that such
Stockholder has an Article III Consent Right in connection with such action,
such Stockholder may provide the Company with written notice of such belief.
By the close of business on the sixth Business Day following receipt of such
Stockholder's notice and prior to taking any such action, the Company shall
provide such Stockholder with a notice that indicates whether the Company
reasonably believes in good faith that such action would trigger an Article
III Consent Right and with all information reasonably relevant and necessary
to determine whether an Article III Consent Right will be triggered by such
action.
(c) If within five Business Days following the Company's receipt
of a notice described in the last sentence of Section 3.3(a) or a
Stockholder's receipt of a notice described in the second sentence of Section
3.3(b), as the case may be, the Company and such Stockholder cannot reach an
agreement as to whether an Article III Consent Right is triggered in
connection with the proposed action, the issue shall be submitted for
arbitration by the Company and the objecting Stockholder(s) in accordance with
the Arbitration Agreement, a form of which is attached Exhibit B (the
"Arbitration Agreement"). The scope of the dispute to be resolved by the
arbitrator thereunder (the "Arbitrator") in connection with any such dispute
is limited to whether, under the terms of this Agreement, an Article III
Consent Right is triggered in connection with the proposed action.
(d) Prior to the Closing Date, SPE, USI, the members of the
Claridge Group and the Company agree to cooperate in good faith in selecting
the Arbitrator, who shall be reasonably acceptable to each such party, and
agree to execute and deliver the Arbitration Agreement at the Closing. If the
parties cannot so select the Arbitrator by such date, SPE, USI and the
Independent Directors shall each designate an individual who qualifies to
serve as the Arbitrator under the Arbitrator Agreement and the three such
individuals shall jointly select to Arbitrator.
SECTION 3.4 Approval of Disinterested Directors. (a) If the
Applicable Percentage of SPE equals or exceeds the Minimum Percentage, neither
SPE nor any of its Affiliates shall enter into any contract with the Company
or any Subsidiary thereof, nor shall the Company otherwise engage in or become
obligated to engage in any transaction or series of related transactions with
SPE and/or its Affiliates, in either case involving more than $1 million per
calendar year, unless such contract or transaction shall have been approved by
a majority of the Disinterested Directors following disclosure of the material
facts of the contract or transaction to the Disinterested Directors, provided,
however, that the foregoing shall not apply to contracts or transactions that
occur in the ordinary course of the Company's business, including film booking
arrangements, or to any Transactions contemplated by the Documents.
(b) If the Applicable Percentage of USI equals or exceeds the
Minimum Percentage, neither USI nor any of its Affiliates shall enter into any
contract with the Company or any Subsidiary thereof, nor shall the Company
otherwise engage in or become obligated to engage in any transaction or series
of related transactions with USI and/or its Affiliates, in either case
involving more than $1 million per calendar year, unless such contract or
transaction shall have been approved by a majority of the Disinterested
Directors following disclosure of the material facts of the contract or
transaction to the Disinterested Directors, provided, however, that the
foregoing shall not apply to contracts or transactions that occur in the
ordinary course of the Company's business, including film booking
arrangements, or to any Transactions contemplated by the Documents.
SECTION 3.5 Additional Shares. Notwithstanding
anything to the contrary in Section
3.1, without the prior written consent of USI, the Company agrees that it
shall not issue or sell any Common Shares or any Voting Share Equivalents
(other than Excluded Securities) at or after the Closing (other than pursuant
to the Amalgamation or the USI Subscription Agreement) unless USI or its
designee shall be issued Additional Shares (as defined in the USI Subscription
Agreement) to the extent required by, and in accordance with, the terms of
Section 4.6 of such agreement.
ARTICLE IV
TRANSFER OF COMMON SHARES
SECTION 4.1 Restrictions on Transfer during Six-Months
Following Closing . Without the consent of a majority of the
Independent Directors, during the period commencing on the Closing and ending
on the six-month anniversary thereof, each of SPE and USI agrees not to, and
to cause its respective Permitted Transferees not to, Transfer in privately-
negotiated transactions more than 20% of such Stockholder's Initial Interest,
provided, that the foregoing shall not be applicable to Transfers (i) between
such Stockholder and its Permitted Transferees, (ii) to another Stockholder or
its Permitted Transferees, (iii) pursuant to a merger or consolidation in
which the Company is a constituent corporation or (iv) pursuant to a bona fide
third party tender offer or exchange offer which was not induced directly or
indirectly by such Stockholder or any of its Affiliates.
SECTION 4.2 Tag-Along for All Stockholders.
(a) Subject to prior
compliance with Section 4.4, neither SPE nor USI nor any of their respective
Affiliates shall be permitted to Transfer, individually or collectively, an
aggregate of more than 50% of the then outstanding Common Shares in one or a
series of related transactions to a Third Party Transferee (or to one or more
Third Party Transferees constituting a Group) (a "Significant Sale") unless
each stockholder of the Company has the right to participate in the
Significant Sale on the same basis as the proposed transferor(s) (all such
proposed transferors, collectively the "Significant Sale Initiator"). If the
Significant Sale Initiator desires to effect a Significant Sale, it shall give
not less than 20 days prior written notice of such intended Transfer to each
Stockholder and the Company. Such notice (the "Significant Sale Notice")
shall set forth the terms and conditions of such proposed Significant Sale,
including the name of the proposed transferee, the number of shares of Common
Stock (the "Significant Sale Shares") proposed to be Transferred by the
Significant Sale Initiator (specifying the number of shares of Common Stock
for each proposed transferor, if more than one), the purchase price per Share
proposed to be paid therefor and the payment terms and other material terms of
the proposed Transfer.
(b) Within 10 days after delivery of the Significant Sale Notice
to the Company, the Independent Directors shall review the terms of the
proposed Significant Sale and, subject to compliance with applicable law and
stock exchange requirements, establish procedures to ensure that each
stockholder of the Company (including each Stockholder which is not a
Significant Sale Initiator) shall have the opportunity and right to sell to
the proposed transferee (upon the same terms and conditions as the Significant
Sale Initiator) up to that number of Common Shares owned of record by such
stockholder as shall equal the product of (x) a fraction, the numerator of
which is the number of Significant Sale Shares and the denominator of which is
the aggregate number of Common Shares beneficially owned as of the date of the
Significant Sale Notice by the Significant Sale Initiator and its Permitted
Transferees (provided that if there shall be more than one proposed
transferor, the denominator shall be the aggregate number of Common Shares
beneficially owned as of such date by all the proposed transferors),
multiplied by (y) the number of Common Shares owned of record by such
stockholder as of the date of the Significant Sale Notice. The number of
Common Shares that a stockholder, including the Significant Sale Initiator,
may sell pursuant to this Section 4.2 shall be determined by multiplying the
maximum number of Common Shares that the proposed transferee of the
Significant Sale Shares is willing to purchase on the terms set forth in the
Significant Sale Notice by a fraction, the numerator of which is the number of
Common Shares that such stockholder proposes to sell hereunder and the
denominator of which is the aggregate number of Common Shares that all
stockholders exercising rights under this Section 4.2, including the
Significant Sale Initiator, propose to sell hereunder.
(c) No Transfer or Transfers constituting a Significant Sale
shall be effected absent compliance with this Section 4.2.
SECTION 4.3 Tag-Along for USI and Claridge Group.
(a) Subject to
prior compliance with Section 4.4, if SPE or any of its Affiliates shall
desire to Transfer an aggregate of more than 50% of SPE's Initial Interest to
any Person (including any Group), other than an SPE Permitted Transferee, in
one or a series of related transactions (a "Tag-Along Sale"), SPE shall give
not less than 20 days prior written notice of such intended Transfer to USI
and the Claridge Group (each, a "Tag-Along Offeree"). Such notice (the
"Tag-Along Notice") shall set forth the terms and conditions of such proposed
Transfer, including the name of the proposed transferee, the number of Common
Shares proposed to be Transferred (the "Tag-Along Shares"), the purchase price
per Share proposed to be paid therefor and the payment terms and type of
Transfer to be effectuated.
(b) Within 10 days after delivery of the Tag-Along Notice by SPE
to the Tag-Along Offerees, each Tag-Along Offeree shall, by written notice to
SPE, have the opportunity and right to sell to the transferee in such proposed
Transfer (upon the same terms and conditions as SPE) up to that number of
Common Shares beneficially owned by such Tag-Along Offeree as shall equal the
product of (x) a fraction, the numerator of which is the number of Tag-Along
Shares and the denominator of which is the aggregate number of Common Shares
beneficially owned as of the date of the Tag-Along Notice by SPE and its
Affiliates, multiplied by (y) the number of Common Shares beneficially owned
by such Tag-Along Offeree as of the date of the Tag-Along Notice, provided,
that in respect of any proposed Transfer to USI or a USI Permitted Transferee,
for purposes of this clause (y), the number of Common Shares beneficially
owned by the Claridge Group shall be reduced by the number of Common Shares
acquired (net of Transfers) by the Claridge Group after the Closing (other
than from the Company or other members of the Claridge Group). The number of
Common Shares that a Stockholder, including SPE, may sell pursuant to this
Section 4.3 shall be determined by multiplying the maximum number of Common
Shares that the proposed transferee of the Tag-Along Shares is willing to
purchase on the terms set forth in the Tag-Along Notice by a fraction, the
numerator of which is the number of Common Shares that such Stockholder
proposes to sell hereunder (subject to the maximum amount for each Stockholder
calculated pursuant to the preceding sentence) and the denominator of which is
the aggregate number of Common Shares that all Stockholders exercising rights
under this Section 4.3, including SPE, propose to sell hereunder.
(c) At the closing of any proposed Transfer in respect of which a
Tag-Along Notice has been delivered, each Stockholder electing to sell Common
Shares shall deliver, free and clear of all liens, to the proposed transferee
certificates evidencing the Common Shares to be sold thereto duly endorsed
with Transfer powers and shall receive in exchange therefore the consideration
to be paid by the proposed transferee in respect of such Common Shares as
described in the Tag-Along Notice.
(d) No Transfer or Transfers constituting a Tag-Along Sale shall
be effected absent compliance with this Section 4.3.
(e) This Section 4.3 shall not be applicable to any Transfer
which constitutes a Significant Sale with respect to which each stockholder of
the Company has the right to participate pursuant to Section 4.2.
SECTION 4.4 Right of First Refusal
(a) The following Transfers of Voting Shares
by SPE or USI or their respective Affiliates (the proposed transferor, the
"Transferring Party") will be subject to the right of first refusal provisions
of this Section 4.4:
(i) any Transfer in one or a series of related privately-
negotiated transactions or a public offering if (A) 5% or more of
the then outstanding Voting Shares are subject to the Transfer,
(B) any transferee, or any Group of which a transferee is a
member, would, following such Transfer, beneficially own 5% or
more of the outstanding Voting Shares (except, in the case of any
public offering, the limitation set forth in this clause (B) shall
not be applicable if the Transferring Party has taken all
reasonable steps to assure that such limitation shall have been
satisfied) or (C) in the case of any Transfer by SPE or any of its
Affiliates, SPE's Applicable Percentage exceeds 25%;
(ii) any Transfer pursuant to a bona fide third party
tender offer or exchange offer;
(iii) any Transfer to the Company or to a Subsidiary of the
Company pursuant to a self-tender offer or otherwise; and
(iv) any Transfer in a Market Sale.
Notwithstanding the foregoing and subject to compliance with Section 4.5(a),
the provisions of this Section 4.4 shall not apply to any Transfer between SPE
or USI and any of their respective Permitted Transferees.
(b) Prior to effecting any Transfer described in Section 4.4(a),
the Transferring Party shall deliver a written notice (the "Offer Notice") to
USI, if the Transferring Party is SPE or an Affiliate thereof, or to SPE, if
the Transferring Party is USI or an Affiliate thereof (the recipient of such
notice, the "Other Stockholder"), which Offer Notice shall specify (i) the
Person to whom the Transferring Party proposes to make such Transfer or the
proposed manner of Transfer in the case of a public offering or a Market Sale,
(ii) the number or amount and description of the Voting Shares to be
Transferred, (iii) except in the case of a public offering or a Market Sale,
the Offer Price (as defined below), and (iv) all other material terms and
conditions of the proposed Transfer, including a description of any non-cash
consideration sufficiently detailed to permit valuation thereof, and which
Offer Notice shall be accompanied by any written offer from the prospective
transferee to purchase such Voting Shares, if available and permitted pursuant
to the terms thereof. The Offer Notice shall constitute an irrevocable offer
to the Other Stockholder or its designee, for the period of time described
below, to purchase all (but not less than all) of such Voting Shares upon the
same terms specified in the Offer Notice, subject to Section 4.4(g) and as
otherwise set forth in this Section 4.4. The Other Stockholder may elect to
purchase all (but not less than all) of the Voting Shares at the Offer Price
(or, if the Offer Price includes property other than cash, the equivalent in
cash of such property as determined in accordance with Section 4.4(g)) and
upon the other terms and conditions specified in the Offer Notice.
(c) For purposes of this Section 4.4, "Offer Price" shall be
defined to mean on a per share or other amount of Voting Shares basis (i) in
the case of a third party tender offer or exchange offer, the tender offer or
exchange offer price per Voting Share taking into account any provisions
thereof with respect to proration and any proposed second step or "back-end"
transaction, (ii) in the case of a public offering or a Market Sale, the
Current Market Value per Voting Share as of the date the election notice of
the Other Stockholder hereinafter described is delivered and (iii) in the case
of a privately-negotiated transaction, the proposed sale price per Voting
Share.
(d) If the Other Stockholder elects to purchase the offered
Voting Shares, it shall give notice to the Transferring Party within 20 days
of its receipt of the Offer Notice of its election (or in the case of a third
party tender offer or exchange offer, not later than five Business Days prior
to the expiration date of such offer, provided that all conditions to such
offer (other than with respect to the number of Voting Shares tendered) shall
have been satisfied or waived and the Offer Notice shall have been provided at
least ten Business Days prior to the expiration date of such offer), which
shall constitute a binding obligation, subject to standard terms and
conditions for a stock purchase contract between two significant stockholders
of an issuer (provided that the Transferring Party shall not be required to
make any representations or warranties regarding the business of the Company),
to purchase the offered Voting Shares, which notice shall include the date set
for the closing of such purchase, which date shall be no later than 60 days
following the delivery of such election notice. Notwithstanding the
foregoing, such time periods shall not be deemed to commence with respect to
any purported notice that does not comply in all material respects with the
requirements of this Section 4.4(d). The Other Stockholder may assign its
rights to purchase under this Section 4.4 to any Person (including the
Company).
(e) Subject to Section 4.4(f) in the case of a Market Sale, if
the Other Stockholder does not respond to the Offer Notice within the required
response time period or elects not to purchase the offered Voting Shares, the
Transferring Party shall be free to complete the proposed Transfer (to the
same proposed transferee, in the case of privately-negotiated transaction) on
terms no less favorable to the Transferring Party or its Affiliate, as the
case may be, than those set forth in the Offer Notice, provided that (x) such
Transfer is closed within 90 days after the latest of (A) the expiration of
the foregoing required response time periods, or (B) the receipt by the
Transferring Party of the foregoing election notice or, in the case of a
public offering, within 20 days of the declaration by the Commission of the
effectiveness of a registration statement filed with the Commission pursuant
to this Agreement, and (y) the price at which the Voting Shares are
transferred must be equal to or higher than the Offer Price (except in the
case of a public offering, in which case the price at which the Voting Shares
are sold (before deducting underwriting discounts and commissions) shall be
equal to at least 90% of the Offer Price). Such periods within which such
Transfer must be closed shall be extended to the extent necessary to obtain
required governmental approvals and other required approvals and the
Transferring Party and the Other Stockholder shall use their respective best
efforts to obtain such approvals.
(f) If the Other Stockholder does not respond to the Offer Notice
with respect to a Market Sale within the required response time period or
elects not to purchase the offered Voting Shares, the Transferring Party shall
be free to complete the proposed Market Sale in one or more transactions
during the 90-day period commencing on the latest of (i) the expiration of the
required response time period described in Section 4.4(d) or (ii) receipt by
the Transferring Party of the election notice described in Section 4.4(d),
provided that the price at which each Voting Share is transferred (excluding
brokerage commissions) shall be at least equal to 90% of the Offer Price.
(g) If (i) the consideration specified in the Offer Notice
consists of, or includes, consideration other than cash or a publicly traded
security for which a closing market price is published for each Business Day,
or (ii) any property other than Voting Shares is proposed to be transferred in
connection with the transaction to which the Offer Notice relates, then the
price payable by the Other Stockholder under this Section 4.4 for the Voting
Shares being transferred shall be the Determination of the Independent
Directors of the Fair Market Value of the consideration per share or amount in
the case of clause (i) and the Determination of the Independent Directors of
the Fair Market Value of the consideration per share or amount determined to
be properly allocable to the Voting Shares in the case of clause (ii).
Notwithstanding anything to the contrary contained in this Section 4.4, the
time periods applicable to an election by the Other Stockholder to purchase
the offered securities set forth in Section 4.4(a) shall not be deemed to
commence until the Determination of the Independent Directors under this
Section 4.4(g) has been made, provided that, in the case of a third party
tender offer or exchange offer, in no event shall any such election be
permitted later than 24 hours prior to the latest time by which Voting Shares
shall be tendered in order to be accepted pursuant to such offer or to qualify
for any proration applicable to such offer if all conditions to such offer
(other than the number of shares tendered) have been satisfied or waived. The
Company agrees to use its best efforts to cause the Determination of the
Independent Directors under this Section 4.4(g) to be made as promptly as
practicable but in no event later than ten Business Days after the receipt by
the Company of the Offer Notice.
(h) The provisions of this Section 4.4 shall be applicable to any
proposed Transfer of Non-Voting Common Stock to any Person other than an SPE
Permitted Transferee as if the Common Stock that is issuable upon Transfer in
accordance with clause (i) of Section 4(b) of Article IV of the Certificate
were being Transferred.
SECTION 4.5 Transferees.
(a) Any Permitted Transferee of a Stockholder shall be
subject to the terms and conditions of this Agreement as if such Permitted
Transferee were SPE (in the case SPE or a Permitted Transferee of SPE is the
transferor), USI (in the case USI or a Permitted Transferee of USI is the
transferor) or a member of the Claridge Group (in the case a member of the
Claridge Group or a Permitted Transferee thereof is the transferor). Prior to
the initial acquisition of beneficial ownership of any Voting Shares or Non-
Voting Common Stock by any Permitted Transferee, and as a condition thereto,
each Stockholder agrees (i) to cause its respective Permitted Transferees to
agree in writing with the other parties hereto to be bound by the terms and
conditions of this Agreement to the extent described in the preceding sentence
and (ii) that such Stockholder shall remain directly liable for the
performance by its respective Permitted Transferees of all obligations of such
Permitted Transferees under this Agreement; provided, however, that, unless
the Trust elects otherwise, the foregoing shall not be applicable to any
Permitted Transferee described in clause (iii)(b) of the definition thereof or
any spouse of any such Permitted Transferee so long as such Person has not
purchased Voting Shares for aggregate consideration (excluding brokerage
commissions) exceeding $20,000 (measured at the time of the applicable
acquisition) and that such Voting Shares have been acquired solely in open
market purchases; provided, further, that the Trust shall not permit all
Persons described in the preceding proviso who the Trust has not elected to be
subject to clause (i) and (ii) above to so acquire Voting Shares for aggregate
consideration (excluding brokerage commissions) exceeding $100,000 (measured
at the time of the applicable acquisition). Each of SPE and USI agrees not to
cause or permit any of its respective Permitted Transferees to cease to be
directly or indirectly wholly-owned by such Stockholder so long as such
Permitted Transferee beneficially owns any Voting Shares or Non-Voting Common
Stock, and if any such Permitted Transferee shall cease to be so wholly-owned,
such Permitted Transferee shall automatically upon the occurrence of such
event cease to be a "Permitted Transferee" for any purpose under this
Agreement. Each Stockholder agrees not to Transfer any Voting Shares or Non-
Voting Common Stock to any Affiliate other than a Permitted Transferee of such
Stockholder.
(b) No Third Party Transferee shall have any rights or
obligations under this Agreement, except:
(i) if such Third Party Transferee (together with its
Affiliates) would beneficially own more than 10% of the
outstanding Voting Shares upon consummation of any Transfer or if
such Third Party Transferee (together with its Affiliates) shall
acquire beneficial ownership of more than 3.5% of the outstanding
Voting Shares in any Transfer or series of related Transfers from
members of the Claridge Group and Permitted Transferees thereof,
such Third Party Transferee shall be subject to the terms and
conditions of Article I, Article II (but shall not have the right
to designate any Directors pursuant thereto, except in the
circumstances described in clauses (ii) or (iii) below), Section
4.4 (but only with respect to the rights and obligations of a
"Transferring Party" thereunder, and such Third Party Transferee
shall not have the right to purchase Voting Shares pursuant
thereto or any other rights of an "Other Stockholder" thereunder),
this Section 4.5, Section 4.6 and Articles VI and VIII as if such
Third Party Transferee were SPE (in the case SPE or a Permitted
Transferee of SPE is the transferor), USI (in the case USI or a
Permitted Transferee of USI is the transferor) or a member of the
Claridge Group (in the case a member of the Claridge Group or a
Permitted Transferee thereof is the transferor);
(ii) if such Third Party Transferee (together with its
Affiliates) would beneficially own more than 10% of the
outstanding Voting Shares upon consummation of any Transfer from
SPE or USI or any of their respective Permitted Transferees, and
if such Third Party Transferee shall have acquired from SPE or USI
(or such Permitted Transferees) all Voting Shares then
beneficially owned by such Stockholder and its Permitted
Transferees, such Third Party Transferee shall have the right to
designate Directors pursuant to Article II if the applicable
transferor elects to assign such right to such Third Party
Transferee;
(iii) if in a Transfer or series of related Transfers from
any member of the Claridge Group and Permitted Transferees thereof
to any Third Party Transferee, such Third Party Transferee
(together with its Affiliates) shall acquire beneficial ownership
of more than 3.5% of the outstanding Voting Shares constituting
more than 50% of the Initial Interest of the Claridge Group, such
Third Party Transferee shall have the right to designate Directors
pursuant to Section 2.1(b)(i) if (x) the applicable transferor
elects to assign such right to such Third Party Transferee (which
in the event of the grant of an option upon Voting Shares, may be
assigned either upon the grant or the exercise thereof) and (y)
SPE and USI shall have given their prior written consent to the
assignment of such right to the Third Party Transferee (which
consent shall not be unreasonably withheld), provided that (i)
upon any such Transfer or series of related Transfers the Claridge
Group shall cease to have a right to elect Directors pursuant to
Section 2.1 in the event that such right is transferred in
accordance with the provisions of this subsection 4.5(b)(iii) and
(ii) such Third Party Transferee shall not have the right to
assign such right to any Person (other than a Permitted Transferee
thereof); and
(iv) if such Third Party Transferee (together with its
Affiliates) shall acquire beneficial ownership of more than 3.5%
of the outstanding Voting Shares in any Transfer or series of
related Transfers from a Stockholder and/or its Permitted
Transferees, such Third Party Transferee shall have the right to
initiate Demand Registrations pursuant to Section 5.1 and the
other rights and obligations of a Holder pursuant to Article V to
the extent the transferor to such Third Party Transferee assigns,
in whole or in part, any such rights and obligations to such Third
Party Transferee (provided that no rights of a Holder under
Article V shall be assigned unless the obligations of a Holder
thereunder are also assigned).
(c) Prior to the consummation of a Transfer described in
Section 4.5(b) to the extent rights and obligations are to be assigned, and as
a condition thereto, the applicable Third Party Transferee shall agree in
writing with the other parties hereto to be bound by the terms and conditions
of this Agreement to the extent described in Section 4.5(b). To the extent
the Third Party Transferee is not an "ultimate parent entity" (as defined in
the HSR Act), the ultimate parent entity of such Third Party Transferee shall
agree in writing to be directly liable for the performance of the Third Party
Transferee to the same extent USI or SPE would be liable for their respective
Permitted Transferees.
SECTION 4.6 Notice of Transfer. To the extent
any Stockholder and its Permitted
Transferees shall Transfer any Voting Shares, such Stockholder shall, within
three Business Days following consummation of such Transfer, deliver notice
thereof to the Company and the other Stockholders, provided, however, that no
such notice shall be required to be delivered unless the aggregate Voting
Shares transferred by such Stockholder and its Permitted Transferees since the
date of the last notice delivered by such Stockholder pursuant to this Section
4.6 or Section 8.4(b) exceeds 1% of the outstanding Voting Shares.
SECTION 4.7 Compliance with Transfer
Provisions. Any Transfer or
attempted Transfer of Voting Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Voting Shares as the owner of
such Voting Shares for any purpose.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.1 Demand Registrations.
(a) Subject to Section 5.1(d), at any time and from
time to time after the one-year anniversary of the Closing, any Holder shall
have the right to require the Company to file a registration statement under
the Securities Act and/or a prospectus under applicable Canadian securities
laws covering all or any part of their respective Registrable Securities, by
delivering a written request therefor to the Company specifying the number of
Registrable Securities to be included in such registration by such Holder(s)
and the intended method of distribution thereof. All such requests pursuant
to this Section 5.1(a) are referred to herein as "Demand Registration
Requests" and the registrations so requested are referred to herein as "Demand
Registrations" (with respect to any Demand Registration, the Holder making
such demand for registration being referred to as the "Initiating Holder").
As promptly as practicable, but no later than 15 days after receipt of a
Demand Registration Request, the Company shall give written notice (the
"Demand Exercise Notice") of such Demand Registration Request to all Holders
of record of Registrable Securities.
(b) The Company shall include in a Demand Registration (i) the
Registrable Securities of the Initiating Holder and (ii) the Registrable
Securities of any other Holder (collectively, the "Other Holders") that shall
have made a written request to the Company for inclusion thereof in such
registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder(s)) within 30 days after
the receipt of the Demand Exercise Notice.
(c) The Company shall, as expeditiously as possible following a
Demand Registration Request, use its best efforts to (i) effect the
registration under the Securities Act (including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested and
if the Company is then eligible to use such a registration) of the Registrable
Securities which the Company has been so requested to register by such Holder,
for distribution, in accordance with such intended method of distribution, and
(ii) if requested by the Initiating Holder, obtain acceleration of the
effective date of the registration statement relating to such registration.
(d) The rights of Holders of Registrable Securities to request
Demand Registrations pursuant to Section 5.1(a) are subject to the following
limitations: (i) the Company shall not be obligated to effect a Demand
Registration within six months after the effective date of any other
registration of equity securities by the Company (other than pursuant to a
registration on Form S-4 or Form S-8 or any successor or similar form that is
then in effect) which was not effected on Form S-3 (or any successor or
similar short-form registration statement), provided, however, that this
clause (i) shall not be applicable with respect to any Registrable Securities
beneficially owned by any Holder if in connection with a Piggyback
Registration such Holder requested during such six month period to have such
Registrable Securities included in such Piggyback Registration and Registrable
Securities with a Current Market Value exceeding $25,000,000 (valued at the
time of such request) were not included pursuant to Section 5.2(d), (ii) in no
event shall the Company be required to effect, in the case of SPE, more than
four Demand Registrations, in the case of USI, more than four Demand
Registrations, and, in the case of the Claridge Group, more than one Demand
Registration, (iii) the Company shall not be obligated to effect a Demand
Registration by either SPE or USI if a Demand Registration initiated by either
SPE or USI shall have been effected in the preceding 12 months, and (iv) the
Company shall not be obligated to effect a Demand Registration the reasonably
anticipated aggregate price to the public of which would not exceed
$25,000,000. Upon assignment by a Stockholder of the right to initiate a
Demand Registration to a Third Party Transferee in accordance with Section
4.5(b)(iv), such Stockholder shall cease to have the right to initiate such
Demand Registration and the number of Demand Registrations to which such
Stockholder shall be entitled as set forth in the preceding sentence shall be
reduced accordingly. In no event shall the Company be required to effect more
than nine Demand Registrations pursuant to this Agreement.
(e) The Company shall select the registration statement form for
any registration pursuant to this Section, provided, that if any registration
requested pursuant to this Section which is proposed by the Company to be
effected by the filing of a registration statement on Form S-3 (or any
successor or similar short-form registration statement) shall be in connection
with an underwritten public offering, and if the managing underwriter shall
advise the Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other
form.
(f) A registration requested pursuant to this Section 5.1 will
not be deemed to have been effected unless it has become effective, provided
that if, within 180 days after it has become effective, the offering of
Registrable Securities pursuant to such registration is subject to any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court, such registration will be deemed not to have
been effected.
(g) If a requested registration pursuant to this Section involves
an underwritten offering, the Company shall have the right to select in good
faith the investment banker or bankers and managers to administer the
offering; provided, however, that such investment banker or bankers and
managers shall be reasonably satisfactory to the Initiating Holder. The
Initiating Holder shall notify the Company if such Holder objects to any
investment banker or manager selected by the Company pursuant to this Section
5.1(g) within 10 Business Days after the Company has notified such Holder of
such selection.
(h) If the managing underwriter of any underwritten offering
shall advise the Holders participating in a Demand Registration that the
Registrable Securities covered by the registration statement cannot be sold in
such offering within a price range acceptable to the Initiating Holder, then
the Initiating Holder shall have the right to notify the Company that it has
determined that the registration statement be abandoned or withdrawn, in which
event the Company shall abandon or withdraw such registration statement. If a
requested registration pursuant to this Section 5.1 involves an underwritten
offering and the managing underwriter advises the Company that, in its
opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering within a
price range acceptable to the Initiating Holder, the Company will include in
such registration only the Registrable Securities requested to be included in
such registration pursuant to this Section 5.1. In the event that the number
of Registrable Securities requested to be included in such registration
exceeds the number which, in the opinion of such managing underwriter, can be
sold in such offering within a price range acceptable to the Initiating
Holder, the Company shall include in such registration the number of
Registrable Securities proposed to be sold by the Initiating Holder and, to
the extent the managing underwriter believes that additional Registrable
Securities can be sold in such offering within such price range, the number of
Registrable Securities proposed to be sold by the Other Holders, allocated pro
rata among the Other Holders on the basis of the relative number of shares of
Registrable Securities requested to be registered pursuant to clause (ii) of
Section 5.1(b) by each such Holder. In the event that the number of
Registrable Securities requested by all Holders to be included in such
registration is less than the number which, in the opinion of the managing
underwriter, can be sold, the Company may include in such registration a
number of securities that the Company proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold in such
offering within a price range acceptable to the Initiating Holder.
(i) If the Company at any time grants to any other holders of
Voting Shares (or securities that are convertible, exchangeable or exercisable
into Voting Shares) any rights to request the Company to effect the
registration under the Securities Act of any such Voting Shares (or any such
securities) on terms more favorable to such holders than the terms set forth
in this Section 5.1, then the Holders shall be entitled to such more favorable
rights and benefits.
SECTION 5.2 Piggyback Registrations.
(a) If, at any time following the Equity
Offering, the Company proposes or is required to register any of its equity
securities under the Securities Act (other than pursuant to (i) registrations
on such form or similar form(s) solely for registration of securities in
connection with an employee benefit plan or dividend reinvestment plan or a
merger, consolidation or acquisition or (ii) a Demand Registration pursuant to
Section 5.1) on a registration statement on Form S-1, Form S-2 or Form S-3 (or
an equivalent general registration form then in effect), whether or not for
its own account, the Company shall give prompt written notice of its intention
to do so to each of the Holders of record of Registrable Securities. Upon the
written request of any Holder, made within 15 days following the receipt of
any such written notice (which request shall specify the maximum number of
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof), the Company shall use its best
efforts to cause all such Registrable Securities, the Holders of which have so
requested the registration thereof, to be registered under the Securities Act
(with the securities that the Company at the time proposes to register) to
permit the sale or other disposition by such Holders (in accordance with the
intended method of distribution thereof) of the Registrable Securities to be
so registered (such registration, a "Piggyback Registration"). There is no
limitation on the number of Piggyback Registrations pursuant to the preceding
sentence that the Company is obligated to effect. No registration effected
under this Section 5.2(a) shall relieve the Company of its obligations to
effect Demand Registrations.
(b) If, at any time after giving written notice of its intention
to register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of
such equity securities, the Company may, at its election, give written notice
of such determination to all Holders of record of Registrable Securities and
(i) in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Section 5.1, and (ii) in the case of a determination to delay such
registration of its equity securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay
in registering such other equity securities.
(c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 5.2 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing
prior to the earlier of the execution of the underwriting agreement or the
execution of the custody agreement with respect to such registration and (ii)
such withdrawal shall be irrevocable and, after making such withdrawal, a
Holder shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
(d) If the managing underwriter of any underwritten offering
shall inform the Company by letter of its belief that the number of
Registrable Securities requested to be included in a registration under this
Section 5.2 would materially adversely affect such offering, then the Company
will include in such registration, first, the securities proposed by the
Company to be sold for its own account, second, the Registrable Securities and
all other securities of the Company to be included in such registration to the
extent of the number and type, if any, that the Company is so advised can be
sold in (or during the time of) such offering, pro rata among the Holders on
the basis of the relative number of shares of Registrable Securities requested
to be registered pursuant to Section 5.2(a) by each such Holder and, third,
pro rata among the holders of any other securities of the Company with respect
to which the holders thereof are entitled to and desire "piggy-back" or
similar registration rights.
SECTION 5.3 Registration Procedures.
If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect or cause
the registration of any Registrable Securities under the Securities Act as
provided in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
on an appropriate registration form of the Commission for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form (i) shall be selected by the Company and (ii)
shall, in the case of a shelf registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and such registration
statement shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith, and the Company shall use
its best efforts to cause such registration statement to become effective
(provided, however, that before filing a registration statement or prospectus
or any amendments or supplements thereto, or comparable statements under
securities or "blue sky" laws of any jurisdiction, the Company will furnish to
counsel for the Holders participating in the planned offering (selected by the
Initiating Holder, in the case of a Demand Registration, or the Requisite
Percentage of Participating Holders, in the case of a Piggyback Registration)
and the underwriters, if any, copies of all such documents proposed to be
filed (including all exhibits thereto), which documents will be subject to the
reasonable review and, in the case of a registration pursuant to Section 5.1,
reasonable comment of such counsel, and the Company shall not file any
registration statement or amendment thereto or any prospectus or supplement
thereto pursuant to Section 5.1 to which the Holders of a majority of the
Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for such period as any seller of
Registrable Securities pursuant to such registration statement shall request
and to comply with the provisions of the Securities Act with respect to the
sale or other disposition of all Registrable Securities covered by such
registration statement in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration statement
until the earlier of (i) such time as all such Registrable Securities have
been disposed of in accordance with the intended methods of disposition by the
Holder or Holders thereof set forth in such registration statement and (ii)
the expiration of 180 days from the date such registration statement first
becomes effective;
(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits),
and the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by reference
in such registration statement, and such other documents, as such seller and
underwriter may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other securities
or "blue sky" laws of such jurisdictions as any sellers of Registrable
Securities or any managing underwriter, if any, shall reasonably request, and
do any and all other acts and things that may be necessary or advisable to
enable such sellers or underwriter, if any, to consummate the disposition of
the Registrable Securities in such jurisdictions, except that in no event
shall the Company be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it would not, but for the requirements
of this paragraph (d), be required to be so qualified, to subject itself to
taxation in any such jurisdiction or to consent to general service of process
in any such jurisdiction;
(e) enter into such customary agreements (including an
underwriting agreement in customary form), which may include indemnification
provisions in favor of underwriters and other persons in addition to, or in
substitution for, the provisions of Section 5.8 hereof, and take such other
actions as the Initiating Holder, in the case of a Demand Registration, or the
Requisite Percentage of Participating Holders, in the case of a Piggyback
Registration, or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities (i) a signed
counterpart, addressed to such seller, of any opinion of counsel for the
Company, dated the date of the closing under the underwriting agreement with
respect to such offering, in customary form and in form and scope reasonably
satisfactory to the underwriter and its counsel, and (ii) a signed
counterpart, if requested by such Seller, addressed to it, of any "cold
comfort" letter signed by the independent public accountants in customary form
and covering matters of the type customarily covered by "cold comfort" letters
(provided that Registrable Securities constitute at least 25% of the
securities covered by such registration statement, unless such a "cold
comfort" letter or letters are provided to the Company or other selling
holders in connection with such registration);
(g) immediately notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed and, with respect to
the registration statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or state securities
authority for amendments or supplements to the registration statement or the
prospectus related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction or the initiation
of any proceeding for such purpose; (v) of the existence of any fact of which
the Company becomes aware that results in the registration statement, the
prospectus related thereto or any document incorporated therein by reference
containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make any statement
therein not misleading; and (vi) if at any time the representations and
warranties contemplated by Section 5.8 below cease to be true and correct in
all material respects; and, if the notification relates to an event described
in clause (v), the Company shall promptly prepare and furnish to each such
seller and each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in
the light of the circumstances under which they were made not misleading;
(h) use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable after the effective date of the registration
statement (and in any event within 16 months thereafter), an earnings
statement (which need not be audited) covering the period of at least 12
consecutive months beginning with the first day of the Company's first
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations thereunder;
(i) use its best efforts to cause all such Registrable Securities
covered by such registration statement to be listed on each securities
exchange or quotation system on which similar securities issued by the Company
are then listed or quoted (if any), and provide a transfer agent and registrar
for such Registrable Securities not later than the effective date of such
registration statement;
(j) enter into such customary agreements (including, if
applicable, an underwriting agreement) and take such other actions as the
Initiating Holder, in the case of a Demand Registration, or the Requisite
Percentage of Participating Holders, in the case of a Piggyback Registration,
shall reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(k) deliver promptly to the each Holder and counsel for the
selling Holders participating in the offering and each underwriter, if any,
copies of all correspondence between the Commission and the Company, its
counsel or auditors and any memoranda relating to discussions with the
Commission or its staff with respect to the registration statement, other than
those portions of any such memoranda that contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of
such confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) use reasonable efforts to prevent the issuance of any stop
order suspending the effectiveness of the registration statement or of any
order preventing or suspending the use of any preliminary prospectus and, if
any such order is issued, to obtain the withdrawal of any such order at the
earliest possible moment;
(m) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the registration statement;
(n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering;
(o) promptly prior to the filing of any document that is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement), provide copies of
such document to counsel for the selling Holders and to each managing
underwriter, if any, and make the Company's representatives reasonably
available for discussion of such document and make such changes in such
document concerning the selling holders prior to the filing thereof as counsel
for such selling holders or underwriters may reasonably request;
(p) furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers, Inc.;
(r) use reasonable efforts to make available the executive
officers of the Company to participate with the Holders of Registrable
Securities and any underwriters in any "road shows" or other selling efforts
that may be reasonably requested by the selling Holders in connection with the
methods of distribution for the Registrable Securities;
(s) cooperate with the selling Holders of Registrable Securities
and the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with
the underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling Holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities;
(t) in the case of a registration under Canadian securities laws,
take such reasonable actions as may be necessary to facilitate the sale of
Registrable Securities on a public basis in Canada, including making any
necessary filings with Canadian securities authorities or any Canadian stock
exchange on which the Registrable Securities are listed; and
(u) take all such other reasonable actions as are necessary or
advisable in order to expedite or facilitate the disposition of such
Registrable Securities.
The Company may require as a condition precedent to the Company's obligations
under this Section 5.3 that each seller of Registrable Securities as to which
any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing and as shall be required
by law or by the Commission in connection therewith, provided that such
information shall be used only in connection with such registration. Each
Holder of Registrable Securities agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in clause (v)
of paragraph (g) of this Section 5.3, such Holder will discontinue such
Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(g) of this Section 5.3 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such
notice. In the event the Company shall give any such notice, the applicable
period mentioned in paragraph (b) of this Section 5.3 shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by paragraph (g)
of this Section 5.3. If any such registration statement or comparable
statement under "blue sky" laws refers to any Holder by name or otherwise as
the Holder of any securities of the Company, then such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and the Company, to the effect that the holding by
such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company or (ii) in the event
that such reference to such Holder by name or otherwise is not in the judgment
of the Company, as advised by counsel, required by the Securities Act or any
similar federal statute or any state "blue sky" or securities law then in
force, the deletion of the reference to such Holder.
SECTION 5.4 Registration Expenses.
(a) Each Holder of Registrable Securities
(together with the Company, if the Company participates in a registration)
participating in any registration pursuant to Section 5.1 shall pay its pro
rata share of Expenses related to such registration on the basis of the number
of Registrable Securities included in such registration by such Holder
(including the Company, if applicable) relative to the number of securities
included in such registration by all holders (including the Company, if
applicable, and any other holders including securities in the registration
pursuant to an agreement with the Company other than this Agreement), other
than Expenses directly attributable to a particular Holder, which shall be
borne by such Holder, provided that the Company shall bear all expenses of the
initial registration effected pursuant to Section 5.1 upon the request of each
of SPE, USI and the Claridge Group.
(b) Each Holder of Registrable Securities participating in any
registration initiated by the Company pursuant to Section 5.2 shall pay its
pro rata share of Expenses (other than Company Expenses which shall be borne
by the Company) related to such registration on the basis of the number of
Registrable Securities included in such registration by such Holder relative
to the number of securities included in such registration by all holders
(excluding the Company and including any holders including securities in the
registration pursuant to an agreement with the Company other than this
Agreement), other than Expenses directly attributable to a particular Holder
which shall be borne by such Holder.
(c) Notwithstanding the foregoing, (i) the provisions of this
Section 5.4 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with the "blue sky" laws of each state in which
the offering is made, (ii) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (iii) the Company shall, in the case of all
registrations under this Article V, be responsible for all its internal
expenses (including all salaries and expenses of its officers and employees
performing legal or accounting duties).
SECTION 5.5 Limitations on Sale or Distribution of
Other Securities. (a) To the extent requested in writing by a managing
underwriter, if any, of any registration effected pursuant to Section 5.1,
each Holder of Registrable Securities agrees not to Transfer, including any
sale pursuant to Rule 144 under the Securities Act, any Common Stock (other
than as part of such underwritten public offering) during the time period
reasonably requested by the managing underwriter, not to exceed 90 days (and
the Company hereby also so agrees (except that the Company may effect any sale
or distribution of any such securities pursuant to a registration on Form S-4
(if reasonably acceptable to such managing underwriter) or Form S-8, or any
successor or similar form that is then in effect or upon the conversion,
exchange or exercise of any then outstanding Common Stock Equivalent) to use
its reasonable best efforts to cause each holder of any equity security or any
security convertible into or exchangeable or exercisable for any equity
security of the Company purchased from the Company at any time other than in a
public offering so to agree). Each managing underwriter shall be entitled to
rely on the agreements of each Holder of Registrable Securities set forth in
this Section 5.5(a) and shall be a third party beneficiary of the provisions
of this Section 5.5(a).
(b) The Company hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 5.1, and if such
previous registration shall not have been withdrawn or abandoned, the Company
shall not Transfer any Common Stock (other than as part of such underwritten
public offering, a registration on Form S-4 or Form S-8 or any successor or
similar form that is then in effect or upon the conversion, exchange or
exercise of any then outstanding Common Stock Equivalent), until a period of
90 days shall have elapsed from the effective date of such previous
registration; and the Company shall so provide in any registration rights
agreements hereafter entered into with respect to any of its securities.
SECTION 5.6 Company Right to Postpone Registration.
The Company
shall be entitled to postpone for a reasonable period of time (but not
exceeding 120 days) the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to this Agreement if the
Company concludes that such registration and offering would materially
adversely affect any financing, acquisition, corporate reorganization or other
material transaction involving the Company or any of its Affiliates or would
require premature disclosure thereof and the Company promptly gives the
Holders of Registrable Securities requesting registration thereof pursuant to
Section 5.1 written notice of such delay. If the Company shall so postpone
the filing of a registration statement, such Holders of Registrable Securities
requesting registration thereof pursuant to Section 5.1 shall have the right
to withdraw the request for registration by giving written notice to the
Company within 30 days after receipt of the notice of postponement and, in the
event of such withdrawal, such request shall not be counted for purposes of
the requests for registration to which Holders of Registrable Securities are
entitled pursuant to Section 5.1 hereof.
SECTION 5.7 No Required Sale.
Nothing in this Agreement shall be deemed to create an
independent obligation on the part of any Holder to sell any Registrable
Securities pursuant to any effective registration statement.
SECTION 5.8 Indemnification.
(a) In the event of any registration of any securities of
the Company under the Securities Act pursuant to this Article V, the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, each seller of any Registrable Securities covered by such
registration statement, its directors, officers, affiliates, employees,
stockholders, members and general and limited partners (and the directors,
officers, affiliates, employees, stockholders, members and general and limited
partners thereof), each other Person who participates as an underwriter in the
offering or sale of such securities, each officer, director, employee,
stockholder, member or general and limited partner of such underwriter, and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof ("Claims") and expenses (including reasonable fees of counsel
and any amounts paid in any settlement effected with the Company's consent,
which consent shall not be unreasonably withheld or delayed) to which each
such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such securities were
registered under the Securities Act, together with the documents incorporated
by reference therein or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary, final or
summary prospectus or any amendment or supplement thereto, together with the
documents incorporated by reference therein, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company shall not be liable to any such indemnified party in any such
case to the extent such Claim or expense arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact made in such registration statement or
amendment thereof or supplement thereto or in any such prospectus or any
preliminary, final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the Transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are included in
the securities as to which any registration under Section 5.1 or 5.2 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 5.1 or 5.2, any underwriter) shall, severally and not jointly,
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a) of this Section 5.8) to the extent permitted by law the
Company, its officers and directors, each Person controlling the Company
within the meaning of the Securities Act and all other prospective sellers and
their directors, officers, general and limited partners and respective
controlling Persons with respect to any untrue statement or alleged untrue
statement of any material fact in, or omission or alleged omission of any
material fact from, such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company or its representatives by or on behalf of such Holder or
underwriter specifically for use therein and reimburse such indemnified party
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such Claim as such expenses are incurred;
provided, however, that the aggregate amount that any such Holder shall be
required to pay pursuant to this Section 5.8(b) and Sections 5.8(c) and 5.9
shall in no case be greater than the amount of the net proceeds received by
such person upon the sale of the Registrable Securities pursuant to the
registration statement giving rise to such Claim. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the Transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 5.8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities
under any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 5.8, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 5.8, except to the
extent the indemnifying party is materially prejudiced thereby, and shall not
relieve the indemnifying party from any liability that it may have to any
indemnified party otherwise than under this Article V. In case any action or
proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, unless in the reasonable opinion of
outside counsel to the indemnified party a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, to
assume the defense thereof jointly with any other indemnifying party similarly
notified, to the extent that it chooses, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if (i) the indemnifying party fails to
take reasonable steps necessary to defend diligently the action or proceeding
within 20 days after receiving notice from such indemnified party that the
indemnified party believes it has failed to do so; (ii) such indemnified party
who is a defendant in any action or proceeding that is also brought against
the indemnifying party reasonably shall have concluded that there may be one
or more legal defenses available to such indemnified party that are not
available to the indemnifying party; or (iii) representation of both parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct, then, in any such case, the indemnified party shall have
the right to assume or continue its own defense as set forth above (but with
no more than one firm of counsel for all indemnified parties in each
jurisdiction who shall be approved by the Requisite Percentage of
Participating Holders in the registration in respect of which such
indemnification is sought), and the indemnifying party shall be liable for any
expenses therefor. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent
to the entry of any judgment with respect to, any pending or threatened action
or claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(x) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (y) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(e) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution that any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the
Transfer of the Registrable Securities by any such party.
(f) The indemnification and contribution required by this Section
5.8 and Section 5.9 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
SECTION 5.9 Contribution.
(a) If for any reason the indemnity provided for in Section
5.8 is unavailable or is insufficient to hold harmless an indemnified party
under Sections 5.8(a), (b) or (c), then each indemnifying party and the
Company (i) as between the Company and the holders of Registrable Securities
covered by a registration statement, on the one hand, and the underwriters, on
the other, in such proportion as is appropriate to reflect the relative
benefits received by the Company and such holders, on the one hand, and the
underwriters, on the other, from the offering of the Registrable Securities,
or if such allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits but also the
relative fault of the Company and such holders, on the one hand, and of the
underwriters, on the other, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations, and (ii) as between the Company, on
the one hand, and each holder of Registrable Securities covered by a
registration statement, on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each such holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
such holders, on the one hand, and the underwriters, on the other, shall be
deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and such holders bear to the total underwriting
discounts and commissions received by the underwriters. The relative fault of
the Company and such holders, on the one hand, and of the underwriters, on the
other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company and such holders or by the underwriters. The relative fault of
the Company, on the one hand, and of each such holder, on the other, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by such
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(b) The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this
Section 5.9 were determined by pro rata allocation (even if the underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the next preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the next preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5.9, no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public exceeds the amount
of any damages that such underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no holder of Registrable Securities shall be required to
contribute any amount in excess of the amount by which the total price at
which the Registrable Securities of such holder were offered to the public
exceeds the amount of any damages that such holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each Stockholder's obligation to contribute pursuant to
this Section 5.9 is several in the proportion that the proceeds of the
offering received by such Stockholder bears to the total proceeds of the
offering received by all the Stockholders and not joint.
SECTION 5.10 Underwritten Offerings.
(a) If requested by the underwriters for any
underwritten offering by the Holders pursuant to a registration requested
under Section 5.1, the Company shall enter into a customary underwriting
agreement with the underwriters. Such underwriting agreement shall be
satisfactory in form and substance to the Initiating Holder and shall contain
such representations and warranties by, and such other agreements on the part
of, the Company and such other terms as are generally included in the standard
underwriting agreement of such underwriters, including indemnities and
contribution agreements. Any Holder participating in the offering shall be a
party to such underwriting agreement and may, at its option, require that any
or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such Holder and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holder. Such underwriting agreement shall also contain such representations
and warranties by the participating Holders as are customary in agreements of
that type.
(b) In the case of a registration pursuant to Section 5.2 hereof,
if the Company shall have determined to enter into an underwriting agreement
in connection therewith, all of the Holders' Registrable Securities to be
included in such registration shall be subject to such underwriting agreement.
Any Holder participating in such registration may, at its option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations
of such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary
in agreements of that type.
SECTION 5.11 Rule 144.
The Company covenants and agrees that (i) so long as it remains
subject to the reporting provisions of the Exchange Act, it will timely file
the reports required to be filed by it under the Securities Act or the
Exchange Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under
the Securities Act), and (ii) it will take such further action as any Holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (x) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (y) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
SECTION 5.12 Article V Termination.
The rights and obligations of a Stockholder
and its Permitted Transferees under this Article V shall terminate upon such
Stockholder's Applicable Percentage equalling less than 3.5%, provided that in
the event that a Stockholder's Applicable Percentage shall be less than 3.5%
as a result of the issuance of additional Voting Shares by the Company, such
Stockholder shall be so advised by the Company by written notice and the
provisions of this Article V shall continue to bind and enure to the benefit
of such Stockholder for a period of 180 days following such Stockholder's
receipt of such notice and will continue to bind and enure to the benefit of
such Stockholder thereafter in the event that such Stockholder (and/or its
Permitted Transferees) acquires, during such 180-day period, a sufficient
number of Voting Shares such that its Applicable Percentage equals or exceeds
3.5%.
ARTICLE VI
STANDSTILL
SECTION 6.1 Standstill with the Company.
(a) Each of SPE and USI and
each member of the Claridge Group covenants and agrees with the Company and
with each of SPE and USI that such Stockholder shall not, and shall cause its
Affiliates not to, acquire, directly or indirectly, the beneficial ownership
of any additional Voting Shares (except by way of stock dividends, stock
reclassifications or other distributions or offerings made available to
holders of Voting Shares generally), except for:
(i) subject to the provisions at the end of clause (ii)
below, acquisitions of a number of Voting Shares representing up to an
aggregate of 5% of the Company's outstanding Voting Shares in open
market purchases or in privately-negotiated transactions during any
rolling 12-month period (measuring the outstanding Voting Shares as of
the first day of such period), provided that any such acquisition in a
privately-negotiated transaction shall not be at a price in excess of 3%
of the closing price of such Voting Shares on the principal exchange or
market on which such security may be listed or trade on the trading day
immediately preceding the date on which a binding agreement is entered
into regarding such acquisition and, in the event a closing price is
unavailable, such price shall not be in excess of Fair Market Value ;
(ii) acquisitions in privately-negotiated transactions from
five or fewer persons pursuant to offers not made generally to holders
of Voting Shares and pursuant to which the value of any consideration
paid for any Voting Shares, including brokerage fees or commissions,
does not exceed 115% of the "Market Price" (as determined in accordance
with the regulations under the Securities Act (Ontario)), provided,
however, that no acquisition shall be permitted pursuant to clause (i)
or (ii) if, as a result of such acquisition, the Public Stockholders
would beneficially own less than 20% of the outstanding Voting Shares,
provided, further, that the foregoing proviso shall not be applicable to
USI or any of its Affiliates, SPE or any of its Affiliates or the
members of the Claridge Group if, upon consummation of such acquisition,
such Stockholder's Applicable Percentage would be less than 25%.
(iii) acquisitions from SPE, USI, members of the Claridge
Group and their respective Permitted Transferees;
(iv) acquisitions from the Company pursuant to Section 7.1
or on terms and conditions approved by a Determination of the
Independent Directors;
(v) acquisitions pursuant to a tender offer or exchange
offer made in accordance with applicable law;
(vi) if the Company shall have issued or sold Voting Shares
(other than pursuant to the Equity Offering) to any Person other than
such Stockholder or a Permitted Transferee thereof without effecting a
pro rata issuance of Voting Shares to such Stockholder or a Permitted
Transferee thereof (calculated based on such Stockholder's Applicable
Percentage at the time of such issuance or sale), acquisitions (whether
pursuant to Section 7.1 or otherwise) of an aggregate number of Voting
Shares equal to the number of Voting Shares that would result in such
Stockholder having the same Applicable Percentage as such Stockholder
would have had if the Company had not issued or sold such Voting Shares;
or
(vii) acquisitions of Common Stock upon the conversion of
Non-Voting Common Stock.
(b) Notwithstanding anything to the contrary contained in Section
6.1(a), in the case of any acquisition permitted pursuant to Section 6.1(a)
that would constitute a "Rule 13e-3 transaction" (as defined in Rule 13e-3
under the Exchange Act), prior to the consummation of any such transaction (x)
a nationally recognized investment bank shall have delivered an opinion to the
Board that such transaction is fair from a financial point of view to the
stockholders of the Company, other than the applicable Stockholder, (y) a
majority of the Independent Directors shall have approved the transaction and
(z) if the Public Stockholders beneficially own more than 20% of the Voting
Shares and if approval of stockholders of the Company is required by the DGCL
or the Certificate, a majority of the shares of Common Stock held by such
holders shall have been voted in favor of the transaction.
(c) The restrictions of Section 6.1(a) and 6.1(b) shall terminate
on the earlier of (x) the six-year anniversary of the Closing and (y) any time
after the four-year anniversary of the Closing upon the Claridge Group ceasing
to have the right to designate a Director pursuant to Section 2.1, or upon the
occurrence of:
(i) a bona fide tender or exchange offer to acquire more
than 20% of the Voting Shares having been made by any Person (except
that such restrictions shall not terminate as to any Stockholder if such
tender or exchange offer is made by such Stockholder or any of its
Affiliates or by any Person acting in concert with such Stockholder or
any of its Affiliates or is induced by such Stockholder or any of its
Affiliates), provided that if such offer is withdrawn or expires without
being consummated, Section 6.1(a) and 6.1(b) shall be reinstated (but no
such reinstatement shall prohibit any Stockholder from thereafter
purchasing Voting Shares pursuant to a contract entered into prior to
the withdrawal or expiration of such tender offer or exchange offer or
pursuant to a tender offer or exchange offer commenced by a Stockholder
prior to such time);
(ii) the Applicable Percentage of SPE, USI or the Claridge
Group equaling or exceeding 80%, provided that, in the case of USI, such
percentage shall be 33 1/3% at any time USI and its Affiliates
beneficially own more Voting Shares than any other holder of Common
Stock;
(iii) with respect to any Stockholder, such Stockholder's
Applicable Percentage being less than 15% (provided that such
restrictions shall be reinstated if such Stockholder's Applicable
Percentage equals or exceeds 15% within one year thereafter);
(iv) any Person (other than a Stockholder or a Permitted
Transferee) beneficially owning more than 20% of the Voting Shares,
excluding from the Voting Shares beneficially owned by such Person
Voting Shares acquired from a Stockholder, a Permitted Transferee or the
Company; or
(v) the Public Stockholders beneficially owning more than
66 2/3% of the Voting Shares.
(d) Notwithstanding anything to the contrary herein, if a
Stockholder who would otherwise be in violation of Section 6.1(a) has violated
such Section inadvertently, and after becoming aware of such violation such
Stockholder divests as promptly as practicable a sufficient number of Voting
Shares so that such Stockholder would no longer be in violation of such
Section, then such Stockholder shall not be deemed to have been in violation
of Section 6.1(a) for any purposes of this Agreement.
(e) Notwithstanding anything to the contrary herein, the
provisions of Section 6.1(a) shall not be applicable to any member of the
Claridge Group so long as the Applicable Percentage of the Claridge Group is
less than 15% (provided that an acquisition by any member of the Claridge
Group shall be subject to the restriction of Section 6.1(a) if such
acquisition would result in the Applicable Percentage of the Claridge Group
equalling or exceeding 15%).
SECTION 6.2 Standstill among the Stockholders.
(a) Each of SPE and USI
covenants and agrees with the other and each member of the Claridge Group
covenants and agrees with each of SPE and USI that neither such Stockholder
nor any of its Affiliates will acquire, directly or indirectly, the beneficial
ownership of any Voting Shares if immediately prior to such acquisition such
Stockholder's Applicable Percentage exceeds 50%, excluding Voting Shares
acquired from another Stockholder or its Permitted Transferees, or if, as a
result of such acquisition, (i) such Stockholder and its Affiliates would
beneficially own an aggregate of more than 50% of the Voting Shares, excluding
Voting Shares acquired from another Stockholder or its Permitted Transferees,
or (ii) the Public Stockholders would beneficially own less than 20% of the
outstanding Voting Shares; provided, however, that this clause (ii) shall not
be applicable to USI or any of its Affiliates, or SPE or any of its Affiliates
or the members of the Claridge Group and their respective Affiliates, if, upon
consummation of such acquisition, such Stockholder's Applicable Percentage
would be less than 25%. Notwithstanding the foregoing, the provisions of this
Section 6.2(a) shall not prohibit the acquisition of Common Stock upon the
conversion of Non-Voting Common Stock.
(b) The restrictions of Section 6.2(a) shall terminate if:
(i) the Applicable Percentage of either SPE or USI is less
than 10% (provided that such restrictions shall be reinstated if such
Stockholder's Applicable Percentage equals or exceeds 10% within one
year thereafter);
(ii) a bona fide tender or exchange offer to acquire more
than 15% of the outstanding Voting Shares is made by any Person (except
that such restrictions shall not terminate as to any Stockholder if such
tender or exchange offer is made by such Stockholder or any of its
Affiliates or by any Person acting in concert with such Stockholder or
any of its Affiliates or is induced by such Stockholder or any of its
Affiliates), provided that if such offer is withdrawn or expires without
being consummated, Section 6.2(a) shall be reinstated (but no such
reinstatement shall prohibit any Stockholder from thereafter purchasing
Voting Shares pursuant to a contract entered into prior to the
withdrawal or expiration of such tender offer or exchange offer or
pursuant to a tender offer or exchange offer commenced by a Stockholder
prior to such time); or
(iii) any Person (other than a Stockholder or a Permitted
Transferee) beneficially owns more than 15% of the Voting Shares,
excluding Voting Shares acquired from a Stockholder or a Permitted
Transferee, but only if the sum of the Applicable Percentages of SPE and
USI is less than 45%.
(c) Notwithstanding anything to the contrary herein, if a
Stockholder who would otherwise be in violation of Section 6.2(a) has violated
such Section inadvertently, and after becoming aware of such violation such
Stockholder divests as promptly as practicable a sufficient number of Voting
Shares so that such Stockholder would no longer be in violation of such
Section, then such Stockholder shall not be deemed to have been in violation
of Section 6.2(a) for any purposes of this Agreement.
(d) Notwithstanding anything to the contrary herein, the
provisions of Section 6.2(a) shall not be applicable to any member of the
Claridge Group so long as the Applicable Percentage of the Claridge Group is
less than 10% (provided that an acquisition by any member of the Claridge
Group shall be subject to the restrictions of Section 6.2(a) if such
acquisition would result in the Applicable Percentage of the Claridge Group
equalling or exceeding 10%).
ARTICLE VII
EQUITY PURCHASE RIGHTS
SECTION 7.1 Equity Purchase Rights.
(a) If the Company proposes to issue or
sell any Voting Shares pursuant to a transaction in respect of which SPE or
USI shall have the right to consent pursuant to clause (vii) of Section 3.1(a)
(any such Stockholder, an "Offeree"), each Offeree shall have the right,
exercisable in whole or in part and subject to the applicable rules of any
stock exchange on which the Common Stock shall then be listed, to acquire from
the Company up to a number of shares or other amount of Voting Shares equal to
the number or amount of Voting Shares proposed to be issued or sold to Persons
other than such Offeree or any of its Affiliates (the "Issuance Shares")
multiplied by such Offeree's then Applicable Percentage, prior to giving
effect to the consummation of the proposed issuance or sale and any
acquisition by an Offeree pursuant to this Section 7.1(a) (with respect to
each Offeree, the number or amount of Voting Shares which such Offeree may
purchase pursuant to this Section 7.1(a) shall be referred to as such
Offeree's "Offered Shares"). Notwithstanding anything to the contrary
contained in this Section 7.1(a), in the event that SPE and its Permitted
Transferees beneficially own Non-Voting Common Stock and Common Stock, SPE's
Offered Shares will be allocated between Non-Voting Common Stock and Common
Stock in the same proportion.
(b) The Company shall give written notice of a proposed issuance
or sale described in Section 7.1(a) to each Offeree within two Business Days
following any meeting of the Board of Directors at which any such issuance or
sale is approved. Such notice (the "Issuance Notice") shall set forth the
material terms and conditions of such proposed transaction, including the name
of any proposed purchaser(s) or the proposed manner of disposition, in the
case of a public offering, the number or amount and description of the
Issuance Shares and, except in the case of a public offering, the proposed
purchase price per share, including a description of any non-cash
consideration sufficiently detailed to permit valuation thereof. Such notice
shall also set forth the number of Offered Shares for all Stockholders and
shall be accompanied by any written offer from the prospective purchaser to
purchase such Voting Shares, if available and permitted pursuant to the terms
thereof. The Issuance Notice shall be received by each Offeree at least 20
days prior to the proposed issuance or sale.
(c) At any time during the 20-day period following an Offeree's
receipt of an Issuance Notice, each Offeree shall have the right to
irrevocably elect to purchase up to the number of such Offeree's Offered
Shares at the purchase price set forth in the Issuance Notice (or if such
price includes property other than cash, the equivalent in cash of such price)
and upon the other terms and conditions specified in the Issuance Notice by
delivering a written notice to the Company. Except as provided in the
following sentence, such purchase(s) shall be consummated concurrently with
the consummation of the issuance or sale described in the Issuance Notice.
The closing of any purchase by an Offeree may be extended beyond the closing
of the transaction described in the Issuance Notice to the extent necessary to
obtain required governmental approvals and other required approvals and the
Company and the Offeree shall use their respective best efforts to obtain such
approvals.
(d) If the Offeree(s) do not elect pursuant to Section 7.1(c) to
purchase Offered Shares, the Company shall be free to complete the proposed
issuance or sale described in the Issuance Notice on terms no less favorable
to the Company than those set forth in the Issuance Notice, provided that (x)
such issuance or sale is closed within 90 days after the latest of the
expiration of the 20-day period described in Section 7.1(c) or, in the case of
a public offering, within 20 days of the declaration by the Commission of the
effectiveness of the applicable registration statement filed by the Company,
(y) the price at which the Voting Shares are transferred must be equal to or
higher than the purchase price described in the Issuance Notice (except in the
case of a public offering, in which case the price at which the Voting Shares
are sold (before deducting underwriting discounts and commissions) shall be
equal to at least 90% of such price) and (z) subject to Section 7.1(f), the
amount of securities to be issued or sold by the Company may be reduced. Such
periods within which such issuance or sale must be closed shall be extended to
the extent necessary to obtain required governmental approvals and other
required approvals and the Company shall use its best efforts to obtain such
approvals.
(e) If (i) the consideration specified in the Issuance Notice
consists of, or includes, consideration other than cash or a publicly traded
security for which a closing market price is published for each Business Day,
or (ii) any property other than Voting Shares is proposed to be transferred by
the Company in connection with the transaction to which the Issuance Notice
relates, then the price payable by the Offerees under this Section 7.1 shall
be the Determination of the Independent Directors of the Fair Market Value of
the consideration per share or other amount in the case of clause (i) and the
Determination of the Independent Directors of the Fair Market Value of the
consideration per share or other amount determined to be properly allocable to
the Voting Shares in the case of clause (ii). Notwithstanding anything to the
contrary contained in this Section 7.1, the time periods applicable to an
election by the Offerees to purchase the Offered Shares set forth in Section
7.1(c) shall not be deemed to commence until the Determination of the
Independent Directors under this Section 7.1(e) has been made. The Company
agrees to use its best efforts to cause the Determination of the Independent
Directors under this Section 7.1(e) to be made as promptly as practicable but
in no event later than ten Business Days after delivery by the Company of the
Issuance Notice.
(f) To the extent that, after an Offeree's election to acquire
Voting Shares pursuant to its purchase right under this Section 7.1, the
number of Issuance Shares shall be reduced (whether at the discretion of the
Company or otherwise), then the number of shares or other amount of Voting
Shares that such Offeree has the right to acquire under this Section 7.1 shall
be reduced pro rata and such Offeree's election shall be deemed to have been
its irrevocable commitment to purchase such reduced number of shares or other
amount of such Voting Shares.
(g) Notwithstanding anything to the contrary contained in this
Section 7.1, an Offeree shall not be entitled to purchase any securities
pursuant to this Section 7.1 (i) unless and until the Company actually issues
or sells the securities that gave rise to the Offeree's purchase right under
this Section 7.1 (and the Company may in its sole discretion elect at any time
to abandon any such issuance or sale) or (ii) in connection with any pro rata
stock split, stock dividend or other combination or reclassification of any
Capital Stock of the Company.
(h) Notwithstanding anything to the contrary contained in this
Section 7.1, upon any purchase of Voting Shares by an Offeree pursuant to this
Section 7.1 on a later date than the issuance or sale of securities described
in the Issuance Notice (x) the purchase price shall be adjusted by subtracting
therefrom the Fair Market Value (as established by a Determination of the
Independent Directors) of any dividend or distribution received in respect of
such Voting Shares after the date of such issuance and prior to the purchase
by such Offeree hereunder, (y) the purchase price and number of shares or
amount to be purchased shall be adjusted to reflect any stock split, stock
dividend, or other combination or reclassification of the Company's Capital
Stock during such time and (z) such Offeree shall be entitled to exercise any
rights to purchase additional Voting Shares available to all holders of Voting
Shares proportionately that it would have been entitled to exercise if it had
been the owner of the Voting Shares purchased by such Offeree hereunder on the
record date for the distribution of such rights.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Conflicting Agreements.
Each Stockholder and the Company represents
and warrants that such party has not granted and is not a party to any proxy,
voting trust or other agreement that is inconsistent with or conflicts with
any provision of this Agreement.
SECTION 8.2 Duration of Agreement.
Except as otherwise provided in this
Agreement, the rights and obligations of a Stockholder and its Permitted
Transferees under this Agreement shall terminate upon such Stockholder's
Applicable Percentage equalling less than 6.25% (or, in the case of the
members of the Claridge Group, 3.5% until the five-year anniversary of the
Closing and 5% thereafter), provided that in the event that a Stockholder's
Applicable Percentage shall be less than 6.25% (or, in the case of the members
of the Claridge Group, 3.5% until the five-year anniversary of the Closing and
5% thereafter) as a result of the issuance of additional Voting Shares by the
Company, such Stockholder shall be so advised by the Company by written notice
following any required recalculation of the number of such Stockholder's
designees pursuant to Section 2.1(e) or Section 2.1(g), and the Agreement
shall continue to bind and enure to the benefit of such Stockholder for a
period of 180 days following such Stockholder's receipt of such notice and
will continue to bind and enure to the benefit of such Stockholder thereafter
in the event that such Stockholder (and/or its Permitted Transferees)
acquires, during such 180-day period, a sufficient number of Voting Shares
such that its Applicable Percentage equals or exceeds the applicable
percentage set forth above.
SECTION 8.3 Best Efforts.
Each of SPE and USI covenant and agree with the other to use
its best efforts to cause the Company to fulfill the Company's obligations
under Article II and Article III of this Agreement. If either SPE or USI
fails to use its best efforts to cause the Company to fulfill in any material
respect any of the Company's obligations under Article II or Article III, such
Stockholder shall immediately cease to have any rights under the provisions of
such Articles, provided, however, that if such failure is reasonably capable
of being cured, such Stockholder shall retain its rights under such provisions
if such failure is cured within 30 days after such Stockholder has received
written notice of such failure.
SECTION 8.4 Ownership Information.
(a) For purposes of this Agreement, a
Stockholder, in determining the amount of outstanding Voting Shares, may rely
upon information set forth in the most recent quarterly or annual report, and
any current report subsequent thereto, filed by the Company with the
Commission, unless the Company shall have updated such information by delivery
of notice to all Stockholders.
(b) Upon the reasonable request of the Company or any
Stockholder, each Stockholder shall deliver to the Company and each other
Stockholder a notice specifying the amount of each class of Voting Shares then
beneficially owned by such Stockholder, its Permitted Transferees and its
Affiliates. The Company and the other Stockholders shall be entitled to rely
on the most recently delivered such notice for all purposes of this Agreement,
unless such Stockholder shall have updated such information by delivery of a
subsequent notice (including a notice delivered pursuant to Section 4.6).
SECTION 8.5 Further Assurances.
At any time or from time to time after the date
hereof, the parties agree to cooperate with each other, and at the request of
any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request
in order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
SECTION 8.6 Amendment and Waiver.
Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or any Stockholder unless such modification,
amendment or waiver is approved in writing by the Company and each Stockholder
whose rights or obligations hereunder are affected by such modification,
amendment or waiver, provided that (i) the Company shall not agree to any of
the foregoing without the prior written consent of SPE and USI and (ii) unless
approved by a Determination of the Independent Directors, the Company shall
not agree to any amendment, modification or waiver of any provision contained
in Section 2.1 (other than Section 2.1(c) and 2.1(k)), Sections 2.6 and 2.7,
clauses (v) and (vi) of Section 3.1(a), Sections 3.3, 3.4, 4.1, 4.2, 4.5(b),
6.1 and 8.2 or this Section 8.6. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its
terms.
SECTION 8.7 Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
SECTION 8.8 Entire Agreement.
Except as otherwise expressly set forth herein,
this document and the other documents dated the date hereof embody the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, that
may have related to the subject matter hereof in any way. Without limiting
the generality of the foregoing, to the extent that any of the terms hereof
are inconsistent with the rights or obligations of any Stockholder under any
other agreement with the Company, the terms of this Agreement shall govern.
SECTION 8.9 Successors and Assigns.
Except as provided in Section 4.5, neither
this Agreement nor any of the rights or obligations under this Agreement shall
be assigned, in whole or in part (except by operation of law pursuant to a
merger whose purpose is not to avoid the provisions of this Agreement), by any
party without the prior written consent of the other parties hereto. Subject
to the foregoing, this Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
SECTION 8.10 Counterparts.
This Agreement may be executed in separate counterparts each
of which shall be an original and all of which taken together shall constitute
one and the same agreement.
SECTION 8.11 Remedies.
(a) Each party hereto acknowledges that money damages would not
be an adequate remedy in the event that any of the covenants or agreements in
this Agreement are not performed in accordance with its terms, and it is
therefore agreed that, subject to the provisions of Section 3.3, in addition
to and without limiting any other remedy or right it may have, the non-
breaching party will have the right to an injunction, temporary restraining
order or other equitable relief in any court of competent jurisdiction
enjoining any such breach and enforcing specifically the terms and provisions
hereof.
(b) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise
of any thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.
(c) In the event that either SPE or USI (the "Aggrieved
Stockholder") has a good faith belief that any other Stockholder or the
Company is likely to breach in any material respect or has breached in any
material respect any of its obligations under Sections 2.1, 2.4, 2.5, 2.6,
2.7, 3.1, 3.2 or 3.5 or Article VI of this Agreement, upon notice of such
belief from the Aggrieved Stockholder, such Stockholder and/or the Company, as
the case may be, agrees to immediately cease taking any action to the extent
such Aggrieved Stockholder believes in good faith that such action breaches or
would breach any of the foregoing provisions of this Agreement in any material
respect. Upon receipt of notice of the Aggrieved Stockholder's belief and
until the dispute is resolved, the Company and each of the Stockholders agree
not to take any action that would facilitate any such breach and to take
reasonable actions to prevent such breach, if it has not yet occurred, or to
minimize any adverse consequences to the Aggrieved Stockholder of any such
breach. The parties agree that the Aggrieved Stockholder shall have the right
to a temporary restraining order from any court of competent jurisdiction
enjoining any such breach or potential breach (or otherwise preserving the
status quo) pending decision as to whether the Aggrieved Stockholder's belief
is correct by, at the Aggrieved Stockholder's election, the court or the
Arbitrator. If the Aggrieved Stockholder seeks a judicial determination of
such dispute, the parties agree that the court should schedule a hearing to
resolve the dispute on one day's notice. If the court or the Arbitrator, as
applicable, shall determine that there is a breach or potential breach, the
parties agree that the court or the Arbitrator, as applicable, should impose a
remedy that would put the Aggrieved Stockholder in the same position it would
have been in had there been no such dispute. If any dispute under this
Section has been previously determined by a court or the Arbitrator adversely
against any party, in connection with any subsequent dispute that is
determined by a court or an Arbitrator adversely against such party, such
party shall bear all costs and expenses of the Arbitrator or the court, as the
case may be, in connection with such subsequent dispute.
(d) In the event that SPE or the Company shall breach in any
material respect any of their respective obligations to USI under this
Agreement, at the request of USI, SPE and the Company shall use their
respective best efforts to amend the Certificate as soon as practicable,
including calling a special meeting of stockholders or soliciting written
consents from stockholders, so as to authorize a class of common stock of the
Company which would be issued by the Company to USI and its Permitted
Transferees on a one-for-one basis in exchange for all the Shares then
beneficially owned by them. Such class of common stock would be identical in
all respects to the existing Common Stock, except that (i) the consent rights
contained in Article III would be incorporated in such class and SPE and USI
would cease to have any consent rights under this Agreement, (ii) such class
would entitle the holders thereof to proportionate Board representation on the
same basis that USI is entitled to Board representation pursuant to Article II
and (iii) shares of such class could be converted from time to time at the
holder's election into Common Stock on a share-for-share basis. In addition,
USI and its Affiliates will have the right to convert any Common Stock from
time to time into shares of such class on a share-for-share basis.
SECTION 8.12 Notices.
Any notice, request, claim, demand or other communication under
this Agreement shall be in writing, shall be either personally delivered or
sent by reputable overnight courier service (charges prepaid) to the address
for such Person set forth below or such other address as the recipient party
has specified by prior written notice to the other parties hereto and shall be
deemed to have been given hereunder when delivered personally or one day after
deposit with a reputable overnight courier service.
If to the Company:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: Larry Ruisi
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: David Golay
If to SPE:
Sony Pictures Entertainment
10202 West Washington Boulevard
Culver City, CA 90232
Attention: Ronald N. Jacobi
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: Morton A. Pierce
If to USI:
Universal Studios, Inc.
100 Universal City Plaza
Universal City, CA 91608
Attention: Brian C. Mulligan
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Attention: John G. Finley
If to the Trust:
Charles Rosner Bronfman Family Trust
c/o Claridge Inc.
1170 Peel Street, 8th Floor
Montreal, Quebec, Canada H3B 4P2
Attention: Robert Rabinovitch
with a copy to:
Goodman Phillips & Vineberg
1501 McGill College Avenue, 26th Floor
Montreal, Quebec, Canada H3A 3N9
Attention: Michael D. Vineberg
SECTION 8.13 Governing Law; Consent to
Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law. Except as provided in Section 3.3, each of
the parties hereto hereby irrevocably and unconditionally consents to submit
to the non-exclusive jurisdiction of the courts of the State of New York and
of the United States of America, in each case located in the County of New
York, for any action, proceeding or investigation in any court or before any
governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby and further agrees that
service of any process, summons, notice or document by U.S. or Canadian
registered mail to its respective address set forth in this Agreement shall be
effective service of process for any Litigation brought against it in any such
court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any Litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America, in each case located in the
County of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such Litigation
brought in any such court has been brought in an inconvenient forum. Each of
the parties irrevocably and unconditionally waives, to the fullest extent
permitted by applicable law, any and all rights to trial by jury in connection
with any Litigation arising out of or relating to this Agreement or the
transactions contemplated hereby.
SECTION 8.14 Legends.
(a) Upon original issuance thereof, and until such time as the
same is no longer required hereunder or under the applicable requirements of
the Securities Act or applicable state securities or "blue sky" laws, any
certificate issued representing any Shares held by a Stockholder or any
Permitted Transferee (including all certificates issued upon Transfer
(including to any Third Party Transferee who has entered into an agreement
contemplated by Section 4.5(c)) or in exchange thereof or in substitution
therefor) shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
AGREEMENTS AND RESTRICTIONS ON TRANSFER SET FORTH IN A CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 30, 1997 AMONG SONY
PICTURES ENTERTAINMENT, INC., UNIVERSAL STUDIOS, INC., CHARLES
ROSNER BRONFMAN FAMILY TRUST, THE OTHER STOCKHOLDERS PARTY THERETO
AND LTM HOLDINGS, INC. (THE "COMPANY"), COPIES OF WHICH AGREEMENT
ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) The certificates representing the Shares (including any
certificate issued upon Transfer (including to any Third Party Transferee who
has entered into an agreement contemplated by Section 4.5(c)) or in exchange
thereof or in substitution therefor) shall also bear any legend required under
any applicable state securities or "blue sky" laws.
(c) The Company may make a notation on its records or give
instructions to any transfer agents or registrars for the Voting Shares in
order to implement the restrictions on Transfer set forth in Article IV.
(d) In connection with any Transfer of Voting Shares, the
transferor shall provide the Company with such customary certificates,
opinions and other documents as the Company may reasonably request to assure
that such Transfer complies fully with applicable securities and other laws.
(e) The Company shall not incur any liability for any delay in
recognizing any Transfer of Voting Shares if the Company in good faith
reasonably believes that such Transfer may have been or would be in violation
in any material respect of the provisions of the Securities Act, applicable
state securities or "blue sky" laws, or this Agreement.
(f) After such time as any of the legends described by this
Section 8.14 are no longer required on any certificate or certificates
representing the Voting Shares, upon the request of any Stockholder, the
Company will cause such Stockholder's certificate or certificates to be
exchanged for a certificate or certificates that do not bear such legend.
SECTION 8.15 Interpretation.
The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
SECTION 8.16 Agents for Stockholders.
(a) The Trust shall act as the
sole agent for each member of the Claridge Group and its Permitted Transferees
(if any) and shall be authorized to exercise all rights of the members of the
Claridge Group and such Permitted Transferees hereunder except that the
designation of Claridge Directors shall be effected by such party as may be
designed in writing at any time or from time to time by the members of the
Claridge Group. The Trust shall have sole power and authority to take any
action on behalf of the members of the Claridge Group and such Permitted
Transferees pursuant to this Agreement, including delivering any notice or
granting any waiver or consent hereunder, and the other parties hereto shall
be entitled to rely on any action taken by the Trust as being taken on behalf
of all members of the Claridge Group and such Permitted Transferees. The
rights of the members of the Claridge Group and such Permitted Transferees
under this Agreement shall be exercised only by the Trust on behalf of such
members and such Permitted Transferees and no such members or Permitted
Transferees shall be separately entitled to exercise any such rights. Any
notice required to be delivered hereunder to any such member or Permitted
Transferee shall be delivered to the Trust.
(b) SPE shall act as the sole agent for each of its Permitted
Transferees (if any) and shall be authorized to exercise all rights of such
Permitted Transferees hereunder. SPE shall have sole power and authority to
take any action on behalf of its Permitted Transferees pursuant to this
Agreement, including delivering any notice or granting any waiver or consent
hereunder, and the other parties hereto shall be entitled to rely on any
action taken by SPE as being taken on behalf of such Permitted Transferees.
The rights of such Permitted Transferees under this Agreement shall be
exercised only by SPE on behalf of such Permitted Transferees and no such
Permitted Transferees shall be separately entitled to exercise any such
rights. Any notice required to be delivered hereunder to any such Permitted
Transferee shall be delivered to SPE.
(c) USI shall act as the sole agent for each of its Permitted
Transferees (if any) and shall be authorized to exercise all rights of such
Permitted Transferees hereunder. USI shall have sole power and authority to
take any action on behalf of its Permitted Transferees pursuant to this
Agreement, including delivering any notice or granting any waiver or consent
hereunder, and the other parties hereto shall be entitled to rely on any
action taken by USI as being taken on behalf of such Permitted Transferees.
The rights of such Permitted Transferees under this Agreement shall be
exercised only by USI on behalf of such Permitted Transferees and no such
Permitted Transferees shall be separately entitled to exercise any such
rights. Any notice required to be delivered hereunder to any such Permitted
Transferee shall be delivered to USI.
SECTION 8.17 Additional Agreement.
The Company agrees to comply with the
provisions set forth in Exhibit C relating to the use of sound systems in
theaters.
SECTION 8.18 Effectiveness.
This Agreement shall become effective upon consummation of
the Transaction and prior thereto shall be of no force or effect, provided
that the provisions of Section 3.3(d) shall be effective as of the date of
their Agreement. If the Master Agreement shall be terminated in accordance
with its terms, this Agreement shall automatically be deemed to have been
terminated and shall thereafter be of no force or effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first written above.
LTM HOLDINGS, INC.
By:/s/ Stanley Steinberg
Name: Stanley Steinberg
Title: Executive Vice President
SONY PICTURES ENTERTAINMENT INC.
BY:/s/ Ronald N. Jacobi
Name: Ronald N. Jacobi
Title: Executive Vice President &
General Counsel
UNIVERSAL STUDIOS, INC.
By:/s/ Brian C. Mulligan
Name: Brian C. Mulligan
Title: Senior Vice President
CHARLES ROSNER BRONFMAN FAMILY TRUST
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
CHARLES R. BRONFMAN
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
E. LEO KOLBER
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
ARNOLD M. LUDWICK
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
PHYLLIS LAMBERT FOUNDATION
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
3096475 CANADA INC.
By:/s/ Robert Rabinovitch
Name: Robert Rabinovitch
Title: Authorized Representative
By:/s/ Michael Vineberg
Name: Michael Vineberg
Title: Authorized Representative
SCHEDULE I
Applicable Percentage Number of Directors
6.25% and < 9.375% 1
9.375% and <15.625% 2
15.625% and <21.875% 3
21.875% and <28.125% 4
28.125% and <34.375% 5
34.375% and <40.625% 6
40.625% and <46.875% 7
46.875% and <53.125% 8
53.125% and <59.375% 9
59.375% and <65.625% 10
65.625% and <71.875% 11
71.875% and <78.125% 12
78.125% and <84.375% 13
84.375% and greater 14
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made as of
September 30, 1997 by and between LTM Holdings, Inc., a Delaware
corporation ("LTM"), and Universal Studios, Inc., a Delaware corporation
("Universal").
WHEREAS, Universal is a significant shareholder of Cineplex
Odeon Corporation, an Ontario corporation ("Cineplex Odeon").
WHEREAS, the Boards of Directors of LTM and Cineplex Odeon
have determined that it is in the best interests of their respective
shareholders and companies that they engage in a strategic business
combination pursuant to which Cineplex Odeon would become a wholly-owned
subsidiary of LTM and the shareholders of Cineplex Odeon would receive
newly issued shares of LTM capital stock (the "Combination Transaction")
as contemplated by that certain Master Agreement of even date herewith
(the "Master Agreement") by and among LTM, Sony Pictures Entertainment
Inc., a Delaware corporation and the indirect parent of LTM ("SPE"), and
Cineplex Odeon and certain other agreements referred to and/or
incorporated therein (capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Master
Agreement); and
WHEREAS, in connection with the Combination Transaction, LTM,
Cineplex Odeon and Universal desire that Universal subscribe for
44,266,062 shares (subject to adjustment for the Reverse Stock Split and
in accordance with Section 4.6 hereof) of LTM's common stock, par value
US$.01 per share (the "Stock"), in exchange for a cash payment to LTM of
US$84,500,000 (the "Purchase Price").
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties and agreements contained herein, LTM and
Universal agree as follows:
Article I
Subscription
Section 1.1. Subscription
. At the Closing, Universal shall purchase the Stock from
LTM, and LTM hereby agrees to issue and sell the Stock to Universal, in
exchange for the delivery by Universal to LTM of the Purchase Price,
subject to the terms and conditions set forth in this Agreement (the
"Purchase").
Section 1.2. Closing; Payment of Purchase Price and Delivery of
the Stock
. (a) Subject to the terms and conditions set forth in this
Agreement, the Purchase shall occur simultaneously with the Closing and
at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, New York.
(b) At the Closing, Universal shall pay to LTM
US$84,500,000 by bank wire transfer in immediately available funds, to a
bank account that LTM shall designate in writing to Universal no less
than three business days prior to the Closing, and deliver (i) a receipt
for the Stock and (ii) the certificate to be delivered pursuant to
Section 5.3(b).
(c) At the Closing, LTM shall deliver to Universal a
certificate or certificates representing the Stock issued in the name of
Universal or its nominee, free and clear of any Encumbrances, except
Encumbrances arising as a result of any action taken by Universal, and
in form reasonably satisfactory to Universal and with any required stock
transfer tax stamps affixed, (i) a receipt for the Purchase Price and
(ii) the certificate to be delivered pursuant to Section 5.2(a).
Section 1.3. Payment of Taxes and Fees. At the Closing, LTM
shall pay all state and local sales taxes, stamp taxes, transfer taxes
and any similar taxes that become payable in connection with the
transactions contemplated hereby.
Article II
Representations and Warranties of Universal
Universal represents and warrants to LTM as follows:
Section 2.1. Existence; Good Standing; Corporate Authority
. Universal is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Universal has all requisite corporate power and
authority to own, operate and lease its properties and carry on its
business as now conducted. Neither Universal nor any of its
Subsidiaries is in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which Universal or any of its
Subsidiaries or any of their respective properties or assets is subject
that would prevent Universal from performing its obligations under the
Documents.
Section 2.2. Authorization, Validity and Effect of Agreements
. Universal has the requisite corporate power and authority
to execute and deliver this Agreement and the Stockholders Agreement,
and all agreements and documents contemplated hereby or thereby to which
it is a party, and the consummation by Universal of the transactions
contemplated hereby and thereby has been duly authorized by all
requisite corporate action. This Agreement and the Stockholders
Agreement, and all agreements and documents contemplated hereby or
thereby, to which Universal is a party, do or (when executed and
delivered pursuant hereto for value received) will constitute the valid
and legally binding obligations of Universal, enforceable against
Universal in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
Section 2.3. No Violation
. Neither the execution and delivery by Universal of the
Documents to which it is a party nor the consummation by Universal of
the transactions contemplated hereby in accordance with the terms
hereof, will: (i) conflict with or result in a breach of any provisions
of the Certificate of Incorporation or Bylaws of Universal; (ii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
in a right of termination or cancellation of, or accelerate the
performance required by, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation or court decree to which Universal
or any of its Subsidiaries is a party, except to the extent any of the
effects described in this clause (ii) would not (x) impair the ability
of Universal to perform its obligations under this Agreement or the
Stockholders Agreement in any material respect or (y) delay in any
material respect or prevent the consummation of the Purchase or any of
the Transactions; or (iii) other than the Regulatory Filings (to the
extent applicable to Universal), require any material consent, approval
or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, the failure to obtain or
make which would (x) impair the ability of Universal to perform its
obligations under this Agreement or the Stockholders Agreement in any
material respect or (y) delay in any material respect or prevent the
consummation of the Purchase or any of the Transactions.
Section 2.4. No Brokers
. Universal has not entered into any contract, arrangement
or understanding with any person or firm which may result in the
obligation of LTM or Cineplex Odeon to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
Transactions.
Section 2.5. Ownership of Cineplex Odeon Capital Stock
. Universal holds beneficially and of record 73,446,426 SRV
Shares, free and clear of all Encumbrances or other restrictions on
transfer except those imposed under securities laws of general
application and those under the Standstill Agreement.
Article III
Representations and Warranties of LTM
LTM represents and warrants to Universal as follows:
Section 3.1. Incorporation by Reference
. LTM hereby makes to Universal the representations and
warranties of LTM set forth in Article III of the Master Agreement, all
of which representations and warranties are hereby incorporated herein
by reference in their entirety.
Section 3.2. The Stock
. At the Closing, the Stock (including any Additional
Shares (as defined in Section 4.6 below) issuable pursuant to Section
4.6) will have been duly and validly authorized, and, when issued and
delivered pursuant to this Agreement, shall be duly and validly issued
and fully paid and non-assessable, and not subject to preemptive or
similar rights. The transfer and delivery of the Stock (including any
Additional Shares issued pursuant to Section 4.6) by LTM to Universal as
contemplated by this Agreement will transfer good title to the Stock
(including any Additional Shares issued pursuant to Section 4.6) to
Universal, free and clear of any Encumbrances, except Encumbrances
arising as a result of any action taken by Universal and Encumbrances
under the Stockholders Agreement.
Section 3.3. Section 203 of the Delaware General Corporation Law
. The Board of Directors of LTM has approved the
Transactions, including, without limitation, the transactions
contemplated by this Agreement (including Universal's acquisition of
beneficial ownership of the Stock for purposes of Section 203(a)(1) of
the Delaware General Corporation Law).
Article IV
Additional Agreements
Section 4.1. Registration Statement/Proxy Statement/Prospectus
. Universal (i) shall cooperate with LTM and Cineplex Odeon
in providing such information concerning Universal, and, to the extent
such information is requested by the staff of the SEC in connection with
its review of the Form S-4 or the Form S-1, information concerning the
Universal City Cinema (as defined in Section 4.7 below), as may be
required under the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder in the preparation of the Registration
Statements, the Proxy Statement and the Prospectus. Universal agrees
that the information provided by it for inclusion in the Registration
Statements, the Proxy Statement or the Prospectus and each amendment or
supplement thereto, (i) in the case of the Proxy Statement, at the time
of mailing thereof and at the time of the Cineplex Odeon Meeting, or,
(ii) in the case of each Registration Statement and the Prospectus or
any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 4.2. HSR Act; Competition Act; Investment Canada Act;
Submission of Plan of Arrangement for Approval
. (a) Each of the parties hereto shall use their best
efforts to file as soon as practicable notifications under the HSR Act
in connection with the Transactions, and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission,
the Antitrust Division of the Department of Justice and/or the DIR for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State
Attorney General or other governmental authority in connection with
antitrust matters.
(b) Universal shall cooperate with LTM and Cineplex Odeon
in connection with the preparation and filing within five business days
after the date hereof (i) with the ICA Minister, an application by LTM
for review under the IC Act in connection with the Arrangement and (ii)
with the DIR, an application for an advance ruling certificate under the
Competition Act in connection with the Arrangement.
(c) Notwithstanding the provisions of Sections 4.2(a) and
(b), nothing in this Agreement shall obligate LTM to agree to any
condition or commitment sought to be imposed on LTM or its Affiliates in
connection with the approval or authorization of, consent or waiver with
respect to, or determination by any Governmental Entity not to challenge
any of the Transactions (including, without limitation, the transactions
contemplated by this Agreement) under the IC Act or any Antitrust Law
that in the good faith judgment of the board of directors of Sony
Corporation of America would, in and of itself, and without regard to
any other circumstance or factor, be a material and substantial basis
for rendering the Transactions (including, without limitation, the
transactions contemplated by this Agreement) no longer in the best
interests of LTM.
Section 4.3. Bank Financing. Universal shall provide such
financial and other information concerning the Universal City Cinema to
the proposed lenders of the Bank Financing as may be reasonably
requested in connection with the Bank Financing by such proposed
lenders; provided that such lenders have agreed to be bound by the
provisions of any confidentiality agreements then in effect between LTM
and Universal.
Section 4.4. No Shop
. Prior to the Closing Date, Universal agrees that:
(a) neither it, nor any Universal Subsidiary, and none of
the officers, directors, employees, agents and representatives thereof
(including, without limitation, any investment banker, attorney or
accountant retained thereby), shall initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of
any Alternative Proposal or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any person relating to an Alternative Proposal, or release any
third party from any obligations under any existing standstill agreement
or arrangement relating to any Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative
Proposal, provided, however, that, in the case of any individual serving
as a director of Cineplex Odeon and acting in such capacity (i) the
provisions of this Section 4.4 shall be subject to such individual's
fiduciary duties as a director and (ii) such provisions shall not
prohibit actions taken in accordance with Section 6.10 of the Master
Agreement.
(b) it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing, and it will
take the necessary steps to inform the individuals or entities referred
to above of the obligations undertaken in this Section 4.4;
(c) it will notify LTM as promptly as practicable and
without delay if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it; and
(d) it will not, unless and until the Master Agreement is
terminated in accordance with Article VIII thereof, directly or
indirectly, purchase or otherwise acquire any Cineplex Odeon capital
stock or, except pursuant to the Plan of Arrangement, sell, offer to
sell, solicit an offer to buy, contract to sell, grant an option to
purchase or otherwise transfer or dispose of any Cineplex Odeon Common
Shares or SRV Shares held, directly or indirectly, beneficially or of
record by it.
Section 4.5. Advice of Changes; SEC Filings
. The parties shall confer with each other on a regular
basis on operational matters affecting or which may reasonably be
expected to affect the Combined Enterprise. LTM and Universal shall
advise each other promptly orally and in writing of any change or event
that has had, or could reasonably be expected to have, a LTM Material
Adverse Effect. Universal and LTM shall provide each other (or their
respective counsel) promptly copies of all filings made by such party
with the SEC, any Canadian Securities Authority or any other
Governmental Entity in connection with the Transactions.
Section 4.6. Issuance of Additional Shares. (a) The number of
shares of Stock to be issued pursuant to this Agreement shall be subject
to adjustment in accordance with this Section 4.6. LTM agrees that at
any time LTM shall issue or sell any Common Stock (as defined in the
Stockholders Agreement) (other than Excluded Securities (as defined in
the Stockholders Agreement)) to any Person other than Universal or any
of its Affiliates (a "Sale"), including issuances of Common Stock upon
conversion, exchange or exercise of Voting Share Equivalents (as defined
in the Stockholders Agreement), whether at the Closing (other than
pursuant to the Amalgamation or this Agreement) or thereafter, and
whether in one or a series of transactions, in exchange for
consideration consisting solely of cash and/or a deferred payment
obligation of the purchaser of such Shares valued (in accordance with
Section 4.6(h) and prior to underwriting discounts or commissions) at an
amount per Share (the "Subsequent Sale Price") less than US$1.90891,
subject to adjustment for the Reverse Stock Split and further as
provided herein (the "Measurement Price"), concurrently with any such
Sale and as a condition thereto, LTM shall issue additional Shares
("Additional Shares") to Universal or its designees for no additional
consideration to the extent required by the provisions of this Section
4.6. The provisions of this Section 4.6 shall not apply to any Sale
occurring after a Capped Sale (as defined in Section 4.6(b) below).
(b) In connection with any Sale described in Section
4.6(a), LTM shall issue a number of Additional Shares calculated as set
forth below:
(i) Upon the closing of the first Sale on or after
the Closing, the number of Additional Shares shall equal (x) the
quotient of US$84.5 million divided by the Subsequent Sale Price
in connection with such Sale minus (y) the number of shares issued
to Universal at the Closing pursuant to Section 1.2 of this
Agreement (such issued shares, the "Universal Cash Shares"). If
the foregoing is not a positive number, no Additional Shares will
be issued in connection with such Sale.
(ii) Upon the closing of any Sales other than the
Sale referred to in clause (i) above, the number of Additional
Shares shall equal (w) the quotient of US$84.5 million divided by
the Weighted Average Subsequent Sale Price (as defined in Section
4.6(c) below) minus (x) the Universal Cash Shares minus (y) any
Additional Shares previously issued by LTM pursuant to this
Section 4.6 ("Previously Issued Additional Shares") plus (z) any
shares delivered to LTM pursuant to Section 4.6(d) ("Section 4.6
Shares"). If the foregoing is not a positive number, no
Additional Shares will be issued by LTM in connection with such
Sale.
(c) The "Weighted Average Subsequent Sale Price" shall
equal the quotient of (x) the Aggregate Consideration, divided by (y)
the Aggregate Share Number. The "Aggregate Consideration" means the
aggregate consideration (prior to underwriting discounts or commissions
and valued in accordance with Section 4.6(h)) received by LTM in
connection with all Sales; provided that (i) Aggregate Consideration
shall not exceed US$100,000,000 (the "Aggregate Consideration Cap") and
(ii) if the proceeds of any Sale, but for the Aggregate Consideration
Cap, would increase the Aggregate Consideration from the level thereof
immediately prior to such Sale (the "Pre-Cap Aggregate Consideration")
(such Sale being a "Capped Sale") to a level in excess of the Aggregate
Consideration Cap, the Aggregate Consideration shall only be increased
by an amount equal to the difference between the Aggregate Consideration
Cap and the Pre-Cap Aggregate Consideration (the "Aggregate
Consideration Margin"). The "Aggregate Share Number" means aggregate
number of shares issued by LTM in all Sales (including the Sale for
which a calculation of Additional Shares pursuant to clause (b)(ii)
above is being made), excluding any Additional Shares that may have been
issued to Universal in connection with such Sales; provided that, with
respect to a Capped Sale, in addition to shares issued prior to such
Capped Sale, the Aggregate Share Number shall include only that number
of shares issuable in exchange for payment of an amount equal to the
Aggregate Consideration Margin based upon the average per share
consideration paid or payable pursuant to such Capped Sale.
(d) Universal agrees that at any time LTM shall issue or
sell any Shares pursuant to a Sale described in clause (ii) of Section
4.6(b) for a Subsequent Sale Price greater than the Weighted Average
Subsequent Sale Price, promptly following such Sale, Universal shall
deliver or cause to be delivered a number of Shares to LTM equal to (x)
the Universal Cash Shares plus (y) any Additional Shares previously
issued by LTM pursuant to this Section 4.6 minus (z) the quotient of
US$84.5 million divided by the Weighted Average Subsequent Sale Price.
If the foregoing is not a positive number, no Shares shall be
deliverable in connection with such Sale; provided, however, that under
no circumstances shall Universal be required to deliver any Shares in
excess of the number of Additional Shares that LTM shall have previously
issued less the number of Shares that Universal has previously delivered
or caused to be delivered to LTM pursuant to this Section 4.6(d).
(e) At least fifteen business days prior to consummating a
Sale, LTM shall deliver a written notice to Universal, which such notice
shall specify the consideration to be paid in connection with such Sale,
LTM's belief as to the value of any deferred payment obligation in
connection therewith, LTM's belief as to the Subsequent Sale Price,
LTM's belief as to the number of Additional Shares to be issued pursuant
to Section 4.6(a), if any, or the number of shares to be delivered
pursuant to Section 4.6(d), if any, along with a calculation in
accordance with Section 4.6(b) or 4.6(d), as applicable, supporting such
determination.
(f) The obligations under this Section 4.6 shall terminate
if LTM shall have issued or sold Shares in one or more Sales for an
aggregate consideration (prior to underwriting discounts or commissions)
equal to or greater than the Aggregate Consideration Cap, provided,
however, that the provisions of this Section 4.6 shall be applicable to
any Sale that is part of a series of related Sales, if such Sale relates
to the Sale that resulted in the Aggregate Consideration Cap having been
exceeded or that was consummated at a time when the Aggregate
Consideration Cap had not yet been exceeded.
(g) If, in connection with a Sale, LTM is prohibited by
the rules of any applicable stock exchange from issuing all of the
Additional Shares required to be issued pursuant to Section 4.6(a) and
(b) or any restrictions or conditions on LTM's ability to issue
Additional Shares in accordance with such Sections are imposed by any
applicable stock exchange which are not satisfactory to Universal, LTM
shall be prohibited from making any such Sale without Universal's
consent, which consent shall be given in Universal's sole discretion.
(h) For purposes of this Section 4.6, the value of the
Subsequent Share Price shall be equal to the per share cash
consideration, if any, plus the per share fair market value of the
deferred payment obligation of the purchaser of the applicable shares
and, in the case of Common Stock issuable upon the conversion, exercise
or exchange of any Voting Share Equivalent, the amount in cash payable
to LTM upon conversion, exercise or exchange thereof. The fair market
value of any such payment obligation shall be determined in good faith
by Universal and LTM, provided that if such parties cannot agree on such
valuation prior to closing of the applicable Sale, each party shall set
forth its proposed valuation and a nationally recognized investment
banking firm jointly selected by such parties shall determine which of
the two such values shall be used to value such obligation. The party
whose value is not selected shall bear the fees and expenses of such
firm. If the parties cannot jointly agree on an investment banking
firm, the parties shall request that the Arbitrator (as defined in the
Stockholders Agreement) select a firm (which firm shall not have
provided any investment banking services to either party during the
prior three years). The parties shall share equally the fees and
expenses of the Arbitrator in connection with the foregoing. LTM shall
not consummate any proposed Sale until the Subsequent Sale Price has
been determined in accordance with this Section 4.6(h).
(i) The number of Universal Cash Shares, the number of
Previously Issued Additional Shares, the number of Section 4.6 Shares,
the Aggregate Share Number, the Measurement Price, the Weighted Average
Subsequent Sale Price and the Subsequent Sale Price in respect of any
Sale that is consummated prior to the effective date of an event
described in this Section 4.6(i) (a "Consummated Subsequent Sale Price")
shall be subject to adjustment from time to time as set forth in this
Section 4.6(i). LTM shall give Universal notice of any event described
below which requires an adjustment pursuant to this Section 4.6(i) at
the time of such event. At any time LTM delivers a written notice to
Universal pursuant to Section 4.6(e), LTM shall, without any action on
the part of Universal, cause the appropriate adjustment to be made
pursuant to this Section 4.6(i). If at any time after the Closing LTM
shall: (A) pay a dividend payable in, or make any other distribution
of, Common Stock; (B) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock; (C) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock; (D) issue any shares of its capital stock or other
securities by reclassification of the Common Stock; or (E) be involved
in any other similar event with respect to which an adjustment would be
equitable; (x) the Measurement Price, the Weighted Average Subsequent
Sale Price and any Consummated Subsequent Sale Price shall be
proportionately decreased in the case of such a dividend or distribution
of Common Stock or such a subdivision, or proportionately increased in
the case of such a combination, (y) the number of Universal Cash Shares,
Previously Issued Additional Shares, Section 4.6 Shares and the
Aggregate Share Number shall be proportionately increased in the case of
such a dividend or distribution of Common Stock or such a subdivision,
or proportionately decreased in the case of such a combination or (z)
the kind of capital stock or other securities of LTM that may be
acquired by Universal upon any Sale shall be adjusted in the case of
such a reclassification of the Common Stock, each on the effective date
of such dividend, distribution, subdivision, combination,
reclassification or similar event, as the case may be.
Section 4.7. Universal City Cinema
. (a) From and after the later of (i) the second
anniversary of the Closing Date and (ii) the fifteenth day of the month
following the first month end as of which the outstanding Debt of LTM is
less than 4.75 times the Consolidated EBITDA of LTM for the twelve month
period then ended (the "Start Date"), Universal shall have the right to
cause LTM to lease the Universal City Cinema motion picture theater
facility located at the Universal City, California retail and
entertainment complex (the "Universal City Cinema") by delivering to LTM
a written notice of its exercise of such right setting forth which of
the options set forth in Section 4.7 (c) it is electing, together with a
draft of a lease agreement (together with any agreements and documents
ancillary thereto, the "Draft Lease") reflecting the terms set forth on
Schedule 4.7 hereto (such notice and Draft Lease, collectively, the "Put
Notice"), to LTM at any time on or before the termination of such right
pursuant to Section 4.7(d). Not later than 30 days following the date
of the Put Notice (the "Put Notice Date"), Universal shall deliver to
LTM the true and accurate statement of Cash Flow of the Universal City
Cinema for the twelve months ended on the last day of the month
preceding the Put Notice Date, accompanied by the unqualified report of
Universal's independent auditors that such statement is complete and
fairly presents such data for the period indicated and has been prepared
in accordance with the terms of this Agreement (the "Audited Cash Flow
Statement").
(b) As soon as reasonably practicable and in any event not
later than ten days following delivery of the Put Notice, LTM and
Universal shall commence negotiation of the definitive lease (the
"Lease"). In addition to the terms set forth on Schedule 4.7 hereto,
the Lease shall provide that LTM shall pay to Universal on the date the
Lease is signed (the "Lease Signing Date") cash consideration for
entering into the Lease and the conveyance of the related personal
property equal to (i) ten times the Cash Flow of the Universal City
Cinema for the twelve-month period covered by the Audited Cash Flow
Statement (the "Base Price") less (ii) (if applicable) any Deficiency
Amount (as defined in Section 4.7(c) below). LTM and Universal shall
use their respective best efforts to complete negotiation and drafting
of, and enter into, the Lease within 90 days following the Put Notice
Date. In connection with such Lease, LTM agrees to accept
representations and warranties with respect to the Universal City Cinema
that would be customarily made by a passive owner of a motion picture
theater entering into a lease with the manager of such theater.
(c) On the Lease Signing Date, Universal shall elect one
of the following three options (provided, however, that, in the case of
an election of the option in clause (ii) below, an engineering firm
reasonably acceptable to LTM shall have been retained at least 30 days
prior thereto and LTM shall have received not less than two business
days advance notice of the Deficiency Amount together with the written
report of such engineering firm):
(i) to provide a surviving representation and
warranty to LTM that, as of the Lease Signing Date, the Universal
City Cinema satisfies all of the operating requirements and
standards set forth in the Lease;
(ii) to (A) certify that, as of the Lease Signing
Date, the Universal City Cinema satisfies all of the operating
requirements and standards set forth in the Lease with only such
deficiencies therefrom as are (x) specifically listed on a
certificate executed by an officer of Universal and (y)
accompanied by an estimate of the cost of eliminating such
deficiencies in full (the "Deficiency Amount") prepared by an
engineering firm or other expert selected by Universal and
reasonably acceptable to LTM and (B) agree that such Deficiency
Amount shall be deducted from the Base Price; or
(iii) to (A) certify as provided in clause (ii)(A) and
(B) agree, at Universal's sole cost and expense, to cause such
deficiencies to be eliminated in full in accordance with the terms
of the Lease in lieu of deducting the Deficiency Amount from the
Base Price.
(d) Subject to the provisions of the following sentence,
the rights granted to Universal pursuant to this Section 4.7 shall
terminate as of the close of business on the third anniversary of the
Start Date if the Put Notice has not been delivered prior to such date.
LTM shall provide to Universal not less than five days prior written
notice of the Start Date (the "Start Date Notice"), and, if LTM shall
fail to provide such notice, the Start Date shall be tolled until the
fifth day following delivery of the Start Date Notice.
Section 4.8. Additional Agreements
. (a) In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of
this Agreement, or any other agreement contemplated hereby, the proper
officers and/or directors of LTM and Universal shall use their best
efforts to effect such action.
(b) Universal shall vote all of its Cineplex Odeon capital
stock and shall take all other necessary or desirable actions within its
control (including, without limitation, attending all meetings in person
or by proxy for purposes of obtaining a quorum, executing all written
consents in lieu of meetings and voting to remove members of the
Cineplex Odeon Board of Directors, as applicable) to approve the
Documents and the Transactions and shall vote against any transaction
that could reasonably be expected to interfere with or adversely affect
the Transactions. Universal hereby irrevocably appoints LTM, its
officers, agents and nominees, with full power of substitution, as proxy
for Universal to act and vote Universal's shares of Cineplex Odeon
capital stock for and in the name, place and stead of Universal at any
annual, special or other meeting of the shareholders of Cineplex Odeon
and at any adjournment thereof or pursuant to any consent in lieu of a
meeting, or otherwise, (i) in favor of the Transactions, (ii) against
(A) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any
other obligation of Cineplex Odeon under the Master Agreement; and (B)
any action or agreement that would impede, interfere with or attempt to
discourage the Transactions, including, but not limited to, any
extraordinary corporate transaction (other than the Transactions), that
would conflict with or result in a breach of any of the representations
and warranties or covenants of Cineplex Odeon under the Documents to
which it is a party such as (1) a merger, consolidation, business
combination, reorganization, recapitalization or liquidation involving
Cineplex Odeon or any of its Significant Subsidiaries; (2) a sale or
transfer of a material amount of assets of Cineplex Odeon or any of its
Significant Subsidiaries; (3) any material change in the present
capitalization or dividend policy of Cineplex Odeon; or (4) any other
material change in Cineplex Odeon's corporate structure or business
unless in any such case such transaction is permitted under Article V of
the Master Agreement; provided that the proxy granted pursuant to this
Section 4.8(b) shall terminate if this Agreement is terminated. The
proxy and powers granted by Universal pursuant to this Section 4.8(b)
are coupled with an interest and are given to secure the performance of
Universal under this Agreement. Such proxy and powers, to the extent
permitted by law, shall survive the bankruptcy, insolvency, dissolution
or liquidation of Universal and shall be effective until this Agreement
is terminated in accordance with its terms.
(c) Universal shall use its reasonable best efforts, prior
to the effective date of the Form S-4 and mailing of the Proxy
Statement, to identify in writing to LTM, SPE, the Trust and Cineplex
Odeon the persons to be elected as the initial USI Directors (as defined
in the Stockholders Agreement) as of the Closing as contemplated by
Section 6.18 of the Master Agreement.
(d) Universal shall not amend or modify any provision of
the letter agreement by and among Universal, Cineplex Odeon, the Trust
of even date herewith, a conformed copy of which is attached hereto as
Exhibit A (the "Three Party Agreement"). without the prior written
consent of LTM, which shall not be unreasonably withheld.
Article V
Conditions Precedent
Section 5.1. Conditions to Each Party's Respective
Obligations to Close
. The respective obligations of LTM and Universal to effect
the Purchase shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) The concurrent closing of the Transactions (other than
the Purchase) in accordance with the terms of the Master Agreement and
the other Documents.
(b) The Stockholders Agreement shall be in full force and
effect.
(c) There shall not be any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Purchase
that makes the consummation of the Purchase illegal.
(d) No preliminary or permanent injunction or other order
by any federal, state or provincial court in the United States or Canada
of competent jurisdiction that prevents the consummation of the
Transactions shall have been issued and remain in effect, nor shall any
proceeding by any Governmental Entity seeking any of the foregoing be
pending. LTM and Universal each hereby agree to use its reasonable
efforts to have any such injunction or order lifted.
Section 5.2. Conditions to Obligation of Universal to Close
. The obligations of Universal to effect the Purchase shall
be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions, unless waived by Universal:
(a) Each of SPE and LTM shall have performed in all
material respects its agreements contained in the Documents required to
be performed on or prior to the Closing Date; their respective
representations and warranties contained in this Agreement and any of
the other Documents shall be true and correct in all material respects
when made and on and as of the Closing Date as if made on and as of such
date (except to the extent they relate to a particular date), except as
expressly contemplated or permitted by this Agreement or such other
Document, as the case may be (provided, however, that for purposes of
this Section 5.2(a) only, such representations and warranties shall be
deemed to be true and correct in all material respects unless the
failure or failures of such representations and warranties to be so true
and correct (without regard to materiality qualifiers contained
therein), individually or in the aggregate, results or would reasonably
be expected to result in a LTM Material Adverse Effect), and Universal
shall have received a certificate of the President or Chief Executive
Officer or a Vice President of LTM to that effect.
(b) From the date of this Agreement through the Closing
Date, there shall not have occurred any change, individually or together
with other changes, that has had, or would reasonably be expected to
have a LTM Material Adverse Effect.
(c) The LTM Debt Repayment, the IMAX Purchase Price and,
if applicable, the Transferred SPE Subsidiary Purchase Price shall not
exceed the LTM Cap.
(d) Cineplex Odeon shall not have breached or violated any
of its obligations under the Three Party Agreement.
Section 5.3. Conditions to Obligations of LTM to Close
. The obligations of LTM to effect the Purchase shall be
subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a) The conditions precedent to the obligations of LTM and
SPE to effect the Transactions contemplated by the Documents as set
forth in Section 7.3 of the Master Agreement shall have been satisfied,
unless waived by LTM.
(b) Universal shall have performed in all material
respects its agreements contained in the Documents required to be
performed on or prior to the Closing Date; its representations and
warranties contained in this Agreement and any of the other Documents
shall be true and correct in all material respects when made and on and
as of the Closing Date as if made on and as of such date (except to the
extent they relate to a particular date), except as expressly
contemplated or permitted by this Agreement or such other Document, as
the case may be, and LTM shall have received a certificate of the
President or Chief Executive Officer or a Vice President of Universal to
that effect.
Article VI
Termination, Amendment and Waiver
Section 6.1. Termination
. (a) This Agreement may be terminated at any time before
the Closing Date:
(i) by mutual written consent of Universal and LTM;
(ii) by either Universal or LTM if the Closing shall not
have occurred on or before June 30, 1998 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 6.1(a)(ii) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the
Termination Date; provided, however, further, that if on the Termination
Date the conditions to the Closing set forth in Section 7.1(b), 7.1(d),
7.1(f) or 7.1(j) of the Master Agreement shall not have been fulfilled,
but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Termination Date shall be extended
to December 31, 1998. The parties agree that any amendment of this
Agreement to extend the Termination Date beyond June 30, 1998 shall be
made without any amendment to or renegotiation of any other material
provisions of this Agreement;
(iii) by either Universal or LTM if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties shall use their
commercially reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement or the Master Agreement, and such order,
decree, ruling or other action shall have become final and
nonappealable;
(iv) by either Universal or LTM if the other shall have
breached, or failed to comply with, in any material respect, any of its
obligations under this Agreement or any representation or warranty made
by such other party shall have been incorrect in any material respect
when made or shall have since ceased to be true and correct in any
material respect, and such breach, failure or misrepresentation is not
cured within 30 days after notice thereof and, in the case of breaches,
failures or misrepresentations by LTM, such breaches, failures or
misrepresentations, individually or in the aggregate and without regard
to materiality qualifiers contained therein, results or would reasonably
be expected to result in a LTM Material Adverse Effect, it being
understood that failure to obtain any landlord or other non-governmental
third party consent to the entering into or completion of the
Transactions that has been disclosed on the LTM Disclosure Statement
shall not give rise to any rights under this Article VI; or
(v) by Universal if Cineplex Odeon shall have breached or
violated its obligations under the Three Party Agreement; provided that
such breach shall not have been induced by Universal.
(b) In addition to and without limiting the foregoing,
this Agreement shall automatically terminate upon termination of the
Master Agreement in accordance with the provisions of Article VIII
thereof.
(c) In the event of termination of this Agreement and the
abandonment of the transactions contemplated hereby pursuant to this
Article VI, all obligations of the parties hereto shall terminate,
except for the obligations of Universal set forth in Section 6.2 and
except for the provisions of Article VII (other than Section 7.4).
Moreover, in the event of termination of this Agreement pursuant to
Section 6.1(a)(iv), nothing herein shall prejudice the ability of the
non-breaching party from seeking damages from the other for the willful
breach of a covenant or agreement contained herein. With respect to any
proceeding initiated hereunder, any party that shall have been found to
have willfully breached any of such party's obligations to perform its
covenants under this Agreement shall bear the costs and expenses of the
other party in connection with such proceeding, including, without
limitation, attorneys' fees.
Section 6.2. Fees
. (a) If the Master Agreement is terminated (i) by LTM
pursuant to Section 8.1(e) thereof or by Cineplex Odeon pursuant to
Section 8.1(g) thereof, (ii) by LTM as a result of Cineplex Odeon's
material breach of Section 6.2 thereof that is not cured within 30 days
after notice thereof to Cineplex Odeon, or (iii)(A) by LTM or Cineplex
Odeon pursuant to Section 8.1(f) thereof because of the failure to
obtain the Cineplex Odeon Shareholder Approval at the Cineplex Odeon
Meeting or by LTM pursuant to Section 8.1(h) thereof if a final decision
that is nonappealable has been issued by a court of competent
jurisdiction denying either the Interim Order or the Final Order, and
(B) prior to the Cineplex Odeon Meeting or the denial of the Interim
Order or the Final Order, as the case may be, there shall have been an
Alternative Proposal, whether or not such Alternative Proposal shall
have been withdrawn prior to such meeting or the denial of either the
Interim Order or the Final Order, involving Cineplex Odeon or any of its
Significant Subsidiaries (other than an Alternative Proposal initiated
prior to the date of this Agreement that shall have been withdrawn,
rejected or terminated or shall otherwise no longer be under
consideration as of the date of this Agreement and that shall not have
been renewed or re-initiated, in any form, by the party or parties that
previously initiated such Alternative Proposal or any Affiliates,
agents, representatives or advisors thereof) and (b) within 12 months of
such termination, Cineplex Odeon consummates or accepts a written offer
to consummate an Alternative Proposal, then in addition to any fees
payable as a consequence of such termination pursuant to Section 8.2 of
the Master Agreement, and without deduction or offset therefor,
Universal shall, upon the consummation of an Alternative Proposal,
(subject to delay solely to the extent necessary to determine the
Alternative Proposal Profit pursuant to Section 6.2(b)) pay to LTM a fee
(the "Universal Termination Fee") in immediately available funds in an
amount equal, at Universal's sole discretion, to either (A) US$5 million
or (B) 25% of the aggregate Alternative Proposal Profit received by
Universal.
(b) For the purposes of this Letter Agreement, the term
"Alternative Proposal Profit" shall mean the excess of (i) the sum of
(A) any cash and (B) the Fair Market Value (calculated in US Dollars) of
the consideration received by Universal upon consummation of or in
connection with an Alternative Proposal over (ii) the product of (x)
US$1.75 and (y) the aggregate number of shares of capital stock of
Cineplex Odeon disposed of by Universal in connection with such
Alternative Transactions. As used herein, (a) "Fair Market Value" shall
mean (i) as to any securities that are publicly traded, the average of
the Current Market Prices of such securities for each day of the
Valuation Period and (ii) as to any security that is not publicly traded
or of any other property shall mean the fair value thereof as determined
by an independent investment banking or appraisal firm experienced in
the valuation of such securities or property jointly selected by LTM and
Universal; (b) "Current Market Price" shall mean the average of the
daily closing prices of such securities for such Valuation Period; and
(c) "Valuation Period" shall mean the period of ten consecutive trading
days immediately following the closing of the Alternative Transaction
with respect to which the Fair Market Value of the consideration to be
received by Universal is to be determined. The closing price for each
day shall be the last quoted bid price in the over-the-counter market,
as reported by the Nasdaq National Market or such other system then in
use, or, if on any such date such securities are not quoted by any such
organization, the closing bid price as furnished by a professional
market maker making a market in such securities jointly selected by LTM
and Universal. If the securities are listed or admitted to trading on a
national securities exchange, the closing price shall be the closing bid
price, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on NYSE or, if the securities are not listed or
admitted to trading on NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the securities are
listed or admitted to trading.
(c) Universal hereby acknowledges that the provisions of
this Section 6.2 are an integral part of the Transactions and the
Universal Termination Fee constitutes liquidated damages and not a
penalty, and that without them, LTM and SPE would not enter into this
Agreement, the Master Agreement or any of the other Documents.
Universal acknowledges and agrees that the Universal Termination Fee is
intended to reimburse LTM for the time and costs attributable to
negotiating this Agreement and the Master Agreement and analyzing the
Transactions, LTM's opportunity cost and foregone alternative
transactions and the impact on LTM's other business relationships. If
Universal fails to pay promptly the amount due pursuant to this Section
6.2, Universal shall pay, in addition to, and not in lieu of, the
Universal Termination Fee, the costs and expenses (including legal fees
and expenses) incurred by LTM and/or SPE in connection with any action,
including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee
at the one-year LIBOR rate plus 2.0% per annum accruing from the date
such fee was required to be paid.
Article VII
Miscellaneous
Section 7.1. Non-Survival of Representations, Warranties and
Agreements
. Except for the representations set forth in Sections 3.2 and
3.3, no representations and warranties set forth in this Agreement shall
survive the Closing Date. All covenants and agreements set forth in
this Agreement shall survive in accordance with their terms.
Section 7.2. Notices
. Any notice, request, claim, demand or other communication under
this Agreement shall be in writing, shall be either personally delivered
or sent by reputable overnight courier service (charges prepaid) to the
address for such person set forth below and shall be deemed to have been
given hereunder when delivered personally or one day after deposit with
a reputable overnight courier service:
If to LTM:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: Larry Ruisi
With a copy to:
LTM Holdings, Inc.
711 Fifth Avenue, 11th Floor
New York, NY 10022
Attention: Seymour Smith
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: David Golay
If to Universal:
Universal Studios, Inc.
100 Universal City Plaza
Universal City, CA 91608
Attention: Brian C. Mulligan
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Attention: John G. Finley
or to such other address as any party may have furnished to the other
parties in writing in accordance with this Section.
Section 7.3. Fees and Expenses
. Whether or not the Transactions are consummated, all costs and
expenses incurred in connection with the Documents and the Transactions
shall be paid by the party incurring such expenses, except as expressly
provided herein. If the Purchase shall be consummated, LTM shall
reimburse Universal for all reasonable out-of-pocket expenses and fees
paid or payable by or on behalf of Universal or any of its Affiliates,
whether incurred prior to, on or after the date of this Agreement, in
connection with the Purchase and the other Transactions; provided that
such amount, together with the amount payable to the Trust under
paragraph 10 of the Letter Agreement, shall not exceed US$1,000,000.
Such reimbursement shall be made on the Closing Date in immediately
available funds to a bank account which Universal shall designate in
writing to LTM no less than three business days prior to the Closing
Date.
Section 7.4. Publicity
. So long as this Agreement is in effect, LTM and Universal agree
to consult with each other in issuing any press release or otherwise
making any public statement with respect to the Transactions, and none
of them shall issue any press release or make any public statement prior
to such consultation, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
The commencement of litigation relating to the Documents or the
Transactions, or any proceedings in connection therewith, shall not be
deemed a violation of this Section 7.4.
Section 7.5. Specific Performance
. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. The parties accordingly agree that each shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction. The provisions of
this Section 7.5 are in addition to any other remedy to which a party is
entitled at law or in equity.
Section 7.6. Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto
(except by operation of law pursuant to a merger whose purpose is not to
avoid the provisions of this Agreement) without the prior written
consent of the other parties. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 7.7. Entire Agreement
. This Agreement, the Stockholders Agreement, the Confidentiality
Agreement and any documents delivered by the parties in connection
herewith and therewith or on the date hereof constitute the entire
agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties
with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.
Section 7.8. Amendments; Modifications
. This Agreement may not be amended or modified in any manner
except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.9. Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflict of laws.
Section 7.10. Counterparts
. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together
signed by all of the parties hereto.
Section 7.11. Headings and Table of Contents
. Headings of the Articles and Sections of this Agreement are for
the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
Section 7.12. Interpretation
. In this Agreement, unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa,
and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and
vice versa.
Section 7.13. Waivers
. At any time prior to the Closing Date, the parties hereto, by
or pursuant to action taken by their respective Boards of Directors, may
(i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein or in any documents
delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any
party hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the same
or any other provision hereunder.
Section 7.14. Severability
. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 7.15. Release
. Subject to the consummation of the Purchase, and
excluding (a) amounts owed to Universal and its Affiliates for film
booking and home video arrangements or under the management agreement in
respect of the Universal City Cinema and (b) obligations and liabilities
included in clauses (ii)(x) and (y) of the definition of Net Working
Capital and Debt reflected in each case in Cineplex Odeon's Closing
Statement or arising under the Documents, Universal, on behalf of itself
and its Affiliates, hereby acknowledges, releases and discharges, and
indemnifies and saves harmless, Cineplex Odeon and the Cineplex Odeon
Subsidiaries and their successors and assigns from all actions, causes
of action, suits, debts, dues, sums of money, accounts, claims and
demands owned by Cineplex Odeon and the Cineplex Odeon Subsidiaries to
Universal and its Affiliates by reason of any matter, cause, contract
(whether written or oral), course of dealing or thing whatsoever arising
during, or in respect of, the period on or before the Closing Date.
IN WITNESS WHEREOF, the undersigned have executed this
Subscription Agreement as of the date first written above.
LTM HOLDINGS, INC.
By: Stanley Steinberg
Its: Executive Vice President
UNIVERSAL STUDIOS, INC.
By: Brian C. Mulligan
Its: Senior Vice President
SONY CORPORATION OF AMERICA AND CINEPLEX ODEON
TO MERGE THEATRE CIRCUITS
Merger will create world's largest theatrical exhibition company
FOR RELEASE: TUESDAY, SEPTEMBER 30, 1997
{All $ are in U.S. $}
NEW YORK/TORONTO: Sony Corporation of America (SCA) and Cineplex Odeon
today announced an agreement to merge Sony Retail Entertainment's
(SRE's) Loews Theatres Exhibition Group and Cineplex Odeon to create the
world's largest theatrical exhibition company, with annual revenues of
approximately $1 billion. The combined company will be named Loews
Cineplex Entertainment (LCE) and will have over 2,600 screens in
approximately 460 locations in North America.
The transaction will involve the merger of Cineplex Odeon with the Loews
Theatres Exhibition Group, which consists of Sony/Loews Theatres and its
joint ventures with Star Theatres and Magic Johnson Theatres. SRE will
own 51.1% of LCE's shares (representing 49.9% of the voting shares) and
Universal Studios will own 26% subsequent to a cash contribution of
$84.5 million; the Charles Rosner Bronfman Family Trust will own 9.6%
and the public Cineplex Odeon shareholders will own 13.3% of the new
company. Cineplex Odeon shares will be exchanged for shares in LCE at
closing. It is estimated that the total number of shares in the
combined company will be 452 million. It is anticipated that the
transaction will close in approximately six months.
"The merger of these two premiere theatre chains will create the global
leader in theatrical exhibition and advance Sony's involvement in this
rapidly expanding industry," remarked Howard Stringer, President and
Chief Operating Officer, Sony Corporation of America.
Lawrence J. Ruisi, currently President of Sony Retail Entertainment, has
been named President and Chief Executive Officer of LCE. Mr. Ruisi, who
spearheaded the merger, has worked extensively in theatrical exhibition
as well as filmed entertainment. He has overseen SRE's Theatrical
Exhibition Group since 1991, and, in that time, has been instrumental in
both the physical and financial growth of the theatres. Previously, Mr.
Ruisi served as Chief Financial Officer of Columbia Pictures
Entertainment, where he was involved in the acquisition of Loews
Theatres. As one of the original executives of TriStar Pictures in
1983, Mr. Ruisi has a proven track record in building successful
entertainment companies.
According to Mr. Ruisi, the merger of the two circuits will enable the
combined company to compete more effectively on a global basis. "We are
very excited about what we have set in motion with this combination,
creating a company with significant growth capacity and the opportunity
to enjoy substantial cost savings and operating efficiencies," he said.
"Using our expertise in designing, building and operating successful
theatres, coupled with our significant cash flow and full access to the
capital markets, LCE will be able to aggressively participate in the
dramatic changes taking place in the U.S. and Canadian marketplace, as
well as pursue the many lucrative opportunities which exist in the
international markets."
Allen Karp, who has led Cineplex Odeon as President and Chief Executive
Officer since 1990 and who initiated the merger for Cineplex, will serve
as Chairman and Chief Executive Officer of Cineplex Odeon Canada, the
Canadian operating subsidiary of LCE. During his tenure at Cineplex,
Mr. Karp has repositioned the theatre circuit as a leading exhibitor in
the U.S. and Canada. He has kept Cineplex Odeon a major force in the
theatrical exhibition business.
Commenting on the merger, Mr. Karp stated, "I am proud to have seen this
merger through to fruition for the benefit of our company and its
shareholders. Additionally, this combination will benefit the Canadian
film industry in that Cineplex Odeon has a long and proud history of
supporting the industry, and I am delighted that LCE is committed to
continue that tradition."
On a combined pro forma basis for the 12 months ending August 31, 1997,
LCE would have generated approximately $700 million in box office
revenues and approximately $140 million in EBITDA. It is anticipated
that as of the closing, combined total debt would be approximately $700
million. The pro forma earnings capacity of the combined entity coupled
with its strengthened capital structure will serve to relieve many of
the capital constraints and balance sheet issues Cineplex Odeon has
faced to date.
The merger of the two theatre circuits will give LCE a key presence in
22 states, including major cities such as New York, Los Angeles,
Chicago, Boston, Seattle, Washington D.C. and Houston, as well as a
leading position in Canada, including major cities such as Toronto,
Montreal and Vancouver, as one of the two major exhibitors in that
country.
Morgan Stanley Dean Witter is advising the Independent Committee of
Cineplex Odeon with respect to this transaction and has provided the
Committee with a fairness opinion in that regard. Credit Suisse First
Boston is advising Sony Corporation of America.
LCE's corporate headquarters will be in New York, with U.S. operational
headquarters in New York and Canadian operational headquarters in
Toronto. The merger is subject to shareholder and regulatory approval
in both Canada and the United States. Upon obtaining these approvals,
it is intended that LCE will be listed on the New York Stock Exchange
and the Toronto Stock Exchange. Cineplex Odeon currently trades on the
New York and Toronto Stock Exchanges under the symbol CPX.
- - 30 -
FOR MORE INFORMATION:
Sony/Loews Theatres:
Marc Pascucci (212) 833-6148
Sony Corporation of America:
Joanne Hvala: (212) 833-6975
Cineplex Odeon:
Howard Lichtman (416) 323-6634
